Question Period Note: Fraudulent Billing

The Government of Canada was fraudulently billed an estimated $5 million by individuals who worked as subcontractors for suppliers on professional services contracts.

• My department has detected several fraudulent billing schemes undertaken by individuals who worked as subcontractors on federal professional services contracts. This has been the result of Public Services and Procurement Canada’s efforts over the last five years to strengthen its approach to detecting fraudulent activity and other types of wrongdoing
• Public Services and Procurement Canada took swift action to suspend the security clearances of the individuals in question. This prevents these individuals from doing business with the Government on contracts with security requirements
• These cases have required months of efforts by officials within my department as these schemes spanned multiple organizations and suppliers across multiple contracts
• Public Services and Procurement Canada is pursuing efforts to recover illegitimate amounts billed to the Government of Canada
• These cases have been referred to the RCMP, so I will not comment further

If pressed on more details about the cases referred to the RCMP:

• The department has referred the cases to the Royal Canadian Mounted Police and officials are trying to balance the need to be transparent while also protecting the integrity of ongoing investigations. Basic information was shared with the public as soon as the investigative process permitted us to do so
• Key components of the department’s approach to managing the risk of fraud are associated with prevention, detection and enforcement
• The department is sending a clear message to the marketplace that this type of behaviour is unacceptable. We are taking the necessary steps to detect and deter those individuals who perpetrate this type of wrongdoing against the Government

If pressed on the providing the names of the three individuals:

• As you would expect, I am not in a position to provide that level of information at this time, but what I can say is that the wrongdoing in these cases occurred mainly within the IT consulting services sector

If pressed on the consequences for the three individuals:

• The security statuses of the individuals were suspended when PSPC’s investigations provided sufficient grounds to believe that overbilling had taken place. This limits their ability to do business on federal contracts
• PSPC continues to closely monitor this situation and will make the necessary adjustments to our approach as new information becomes available

If pressed on the consequences for the prime contractors:

• At this time, the department is assessing whether there will be measures imposed on the prime contractors involved with these three subcontractors
• While these investigations are case-specific, the department has a framework of fraud detection tools and activities, which enables PSPC to continually monitor the procurement system for potential instances of fraud and wrongdoing
• This includes active measures associated with ongoing data analytics to identify potential instances of fraudulent billing. And when an issue is detected, we respond quickly to mitigate the risk

If pressed on providing the departments impacted by this fraudulent activity:

• A total of 36 departments, agencies and Crown Corporations were impacted by this fraudulent activity. In order to protect the integrity of ongoing investigations, additional details cannot be provided at this time

PSPC uncovered three cases of fraudulent billing by professional services subcontractors (i.e. individuals who were subcontracted) who were employed by prime contractors that held multiple contracts with a number of federal departments and agencies:

• An IT subcontractor fraudulently billed eight departments between May of 2020 and June of 2022
• A second IT subcontractor fraudulently billed a total of 20 departments between April 2018 and May 2022
• The third subcontractor provided professional services as a business architect from April 2019 until December 2022 and fraudulently billed a total of 24 departments

Administrative investigations were launched and found that the subcontractors’ actions resulted in 36 federal departments, agencies and Crown corporations being fraudulently billed. Illegitimate payments are estimated to be $5 million.

These three cases have been referred to the RCMP for further investigation.

PSPC has a framework in place to prevent, detect and respond to wrongdoing in order to safeguard the integrity of the federal procurement system. This approach includes the use of a variety of tools to actively detect fraudulent activity, and respond to alleged misconduct that the Government of Canada is being defrauded in either a specific contract or on a broader scale.

PSPC employs active measures to raise awareness among procurement officers on how to identify potential instances as well as the use of data analytics and tips from the public to identify potential instances of fraud and wrongdoing. In order to respond to alleged instances, the department has an investigatory capacity to examine allegations that the Government of Canada is being or has been defrauded within its procurements.

The identified three cases demonstrates that departmental approach and techniques to prevent, detect and respond to instances of fraudulent activity are working.

The department will continue to refine and expand the use of our tools to detect and address wrongdoing and ensure that individuals or entities engaging in fraud or other illegal activities are held accountable for their actions and return monies owed to the Crown. 

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