Appearance before the Standing Committee on Public Accounts (PACP) by the Deputy Minister of Innovation, Science and Economic Development Canada

Table of contents

• Professional services contracts at ISED: AG report 5 protection value for taxpayer dollars
• Professional services contracts at ISED: AG report 5 compliance and risk management
• Review of contracts awarded to McKinsey: Remediation actions
• Background on the Review of contracts awarded to McKinsey
• Issues observed by OAG & AEB
• Issues observed by OPO
• OPO practices review
• Overbilling
• GC Strategies, Coradix Technology Consulting Ltd., and Dalian Enterprise Inc.
• Change of strategy
• Spending on management consultants
• Spending on IT professional services
• Procurement management control framework
• Approach to contracting and the proper management of contracting
• McKinsey change of strategy
• Incomplete bid evaluation documents and the PMCF
• Conflict of interest
• Changes in procurement services in response to the procurement Ombud's and Auditor General's reports
• Procurement & use of consultants
• OAG Report professional services contracts with GC Strategies Inc.
• AG Report 5 2024: Professional services contracts (McKinsey)
• AG Report 4 2025: Professional services contracts with GC Strategies Inc
• Press release: Office of the Procurement Ombud (Oct 16)
• Standing committee on Public Accounts (PACP)
• Biographies of the members of the committee
• Notice of meeting
• Scenario note for Deputy Jennings Appearance before the Standing committee on Public Accounts

Professional services contracts at ISED: AG Report 5 protection value for taxpayer dollars

Question: How does ISED protect value for taxpayer dollars in professional services contracting?

Key messages:

• Innovation, Science and Economic Development Canada (ISED) acknowledges the important work of the Auditor General and her team and agrees with the findings found in the report
• ISED has overhauled its procurement function, beginning with the centralization of procurement under one directorate to ensure consistent oversight and accountability across the department
• We have implemented a centralized intake and triage process as well as a pre-award quality assurance review to ensure policy compliance and value for money on 100 percent of contracts prior to award
• These measures reinforce ISED's commitment to value for money and integrity in all contracting activities

Background:

Professional services contracts at ISED: AG Report 5 compliance and risk management 

Question: What measures has Innovation, Science and Economic Development Canada implemented to ensure compliance, manage risks, and protect taxpayer dollars in professional services contracting?

Key messages:

• ISED has strengthened its procurement controls ensuring full compliance with Treasury Board and Public Services and Procurement Canada directives
• New governance checkpoints ensure that decisions are well documented, justified, and supported by proper oversight
• These measures reinforce ISED's commitment to value for money and integrity in all contracting activities

Background:

ISED actions to ensure compliance and manage risks:

• Compliance & documentation:
  • 100 percent pre-solicitation and pre-award quality assurance (QA) review verifies procurement method, evaluation criteria, deliverables, and documentation
  • File checklists embedded in GCdocs ensure evidence of decision-making is on record
• Risk management & value for money:
  • Centralized procurement under one directorate with multi-level approvals.
  • Price justification mandatory for all non-competitive contracts over $40 thousands
  • Internal peer reviews strengthen oversight and reduce risk of bias
• Fairness & transparency:
  • Procurement strategies validated by QA to prevent tailoring to specific suppliers
  • Governance framework aligns departmental policy with Treasury Board Secretariat and Public Services and Procurement Canada's directives
  • All evaluators sign Conflict-of-Interest declarations, retained in file
• Security & integrity:
  • Pre-award validation of contractor security clearance mandatory
  • Security proof retained on file through GCdocs, verified by QA
• Demonstrating need & results:
  • Professional services procurement request form documents the business need and rationale for outsourcing
  • Robust cost estimates required at intake and approved by the Investment Oversight Committee
  • Section 34 confirmations directly linked to deliverable acceptance to ensure expected results are achieved

Review of contracts awarded to McKinsey: Remediation actions

Question: What remedial actions has ISED implemented to prevent a recurrence of the issues identified in the Auditor General's report and related reviews?

Key messages:

• Innovation, Science and Economic Development Canada (ISED) has implemented a comprehensive set of corrective and preventive measures to ensure procurement integrity, transparency, and value for money
• ISED continues to monitor compliance performance through quality assurance metrics (100 percent pre-solicitation and pre-award review since April 2024 along with a 10 percent monthly closeout audit since July 2025
• We are committed to publishing service standards by FY 2025–26 to ensure transparency and accountability to Canadians
• Strengthened governance and approval processes ensure that all procurement decisions are properly documented, justified, and reviewed at the appropriate senior management and are in compliance with all Treasury Board and Public Services and Procurement Canada's requirements

Background:

• Following the Auditor General's 2023 Report on professional services contracts, ISED undertook a full review of its procurement practices to address findings from the OAG, Office of the Procurement Ombudsman (OPO), and Audit and Evaluation Branch (AEB)
• These reviews identified gaps in evaluation documentation, record retention, and governance challenge functions
• In response, ISED implemented a Quality Assurance Framework for procurement in 2024, designed to provide consistent oversight at every stage of the contracting process
• The reforms are complemented by a Procurement Governance Framework and Investment Oversight Committee review of high-value or complex professional services requirements
• ISED continues to monitor compliance performance through quality assurance metrics (100 percent pre-solicitation and pre-award review since April 2024; 10 percent monthly closeout audit since July 2025) and is committed to publishing service standards by FY 2025–26 to ensure transparency and accountability to Canadians

Background on the review of contracts awarded to McKinsey

Question: Can you summarize ISED's contracts with McKinsey & Company?

Key messages:

• ISED awarded only three competitively awarded contracts, totaling approximately $3.4 millions — about 1.6 percent of the total
• All were conducted under Public Services and Procurement Canada's Task and Solutions Professional Services arrangements

Background:

Issues observed by OAG & AEB

Question: What issues were identified by to OAG, AEB and OPO and what actions were taken?

Key messages:

• The Office of the Auditor General noted incomplete documentation supporting bidder selection and evaluation rationale
• The Audit and Evaluation Branch found documentation gaps across numerous phases of a contract's lifecycle
• The Office of the Procurement Ombuds noted minor inconsistencies in recording mandatory criteria
• ISED has since implemented a comprehensive suite of reforms addressing the finding, ensuring transparency and accountability in future procurements
• These reforms focus on clear roles, strengthened governance, enhanced controls and oversight of procurement activities

Background:

• Remedial actions have been implemented by ISED
• Procurement Quality Assurance (Q) Framework:
  • 100 percent pre-solicitation and pre-award review of strategy, evaluation, and documentation
• Governance controls:
  • Director review for contracts between $40 thousands and $100 thousands
  • Director General approval required for contracts exceeding $100 thousands
• QA metrics:
  • 100 percent pre-solicitation and pre-award compliance since April 2024
  • 10 percent monthly closeout QA audits since July 2025
• Policy alignment:
  • Procurement Governance Framework aligns ISED policy with Treasury Board and Public Services and Procurement Canada's directives
• Transparency commitments:
  • Service standards for procurement to be published by FY 2025–26
  • Continued participation in OAG follow-ups to verify sustained compliance
• Management action plans:
  • While the OAG conducted two studies only one recommendation was issued, related to conflict-of-interest practices, in the McKinsey report. This recommendation has been closed by AEB
  • Before the OAG reviewed McKinsey, the Comptroller General directed all departments to audit McKinsey contracts internally. ISED's audit team identified documentation challenges as a key issue, and AEB continues to monitor the implementation of measures to improve file completeness on a bi-annual basis to ensure they are operating as intended

Issues reported by OPO

Question: What issues did the Office of the Procurement Ombudsman (OPO) identify in its practice review of professional services contracts at ISED?

Key messages:

• The Office of the Procurement Ombudsman identified documentation inconsistencies in ISED's professional services files reviewed as part of its 2023–24 practice review
• These issues were administrative in nature and did not affect the fairness, openness, or transparency of the procurement processes
• ISED continues to work closely with central agencies and the Office of the Procurement Ombudsman to ensure sustained compliance, accountability, and integrity in all procurement activities

Background:

• The Office of the Procurement Ombudsman (OPO) conducted a practice review of professional services contracts awarded by ISED during the period covered by the Auditor General's Report 5 (2023)
• The review focused on procurement documentation practices, including how mandatory criteria, evaluation results, and award rationales were recorded
• The OPO found that while ISED complied with applicable laws and policies, documentation could be strengthened to enhance transparency and traceability.
• ISED has since implemented a comprehensive Quality Assurance (QA) Framework to ensure all procurement decisions are documented, validated, and retained
• These reforms form part of ISED's broader Procurement Governance Framework, aligning departmental practices with Treasury Board Secretariat and Public Services and Procurement Canada directives

OPO practices review

Question: Has ISED been exposed to practices of resource misrepresentation or substitution under TBIPS or TSPS contracts, and if so, how has this been addressed?

