Canada's ArriveCan app on a mobile device, on Feb. 12, in Ottawa.Adrian Wyld/The Canadian Press
The federal government is disputing an IT staffing firm’s claims in a lawsuit that says it has been unfairly suspended from government contracting because Ottawa is trying to distract from negative publicity over its handling of the ArriveCan app.
Coradix Technology Consulting Ltd., which was among the main contractors on the federal app project, filed a lawsuit in May seeking $64-million in compensation after the government’s March decision that it was suspending the company from the federal contracting system.
The government’s news release did not provide detailed reasons for the suspension, but Public Services and Procurement Canada said at the time that it has a framework in place “to prevent, detect, and respond to situations of conflict of interest or potential wrongdoing.”
But the government has since filed a statement of defence denying the suspensions were linked to ArriveCan and saying the company had failed to properly disclose that one of its business partners had taken a job in the public service.
ArriveCan, an app for cross-border travellers launched during the pandemic, has put a spotlight on the government’s reliance on contracts with staffing firms that subcontract technology work, causing costs to balloon. Issues related to the app have spurred House of Commons committee hearings, Auditor-General probes and RCMP investigations.
Last March, the federal government also suspended Dalian Enterprises, a small Indigenous-owned company, and a joint venture between Coradix and Dalian, which frequently worked together to land contracts set aside for Indigenous businesses.
Coradix and Dalian worked together on the federal government’s ArriveCan app project. The main private contractor on that project, GCStrategies, has also been suspended from federal contracting.
The suspensions of Coradix and Dalian came shortly after public revelations that David Yeo, the founder and president of Dalian, had been working as a full-time public servant at the Department of National Defence since September, 2023, without fully severing ties with his company, which continued to conduct contract work with DND.
The focus on the business relationship between Dalian, which Mr. Yeo has said has just two employees, and the much larger Coradix, a non-Indigenous company that provides back office support to Dalian, has drawn attention to long-standing concerns over oversight of the Procurement Strategy for Indigenous Business, which creates incentives for Indigenous companies to access federal contracts through reduced competition.
Critics say the program’s provision that allows non-Indigenous companies to qualify if they have an Indigenous partner via a joint venture is vulnerable to abuse.
The Coradix-Dalian joint venture’s status as an Indigenous business was based on the fact that it was led by Mr. Yeo, whose heritage traces back to Alderville First Nation, where his great-grandfather was once the chief.
In its statement of claim, Coradix says it did not learn of Mr. Yeo’s public service job at DND until Oct. 31 of last year. The company said it took various precautionary steps, including advising Mr. Yeo to put his Dalian shares in a blind trust and to not have any direct involvement in Dalian. The company said it was assured by Mr. Yeo that his DND supervisor had told him there was no conflict concerns.
Coradix’s main argument is that PSPC did not conduct a proper investigation before publicly announcing in March that it had suspended its contracting relationship with the company.
“The terminations and suspensions of the contracts were done for an improper purpose, namely, to deflect or distract from negative publicity regarding alleged lapses in PSPC and/or SSC’s [Shared Services Canada] management and budgetary oversight of the ArriveCan App and alleged inadequacies or shortcomings of PSPC and SSC’s procurement practices,” the company said in its statement of claim, dated May 30, 2024.
Ben Mills, a lawyer representing Coradix, said the company will not be commenting as the matter is before the courts. Mr. Yeo also declined to comment.
Coradix and Dalian have been awarded nearly $1-billion in contracts since 2011, either directly to one or the other or through joint ventures between the two. Contract values do not mean the companies actually received all of those funds. The public accounts show that Dalian and Coradix have collectively been paid $635-million through federal contracts since 2003.
They were among the top contractors on the ArriveCan project and through that controversy, the companies faced scrutiny over their joint venture business model.
Coradix is seeking damages only with respect to the end of its direct contracting relationship with Ottawa. It is not claiming damages with respect to its joint venture with Dalian. Neither Dalian nor Mr. Yeo are parties to the Coradix lawsuit.
The company also said the government “failed to recognize that Mr. Yeo is not part of Coradix.”
In a statement of defence dated Sept. 6, 2024, the federal government says the suspensions were not linked to ArriveCan.
“The defendants deny that any actions taken regarding the contracts were influenced by any events or allegations related to the ArriveCan application,” the government states in court records.
Instead, Ottawa said the suspensions were warranted because neither Coradix nor Dalian properly disclosed that Mr. Yeo was employed by DND.
In the statement of defence, the government takes issue with how Coradix described its relationship with Dalian.
The government said Coradix has had a 49-per-cent ownership in Dalian since 2003. It also says the two senior leaders of Coradix – Anthony Carmanico and Doug Duncan – also have senior roles at Dalian, where Mr. Carmanico has held the position of vice-president and director and Mr. Duncan has been secretary and treasurer.
The government also points out that the two companies regularly work in joint venture to qualify for the Procurement Strategy for Indigenous Business, relying on Mr. Yeo’s Indigenous heritage.
“At all material times, Coradix, either directly or through its officers and directors, effectively controlled the activities of the joint venture,” the government states.
“PSPC also had concerns regarding Coradix’s purported attempts to distance itself from Mr. Yeo at the time that Mr. Yeo, on behalf of the joint venture, was representing to the defendants that he was actively involved in the joint venture in order to preserve the joint venture’s compliance with the requirement to continue to qualify as an Indigenous business during the entire period of the contract,” the government states.
“Coradix’s actions in this matter confirmed its failure to abide by the Code of Conduct for Procurement, and further called into question its willingness to abide by the Code of Conduct for Procurement in the future.”
Indigenous Services Canada announced earlier this year that it has launched audits related to whether Coradix and Dalian have complied with the Indigenous procurement program’s rules.
Coradix responded on Sept. 26, stating that Dalian and Dalian and Coradix in joint venture fully complied with the requirements associated with the Procurement Strategy for Indigenous Business.
Coradix said the government’s comment with respect to Indigenous procurement “is scandalous and vexatious and is further evidence of the defendant’s strategy to publicly malign and defame the plaintiff.”
No court dates have been scheduled.