Government Operations Committee on May 15th, 2007

[Garth Turner, Conservative, Halton, ON]

Have you had any discussions with this government, or is there any hope that Canada's new government will come up with new money to protect our national heritage, or are you assuming no budget increase?

[Daphne Meredith]

We are certainly pursuing a program for Parliament Hill, including, probably most importantly right now, and pressingly, the West Block, so yes, there is a commitment of a significant amount of money for Parliament Hill. It's fair to say that we're going about it project by project, where the need is most significant. Yes, we have initiatives under way that go beyond the $200 million a year.

The issue is that it's not entrenched in our funding formulas; that is, to keep maintenance at the level that you would want it to make up the gap that we got into pre-1995. I think that's fair to say. I'd also just add, contextually, that we meet with provincial governments every year, and we're certainly not alone in this regard. All of them have a deferred maintenance issue.

[Garth Turner, Conservative, Halton, ON]

All right, but I don't hear any way that we're dealing with this; I don't hear any solution here. You've got a pretty frustrating job. You've got to manage crumbling assets, right? You don't really have the money to take care of all of this stuff. The selling of these assets, is that the best hope we've got?

[Daphne Meredith]

I think the rationale for selling the assets is based on more than a deferred maintenance issue. I think the rationale for it--to be tested by the fairness monitor, once we understand what the proceeds of this potential would be--would be that it's a good bet for the federal government to be selling and leasing back these properties, in part because of maintenance, but also for other considerations as well. Of course, we would expect--

[Garth Turner, Conservative, Halton, ON]

Do you have a financial model that shows the justification, that shows the reasonableness of sale and leaseback?

[Daphne Meredith]

Yes, very much so.

[Garth Turner, Conservative, Halton, ON]

Can we see it?

[Daphne Meredith]

Tim, I don't know what our funding model looks like.

[Tim McGrath]

We've used the standard government model for investment analysis as part of that. There are factors in it that are variable, as you would know, and certainly residual value is one of them--what's the residual value of the property. If you take a look at a Crown-owned building versus a private sector building, the residual values of our buildings are generally much lower because of our inability to invest and keep the buildings up to a good standard. There are other things, like discount rates, for which, when we do investment analysis, we use a sovereign rate for discount, which basically is saying that owning a bond and owning real estate is the same risk.

So there are challenges there.

[Garth Turner, Conservative, Halton, ON]

What we're interested in is the rationale behind the sale. One thing this committee has been interested in is finding out exactly what the reasonableness is of selling the assets and leasing them back over the course of 25 years, because we have heard that a 25-year lease is quite extraordinary in terms of the commercial private sector. It's usually much shorter. Also, we're hearing today about the built in 10-year obligations of the landlord, so there are some new wrinkles here.

We're just trying, as committee members, to understand whether this is the appropriate course of action for the government. We'd be very interested, and I would be very interested, Madam Chair, in seeing this cost analysis that you've done, and I would ask that it be tabled as quickly as possible, please.

[Tim McGrath]

I guess the issue--and I know that our minister addressed it before--is that the financial analysis also contains what our positioning would be on this in terms of the process we're under right now. I know that the minister has undertaken to come back in two weeks' time as part of that.

[The Chair, Liberal, Diane Marleau]

Thank you very much.

We will go to Mr. Albrecht.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Thank you, Madam Chair.

Thank you to each of you for being here today. I especially found the summary very helpful. It's a very complex department, as you pointed out, so the summary was very helpful to me.

I'd like to get your comments on something. On page 37 and following, you discuss the greening of government operations, and also discuss electronic waste guidance for new government office buildings in terms of the LEED standard, long-term leases, and those sorts of things, which I think are very good initiatives. I notice on the graph on page 37, at the bottom, that the expenditures rise dramatically to 2008-09, and then there's a very dramatic drop-off. It looks to me to be a drop-off from a $14 million to a $3 million--and maybe that's billion--investment.

What is the rationale for the sudden drop-off? I would think we'd have a longer curve to continuing planning expenditures in that as opposed to a quick reduction. Maybe I'm misreading that graph.

[Daphne Meredith]

Mike?

[Mike Hawkes, Chief Financial Officer, Finance Branch, Department of Public Works and Government Services]

No, you're reading it perfectly clearly.

