Compared to the C$496 billion the federal government spent last year, the amounts are small. But this week’s revelations of millions of dollars in potentially fraudulent billing from subcontractors, along with the ongoing ArriveCAN app scandal, show just how much of a mess software development can be for the government.
Even after an extensive investigation, Karen Hogan, the auditor general, said she could not determine exactly what it cost to create ArriveCAN, which was hastily launched in 2020 to collect contact and health information from international travelers during the Covid-19 pandemic and coordination of quarantine measures. Ms. Hogan’s best guess is about $60 million for an app that was widely derided as difficult to use. Its original budget was $2.3 million.
This week, as federal officials announced measures to tighten oversight of government procurement, particularly software services, they said the government had asked the Royal Canadian Mounted Police to investigate $5 million in invoices from three software contractors as possible fraud. Officials did not name the companies, but said the suspected charges are not related to ArriveCAN.
Citing the criminal investigation, Jean-Yves Duclos, minister of public services and procurement, declined to give details about the possible fraud. But he suggested that contractors had taken advantage of the fact that government contracts were mostly paper-based to bill multiple government departments for the same work.
“When everything was done on paper until recently, it was difficult for departments to coordinate and share that information,” he told a news conference. Mr. Duclos noted that 98 percent of contracts are now in electronic form, allowing officials to easily look for attempts at fraudulent double billing.
The political debate surrounding ArriveCAN and the auditor general’s report highlighted that under the government procurement system, millions of dollars flow to companies that don’t actually create software. These companies are instead middlemen who find software developers to do the work and then extract a large portion of the contract value for their efforts.
In ArriveCAN’s case, the middleman was a two-person firm called GC Strategies. The auditor general estimates the company took $19 million from the project. In a parliamentary hearing, one of the company’s owners, Darren Anthony, claimed the correct amount was around $11 million. He also said he had not read the auditor general’s report and had no intention of doing so.
Whatever the amount, Mr. Anthony said he and his business partner were left with about $2.5 million over two years after paying the subcontractors who built the app. He said the company had been spending about 30 to 40 hours a month on the project. Following the release of the auditor general’s report, the government suspended all business with GC Strategies.
Professor Daniel Henstra, a political scientist who studies public administration at the University of Waterloo, told me that the rise of companies like GC Strategies was a direct consequence of the government’s decades-long shift from civil servants developing software to outsourcing the work. .
When a project has to be done on a tight deadline, as ArriveCAN was, the usual procurement system is “almost impossible to follow,” he said. Even if government officials can identify all the necessary subcontractors – which Professor Henstra said is rare – certifying that they are up to the task and then contracting with each one would overwhelm the system.
For government officials, companies like GC Strategies are “like gold”, Professor Henstra said. “It’s very appropriate for the government to just funnel money through one of these companies, which is basically just a coordination company, and have them find the actual contractors to get the job done.”
But, he said, at both the federal and provincial levels, the deal sometimes “blows up,” as with ArriveCAN, and raises uncomfortable questions about what exactly middlemen do in exchange for millions of dollars of public money.
Professor Henstra said he believes governments in Canada now generally outsource too much work — including the policy advisory work he does for the federal government.
“If we had a strong policy analysis capability in government, I wouldn’t need my services,” he said. “They would, and should, in government.”
But the days when the government had an army of software coders who spent their entire careers in public service probably won’t return, he said.
Demand for skilled software developers continues to outstrip supply despite recent layoffs in the tech industry, Professor Henstra said, and no government is likely to want to shoulder the costs of companies that overbid for their services, such as Google or Microsoft.
“There should be more of that capacity within government,” he said. “The trade-off is that when you do things within government, it’s expensive and probably takes longer.”
However, Professor Henstra said despite the heated political debate now underway, the increased cost of the ArriveCAN application and recent allegations of fraud were exceptions.
“The government does get things done and its relationship with contractors works very well for the most part,” he said. “There is room for bad actors to break the law and when they are caught, they are prosecuted. Meanwhile, however, most of these contracts are all happening in good faith, increasingly, and serving the public interest.”
Trans Canada
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A Canadian living in China has been arrested after trying to sell secret battery-making technology owned by Tesla, prosecutors say.
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British photographer Toby Coulson documented the life of his aunt, the artist Joan Jonas, at her cottage in Cape Breton.
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In Real Estate, the What You Get feature looks at what $700,000 can buy in Quebec.
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After some behind-the-scenes negotiations that led to a series of amendments, the government backed a proposal on Gaza and Israel from the New Democrats. The Conservative Party flatly rejected it.
Ian Austen, a native of Windsor, Ontario, studied in Toronto, lives in Ottawa and has reported on Canada for The New York Times for two decades. Follow him on Bluesky: @ianausten.bsky.social
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