Key messages:

• The Office of the Procurement Ombudsman recently released a report addressing bait-and-switch practices, specifically the replacement of resources in professional services contracts. This prompted changes at Public Services and Procurement Canada to strengthen controls under task-based tools, including the adoption of corporate criteria for supplier qualification and a shift toward evaluating individual resources at the task authorization stage rather than solely at the contract award stage
• At ISED, we promptly adopted these Public Services and Procurement Canada changes and continue to monitor updates to the TBIPS and TSPS tools to ensure ongoing compliance and integrity in our procurement processes. To further mitigate risk and uphold fairness, ISED employs a four-pronged methodology:
  1. Template and clause management: We are continuously adopting the most up-to-date solicitation and contract templates from PSPC to ensure the latest clauses, terms, and conditions are reflected in all ISED instruments
  2. Resource evaluation and substitution control: We are ensuring that all new or replacement resources meet or exceed the qualifications and experience outlined in the original solicitation
  3. Simplification of technical criteria: We are working closely with internal clients to reduce unnecessary complexity in technical evaluations, enabling fair access for both small and medium-sized enterprises (SMEs) and larger firms
  4. Commitment to Indigenous and small and medium-sized enterprises participation: We have strengthened ISED's internal Indigenous procurement policy and continuing to advance opportunities for small and medium-sized enterprises. Contracts under $40,000 are directed to Indigenous firms where capacity exists, while the Procurement Strategy for Indigenous Business (PSIB) ensures sustained engagement with Indigenous suppliers, who are predominantly small and medium-sized enterprises
• Looking ahead, and in alignment with an anticipated Buy Canadian policy, ISED remains focused on promoting small and medium-sized enterprises, ensuring fair and equitable access to federal procurement opportunities while maintaining rigorous stewardship and compliance with Treasury Board policies

Background:

• The OPO Practice Review (October 2025) examined systemic issues related to resource misrepresentation and substitution in federal IT professional-services contracting under TBIPS and TSPS supply arrangements. The review found that, across several departments, suppliers occasionally bid resources not available at time of contract award, leading to substitutions that circumvented the integrity of the competitive process and undermined value for money
• To address this, ISED implemented a suite of preventive reforms aligned with PSPC and Treasury Board guidance:
  • Early adoption (2024-25) of PSPC's corporate criteria for supplier qualification, shifting resource validation to the Task Authorization phase and ensuring that any substituted resources continue to meet the qualifications and FlexGrid requirements of the original solicitation
  • Centralization of procurement functions under the Contracts and Materiel Management Directorate, supported by 100 percent pre-solicitation and pre-award quality assurance reviews
  • Mandatory validation of resource security clearances and verification of rates prior to contract authorization
  • Adoption of PSPC's 2025 professional-services reforms, including a maximum 2-year duration for TBIPS contracts, stronger justification of costs, and enhanced oversight checkpoints
• These measures ensure that ISED's procurement activities remain fair, transparent, and defensible, and that all contracts deliver value for money while addressing systemic vulnerabilities identified in recent government-wide reviews
• ISED consistently exceeds government-wide Indigenous procurement targets, awarding over 15% of eligible procurements to Indigenous businesses in FY 2024/25

Overbilling

Question: What contracts involved overbilling by a vendor, did ISED receive value for money, and what actions were taken in response?

Key messages:

• The overbilling case identified by Public Services and Procurement Canada and Justice Canada related to GC Strategies
• [REDACTED]
• In cases of overbilling, ISED relies on the subject matter expertise of Public Services and Procurement Canada and Justice Canada, who are seeking recoveries on behalf of the Crown
• Justice Canada is leading the GCStrategies litigation file in the Ontario Superior Court
• Following notification from Public Services and Procurement Canada's Office of Supplier Integrity and Compliance, GC Strategies was suspended, and no further contracts were awarded to the firm by ISED. Public Services and Procurement Canada also revoked the resource's security clearance

Background:

• The overbilling matter involving ISED arose from a task authorization issued to GC Strategies. The work related to IT advisory services delivered through Public Services and Procurement Canada's (PSPC) Task and Solutions Professional Services (TSPS) supply arrangement
• In early 2024, PSPC's Special Investigations and Internal Disclosure Directorate uncovered evidence that a subcontracted resource, [REDACTED]. PSPC subsequently advised ISED and other implicated departments to preserve all related documentation under a Litigation Hold. The matter was referred to Justice Canada, and a Statement of Claim (AGC v GC Strategies et al.) was filed seeking recovery of overbilled amounts
• Following notification, ISED immediately cooperated with PSPC and Justice Canada by:
  • providing full access to contract, task authorization, and invoice files
  • issuing suspension of work notices on all active GC Strategies contracts
  • implementing enhanced invoice validation and timesheet verification controls across all professional-services contracts
• The amount Justice seeks to recover the amount of $725,000 plus interest and costs as against two defendants (including GCStrategies). The amount being sought as against GCStrategies relates to two contracts it had with ISED. The amount sought to be recovered as against GCStrategies is $198,000, plus prejudgement interest and costs
• PSPC's Office of Supplier Integrity and Compliance formally suspended GC Strategies, rendering it ineligible for new federal awards. PSPC also confirmed that the implicated resource's security clearance was revoked
• Justice is moving the litigation forward, but it is in its early stages. The pleadings have not yet closed. ISED has been advised that a typical case could take several years to get to trial, if it has not been resolved before then
• Although ISED paid the full value of the task authorization, the OAG (2025 Report 4) found insufficient documentation in ISED's files to demonstrate that the department had received full value for money. ISED continues to monitor the matter through the CFO and Procurement Operations to ensure compliance with the Government of Canada's Integrity Regime

GC Strategies, Coradix Technology Consulting Ltd., and Dalian Enterprise Inc

Question: What is the status of ISED's contracts with GC Strategies, Coradix Technology Consulting Ltd., and Dalian Enterprise Inc., and what findings did the Auditor General make in relation to these contracts?

Key messages:

• Between 2018 and 2023, ISED awarded a total of nine contracts to GC Strategies and Coradix Technology Consulting Ltd., with a combined value of approximately $13.7 million before taxes
• No contracts were awarded to Dalian Enterprise Inc. during this period
• All contracts were competitively awarded under Public Services and Procurement Canada (PSPC) Task and Solutions Professional Services (TSPS) supply arrangements
• The Office of the Auditor General's (OAG) 2025 Report 4 – Government Contracts with GC Strategies Inc. identified two administrative documentation gaps in one ISED contract with GC Strategies:
  • missing documentation confirming that all resources had valid security clearances
  • absence of timesheets supporting work performed
• ISED has since addressed both findings and closed the related recommendations, confirming that all resources held valid security clearances through Public Services and Procurement Canada, and instituting a mandatory timesheet submission and retention requirement across all professional-services contracts

Background:

• Between 2018 and 2023, Public Services and Procurement Canada (PSPC) entered into four contracts with GC Strategies and five with Coradix Technology Consulting Ltd., with a total value of approximately $13.7 million before taxes. These contracts were awarded under the Task and Solutions Professional Services (TSPS) framework, managed by PSPC, and supported various IT modernization and data-analysis initiatives
• The Office of the Auditor General's (OAG) 2025 Report 4 on Government Contracts with GC Strategies Inc. reviewed files across multiple federal departments. In ISED's case, the OAG identified two administrative documentation gaps in one GC Strategies file:
  • No record of resource security clearances was found on file
  • Timesheets were not retained to substantiate billed work
• The OAG noted that these deficiencies did not indicate a lack of compliance with contracting authorities or competitive requirements, but reflected record-keeping and Quality Assurance (QA) oversight gaps common across departments at the time
• Following the audit, ISED verified through PSPC that all GC Strategies personnel who worked on the file held valid security clearances during the contract period. ISED has also implemented the following corrective measures:
  • Mandatory verification and retention of security clearance documentation in GCdocs as part of QA review
  • Mandatory timesheet submission and retention for all professional-services contracts
  • Centralized procurement oversight under the Contracts and Materiel Management Directorate, including 100% pre-award quality assurance and Director/DG-level approvals for all professional-services procurements
• As of October 2025, ISED has no active contracts with GC Strategies, Coradix, or Dalian, and all OAG recommendations pertaining to ISED have been fully implemented and closed. These measures ensure that ISED's contracting practices remain transparent, compliant and auditable

Change of strategy

Question: Why did ISED modify the contract requirements to use a different supply arrangement once informed that McKinsey & Company was not a pre-qualified vendor under the supply arrangement originally considered?

