Government Operations Committee on May 28th, 2009

[Martha Hall Findlay, Liberal, Willowdale, ON]

I have to say I'm at a bit of a loss, because you yourself have admitted that this is not a time to sell assets. I go back to the concern we have that we have $2 billion or so allocated—not allocated, but assumed—that would actually be seen on the books as money that was over and above the book value of assets. That's an awful lot of assets that would need to be sold to show an increase of $2.1 billion in this year, let alone $10 billion over the course of the next five years.

If I have a little bit of time left, I would like to go back to my earlier question about the $100 million associated with infrastructure. I will repeat our concern that we supported vote 35, despite significant concerns about the budget as a whole, specifically because we understood the need to get money out into the economy right away. It is the nature of stimulus. The stimulus is not going to be effective a year from now the way it is needed now. I'm concerned about getting answers that indicate cannibalization of earlier projects that were announced, for example.

Of that $100 million, what has actually been spent that is incremental, that is over and above what already would have been spent that can justify the concept of actual immediate stimulation in the economy? From whoever would be best to answer that, I would really appreciate an answer.

[François Guimont]

On vote 35, as we were doing our financial planning for getting stimulus money--which in our case we call accelerated infrastructure because we're putting that cash on top of the base that we have--we've identified requirements for $100 million. That $100 million is to allow us—and that's what we're doing—to roll out and have ProFac do projects. They are doing projects. The minister ran through a number of projects by provinces, including Quebec and Ontario. These projects are consuming cash, cash that normally would not have been available until supplementary estimates A.

[Martha Hall Findlay, Liberal, Willowdale, ON]

To be clear, these are projects that would not have people working on them right now, but because of this they now have people working on them?

To be honest, I understand the concept of vote 35 being bridging, and I understand all that. But my very strong suspicion is that if indeed there are people working on these projects, these people would already have been at work, and we're not actually seeing incremental employment, which is the reason why we supported vote 35.

I understand the concept of the bridging, but I'm still not hearing that we're seeing an actual increase in jobs as a result of this at this point in time.

[François Guimont]

I understand the question. The $100 million, in reality, will total to more than what we would have done. To give you a clear idea, for instance, we had budgeted an amount for the Alexandra Bridge of $50 million or so. If we had not had the AIP increment to the base, we probably would have waited for a year to get that increment in order to bridge the gap between the original approval of $30 million and where we ended up, with $52 million. So if I did not get part of that $100 million out of the AIP vote 35, I would not have been able to kick-start that project. We had to go get revised approval, but I would not have had a source of funds. Part of that $100 million for the Alexandra Bridge, for example, gave me that source of funds.

I want to be respectful and fair. You're right. I'm not saying that the Alexandra Bridge is solely out of the $100 million of the AIP. I'm not saying that at all. We were using our base. We had that discussion yesterday. The top-up would have required time for us to be able to put what we're doing now with that contractor, Pomerleau. We awarded the project contract on March 16. We probably would have obtained that cash six, seven, or eight months down the road.

Is that fair to say that, Tim?

[Tim McGrath]

That's correct.

[The Chair, Liberal, Derek Lee]

Thank you.

Mr. Anders.

[Rob Anders, Conservative, Calgary West, AB]

Thank you, Mr. Chair.

I note that earlier this week there was a proposal tabled to increase the user fees for the Esquimalt graving dock, in Victoria. While this question may be slightly different from what has been proposed, I'd like to know a little bit more about what a graving dock is, exactly. I'm familiar with a dock, but I'm new enough with regard to docks that I don't know what a graving dock is. I wondered if you could educate us on the importance of the dock and why the fees are being raised. Just give us some background, generally, and maybe some follow-up questions will arise, depending on what you say.

[François Guimont]

I had a chance to fly over and walk not too far from the graving dock, so I had a chance to see it. Believe it or not, I asked the same question: why graving? My folks will help me, but if I remember, it has to do with scraping barnacles. Yes, that's exactly what it is. I didn't dare say it, but that's what I saw, in getting confirmation. That's the terminology now. Today, that's not what they do solely--it's about refitting a ship and doing other work; but originally it had to do with removing the barnacles. That's the first thing.

The second thing about the graving dock is that it's an important piece of equipment on the west coast for la réfection des navires, notamment. It was quite clear, when I was there, that there is demand for that dock. That capacity is there.

The issue with the graving dock has to do with the fee structure, which hopefully you're going to be discussing. It has been a little too low in the past. Over the last two years we've been consulting with the industry. There's a consensus now that it would be fair to put the fee structure at a higher level--at a reasonable high level--so that there is not a deficit, which, by the way, Public Works used to mop up every year. It was around $5 million.

We want to be able to correct that deficit. And it has a magical effect, because the graving dock used to be on what we call our divestiture list of assets. Think about it: divestiture, letting go. The fact that it was on that list was preventing recapitalization by the private sector. So the two kind of go together.

Briefly, it's now off the divestiture list, so it is an asset of the federal government. Now that the private sector sees that it may not be let go to I don't know who, creating equilibrium on the fee structure will ensure that it's operated correctly. Then there will be, as well, an appetite for recapitalization, in an ongoing fashion, of that graving dock for the long-term sustainability of that piece of equipment.

That's the logic behind the user fee increase. We went at it for two years of dialogue with the industry. Unless I'm told otherwise, there's good support for moving ahead with that fee structure, because they see in this long-term sustainability for the west coast as it relates to fixing ships when they need to be fixed.

[Rob Anders, Conservative, Calgary West, AB]

Okay.

