The world of app startup ideas is often shrouded in mystery, but one recent controversy has shed light on the importance of efficient outsourcing practices. The federal government's ArriveCan app saga continues to captivate headlines, and it appears that Prime Minister Justin Trudeau himself has weighed in on the matter.
In a recent exchange with a reporter, Trudeau acknowledged the illogical nature of outsourcing work to an Ottawa-based two-person team (with no offices) for ArriveCan. "Why is the federal government paying millions to a 2-person company, to then hire other companies to do their work? Can't the public service hire the companies directly, or perform IT work in-house?" questioned the reporter.
"That's exactly the question I just asked the public service" immediately quipped Trudeau. "Obviously this is a practice that seems highly illogical and inefficient," added Trudeau. "I have made sure that the Clerk of the Privy Council is looking into procurement practices to make sure that we're getting value for money, that we're doing things in a smart and logical way."
The controversy centers around GCStrategies, the two-person firm hired by the federal government to create the ArriveCan app. Instead of handling the work themselves, they outsourced it to multinationals including Belgium accounting firm BDO and London-based KPMG. According to documents revealed, GCStrategies billed the government rates of $1,000 to $1,500 per day, per worker, while taking a commission of 15-30%.
The details have been revealed after the Canada Border Services Agency (CBSA) in charge of the project refused to identify third-party subcontractors. The two-person firm has been paid $4.5-million a year, or about $9-million as of March 31, 2022, to work on the ArriveCan app.
GCstrategies hired six companies to help create ArriveCan: BDO Canada LLP; Optiv Security Inc./Optiv Canada Inc.; KPMG LLP; Macadamian Technologies Inc.; Level Access and Distill Mobile Inc. These companies received $8.3 million in payments from GCStrategies from June 2020 to July 2022.
The CBSA told The Globe that it did not know these six companies were involved as subcontractors, and Liberal MP Anthony Housefather questioned the need for GCStrategies and asked if there should be human resources specialists in the federal government to find personnel.
NDP's Matthew Green criticized the arrangement, stating that it is "an atrocious abuse of public dollars" and calling it "scary." Over two years, the two-person firm has made $44-million in deals to hire subcontractors for over 20 federal government departments. This would result in $6.6 million to $13.2 million in commissions for GCStrategies, if the ArriveCan finder's fee rate was applied to these hires.
The controversy highlights the importance of efficient outsourcing practices in app startup ideas. As the world becomes increasingly digital, it is crucial that governments and businesses alike prioritize transparency and accountability in their dealings.