Travellers use their phones as they line up at the Ottawa International Airport on Dec. 23, 2022. The scandal around the ArriveCan app, which was used to track cross-border travellers during the COVID-19 pandemic, has morphed into a series of problems with dysfunctional IT procurement across the federal government.Justin Tang/The Canadian Press
The good news is that federal officials asked the RCMP to investigate the cases of seven programmers who allegedly bilked the government out of more than $5-million by billing the same hours to several different departments.
The bad news is that until the government started data mining to find double-dippers, the departments that paid for the work hadn’t even noticed it wasn’t actually done. And Ottawa still hasn’t persuaded all of the companies that hired those programmers to repay the sums that were overbilled.
The big problem is that this isn’t just a matter of seven cases of fraud. Ottawa’s IT procurement is a textbook case of a system set up in a way that encourages waste and abuse.
The federal government didn’t hire those programmers. It did what it often does: It contracted companies to supply programmers and bill for their work. Those contractors don’t have much of an incentive to sniff out overbillings. They make a hefty commission on every hour the programmers bill.
That’s an issue that everyone involved should have seen from the get-go. It’s a classic conflict known in economic and management textbooks as the principal-agent problem: When you hire a contractor or anyone else to manage resources for you, they might do things that aren’t in your best interest – especially if their incentives aren’t aligned with yours.
You’d think Public Services and Procurement Minister Jean-Yves Duclos, who used to be an economics professor, would know that the system he oversees needs to be revamped from top to bottom.
The scandal around the ArriveCan app, used to track cross-border travellers during the COVID-19 pandemic, has already morphed into a series of problems with dysfunctional IT procurement across the government.
But the cases of belatedly discovered fraud only prove abuse is a feature built into the system. The problems don’t stop with the seven cases.
For one thing, the deputy minister of Public Services and Procurement Canada, Arianne Reza, testified at the Commons public accounts committee on Nov. 6, that it is “inconceivable” they won’t find more incidents of this kind of fraud now that they are searching for it.
Those efforts, including data mining, began in 2022 as scandals around IT contracting mounted. PSPC has since sent police the cases of the seven programmers, who billed through 35 different companies. The businesses, officials testified, didn’t know that the others had hired the same individuals.
Now the government has asked those companies to pay them back, but so far only about $800,000 has been recovered.
There are so many red flags. One is that the government departments that paid for the programmers didn’t notice the work wasn’t done.
“I just don’t know how the departments can have such lax oversight,” said Edmonton Conservative MP Kelly McCauley, who sits on the public accounts committee.
One should also expect a contractor to verify their subcontractor’s work was done, he said. In fact, they are contractually obligated to do so. He was surprised to hear officials testify that they are negotiating with contractors to get money back – rather than calling them on the carpet or blacklisting them.
“I was flabbergasted,” Mr. McCauley said.
Instead of a system that pays for results, this one incentivizes billings. In the case of ArriveCan, the key contractor, a two-person firm called GC Strategies, said it charged commissions of 15 to 30 per cent. But it turns out the commissions don’t pay for accountability for ensuring the work is done.
Look again at the alleged fraud unearthed so far: seven individuals who worked for 35 companies. The government’s procurement practices have created an ecosystem of contractors using the same pool of freelance programmers. Everybody knows who they are except the government of Canada.
The government could hire the programmers directly, rather than paying a contractor that adds little except for opportunities for waste.
Instead, it is beefing up its efforts, including data analysis, to sniff out fraud. That’s good, but a better way to tackle waste and abuse is to reduce the incentives for them.
In January, 2023, Prime Minister Justin Trudeau criticized some of the contracting processes used to develop the ArriveCan app as “illogical.” But it’s almost two years later, and Ottawa’s IT procurement still doesn’t make sense.