Feds wasting millions on middlemen agencies, contractor says

A government contractor has stepped forward to expose a procurement system that is costing Canadian taxpayers tens of millions of dollars.

A government contractor has stepped forward to expose a procurement system that she says is costing Canadian taxpayers tens of millions of dollars.

The information technology specialist says a system of unnecessary middlemen is adding an extra 47 per cent on to the cost of hiring her.

The woman revealed that Canada Revenue Agency hires her for $735 a day. The independent consultant receives $500, while two other firms get $235.

CGI, a large Canadian IT firm, has an ongoing contract to take care of the revenue agency's IT needs, so it gets $195 a day, while a smaller firm, who is subcontracted by CGI to find the IT specialist, gets $40. 

"In the end, I'm the one doing the work," said the woman, a single mother, who did not want to be identified because she wants to continue working and supporting her child.

"If the process was not as complicated as it is today, that would save the government a lot of money, and probably put more money in my pocket."

Another IT specialist balks at the fact CGI is taking a large chunk of his pay when he does all the work. He told the CBC: "I pay CGI $36,000 a year to cut me a cheque once a month."

Lorne Gorber, vice president of global communications for CGI, says his company takes care of a lot of issues for the Canada Revenue Agency.

"I don't think our client would say" the company is getting something for nothing, said Gorber.

He maintains CGI takes care of many IT issues in its contract, and has 1,500 employees in the National Capital Region. Many of its employees fill government positions, says Gorber, but CGI subcontracts for extra IT specialists because "we're not a staffing agency."   

A Canada Revenue Agency spokesperson says CGI is entitled to provide IT specialists to the department because it gained control of one of eight successful companies who bid on the CRA contract in 2004.

Up to 30% commission

However, a review of CRA contracts in the fiscal year 2007-2008 showed that CGI received $44 million of the $49 million the revenue agency paid to get IT consultants and is in the dominant position on that 2004 contract.

The hired consultants themselves complain that CGI takes up to 30 per cent commission, while other smaller companies only take five per cent to connect them to the government.

"There are instances like this that they can pursue better value through direct relationships," said Jon Hansen, a researcher and writer who studies government procurement issues.

When the government paints itself into a corner and deals with a limited number of companies, he says, it ultimately leads to increased costs.

Fourteen months ago, the government initiated a plan called TBIPS — Task-Based Informatics Professional Services — to bring in IT specialists under a competitive structure. However, Caitlin Workman, a CRA spokesperson, said the CRA found that using "existing providers" was more efficient and came at a comparable cost.

A House of Commons committee, though, is looking into ways to get more small- and medium-sized businesses into the competition for government contracts. Derek Lee, MP for Scarborough Rouge River and chairman of the Government Operations Committee, says MPs are tackling the trend toward "bundling" contracts.

"If you make contracts bigger and bigger, it tends to make it better for the big guy, not the little guy," says Lee. "It allows for a broker or middleman to come in and bid on big contract and he or she parcels off to little guys — who would be contributing their goods and services — but at a price that's less than they would have wanted to."

The Commons committee held hearings all this week. It heard from several companies and business organizations that take issue with the current system. The members will now develop recommendations and a report on how the procurement process could be fixed.

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With files from Julie Ireton