Key messages:

• ISED is committed to ensuring procurements are conducted in a fair, open, and transparent manner and in accordance with Treasury Board policies, regulations, guidelines, trade agreements and procedures
• ISED had planned to issue this contract, for services in support of the development of economic policy to ensure a robust recovery for Canadian industrial sectors from COVID-19 (global analysis of economic stabilization and recovery in high growth sectors), directly to McKinsey, but changed the procurement strategy. This change allowed for a competitive process to assess potential suppliers and ensure value for money by sending invitations to 15 potential bidders including Deloitte and KPMG, among others
• ISED has taken action to clarify roles and responsibilities for procurement processes, and to ensure that any deviations in procurement strategy are approved by senior management and documented in the file. This process was implemented 2024
• ISED has since implemented centralized executive level governance, 100 percent pre-contract award file review by a dedicated team independent of the procurement team, and mandatory senior review checkpoints to ensure all procurement strategies are fully validated and documented before approval

Background:

• Two competitive contracts included in the OPO report totalled $3.4 million:
  • A $452,000 contract awarded on January 4, 2018, to identify global emerging trends linked to economy-wide horizontal issues for six strategic sectors (international economic analysis and growth studies)
  • A contract totalling $2,988,497 awarded on June 3, 2020, for services in support of the development of economic policy to ensure a robust recovery for Canadian industrial sectors from COVID-19 (global analysis of economic stabilization and recovery in high growth sectors)
• McKinsey has never been a main supplier for ISED. They have been contracted only three times since 2011, for a total of $3.8M. In that period, McKinsey has received only 0.2% of all professional services contracts at ISED. In comparison, Deloitte was contracted for $61M worth of services over the same period (3.6%)
• The client originally requested that the work be awarded to McKinsey & Company through an Advance Contract Award Notification (ACAN), reflecting the client's preference for that firm. The procurement team declined the ACAN, determining that the requirement did not meet the criteria for non-competitive contracting and that it could be sourced competitively through the task and solutions professional services supply arrangement
• Based on the statement of work, the procurement team initially assessed that a task-based stream was appropriate. However, during early engagement, McKinsey advised the client that it was not pre-qualified under the task stream but was qualified under the Solutions-Based stream. To ensure compliance with Public Services and Procurement Canada's mandatory methods of supply, the procurement strategy was changed to the Solutions stream, maintaining a competitive intent throughout
• In response, ISED has introduced a Procurement Governance Framework that embeds rigorous internal controls, including:
  • Centralized procurement operations under the Contracts and Materiel Management Directorate
  • 100 percent pre-solicitation and pre-award QA reviews
  • Director and DG approval checkpoints based on contract value
  • Mandatory documentation of procurement rationale and evaluation decisions
• These reforms ensure that procurement strategies cannot be modified without proper governance, that all requirements align with mandatory methods of supply, and that ISED contracting decisions are fair, transparent, and defensible

Spending on management consultants

Question 1: Why does ISED rely so heavily on Management Consultants when it has such a large employee base?

Key messages:

• ISED engages management consulting firms on a selective basis for discrete requirements where it does not have the expertise or reach
• In 2024-25, ISED's spent $5.5 million on management consulting services, which represents approximately 3 percent of total professional services expenditures. This further represents a threefold decrease in expenditures compared to 2022-23
• This is consistent with the Refocusing Government Spending initiative in Budget 2023, which was presented to Parliament in March 2023
• ISED's approach to ensure value for money for Canadians not only focused on the reduction of the use of management consultants, but is also built into the core of the procurement processes and governance for those services we continue to acquire

Background:

• ISED spending on management consulting:
  • 2022-23 $14.7 million
  • 2023-24 $10.8 million
  • 2024-25 $5.5 million
• Percent of total professional services expenditures:
  • 2022-23 7 percent
  • 2023-24 5 percent
  • 2024-25 3 percent

Question 2: Did ISED have contracts to McKinsey & Company and what were the resulting deliverables?

Key messages:

• ISED issued three contracts with McKinsey & Company: one in 2013 to analyze global trends shaping the manufacturing sector, one in 2018 for the Economic Strategy Tables, and one in 2020 for the COVID-19 Industry Strategy Council
• In 2013, the emergence of increased international competition to attract mandates for high value-added manufacturing, changing supply chains and technological disruption prompted ISED to seek expertise on how knowledge-intensive manufacturing industries were diversifying and adapting in order to remain competitive in a rapidly changing economic environment
• As part of that work, McKinsey provided analysis that identified and assessed new trends in the global manufacturing sector and evaluated their impact on Canadian manufacturing sectors, with a consideration of the risks and growth opportunities for the next ten years
• The Economic Strategy Tables (ESTs) were created following a key recommendation from the Advisory Council on Economic Growth, chaired by Dominic Barton and supported by Finance Canada. ISED established the ESTs as a direct follow-up to the Growth Council's work
• For the ESTs, McKinsey provided global qualitative and quantitative analysis across six high-growth sectors, focusing on skills and talent development, expanding global markets, and firm lifecycle support
• In May 2020, during the COVID-19 crisis, the Industry Strategy Council (ISC) was announced by the Prime Minister in order to convene senior industry leaders, assess the pandemic's impact on priority sectors, and inform government understanding of sector-specific pressures, to provide recommendations
• For the ISC, McKinsey conducted extensive analysis of strategic industrial sectors, modeling medium- and long-term pandemic impacts and identifying opportunities and vulnerabilities for Canadian industry
• The contract supported ISC members with real-time economic indicators and analysis, including two detailed recovery scenario models for nine key sectors:
  1. Advanced Manufacturing
  2. Agri-Food
  3. Clean Technology
  4. Digital Industries
  5. Health/Bio-sciences
  6. Resources of the Future
  7. Tourism/Hospitality
  8. Retail
  9. Transportation
• McKinsey's work enabled the ISC to publish its comprehensive public report, Restart, Recover, and Reimagine Prosperity for All Canadians. The report's recommendations reflected the evolving nature of the pandemic, including multiple waves and emerging economic challenges, which required amendments to the contract throughout the Council's mandate

Spending on information technology (IT) professionals services

Question: Why does ISED rely so heavily on IT Consultants when it has such a large employee base?

Key messages:

• ISED engages IT consulting firms on a selective basis for specific requirements where it does not have the expertise or reach
• ISED is implementing a multi-year process to decrease it's reliance on contractors
• This is consistent with the Refocusing Government Spending initiative in Budget 2023, which was presented to Parliament in March 2023
• ISED's approach to ensure value for money for Canadians not only focused on the reduction of the use of IT consultants, but is also built into the core of the procurement processes and governance for those services we continue to acquire

Background:

• ISED spending on IT services:
  • 2022 $75 million
  • 2023 $93.9 million
  • 2024 $96.3 million
  • 2025 $72.9 million
• ISED target for IT workforce complement:
  • 80 percent indeterminate staff
  • 10 percent determinate staff
  • 10 percent IT consultants
• ISED has gone from 230 IT consultants, in 2023 to presently <100

Procurement management control framework

Question: What has Innovation Science and Economic Development Canada (ISED) done to ensure the issues noted in the Office of the Auditor General audits do not happen again?

