Ottawa reviewing Indigenous contracting program linked to ArriveCan contractors, Hajdu says

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Indigenous Services Minister Patty Hajdu said the federal government is conducting a review of its program to support Indigenous contractors in light of concerns about its use by companies that worked on the ArriveCan app.

While much of the focus on ArriveCan has centred around GCStrategies, the two-person IT staffing company that received $19.1-million to work on the app for cross-border travellers, concerns have also been expressed about Dalian Enterprises, which received $7.9-million.

Dalian presents itself as an Indigenous-owned company and regularly wins federal contracts under a procurement program that promotes Indigenous businesses. Dalian has also said it has just two staff members. It often operates in joint ventures with Coradix, a larger company that does not bill itself as Indigenous.

Dalian and Coradix have received more than $400-million in federal contract work over the past decade.

Indigenous organizations have raised concerns with these types of arrangements, warning they can promote “phantom joint ventures.”

”It’s really complicated actually because defining who is Indigenous is actually challenging in some cases,” Ms. Hajdu told reporters Tuesday. “We’re working with Indigenous partners to think through a better way, perhaps even at some point, turn over maintenance of the list to Indigenous partners.”

GCStrategies, Coradix and Dalian have the same business model: Small teams win federal contracts and then they find subcontractors to perform the work. GCStrategies has said it keeps a commission of between 15 to 30 per cent of the value of contracts.

After receiving questions from The Globe and Mail about Dalian and Coradix late last year, federal procurement officials asked Indigenous Services Canada to audit the two companies.

Federal officials told The Globe that Dalian and Coradix have never been audited to determine whether they delivered on the program’s requirements to support Indigenous entrepreneurs.

Anispiragas Piragasanathar, a spokesperson for the department, told The Globe in December that audits are under way but the results will not be made public as they “contain commercially sensitive information.”

The government announced in 2021 that Ottawa would, by 2024, fully phase in a rule that all departments ensure a minimum of 5 per cent of the total value of federal contracts are awarded to Indigenous businesses.

To help achieve that target, Ottawa has a long-standing program that allows Indigenous businesses to qualify via a joint venture with a non-Indigenous business, provided the Indigenous business has at least 51-per-cent ownership and control of the joint venture and at least 33 per cent of the total value of the work is performed by the Indigenous contractor or using Indigenous subcontractors.

Ms. Hajdu has been minister of Indigenous Services since Oct. 26, 2021. She was minister of health at the onset of the pandemic when the ArriveCan app began as a joint project of the Public Health Agency of Canada and the Canada Border Services Agency. It was later fully transferred to the CBSA.

Debate in the House of Commons and some parliamentary committees continued to be dominated Tuesday by the fallout from this month’s ArriveCan report by Auditor-General Karen Hogan, who found Ottawa spent about $59.5-million on contractors to build and maintain the smartphone app.

RCMP Commissioner Mike Duheme was asked at a committee Tuesday whether the RCMP is investigating ArriveCan.

“With the totality of what you’ve heard on the ‘Arrive Scam,’ Is there an investigation?” asked Conservative MP Michael Barrett.

“I confirm that there is an investigation. And we’re not going to comment because it’s ongoing,” Commissioner Duheme said.

The RCMP media relations team later clarified that the force was still assessing the Auditor-General’s report to determine whether further action is warranted.

The Globe first reported in October that the RCMP was investigating allegations of contracting misconduct at the CBSA. While those allegations involved companies such as GCStrategies, Dalian and Coradix that worked on ArriveCan, they were related to a separate IT project.

The allegations were brought forward by Montreal software company Botler.

Its work was funded through extensive subcontracting that linked back to a $21.2-million “informatics professional services” contract to Dalian – awarded under the Indigenous set-aside program – that was also used to fund work on the ArriveCan app.

Indigenous leaders have questioned how Ottawa runs the set-aside for Indigenous business.

A 2021 research report by the Canadian Council for Aboriginal Business urged the government to address “predatory practices” with the set-aside targets.

“Phantom joint ventures, where an Indigenous partner is used as a front by a non-Indigenous business to obtain a contract set-aside, corrodes the integrity of an Indigenous procurement policy,” the council report stated.

After the release of Ms. Hogan’s report, Public Services and Procurement Canada said in a statement that GCStrategies is no longer eligible to participate in government tenders. In November, the CBSA announced that it was temporarily suspending all contracts with the three IT staffing companies.

On Monday, the House of Commons unanimously approved a formal summons ordering GCStrategies partners Kristian Firth and Darren Anthony to appear before the government operations committee within 21 days.

Should they fail to appear within that time, the motion states that the Sergeant-at-Arms “shall take Kristian Firth, Darren Anthony or both of them, as the case may be, into his custody for the purposes of enforcing their attendance” at the committee.

GCStrategies has previously testified twice before the government operations committee as part of its study into ArriveCan and broader contracting issues.

During his last appearance in November, Mr. Firth acknowledged that he had submitted inflated résumés as part of the federal procurement process connected to the Botler project. He said this was a unique event. However, Procurement Ombudsman Alexander Jeglic’s report on ArriveCan found “numerous examples” where GCStrategies “had simply copied and pasted” the required work experience listed by the government in a points grid to describe the skills and experience of the company’s proposed subcontractors.

Mr. Firth and Mr. Anthony defied an earlier summons in December, citing mental-health issues.

The House of Commons spent the day debating a lengthy motion from Conservative Leader Pierre Poilievre, which called on the government to collect and recoup all funds paid to ArriveCan contractors “which did no work on the ArriveCan app.” It also called on the government to produce a wide range of documents.

Editor’s note: A previous version of the article incorrectly stated that GCStrategies Managing Partner Kristian Firth told MPs he had submitted inflated invoices as part of the federal procurement process connected to the Botler project. In fact, he said inflated résumés were submitted. This version has been updated.