You mentioned that it was losing, let's say, maybe $5 million a year. That was the difference between revenue coming in versus what it was costing. What are the total aggregate numbers we're looking at? Was it bringing in $40 million a year in revenue and losing $5 million? What are the numbers we're looking at?

[François Guimont]

I'll let Mr. McGrath address this, if you don't mind.

[Tim McGrath]

You have to understand that what we do is provide the infrastructure. We provide a facility for small and medium enterprises to come in and work on ship repair, and any type of repair work required, for a number of fleets.

The type of revenue the graving dock brings in is around $6.4 million or $6.5 million on an annual basis. Under the fee proposal that will be phased in over a five-year period, we see that being raised to around $15.5 million, which will include an element of recapitalization. Through the consultation process with the industry, the industry is in full agreement with that process and with the proposed fee schedule we've consulted on.

[Rob Anders, Conservative, Calgary West, AB]

Just to make sure I understand that correctly, we were subsidizing that to the tune of at least half, if not more. Is that right?

[Tim McGrath]

That's correct.

[Rob Anders, Conservative, Calgary West, AB]

All right. Well, that explains it to me.

Is it just scraping? Is that how it works? They scrape barnacles off. Or is it a chemical treatment? How does it work?

[Tim McGrath]

No, actually there are not as many barnacles coming in now. It's basically redoing the hulls, redoing the electronic systems, redoing engines, and refurbishing cabins. There are a number of elements. It's total ship refurbishing that takes place at the graving dock now.

[Rob Anders, Conservative, Calgary West, AB]

Okay, fair enough.

[The Chair, Liberal, Derek Lee]

Thank you, Mr. Anders.

Since Mr. Anders raised the issue of the User Fees Act here, I just wanted to mention to members that we will be proceeding to consider some motions for adoption near the end of the meeting, one of them having to do with the Esquimalt dry dock. We're also about to consider several billion dollars in spending, so we'll move to that shortly.

We'll go to Madame Bourgeois for five minutes.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Thank you, Mr. Chairman.

Mr. Guimont, in the forecast and planned spending of Public Works and Government Services Canada, for program activities under the heading “Information Technology Infrastructure Services” the amount of $19.4 million has been indicated for 2008-2009 and only $1.5 million for 2011-2012.

Could you explain why these funds have been so drastically reduced? Is this because of excessive optimism on your part?

[François Guimont]

Thank you for the question.

Yes, we are optimistic, but that is not necessarily because of the numbers. What happened, Mr. Chairman, as far as the lower numbers are concerned, that is, the fact that we went from 19.4 in 2008-2009 to 14.4, and the 3.9 and 1.5 you referred to, is due to the fact that we took the difference between 14.4 and 3.9, and we did the same thing for 3.9 and 1.5, and this was perfectly legitimate.

Remember the structure of the department's budget. We have what is called a special purpose allotment and revolving fund. Part of the money we put in the special purpose allotment fund for IT services. Therefore, in theory, the money is still there. It was simply moved within the forecast and planned spending fund.

Jean-Luc, would you like to add something?

[Jean-Luc Caron, Acting Chief Financial Officer, Finance Branch, Department of Public Works and Government Services]

In answer to the question, we restructured our internal activities, but the amounts which will be spent remain the same.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Does this not affect small- and medium-sized enterprises?

[Jean-Luc Caron]

No, not at all.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

That's not what I wanted to know. It was a legitimate question, and all the more so because we did not have the information.

I have another question. Mr. Guimont, your department tabled with this committee what it called an operational justification. By that I am referring to shared information technology services. It was not a business plan, nor was it a work plan. In the past few years, the Auditor General had already asked for a business plan for this type of project. The Standing Committee on Public Accounts had also asked for the same thing in 1996.

Do you think you could table with this committee a business plan or a strategic plan with regard to shared services in the other areas we have already discussed?

[François Guimont]

Thank you for the question. I understand exactly what you are getting at. I am a bit perplexed, because we made public a document a couple of weeks ago... I have with me the English version of the document; it refers to a business rationale. It's not a business plan, the word "plan" does not appear, but "business rationale" is perhaps a hybrid concept. The first part of the document describes the direction the department intends to take, and the four pillars, as well as the rationale. The rest of the document, which is about 80 pages long, refers specifically to GENS activities.

The point I am trying to make is that the document situates the government enterprise network services initiative within the general approach we want to take for IT services. It is actually a matter of degree. The document is available, and it provides a description, that is, it lays out the reasoning, the direction and the rationale. If you are looking for charts with numbers, you won't find them here. I'm not saying that the opposite is true. There are charts and numbers specifically within GENS, but not as far as the other proposed initiatives are concerned. If a "business plan" is supposed to contain numbers, this business rationale, however, does not have any.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Mr. Guimont, if I may, I will come back to the first question I asked the minister. You are the deputy minister. Last April, Mr. Paradis announced that the contract with Royal LePage would not be extended. You knew this two and a half years before that date. The Auditor General of Canada had said that the contract contained countless irregularities. You knew this, so you decided not to extend the contract.

How is it then, when you knew that the contract would not be extended, and when you knew that the documentation for the last request, which had been won by Royal LePage, was enough to fill boxes and boxes, that at this stage, you only gave new bidders six weeks to familiarize themselves with the file, to grasp an understanding of it and to submit a proposal? When you put that into perspective, Royal LePage may have had a year, a year and a half or even two years to familiarize itself with the file.

I understand that some people are extremely smart, but six weeks is an impossibly short time to go through reams and reams of documents. So I ask you the question, Mr. Guimont: What in God's name possessed you to grant new bidders only six weeks?