Key messages:

• In April 2024, ISED designed and implemented a management control framework to mitigate the risk of these issues happening again
• The framework consists of four prongs:
  1. Firstly, ISED set expectations and clear roles and responsibilities for both the procurement teams and management team. These relate to not only the processes to be followed and documentation to be retained, but the guiding principles regarding how we conduct procurement
  2. These expectations are supported by a new governance structure that significantly strengthens governance and accountability. All files undergo a pre-award quality assurance review, followed by tiered approvals; Manager and Director review for contracts up to $100K and DG review for those above. The Investment Oversight Committee, composed of DGs from across ISED, meets weekly to review and approve contracts valued over $250K, while the Deputy Minister reviews all professional-service requirements over $40K to ensure visibility and alignment with policy direction
  3. To ensure these requirements are being followed, an independent team within ISED reviews 100% of all contracts before they are awarded. That review consists of checking all contracting compliance points
  4. The effectiveness of these measures will be reviewed on a cyclical basis by both ISED's Internal Audit and Internal Controls teams
• ISED continues to monitor the sufficiency of the framework, most recently in May of 2025. That review led to augmented documentation and reporting of the impact of those controls
• Additionally, ISED introduced a post-contract close-out quality assurance review to assess how contracts were managed and completed. As part of this review, business owners must confirm that all goods and services were received in full compliance with the statement of work and the terms and conditions of the contract

Background:

• Although the Office of the Auditor General's 2024 report was not tabled until June, ISED implemented its augmented control framework in April 2024, based on observations shared by the Office of the Auditor General
• The Investment Oversight Committee reviews and approves procurements exceeding $250K
• All procurement files undergo a pre-solicitation quality assurance review to confirm that the proposed procurement strategy is appropriate, compliant, and aligned with departmental objectives
• Professional service requirements over $40K are reviewed weekly by the Deputy Minister, providing visibility on contracting activities and adherence to policy direction
• Prior to award, all contracts between $40K and $100K are reviewed by the Director of Contracts and Materiel Management, while those exceeding $100K are reviewed by the Director General of Corporate Finance, Systems and Procurement Branch to ensure oversight and consistency in contracting practices

Approach to contracting and the proper management of contracting

Question: How does ISED ensure that its procurement of goods and services—particularly IT and management consulting—is transparent, well-governed, aligned with parliamentary expectations, and continuously improving in response to findings from the OAG, OPO, and internal audit?

Key messages:

Why ISED procures goods and services:

• Innovation, Science and Economic Development Canada (ISED) procedures goods and services to support its diverse mandate that includes fostering innovation, enabling business growth, securing major industrial investments, supporting science and research, and delivering digital and spectrum services to Canadians. The Department's operations require specialized capabilities that cannot always be housed internally, particularly during periods of peak demand or complex, time-sensitive initiatives
• According to Proactive Disclosure of Contracts (valued greater than $10,000) ISED procures significant volumes of services, both professional and otherwise, each year. For example, ISED awarded just over $167M in services contracts in 2024
• Of particular interest to this committee, in fiscal year 2024-25, ISED's spent $5.5 million on management consulting services, which represents approximately 3 percent of total professional services expenditures. This further represents a threefold decrease in expenditures compared to 2022-23
• On average, ISED awards between 2200 and 2400 contracts per year across its mandate, ranging from small operational procurements to high-complexity professional service engagements. These procurements ensure the Department can scale quickly, access niche expertise, and deliver on commitments to Canadians and Parliament

ISED's professional services requirements fall broadly into two categories:

• ISED procures both IT professional services and management consulting services
• The IT professional services support digital modernization, cybersecurity, enterprise systems, cloud migration, and the maintenance of mission-critical platforms. ISED engages IT consultants selectively when the Department does not have the necessary in-house expertise or when projects require temporary surge capacity
• Management consultants are used sparingly to support specialized projects such as major industrial investment analyses, due-diligence assessments, governance reviews, operational transformation, and targeted research
• Across both categories, ISED's focus is on targeted, value-for-money engagements that supplement, not replace, the Department's internal capabilities

How does ISED manage procurements:

• ISED has a dedicated procurement team that operates within the Corporate Management Sector. Their mandate includes procuring goods and services for ISED in compliance with government of Canada processes and rules

Findings of oversight bodies going back to 2023–24:

• Historical audits had found deficiencies in procurement operations in all government departments, including ISED. Beginning in 2023 and culminating in the Auditor General's 2024 review, several oversight entities, including the Office of the Auditor General (OAG), the Office of the Procurement Ombudsman (OPO), and ISED's Internal Audit, identified recurring deficiencies across federal procurement practices, including at ISED. Key issues included:
  • Incomplete bid evaluation documentation and insufficient records on file to demonstrate that evaluations were conducted fairly and transparently
  • Inconsistencies in procurement strategies, including instances where the chosen method of supply or contract vehicle was not supported by adequate justification
  • Insufficient governance visibility on high-value contracting activities and professional services spending
  • Varying adherence to procurement roles and responsibilities
  • Lack of standard departmental processes, which created inconsistencies in how documentation was prepared and retained
• These findings formed the basis of significant modernization efforts launched by ISED in 2024

How ISED is now consistent with OAG findings and has addressed deficiencies:

• Beginning in April 2024, ISED proactively implemented an augmented Procurement Management Control Framework to directly address the deficiencies identified by the OAG and other oversight partners. This framework focuses on the application of existing processes and rules
• Key corrective measures now in place include a strengthened file documentation and completeness process, tiered executive approvals for all contracts, alignment with policies governing procurement, the communication of clear roles, responsibilities, and a comprehensive internal oversight process
• ISED instituted a 100% pre-award quality assurance review for all contracts. Independent reviewers now check every file to ensure:
  • the procurement strategy is justified and compliant
  • evaluation criteria and documentation are complete and consistent
  • all decisions are fully recorded
  • all mandatory documentation is on file
• This directly resolves the OAG finding regarding incomplete bid evaluation records
• To ensure every significant procurement action meets policy and documentation requirements before issuance, ISED now applies strict tiered approvals including:
  • Manager & Director review for contracts up to $100K
  • Director & Director General review for contracts above $100K
  • A cross-sectional DG review and approval committee for procurements above $250K
  • Weekly, I review and approve all professional-service requirements above $40K
• The internal oversight process checks for compliance and alignment with policies and conforms to OAG recommendations which are all closed. Additionally, ISED's internal audit function continues to monitor the implementation of measures to improve file completeness on a bi-annual basis to ensure they are operating as intended

ISED's governance framework and checkpoints:

• ISED's revamped governance framework is designed to provide continuous oversight from planning to contract close-out. Its structure includes:
  1. Pre-solicitation quality assurance review:

     Every procurement undergoes an upfront challenge function to confirm:

     • the procurement strategy is appropriate and compliant
     • the method of supply is correct
     • evaluation criteria are suitable
     • risks are identified early
  2. Pre-award quality assurance review (100% of files):

     Independent review ensures that:

     • documentation is complete
     • evaluations were conducted as per the file
     • all compliance points are met
     • decisions are recorded and defensible
  3. Tiered approval governance, as I outlined above
  4. Post-contract close-out reviews:

     ISED has implemented a new review process that requires business owners to confirm:

     • goods and services were received
     • deliverables match the contract
     • invoicing aligns with work performed
  5. Ongoing monitoring by internal audit and internal controls:

     The framework is reviewed cyclically by both internal functions, with updates incorporated.

Work remaining to be done:

• Although ISED has made substantial progress, several areas remain priorities. These include:
  • Continuous digital integration of procurement files, including improved e-filing consistency and automated completeness checks
  • Strengthening business owner capability, through targeted training on evaluation documentation, contract management, and roles under FAA sections 32/34/33
  • Improved enterprise-wide planning for professional services, ensuring early identification of needs and reducing urgency-driven procurements.
  • Development and issuance of internal service standards
• ISED is committed to continuous improvement and will continue to refine its controls, governance, training, and oversight mechanisms to ensure Parliament's expectations for transparency, value for money, and integrity in contracting are fully met

McKinsey change of strategy

Question: Why did ISED modify the contract requirements to use a different supply arrangement once informed that McKinsey & Company was not a pre-qualified vendor under the supply arrangement originally considered?

