There’s a reason that outside consultants get paid the big bucks.
In the case of the administration of COVID-era small business loans program, that reason was because the government allowed a consultancy firm to set its own prices, hire its own subsidiary and generally treat the taxpayer as a cash cow to be milked frequently and enthusiastically.
Most of the coverage of the latest Auditor General’s report into the Canada Emergency Business Account program will focus on the $3.5 billion that went to recipients subsequently deemed ineligible, or on the $8.5 billion in loans that have still to be repaid.
But the real story of bureaucratic bungling is buried halfway through the chapter on the Canada Emergency Business Account’s administration.
The program was designed to provide interest-free loans of up to $60,000 to eligible small businesses, forgiving up to $20,000 if the loan was repaid. The offer of free money was a no-brainer and it proved wildly popular, with nearly 900,000 businesses signing up to borrow $49 billion to cover undeferrable expenses like rent, utilities and wages.
The job of administering the program was given to Export Development Canada, even though it protested it did not have the capacity, expertise or infrastructure to manage a project that size.
EDC prioritized getting the money out the door as quickly as possible and sole sourced a contract from a single vendor, Accenture, with which it already had a working relationship.
However, as Auditor General Karen Hogan found, EDC gave Accenture too much control over too many key aspects of the program to be able to exercise even the most basic cost controls, such as being able to evaluate whether the amount of money paid out in contracts aligned with the work done.
In total, Accenture received 19 non-competitive contracts worth $313 million.
Since loans have still to be repaid, and the repayment system relies on Accenture’s proprietary systems, it will continue to be paid until 2028.
Hogan’s report was especially critical of the extended use of hourly rate contracts. It said EDC accepted the contract’s value from Accenture with no breakdown on how the amounts were determined. As Hogan told the House of Commons Public Accounts committee on Monday, there was an over-reliance on hourly based pay that is not typical of the public service, but because EDC is a Crown corporation, and, since it nominally operates according to commercial principles, it is not subject to Treasury Board procurement policies.
“Accenture was involved in proposing solutions to implementing program changes, determining contract scope and prices with little challenge from EDC,” said the report.
The extent of Accenture’s control became clear when EDC decided it needed a loan accounting system to track and monitor loans transferred from financial institutions.
Accenture was asked to lead the informal procurement process and apply the evaluation criteria, even though one of the competing vendors was an Accenture subsidiary.
Amazingly enough, Accenture was dazzled by the solution offered by one particular company, its own subsidiary. To add considerable insult to injury, the report revealed that Accenture was paid to run the process it ultimately won.
“That was unacceptable,” said Hogan in committee, when Conservative MP Kelly McCauley asked if procurement rules were violated.
EDC tried to cover its tracks by asking for a third-party independent assessment on whether all this was okay. The fact the Crown corporation even had to ask suggests a serious lack of situational awareness.
The assessment concluded that while due diligence was exercised when it came to financial and technical risk, EDC’s dependency on Accenture created reputational and cost risks.
The report is not specific but presumably the third party involved was not Accenture, though it would not come as a total shock to find out it was.
Hogan’s report said the third-party assessment did not absolve EDC of its responsibilities. She revealed that the price was $36 million of contracted work and a $7 million licensing fee to build and integrate the loan accounting system.
It all smacks of a bureaucracy that had no idea what it was doing.
The deference awarded Accenture by EDC suggests the Crown corporation’s staff thought the outside consultants were much smarter than they were, either because they didn’t work in government or because they were able to get away with charging up to $750 an hour.
Pierre Poilievre has promised to cut back on the $21 billion Ottawa pays for outside consultants, if he is elected prime minister, because, he said, public servants are more accountable and affordable.
That may be so but the public sector cannot compete when it comes to the rat-like cunning of the consultant, whose primary job is to create new business and who can guarantee no outcome but the expense.
National Post
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