Ottawa to release review of ArriveCan contractor’s use of Indigenous program

The Indigenous Services department now says it will release audit summaries of how ArriveCan contractor Dalian Enterprises used a federal government procurement program aimed at supporting Indigenous businesses, after previously saying all results would be kept secret.
The department had previously said no information would be released because it was commercially sensitive.
Dalian founder David Yeo, who was suspended from the public service last month after federal ministers learned he was working as a Defence Department employee, is scheduled to appear Tuesday before a House of Commons committee.
Dalian describes itself as an aboriginally owned company, and it regularly works in joint ventures with a larger company called Coradix Technology Consulting Ltd., which does not contend to be Indigenous.
The joint ventures are usually for the purpose of qualifying for a long-standing Procurement Strategy for Indigenous Business (PSIB), which is a set-aside program meant to support Indigenous businesses and workers.
The two companies have been paid more than $400-million over the past decade.
Indigenous organizations have raised concerns with these types of arrangements, warning that they can promote “phantom joint ventures” where an Indigenous partner is used as a front by a non-Indigenous business to obtain a contract set-aside.
It was under this Indigenous set-aside program that Dalian was awarded a $21.2-million contract in 2019 for “informatics professional services.” That contract was later used to fund work on the ArriveCan app for international travellers, as well as another project at the Canada Border Services Agency that led to allegations of misconduct and an RCMP investigation.
Dalian received $7.9-million to work on ArriveCan, according to a recent Auditor-General’s report.
After the release of the report, the federal government suspended Dalian, Coradix and a third IT staffing company, GCStrategies, from accessing federal contract work.
The suspension of Dalian and Mr. Yeo has led to increased attention on both the set-aside program for Indigenous businesses as well as the rules related to when public servants are allowed to also work as government contractors.
The rules of the set-aside program state that participants are subject to mandatory preapproval audits and random after-the-fact audits to ensure compliance.
The initial audits are primarily focused on confirming that the Indigenous company is on an existing Indigenous Business Directory (IBD) maintained by the department.
After-the-fact audits could determine whether the company followed through on the program requirements, including ensuring that at least 33 per cent of the total value of the work is performed by the Indigenous contractor or through a combination that includes Indigenous subcontractors.
The Globe and Mail reported in December that Indigenous Services Canada has never performed an after-the-fact audit of the Dalian/Coradix joint ventures.
After receiving questions from The Globe, Indigenous Services said in December that it would conduct such audits of all Dalian and Coradix contracts under the program. But department spokesperson Anispiragas Piragasanathar originally said the results would not be made public.
In an update to The Globe sent late Friday, the department said the audits are expected to be completed this summer and the department now plans to release audit summaries. The department maintains that releasing the full audit reports would violate federal privacy laws.
“Due to the complex nature of these audits, an exact timeline for completion cannot be provided,” the department said. “A summary of the results will be made public once the audits are completed. ISC cannot, however, make public the full copies of audits as audits contain commercially sensitive information. This is the case for all PSIB audits.”
The department also said it completed an audit last month that confirmed Dalian qualifies to be registered on the Indigenous Business Directory.
“However, information attributed to Dalian Enterprises by recent media outlets appears to contradict the information provided to ISC by the company during the audit earlier this year. The federal government is therefore auditing the company again to confirm eligibility for the IBD,” the department said, adding that a summary of that review will also be made public upon completion and the company is suspended from the program until further notice.
The statement does not explain what new information led to the decision to review Dalian’s eligibility to be on the IBD.
In a detailed statement released earlier this month, Dalian defended Mr. Yeo’s decision to join the public service. Dalian said Mr. Yeo’s DND position began in September after Dalian’s work on ArriveCan was complete.
The company said Dalian set up a conflict-of-interest screen so he would not be involved in the company’s interactions with his new employer.
The statement also said that since becoming a DND employee in September, Mr. Yeo “has had no involvement in the management or operations of Dalian, and has not had access to Dalian confidential information of any kind.” It also said he has resigned as a director and officer of the company and placed his shares in a blind trust.
The company has not answered questions as to why Mr. Yeo made no mention of any of this when he appeared before a Commons committee in October as the president and founder of Dalian, the month after joining the public service, and described himself as a current director of the company.
During that October appearance, Mr. Yeo said he helped form the PSIB, which was previously called the Procurement Strategy for Aboriginal Business (PSAB), and works with federal officials with respect to the program.
“I still continue to do that today. We are completely registered and have audits very regularly,” he said, rejecting the suggestion that his company is misusing the program.
“These types of accusations don’t ring true, in my opinion,” he said.
Later in the Oct. 31 meeting, he described himself as a current member of Dalian’s board of directors.
“I am an executive on the board of directors for Dalian, and I maintain all of the governance as it relates to the PSAB and make sure that the company is absolutely in line, in step, with everything that relates to procurement and government contracting within the federal government,” he said.
Defence Department spokesperson Frédérica Dupuis said department employees and Canadian Forces members can accept federal contracts under certain conditions.
“From a contractual point and as per all of Government of Canada’s internal policies, while there is no prohibition against contracting for services with current and former employees at any level, and current and former CAF members at any rank, it is essential that the contracting be conducted honestly and prudently to withstand public scrutiny,” she said in an e-mail.
“If a contract is awarded to a Government of Canada employee or CAF member, it should not give rise to any suggestion of preferential treatment.”