Key messages:

• Innovation, Science and Economic Development (ISED) is committed to ensuring procurements are conducted in a fair, open, and transparent manner and in accordance with Treasury Board policies, regulations, guidelines, trade agreements and procedures
• In 2020, and in response to the COVID-19 pandemic, ISED took the decision to engage a management consulting firm to provide advice and recommendations on economic policy aimed at driving Canada's industrial sector's robust recovery. The cost of the contract was $2.988 million dollars
• The original plan was to award the contract directly to McKinsey & Company through an Advance Contract Award Notification (ACAN). In the spirit of openness, transparency, and fairness, the decision was taken to compete this requirement
• The competition of contracts can take the form of a task-based mechanism or a solutions based mechanism. A key difference between the two is that task-based mechanisms are generally used for IT-based contracts with discrete tasks whereas solutions-based seek a comprehensive end-product, rather than tasks
• ISED originally chose to move forward with a task-based mechanism and learned McKinsey & Company were not pre-qualified vendors in this stream. A decision was taken to change the procurement strategy to a solutions based contract, where McKinsey & Company was prequalified. However, the rationale for this change was not documented in the procurement files, as noted by the OAG
• The change in mechanism did not impact the competitive nature of the contract award. The decision was taken, in support of Canadians, to ensure Canada had access to bids from companies it deemed to have subject matter expertise in the area of a global analysis of economic stabilization and recovery in high growth sectors
• To support value for money a total of 15 companies were invited to bid on the contract, include Deloitte and KPMG, among others
• ISED does not favour specific companies. For example, since 2011, McKinsey and company have been contracted only three times, for a total of $3.8M. In that period, McKinsey has received only 0.2% of all professional services contracts at ISED. In comparison, Deloitte was contracted for $61M worth of services over the same period (3.6%)
• In response to the findings of the Office of the Auditor General, ISED has taken action to clarify roles and responsibilities for procurement processes, and to ensure that any deviations in procurement strategy are approved by senior management and documented in the file. This process was implemented 2024
• ISED has since implemented centralized executive level governance, 100 percent pre-contract award file review by a dedicated team independent of the procurement team, and mandatory senior review checkpoints to ensure all procurement strategies are fully validated and documented before approval

Background:

• Two competitive contracts included in the OPO report totalled $3.4 million:
  • A $452,000 contract awarded on January 4, 2018, to identify global emerging trends linked to economy-wide horizontal issues for six strategic sectors (international economic analysis and growth studies)
  • A contract totalling $2,988,497 awarded on June 3, 2020, for services in support of the development of economic policy to ensure a robust recovery for Canadian industrial sectors from COVID-19 (global analysis of economic stabilization and recovery in high growth sectors)
• McKinsey has never been a main supplier for ISED. They have been contracted only three times since 2011, for a total of $3.8M. In that period, McKinsey has received only 0.2% of all professional services contracts at ISED. In comparison, Deloitte was contracted for $61M worth of services over the same period (3.6%)
• The client originally requested that the work be awarded to McKinsey & Company through an Advance Contract Award Notification (ACAN), reflecting the client's preference for that firm. The procurement team declined the ACAN, determining that the requirement did not meet the criteria for non-competitive contracting and that it could be sourced competitively through the task and solutions professional services supply arrangement
• Based on the statement of work, the procurement team initially assessed that a task-based stream was appropriate. However, during early engagement, McKinsey advised the client that it was not pre-qualified under the task stream but was qualified under the solutions-based stream. To ensure compliance with Public Services and Procurement Canada's mandatory methods of supply, the procurement strategy was changed to the Solutions stream, maintaining a competitive intent throughout.
• In response, ISED has introduced a Procurement Governance Framework that embeds rigorous internal controls, including:
  • Centralized procurement operations under the Contracts and Materiel Management Directorate
  • 100 percent pre-solicitation and pre-award QA reviews
  • Director and DG approval checkpoints based on contract value
  • Mandatory documentation of procurement rationale and evaluation decisions
• These reforms ensure that procurement strategies cannot be modified without proper governance, that all requirements align with mandatory methods of supply, and that ISED contracting decisions are fair, transparent, and defensible

Incomplete bid evaluation documents and the procurement management control framework

Question: What has ISED done to ensure the issues noted in the OAG audits, including incomplete bid evaluation documents, do not happen again.

Key messages:

• In April 2024, Innovation Science and Economic Development Canada (ISED) designed and is implementing a management control framework to mitigate the risk of these issues happening again
• The framework is designed to ensure that existing contracting rules and processes are followed. In 2025, in the context of the OAG's report titled Professional Services Contracts with GCStrategies Inc., the Auditor General emphasized "the federal government does not need more procurement rules, but rather existing rules need to be understood and followed." That is the focus of ISED's management control framework
• The framework consists of four prongs:
  1. Firstly, ISED set expectations and clear roles and responsibilities for both the procurement teams and management team. These relate to not only the processes to be followed and documentation to be retained, but the guiding principles regarding how we conduct procurement
  2. These expectations are supported by a new governance structured that significantly strengthens governance and accountability. All files undergo a pre-award quality assurance review, followed by tiered approvals; Manager and Director review for contracts up to $100K and DG review for those above. The Investment Oversight Committee, composed of DGs from across ISED, meets weekly to review and approve contracts valued over $250K, while the Deputy Minister reviews all professional-service requirements over $40K to ensure visibility and alignment with policy direction
  3. To ensure these requirements are being followed, an independent team within ISED reviews 100% of all contracts before they are awarded. That review consists of checking all contracting compliance points. The review also ensure that all pertinent documentation is presented on-file, and that all procurement-related decisions are well documented
  4. The effectiveness of these measures will be reviewed on a cyclical basis by both ISED's Internal Audit and Internal Controls teams
• ISED continues to monitor the sufficiency of the framework, most recently in May of 2025. That review led to augmented documentation and reporting of the impact of those controls
• Additionally, ISED introduced a post-contract close-out quality assurance review to assess how contracts were managed and completed. As part of this review, business owners must confirm that all goods and services were received in full compliance with the statement of work and the terms and conditions of the contract

Background:

• Although the OAG's 2024 report was not tabled until June, ISED implemented it's augmented control framework in April 2024, based on observations shared by the OAG.
• The Investment and Oversight Committee is a strict governance body that oversees and approves key procurement and priority activities, including high-value transactions, sole-source and competitive procurements, and all ACANs. It may also require review of any initiative that is complex, sensitive, or highly visible, regardless of value
• All procurement files undergo a pre-solicitation quality assurance review to confirm that the proposed procurement strategy is appropriate, compliant, and aligned with departmental objectives
• Professional service requirements over $40K are reviewed weekly by the Deputy Minister, providing visibility on contracting activities and adherence to policy direction
• Prior to award, all contracts between $40K and $100K are reviewed by the Director of Contracts and Materiel Management, while those exceeding $100K are reviewed by the Director General of Corporate Finance, Systems and Procurement Branch to ensure oversight and consistency in contracting practices

Conflict of interest

Question: What conflict-of-interest controls does ISED have in place to ensure procurement integrity?

Key messages:

• ISED has strengthened its conflict-of-interest (COI) controls to ensure that all procurement activities are conducted with the highest level of integrity and impartiality
• At the beginning and middle stages of a contracting process, procurement officers review technical requirements and their evaluation criteria to ensure clarity and a fair, open, and transparent process
• Conflict of interest declarations from all evaluators and technical authorities must be completed before accessing any bid or evaluation material
• The procurement team checks for the completion of these forms as part of the 100% pre-award QA review
• If a conflict of interest is declared or suspected, evaluators are immediately recused, and alternate evaluators are appointed to maintain the integrity of the process
• These controls form part of ISED's integrated procurement oversight model, ensuring transparency, fairness, and defensible decision-making

Background:

COI requirements apply to every technical bid/proposal evaluation at ISED, regardless of dollar value.

The controls include:

• Use of a standardized COI declaration form requiring evaluators to confirm they have no conflicts with any bidder
• Requirement that evaluators complete and sign the form before any evaluation activity begins
• GCdocs retention of all COI documents to ensure the file is audit-ready
• Oversight by QA reviewers, Managers, Directors, and DGs to confirm COI documentation is present and complete prior to approval
• Alignment with Treasury Board policy and PSPC guidance on procurement integrity

These measures ensure that evaluations are impartial, and that ISED maintains public trust and rigorous ethical standards in all contracting activities.

Changes in procurement services in response to the procurement Ombud's and Auditor General's reports

Issue:

On November 2, 2022, a motion was passed by the House of Commons that called on the Office of the Auditor General of Canada to conduct a performance audit on ArriveCAN, including on contracts and subcontracts, as well as payments under those contracts.

Reports resulting from a review carried out by the Office of the Procurement Ombud (OPO) and an audit conducted by the Office of the Auditor General (OAG) were tabled on January 29, 2024, and February 12, 2024, respectively. The reports highlight serious concerns regarding project management and offer recommendations pertaining to procurement, specifically with regard to professional services.