What we have in this case is what I already identified in the base of the expenditures for PWGSC. A lot of the source of funds for that comes to us from other programs and organizations. In particular, we have some of those that are sunsetted—that is, the funding was provided to the government for a period of time to implement a series of priorities.

What you're seeing there is that the currently funded priorities sunset at the end of fiscal year 2008-09, and they're likely to be added to through the supplementary estimates process as the planning changes during the current and future years. So it's a relatively short-term set of priorities that will continue to evolve, and as priorities change or more funding is required, you'll see that base grow.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Thank you.

I do agree that government needs to take the lead in terms of greening and environmental policies that people will see, and I think we have some good indications of that through the LEED program and buildings that have been leased.

I just want to pick up on the West Block issue. Probably this isn't the best example of some of the energy-efficient places on Parliament Hill, as is the Confederation Building. Often the heat in these buildings is still on into May, and we sit in here with heat still coming through some of the registers.

But I do want to comment on the Library of Parliament restoration. As a member of Parliament, I take great pride in walking into that facility, and in the detail that was given to that restoration project. On that note, a lot of my constituents also come into West Block, and there's quite a contrast.

I notice on page 75 of your details on project spending—and I don't think it's this committee's mandate to get involved in all the technical details, but just for a point of clarification—West Block renovation is listed there, about midway through the chart on that page, and there doesn't seem to be a great deal of investment until later in the process. So can we expect that it is going to be a number of years yet until this building is actually retrofitted properly?

[Daphne Meredith]

Mr. McGrath, can you please respond to that question?

[Tim McGrath]

For the West Block, the first thing we have to do is empty the West Block. We have approval now to empty the West Block, and there is a series of work involved. Also in the approval, we received a spending authority to plan the long-term use of the West Block.

But you are correct, it is a long program of work, probably into the years 2015 or 2016 before it's completed, and it is part of the long-term vision plan on Parliament Hill, where it would actually become the temporary chamber of the House of Commons as we move through a program of work over the course of the next 25 years.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

That was a bigger answer than I expected.

As well, I'm very interested in the small and medium-sized enterprises that you referred to on page 15 of your project booklet here. I know we're early in the process, but I'm just wondering how you assess the current success. And do you have any plans to broaden that program to smaller communities?

For example, the area that I come from has about 500,000 people, and it would seem to me that after we've achieved a certain level of success in Toronto and Vancouver and across the country, we can maybe look at expanding that to areas such as the Waterloo region.

[Daphne Meredith]

Thank you for the question.

Certainly encouraging small and medium-sized enterprises is one of our priorities right now. It's certainly an area of lots of activity in our department. We have a new office of small and medium-sized enterprises. We have representatives across the country in six regional offices as well, working with individual companies to help them get access to government procurement.

As to the kinds of things we do, we're simplifying the language we use in our solicitation documents and our contracting documents, to unburden them of that. We have professional services online, which makes it much easier for them to sign up on a standard offering and then be chosen by a given department. We have greater use of master standing offers, with good representation from small and medium-sized enterprises on them. Those are the main initiatives that we have.

Your question was, are they succeeding? I think they are. I'm just trying to think of the statistics here. Currently 29% of the market share of our federal buy is owned by small and medium-sized enterprises. They have increased by the thousands.

I'm trying to find the numbers here.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

I don't really need that kind of technical detail. I'm wondering in a general way if we see movement. Then the second part of the question is whether it is dependent upon having regional offices, or in our technological age, is it happening through the Internet without the offices? I would think people still like to walk into an office and get help and so on.

The second part of the question was this: is there a long-term potential that this would be expanded to smaller communities?

[Daphne Meredith]

I think there is. The personal touch helps in terms of our representation in the regions, but that's not to say that the effect of it isn't felt by those who access the Internet too. I was looking for the stats. I have them. The SME share increased from 24% to more than 30% from 2004 to 2006. We have over 8,000 new SMEs registered with Public Works and Government Services to do business with the government last year alone, so we are seeing some success.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

I have one last quick question. Do we have a regional breakdown at all, not for the committee today, but could we access a regional breakdown at some point as to where those SMEs are located across the country?

[Daphne Meredith]

I'm pretty sure we can get you some good information on that, because we're building our information system to track it and manage it that much better. We'll do what we can.

[Harold Albrecht, Conservative, Kitchener—Conestoga, ON]

Thank you.