ArriveCan’s $54-million price tag ‘outrageous,’ tech leaders say

Canadian tech leaders who have built apps for large corporate clients have described Ottawa’s $54-million price tag for ArriveCan as outrageous, explaining that in their experience, most apps are built for less than $1-million.

They also question why the government did not turn directly to a Canadian app developer rather than 23 separate contractors and an unknown number of additional subcontractors.

“The people in the Canadian technology community that I’ve talked to are outraged, and I’ve talked to a lot today,” said Neil Selfe, a technology investment banker, and founder and chief executive officer of INFOR Financial Group Inc.

A Globe and Mail analysis of federal contracts related to the ArriveCan app found total spending on it is on pace to exceed $54-million this year, which is more than double what the government recently said was spent.

Further, the review found that the Ottawa-area company that received the most federal work on the app – GCstrategies – has fewer than five employees. The company told The Globe it is working with more than a dozen government departments, and delivers on its contracts through the use of more than 75 subcontractors. However, the company and the government say the identities of subcontractors cannot be revealed because of confidentiality provisions in federal procurement rules.

The company also worked on the COVID Alert app, which was meant to assist with contact tracing, but has been shut down. That app had a reported price tag of $20-million.

ArriveCan was designed as a tool for travellers to upload their mandatory health information in relation to COVID-19 measures. It was expanded to allow users to answer customs and immigration questions up to 72 hours before flying into Canada.

While the Canada Border Services Agency (CBSA) initially said five companies received contracts to work on the app, it later revealed the work involved 27 contracts to 23 unique companies.

Public Safety Minister Marco Mendicino, who is responsible for the CBSA, defended ArriveCan’s cost on Thursday.

“It was an essential tool,” he said, adding that it is now voluntary and will be used for customs declarations. “It is an investment that will carry forward for those who want to use it.”

Fahd Ananta, an investor at Roach Capital who has previously held senior product lead positions at Snapchat and Shopify, said he can’t understand how the ArriveCan price climbed to more than $54-million.

He said, in his experience, building an app for a major corporate client would cost no more than about $1.5-million, and developers would be celebrating upon landing a contract that large.

“It’s outrageous,” he said in an interview. “In my view, I think they got fleeced.”

Similarly, Apply Digital CEO Gautam Lohia, who has built numerous apps, told The Globe his company has created complex software for global organizations with all-in costs in the seven-to-low-eight figure range for a product comparable to ArriveCan.

“I have used it many times and it’s not complex,” he said of the government app. “Fifty-four million over a two-and-a-half year period is excessive.”

The Globe spoke with a total of seven Canadian-based tech executives on Thursday for their thoughts on the price and the government’s approach to outsourcing the related work. All seven said the app is relatively simple from a technical perspective and should not have cost anywhere near $54-million.

Richard Hyatt, an entrepreneur who has founded several tech companies and is currently CEO of Candr, which facilitates the use of QR codes, described the ArriveCan app as “horrible” and called for a review into why the costs climbed so high.

“It doesn’t make sense,” he said.

Zain Manji, co-founder at Lazer Technologies, said the government’s approach raises a lot of questions about its decision-making.

“The amount spent on the app is shocking, especially around the amount of capital spent to build the app and the distribution of the funds,” he said.

Nick Van Weerdenburg, CEO and founder of Toronto-based Rangle, said his firm could likely have built the app in less than a month for about $250,000.

“This is a very simple app,” he said.

He added that it is “completely unacceptable” that the government turned to a company that primarily outsourced the work to subcontractors. He said there are about 100 Canadian tech companies that probably could have built the app directly for much less.

John Ruffolo, founder and managing partner at Maverix Private Equity and co-founder of the Council of Canadian Innovators, said Ottawa should do more to support Canada’s tech sector through procurement. Yet when a Canadian company is hired that relies primarily on unidentified subcontractors, there’s no assurance the work stays in Canada.

“It just seems like a shockingly high amount of money to pay for a pretty mundane app,” he said.

Conservative MP and public safety critic Raquel Dancho said in an interview that all pandemic spending and contracts should be audited. Ms. Dancho said the app has been criticized as an irritant at the Canada-U.S. border and should have been scrapped long ago. While it is not mandatory as of Sept. 30, Ms. Dancho said it should be abandoned.

“It would be inappropriate to continue something that’s so expensive,” she said.

NDP MP Taylor Bachrach said the Liberal government has failed to be transparent about the ArriveCan’s cost and repeatedly chooses to “enrich private corporations” through outsourcing rather than strengthening Canada’s public service.

With a report from Sean Silcoff

Read More