$6.8 million Nuctech deal rejected after security review

Ottawa has increased its national security requirements based on a risk review, and as a result, Global Affairs Canada will not proceed with a $6.8 million contract with a partially Chinese state-owned security company that was to install and run X-ray scanners in Canada’s embassies around the world.

In July, Ottawa posted details of a “standing offer” from Nuctech, which would see the Beijing-based company install X-ray scanning equipment and software in 170 Canadian embassies, consulates and high commissions worldwide.

However, after critics raised concerns the company is closely associated with Chinese Communist Party leaders, Global Affairs Canada (GAC) announced a review.

In a hearing Wednesday in Ottawa, a GAC official said a review by Deloitte Canada recommended the federal government only install security equipment in Canadian embassies, from companies with national security clearances.

Nuctech was not reviewed for national security in the GAC procurement process, the hearing was informed.

The GAC official said when Ottawa accepted Nuctech’s standing offer, existing security requirements judged that Nuctech’s equipment would not present a security risk, because it would only be installed in public areas and would not be connected to Canada’s secure information networks.

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Michele Mullen, director-general for the Canadian Centre for Cyber Security, said the centre wasn’t approached by GAC to do a risk review on Nuctech’s bid.

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“We only perform assessments when we are approached by departments making decisions,” she said.

Mullen said Ottawa now recognizes, after the Deloitte review, the types of equipment Nuctech was to provide, could be used to access information networks, if installed in Canadian foreign missions.

“The nature of the technology has evolved so that (X-ray machines provided by Nuctech) actually could gather information,” Mullen said.

Global News has reported that since 2017, Nuctech had been awarded four border security and customs warehouse contracts valued at $6.5 million to provide scanners and lab equipment to Canada Border Services Agency (CBSA), according to procurement documents.

This is despite mounting concerns among some national security experts about Nuctech’s growing access to sensitive facilities worldwide.

Nuctech, which was headed by the son of former Chinese President Hu Jintao for several years, has accumulated a number of airport and border security infrastructure contracts around the world.

According to the Nuctech website, the company has customers in 160 countries.

However, Nuctech has also garnered criticism over alleged corruption in its business dealings in Africa.

According to Lorenzo Ieraci, assistant deputy minister for Public Services and Procurement Canada, Nuctech was one of seven companies considered for bids on the GAC security equipment contract, in December 2019. The other companies were from the U.K., Canada and the United States, he said.

“How could we overlook that a Chinese Communist Party state-owned company would put equipment into our embassies?” Ieraci was asked by an elected official.

“The way forward is to make these decisions based on a more rigorous security assessment than we have done in the past,” Ieraci answered. “We are now aware of risks, that we were not previously.”

A CBSA official said the border agency will also reassess its dealings with Nuctech.

“We are looking at our life-cycling (of existing Nuctech equipment) given our new security requirement guidelines,” he said.