Key facts:

• The Procurement Ombud report made 14 recommendations based on the analysis of information and documentation provided to OPO by the Canada Border Services Agency (CBSA), Public Services and Procurement Canada (PSPC) and Shared Services Canada (SSC) during the course of the review; PSPC responded to 8 recommendations
• The Auditor General (AG) report made 8 recommendations, 1 of which relates to PSPC (jointly with CBSA)

Key messages:

• PSPC takes the conclusions of the AG and of the OPO very seriously and is acting on the recommendations, in line with our commitment to open, fair and transparent procurement processes, while obtaining value for Canadian taxpayers
• Over the past year, PSPC has taken concrete actions to strengthen oversight on all professional services contracts falling under PSPC authority
• In light of the OPO and AG reports, PSPC instituted measures and controls on new and existing professional services contracts to strengthen contract management practices and is actively engaging with client departments and agencies to ensure that these new measures are implemented quickly and efficiently
• Collectively, these measures will help us continue to strengthen and enhance federal procurement processes to promote greater competition, particularly in the field of Information Technology (IT) consulting services

If pressed on immediate actions that PSPC is taking to strengthen existing controls and oversight for professional services contracting:

• PSPC has implemented the following changes:
  • Requiring increased clarity from business owners on the scope, tasks and deliverables of new professional services contracts and task authorizations
  • Improving evaluation requirements to more effectively validate that all resources have the required work experience and valid security clearances
  • Improving documentation requirements at the time of contract award and when task authorizations are issued
  • Suspending delegated authorities for departmental issuance of task authorizations against contracts awarded by PSPC until PSPC's newly mandated professional services measures are implemented by departments
• The department is actively engaging with client departments and agencies to ensure that these new measures are implemented quickly and efficiently

If pressed on the actions being taken in response to the auditor general report:

• PSPC accepts recommendation 73, and has already taken action:
  • PSPC provided direction to procurement staff in a December 4, 2023 communiqué to ensure that task authorizations include clear tasks and deliverables, in addition to identifying the specific project(s) or initiative(s) that are included in the scope of contracts
  • Additionally, PSPC sent a directive to its client departments, via their Senior Designated Official for the Management of Procurement, indicating that this change was brought into effect for professional services contracts as of November 28, 2023
  • PSPC will also update the Guide to Preparing and Administering Task Authorizations, as well as the Record of Agreement template for clients, by April 2024

If pressed on the actions being taken in response to the procurement ombud's review:

• The Procurement Ombud's report made 13 recommendations, 8 of which were assigned to PSPC
• PSPC has taken immediate action in response to the recommendations to strengthen existing controls around the administration of professional services contracts:
  • PSPC has implemented a new checklist for task authorizations to ensure that contracts include specific criteria for technical authorities to assess resource qualifications and criteria
  • PSPC will ensure that task authorizations include clear tasks and deliverables and identify the specific project or initiative on which a resource will be working
  • PSPC will ensure more robust procurement files, by, for example, obtaining security clearance confirmation, copies of résumés and evaluation grids that demonstrate that resources meet qualification and experience requirements, copies of invoices accompanied by time sheets
• PSPC is also reviewing the "Substantiation of Professional Services Rates" clause that permits Canada to require bidders to substantiate proposed rates that fall below the lower limit of the median band

If pressed on indigenous contracting:

• The Government of Canada is committed to economic Reconciliation with Indigenous Peoples. As part of this commitment, we will promote socio-economic outcomes by increasing economic opportunities for First Nations, Inuit and Métis businesses through the federal procurement process
• Indigenous Services Canada (ISC) administers the Procurement Strategy for Indigenous Businesses and is responsible for assessing suppliers' eligibility for the program and for maintaining the Indigenous Business Directory
• When awarding contracts under the Procurement Strategy for Indigenous Businesses program, PSPC relies on pre-award audits performed by ISC to verify if the Indigenous business meets the ownership and control criteria
• Post-award audits are optional under the program. These audits re-examine ownership and control criteria and Indigenous content criteria, including the requirement that 33% of the work be performed by the Indigenous partner in a joint venture

Background:

Under its authorities, PSPC awarded contracts in support of ArriveCAN and was responsible for providing procurement guidance to the client department. The Canada Border Services Agency (CBSA) was responsible for developing and managing the ArriveCAN tool based on the Public Health Agency of Canada's health requirements enforced by the Quarantine Act.

A total of 46 different contracts were used in support of ArriveCAN. Of these 46 contracts, 31 were awarded by PSPC under its authorities:

• 19 contracts were competitive under normal contracting authorities, including 6 that were set-aside for Indigenous businesses under the Procurement Strategy for Indigenous Business program
• 12 contracts were non-competitive, including 8 contracts to procure software licenses that were sole sourced due to intellectual property rights or urgent need
• Of the 12 non-competitive contracts, 4 used COVID emergency contracting authorities for the contracting of IT consultants
• 11 of the 31 competitive and non-competitive contracts that PSPC issued were awarded before the COVID-19 pandemic and were leveraged by the CBSA to bring in resources to work on ArriveCAN

On November 14, 2022, the House of Commons Standing Committee on Government Operations and Estimates (OGGO) adopted a motion recommending that the Procurement Ombud conduct a review of contracts awarded in relation to the ArriveCAN application.

On January 13, 2023, the Office of the Procurement Ombud determined that there were reasonable grounds to launch a review of procurement activities associated with the creation, implementation and maintenance of ArriveCAN.

In light of the findings of the review and audit, PSPC took immediate action to strengthen existing controls around the administration of professional services contracts. On November 28, 2023, other government departments and agencies were informed of new measures, introducing a common set of principles and mandatory procedures that clients must abide by to use PSPC's professional services contracting instruments.

These changes closely align with the recommendations in the OAG and OPO reports and are echoed in the resultant management action plans to which PSPC has committed.

Procurement & use of consultants

Issue: What actions has the government taken in response to procurement issues uncovered through the ArriveCan case and other situations where procurement rules were broken?

Response:

• I expect that all spending, including the use of professional services, is sensible, well managed and directed to priorities that provide value for Canadians
• The use of professional services is a normal part of government operations
• Very little of what the government spends goes to management consultants. Most is for specialized expertise and capacity needed to advance key priorities
• For example, the government uses contracting to hire construction firms to build and maintain various assets, to secure nurses for health care in the north, and to manage contaminated sites across the country

If pressed on IT contracting:

• While contracting for IT services is sometimes necessary, we are focused on building our own digital workforce
• Through our Digital Talent Strategy, we are investing in skills development and training so the federal public service has the in-house talent needed to deliver secure and efficient digital services

If pressed on measures being taken to improve procurement:

• To strengthen procurement oversight the government has:
  • Updated the manager's guide and introduced new mandatory procedures for procuring professional services
  • Published the Directive on Digital Talent to support the development of a robust internal digital workforce, establishing reasonable thresholds for departments to ascertain whether qualified talent is available before contracting out
  • Completed a horizontal audit to evaluate governance, decision-making, and contracting controls. The audit found that we have processes in place to manage and oversee procurement, in compliance with roles, responsibilities and accountabilities
  • Developed a new Risk and Compliance Process to assess controls and risk in procurement and other key administrative areas, which was launched in June 2025

Background:

Government spending on External Professional Services (EPS) – This is a broad type of services, including, but not limited to health and welfare, engineering and architectural services, scientific services and management consulting – increased by $2.0B (14%) in 2023/24 when compared to fiscal 2022/23. 65% of departments have increased their EPS in fiscal 2023/24 which is consistent with prior year, and the year over year variance or "growth rate" of 14% for the Government of Canada is higher than the average increase for the past 4 years (9.7%).

While absolute procurement spending has increased, the proportion of spending on EPS has decreased slightly when compared to overall adjusted gross expenditures of the past 10 years (9.7% compared to an average of 11.6%). Specifically, total departmental EPS in 2014 was 11.1% of gross external expenditures excluding transfer payments and public debt charges as compared to 12.4% in 2023. Through those years, the range was from 10.6% (2021) to 11.8% (2016 and 2017).

TBS and Public Services and Procurement Canada (PSPC) published the results of their review of contracts with McKinsey & Company in June 2023. The independent audits conducted as part of the review found no evidence of political interference in the contracts awarded to McKinsey. The review also found that certain administrative requirements and procedures were not consistently followed. TBS has since implemented several measures to address these findings. This includes amendments made in June 2023 to the Directive on the Management of Procurement and the Guide to the Proactive Publication of Contracts to increase transparency and strengthen risk-based systems of internal control and documentation requirements.

There have been serious questions raised regarding the integrity of the federal procurement system, including the practices of certain suppliers to the Government of Canada. Recent and ongoing audits (including by the Office of the Auditor General, Indigenous Services Canada, and departmental internal auditors), practice reviews (by the Procurement Ombud), investigations (including by internal departmental investigators, the Privacy Commissioner, and the Royal Canadian Mounted Police) and studies by parliamentary committees concerning the use of professional services have consistently identified gaps in contracting practices and documentation.

