Government will review RCMP contract awarded to China-linked company
Radio-Canada investigation found contract saved less than $60,000 on radio communications equipment
The federal government is reviewing an RCMP equipment contract awarded to a company with ties to China's government that Prime Minister Justin Trudeau called "disconcerting."
Trudeau said the government will also re-examine its approach to procurement.
A Radio-Canada investigation found that Public Services and Procurement Canada (PSPC) awarded Sinclair Technologies a contract worth $549,637 last year to build and maintain a radio frequency (RF) filtering system for the Mounties.
While Sinclair is based in Ontario, its parent company Norsat International has been owned by Chinese telecommunications firm Hytera since 2017. The Chinese government owns about 10 per cent of Hytera through an investment fund.
PSPC said in response to Radio-Canada's inquiries that it did not consider security concerns or Sinclair's ownership in the bidding process. Radio-Canada confirmed through sources with knowledge of the matter that the difference between Sinclair's bid and that of its competitor, Quebec-based Comprod, was less than $60,000.
Trudeau said Wednesday morning that his government will look into the matter and will examine the role security plays in government procurement.
"Absolutely, we're going to be finding out first of all what needs to be done to ensure that our communications technology is secure, but also make sure we're figuring out how this could continue to happen and make sure that Canada is not signing contracts with the lowest bidder that then turn around and leave us exposed to security flaws," he told a news conference.
"We will have some real questions for the independent public service that signed these contracts, and we'll make sure that this is changed going forward. It's high time that happens."
WATCH | Trudeau: 'We will have some real questions' about contract for RCMP equipment with Chinese-linked company
Part of the RF system's function is to secure the RCMP's land-based radio communications. An RCMP spokesperson told Radio-Canada that installation of the equipment has started in Ontario and Saskatchewan, and that any contractor working on the equipment has to get a security clearance.
The news comes after Canadian national security organizations have warned about threats to Canadian democracy and institutions posed by foreign actors, including China. The federal government also recently unveiled its Indo-Pacfic Strategy, which includes a plan to confront an 'increasingly disruptive' China.
Trudeau said Wednesday he finds it "disconcerting" that while security agencies were "advising us as a government and as Canadians that we have to be very careful about foreign interference in our institutions ... other parts of the civil service were signing contracts that have questionable levels of security for our operations and our national security institutions like the RCMP."
WATCH | Government is looking at RCMP contract with China-linked company ' very carefully': Mendicino
Public Safety Minister Marco Mendicino said Wednesday that department officials are examining the RCMP contract.
"We're eyes wide open about the threats that are posed by hostile state and non-state actors, and that includes [China]," he told a media scrum.
"What I've done, in the light of this report, is to instruct my officials to look very closely at the details of that contract and also to work with our officials to review the process by which this contract was awarded."
A Sinclair Technologies executive declined an interview with Radio-Canada on the equipment and the contract, citing customer confidentiality.
The United States Federal Communications Commission (FCC) banned the sale and import of Hytera products in 2021, citing national security concerns.
Hytera is also facing 21 charges in an American espionage case. The United States Department of Justice has accused the company of conspiring to steal trade secrets from American telecommunications company Motorola. Hytera has denied the allegations.
Opposition leaders criticize government over contract
Speaking with reporters before question period Wednesday, Conservative Leader Pierre Poilievre called on the government to terminate the contract and called on Trudeau to take responsibility for it.
"Yes, it should be cancelled, and Justin Trudeau is responsible. He's the head of government and this is a government contract," Poilievre said.
Poilievre said the American charges against Hytera should have been cause for concern about Sinclair's bid.
He added the government should limit its sources for equipment purchases.
"We as a government, we as a country, should not allow countries and government-owned enterprises that are known for espionage to sell technology that is related to our telecommunications," Poilievre said.
WATCH | 'He's head of government and this is a government contract': Poilievre
NDP Leader Jagmeet Singh said the American government's decision to blacklist Hytera should have been a red flag for the federal government.
"You would think that Canada would go through the proper protocol to make sure our information, as sensitive as it is with a federal policing agency, is not being subject to a serious threat or breach," Singh told a news conference.
"I'm deeply concerned, I think that there is a real risk here, and it shows that the government did not take the appropriate steps to vet this project or the company."
WATCH | Singh calls RCMP equipment contract with China-linked company 'shocking'
Singh called on the government to make changes to its procurement process.
"There needs to be a better process in place to protect our privacy and our security for our information systems — particularly given that this is now being identified as the major security risk to our country," Singh said.
Innovation Minister François-Philippe Champagne said Wednesday that the government should investigate the RCMP contract.
"We need to remain more vigilant to prevent things like that, and understand the why and how something can happen at a moment where we know that we have to take care of geopolitical challenges with respect to China," Champagne said Wednesday in a media scrum.
"So we need to be very mindful of what happened and I think every branch of government needs to apply that level of scrutiny."
Later Wednesday evening, Champagne held a press conference outlining a number of proposed changes to Canada's foreign investment rules which he said would bolster national security.
When asked if the proposed rules would have prevented Norsat from investing in Sinclair, he said the new rules are a step in the right direction.
Government likely could terminate deal, experts say
While the terms of the Sinclair contract aren't public, experts say Ottawa probably could terminate the contract.
Peter Jarosz, an Ottawa-based lawyer at McMillan LLP, said a set of standard terms govern all federal government contracting and they include termination clauses.
One of those clauses — "Termination for Convenience of Canada" — gives the government wide latitude to cancel contracts, Jarosz said, but it may come at a price.
"The government can cancel because it wants to, and it may have to compensate the supplier," he said.
Jarosz said such clauses exist because the government needs flexibility in procurement.
"When the government purchases things, it's not like a consumer," he said. "A government has policy issues to deal with, national security issues to deal with — all kinds of things that the consumer doesn't."
Alan Williams, a former assistant deputy minister of materiel at the Department of National Defence, said termination of government procurement contracts is uncommon but not unheard of. He cited the Chretien government's 1993 cancellation of a $5 billion military helicopter contract as an example.
"If you can't cancel for non-performance, you have to cancel just simply because you want out of the deal," Williams said.
"That puts you in a difficult negotiating position but sometimes that's the best option in a case."
The government still should review the list of companies it allows to bid on procurement projects, Williams said.
"The government is accountable for determining which, if any, companies we ought to buy equipment from, or cannot buy equipment from. And then the bureaucrats just comply with those rules," he said.
"But if the government doesn't set those rules, there's no reason for the purchasers to arbitrarily exclude them."
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