In their reports, the Auditor General of Canada and the Procurement Ombud confirmed there are clear rules in place to ensure sound procurement management practices across government, but more can be done. In response, TBS and PSPC announced a series of new measures on March 20, 2024, to strengthen management and oversight of government procurement. This includes undertaking a horizontal audit of professional services contracts governance (complete), updating the Manager's Guide on procuring professional services (complete), and new mandatory procedures on procuring professional services (compete). TBS and PSPC are continuing to explore and action procurement modernization efforts with the intent to strengthen procurement and management practices.

While contracting is a normal and acceptable delivery strategy, the Government of Canada Digital Talent Strategy supports skills development and training for the federal public service's digital and IT community and helps ensure it has the in-house digital talent and leadership needed to build, deliver, and maintain simple, secure, and efficient digital services and programs.

OAG report: Professional services contracts with GC Strategies Inc.

Issue: A June 2025 Auditor General Report has concluded that government contracts with GC Strategies and the payments made to it were not in accordance with applicable policy instruments and that value for money for these contracts was not obtained. The Auditor General was also critical of three instances in which TBS used services without a contract in place. What is the government doing to fix this situation?

Response:

• The Government has stringent requirements for procurements so they are conducted in a fair, open and transparent manner
• The Auditor General has been clear that procurement rules are in place but have not been consistently followed
• Efforts have been taken or are underway to strengthen compliance with procurement rules, including:
  • Producing a manager's guide with mandatory procedures for procuring professional services,
  • launching a new risk and compliance process which will help departments assess compliance in various areas of management, including procurement

If pressed on recommendations:

• While the Auditor General did not provide any recommendations for TBS in her most recent report, my department has implemented corrective measures to respond to previous recommendations

Background:

The OAG Audit on Professional Services Contracts (GC Strategies) was tabled in the House of Commons on June 10, 2025.

It focused on whether professional services contracts awarded and payments made by federal organizations to GC Strategies and other companies incorporated by its co-founders were in accordance with applicable policy instruments and whether value for money for these contracts was obtained.

From April 2015 through March 2024, federal organizations awarded 106 professional services contracts to GC Strategies, with a maximum value of $92.7 million, of which $64.5 million was ultimately paid out.

The report was critical of three instances in which TBS used confirming orders to pay for services (valued at less than $100K) where resources worked without a contract in place. While the total value of these contracts was relatively low, TBS has since taken measures to ensure these situations do not reoccur.

The audit concluded that these professional services contracts and the payments made were not in accordance with applicable policy instruments and that value for money for these contracts was not obtained.

No recommendations were issued as part of this audit report, but the OAG encouraged federal organizations to implement the recommendations from other procurement audits recently completed, including the horizontal audit conducted by the Office of the Comptroller General.

PSPC and TBS continue to work in close collaboration with client departments and agencies to address the gaps identified in previous audits related to professional services contracting, including improving data collection, increasing transparency in procurement decisions, clarifying roles and responsibilities and strengthening oversight and accountability in procurement activities.

These changes will help strengthen the federal procurement process, improve the way the Government does business with suppliers and ensure best value for Canadian taxpayers.

The OAG appeared at the Standing Committee on Public Accounts (PACP) regarding this report on June 19, 2025. TBS officials may be called to appear at PACP during the Fall regarding this audit.

AG report 5 2024: Professional services contracts (McKinsey)

Link to access AG Report 5: Report 5: Professional Services Contracts

AG report 4 2025: Professional services contracts with GC Strategies Inc

Link to access AG Report 4: Report 4: Government Contracts with GCStrategies Inc.

Press release: Office of the Procurement Ombud (Oct 16)

Procurement Ombud releases findings of his review of "Bait and Switch" in professional services contracts: the good, the bad and the unintended

From: Office of the Procurement Ombud

News release

Ottawa, Ontario – October 16, 2025

The Procurement Ombud released a report detailing the findings of his Procurement Practice Review (PPR) of "Bait and Switch" tactics in the replacement of resources in federal professional services contracts. The review uncovered results that were both good and bad, and highlighted the potential unintended consequences of recent policy changes.

When replacing resources whose personal experience and qualifications helped a supplier win the contract, policies and guidelines must be followed to ensure the fairness of the procurement process and that Canada obtains the best-value supplier. OPO reviewed these replacement of resources practices to determine whether they were conducted fairly and transparently.

The review revealed mixed outcomes. The Ombud found that in more than half of the files reviewed, the practice of replacing resources was done correctly and did not impact Canada's selection of the best-value supplier. However, in some cases, replacement resources did not meet or exceed the qualifications of the original resource proposed to secure the bid, calling into question Canada's selection of the winning supplier and the fairness of the procurement process. The Ombud also noted how policy changes made by PSPC effectively eliminate the use of 'Bait and Switch' tactics from being used, but may bring with them negative impacts to certain suppliers that departments should mitigate.

To address these concerns, the Ombud made 4 recommendations to strengthen the existing controls at Canada's disposal and to ensure that the replacement of resources in professional services contracts are done in a way that does not jeopardize the fairness of the procurement process or Canada's obtainment of the best-value supplier.

A follow-up review will be conducted in 2 years to assess whether federal organizations have implemented the Ombud's recommendations.

Quotes

"While some replacements of resources are understandable and necessary, any switch must be transparent, justified, documented and match or exceed the originally proposed resource's qualifications. Reinforcing the rules around resource replacements helps keep the process fair and transparent. Strong procurement frameworks are essential to safeguard fairness and make sure Canadians get the best value from every contract."
— Alexander Jeglic
Procurement Ombud

Quick facts

• A procurement practice review is an independent and objective examination of procurement practices within one or more federal organizations. Through these reviews, OPO assesses the fairness, openness and transparency of the practices under review and makes recommendations for improvement, as appropriate.
• The Ombud reviewed 6 federal organizations including Employment and Social Development Canada (ESDC), Global Affairs Canada (GAC), Immigration, Refugees and Citizenship Canada (IRCC), National Defence (DND), Shared Services Canada (SSC) and Public Services and Procurement Canada (PSPC). PSPC was included in this review due to its role as a central purchasing agent.
• The Ombud will conduct a follow-up review in 2 years to evaluate departments' progress on implementing his recommendations.

Related products

• Procurement Practice Review of Replacement Resources in Professional Services Contracts

Associated links

• The Procurement Ombud launches "Bait and Switch": Procurement Practice Review of Replacement Resources in Professional Services Contracts
• Procurement Practice Review Reports

Contacts

Media Inquiries
Office of the Procurement Ombud
Phone: 613‑947‑9755
Email: MediaBOA.OPOMedia@boa-opo.gc.ca

Standing committee on Public Accounts (PACP)

Mandate of the committee:

When the Speaker tables a report by the Auditor General in the House of Commons, it is automatically referred to the Public Accounts Committee.

The Committee selects the chapters of the report it wants to study and calls the Auditor General and senior public servants from the audited organizations to appear before it to respond to the Office of the Auditor General's findings.

The Committee also reviews the federal government's consolidated financial statements – the Public Accounts of Canada – and examines financial and/or accounting shortcomings raised by the Auditor General. At the conclusion of a study, the Committee may present a report to the House of Commons that includes recommendations to the government for improvements in administrative and financial practices and controls of federal departments and agencies.

Pursuant to Standing Order 108(3) of the House of Commons, the mandate of the Standing Committee on Public Accounts is to review and report on:

• The Public Accounts of Canada
• All reports of the Auditor General of Canada
• The Office of the Auditor General's Departmental Plan and Departmental Results Report
• Any other matter that the House of Commons shall, from time to time, refer to the Committee

Committee operating procedures:

Witness' opening statements: 5 minutes

Questions Round 1

1. Conservative: 6 minutes
2. Liberal: 6 minutes
3. Bloc Québécois: 6 minutes

Questions Round 2 (and subsequent rounds)

1. Conservative: 5 minutes
2. Liberal: 5 minutes
3. Bloc Québécois: 2.5 minutes
4. Conservative: 5 minutes
5. Liberal: 5 minutes

Anticipated TBS-related activity – 45th Parliament

• Public Accounts 2025
• Real Property
• Professional Service Contracts

Biographies of the members of the committee

Chair: John Williamson (Saint John—St. Croix, NB)

Conservative

• Elected as MP for New Brunswick Southwest in 2011, he was then defeated in 2015 and re-elected in 2019, 2021 and 2025
• Currently also serves as a Member of the Liaison Committee and Chair of the Subcommittee on Agenda and Procedure of the Standing Committee on Public Accounts
• Previously served on many committees, including PACP for a brief time in 2013
• Prior to his election, M. Williamson occupied different positions. He was an editorial writer for the National Post from 1998 to 2001, then joined the Canadian Taxpayers Federation until 2008. In 2009, he was hired by Stephen Harper as director of communications in the PMO
• Interest in the TBS portfolio:
  • OAG Performance audits
  • Integrity of the Public Service
  • Transparency & Accountability

1st Vice-chair: Jean Yip (Scarborough – Agincourt, ON)

Liberal

• Elected as MP for Scarborough—Agincourt in a by-election on December 11, 2017, and re-elected in 2019, 2021 and 2025
• Has served on Public Accounts (since 2018), as well as Government Operations and Canada-China committees in the past.
• Also serves on the Special Committee on the Canada – People's republic Of China Relationship and as Vice-Chair of the Subcommittee on Agenda and Procedure of the Standing Committee on Public Accounts
• Before her election, Ms. Yip was an insurance underwriter and constituency assistant
• Interest in the TBS portfolio:
  • GBA+ and gender and diversity considerations in the Public Accounts
  • Environmental, Social, and Governance reporting

2nd Vice-chair: Sébastien Lemire (Abitibi—Témiscamingue, QC)

Bloc Québécois

• Elected as the Member of Parliament in 2019 for Abitibi—Témiscamingue, re-elected in 2021 and 2025
• BQ critic for Public Accounts, Sport and Indigenous Relations and Northern Development
• Previously served on Indigenous and Northern Affairs and Industry and Technology
• Before politics, he worked at the Fédération de l'UPA d'Abitibi-Témiscamingue, the Juripop Legal Clinic, Octane stratégies, and the Forum jeunesse de l'Île de Montréal of the Conférence régionale des élus de Montréal
• Interest in the TBS portfolio:
  • OAG Performance audits
  • Government Accountability

Gérard Deltell (Louis-Saint-Laurent—Akiawenhrahk, QC)

Conservative

• Elected as the Member of Parliament in 2015 for Louis-Saint-Laurent, re-elected in 2019, 2021 and 2025
• Previously served on many committees, including Public Accounts
• Was leader of the Action démocratique du Québec from 2009 to 2012
• Prior to his election, he was a journalist with TVA, Radio-Canada and TQS.
• Interest in the TBS portfolio:
  • Professional Service Contracts

Ned Kuruc (Hamilton East—Stoney Creek, ON)

Conservative

• Elected as the Member of Parliament in 2025 for Hamilton East—Stoney Creek
• Prior to his election, he was an entrepreneur and was Director of Events and Fighter Acquisitions at K-1 Global
• Interest in the TBS portfolio:
  • Professional Service Contracts
  • Government Accountability

Stephanie Kusie (Calgary Midnapore, AB)

Conservative

• Elected as the Member of Parliament in 2017 for Calgary Midnapore, re-elected in 2019 and 2021
• Conservative Shadow Minister for Treasury Board
• Previously sat on the Standing Committees of Official Languages, Procedure and House Affairs, and Transport
• Has a B.A in political science from the University of Calgary and an M.B.A. from Rutgers University
• Prior to her election, Ms. Kusie occupied multiple positions, including chargé d'affaires ad interim for Canada to El Salvador, consul for Canada to Dallas, Texas and senior policy advisor to Peter Kent in Latin America
• Some of her duties before her time in office included negotiating free trade deals, work related to the Keystone Pipeline project, and lobbying the United Nations to place Canada on the Security Council
• Interest in the TBS portfolio:
  • Government Spending
  • Government use of Professional Service Contracts
  • Whistle Blowers / Disclosure of wrongdoing in the workplace

Kristina Tesser Derksen (Milton East—Halton Hills South, ON)

Liberal

• Elected as the Member of Parliament in 2025 for Milton East—Halton Hills South
• Attended the University of Toronto where she obtained a law degree.
• Prior to her election, she served two terms on the Milton Town Council
• Interest in the TBS portfolio:
  • Professional Service Contracts and the Government's Legal Liability

Anthony Housefather (Mount Royal, QC)

Liberal

• Elected as the Member of Parliament in 2015 for Mount Royal, re-elected in 2019, 2021 and 2025
• Previously served on many committees, including Justice and Human Rights, Government Operations and Access to Information, Privacy and Ethics
• Attended McGill University where he obtained two law degrees, he also has an MBA from Concordia University's John Molson School of Business
• Prior to his election, he served as Executive Vice President Corporate Affairs and General Counsel at a multinational technological company
• He also served as mayor of Côte Saint-Luc between 2005 and 2015
• Interest in the TBS portfolio:
  • Professional Service Contracts and the Government's Legal Liability

Tom Osborne (Cape Spear, N.L.)

Liberal

• Elected as the Member of Parliament in 2025 for Cape Spear
• Attended Cabot College and Memorial University of Newfoundland
• Prior to his election, he was a member of the Newfoundland and Labrador House of Assembly from 1996 to 2024 where he held several cabinet posts including Minister of Finance and President of the Treasury Board
• Interest in the TBS portfolio:
  • Professional Service Contracts
  • Procurement Rules

Notice of meeting

Link to access to the PACP meeting notice : Notice of Meeting – PACP (45-1) - No. 21 – House of Commons of Canada

Scenario note for Deputy Jennings Appearance before the Standing committee on Public Accounts

Details of the appearance:

The House of Commons Standing Committee on Public Accounts (PACP) is undertaking a study on The Auditor General's 2024 Report 5—Professional Services Contracts. As a part of PACP's mandate, all Auditor General reports are automatically referred to the committee.

PACP selects which reports it wants to study and calls the Auditor General and senior public servants from the audited organizations to appear before it to respond to the Office of the Auditor General's findings.

In this case, PACP has selected the following departments to appear as a part of this study – Report 5 – Professional Services Contracts:

• Department of National Defence
• Employment and Social Development Canada
• Department of Citizenship and Immigration
• Canada Border Services Agency
• Innovation, Science and Economic Development Canada
• Canada Post Corporation
• Business Development Bank of Canada
• Canada Infrastructure Bank
• Trans Mountain Corporation

ISED Senior Management have previously appeared at similar meetings. Specifically, DM Kennedy appeared at PACP regarding "Report 2: Connectivity in Rural and Remote Areas, of the 2023 Reports 1 to 4 of the Auditor General of Canada" in October 2023. Minutes, evidence and video available here: Notice of Meeting – PACP (44-1) - No. 75 – House of Commons of Canada

Appearance logistics:

PACP is studying this AG report for four meetings:

1. October 9: Senior officials from the Department of National Defence, Canada Infrastructure Bank, Public Works and Government Services appeared, alongside the Office of the Auditor General (OAG)
2. November 18: Senior officials from the Trans Mountain Corporation appeared, alongside the Office of the Auditor General (OAG)
3. December 2: Senior officials from Business Development Bank of Canada, Canada Post Corporation and Citizenship and Immigration, alongside the Office of the Auditor General (OAG)

While the notice for the December 11th meeting is not yet public, it is expected senior officials from Canada Border Services Agency, Employment and Social Development Canada, Public Sector Pension Investment Board and the Office of the Auditor General of Canada. Departments will deliver opening remarks. OAG will be present to answer questions only.

DG Valerie Huot is appearing alongside DM Jennings.

Questioning will then begin:

• First round: 6 minutes to the CPC, LPC, and BQ, in that order
• Second (and subsequent rounds): 5 min to the CPC, and LPC, 2.5 min to the BQ, and then 5 min to the CPC and the LPC

Notably, PACP is an opposition-chaired committee, meaning the governing party has less control over the agenda compared to other Standing Committees. This may lead to a more contentious atmosphere.

Additional context:

• In the last Parliament, the House of Commons Standing Committee on Government Operations and Estimates (OGGO) conducted a study regarding the federal government consulting contracts awarded to McKinsey & Company
  • Over this study, 69 witnesses were heard from, and a report was tabled in January 2023
• This report requested that the AG conduct a performance and value-for-money audit of the contracts awarded to McKinsey & Company since 1 January 2011 by any department, agency, or Crown corporation
  • Once completed, the AG appeared at OGGO to discuss the findings of her report (June 2024)
  • Additionally, and per the usual process, the AG report was automatically referred to PACP
• In 2023, OGGO adopted a production of papers order that requested copies of all contracts any government department signed with McKinsey. ISED provided material in batches – and redacting third-party information and confidential business information