Government Operations Committee on May 28th, 2009

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

For me, it's noon, Mr. Chairman.

Thank you.

[The Chair, Liberal, Derek Lee]

You've advised us that you have to leave at this time.

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

Sorry, Mr. Chair. I'm running late.

[The Chair, Liberal, Derek Lee]

You'll miss some very valuable questioning from Mr. Brown. I know that you'll be very disappointed.

Mr. Minister, before you actually leave, it has already been expressed here by some of the members that we would have preferred to have more time with you. There is a possibility that we may invite you to come back again in the near future, but thank you for attending today.

Good luck with your work later in the day today. Thank you for coming.

We'll continue the meeting now with officials.

Monsieur Roy.

[Jean-Yves Roy, Bloc, Haute-Gaspésie—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chairman.

In his presentation, the minister stated that SNC-Lavalin ProFac was going to hire some 3,700 small and medium-size businesses. It is already hiring some. I would like to know the process used by this company in its relations with small and medium-size businesses.

Does SNC-Lavalin ProFac conduct its activities from Toronto throughout Canada or only in certain provinces? Fifteen hundred Public Works and Government Services Canada facilities were mentioned. You are in my region and I know that people are extremely dissatisfied. I'd like to know what control Public Works and Government Services Canada has over the operations of SNC-Lavalin ProFac.

Does this company simply award contracts to companies that it already knows or does it call for tenders for the cleaning of a building, for instance? We're not talking about high-value contracts.

Nevertheless, I have heard that there were serious problems in my region regarding relations between the small companies in question and SNC-Lavalin ProFac. There were even aspects that were more or less clear or legal in the contracts that they had signed with small and medium-size enterprises.

What kind of an audit does Public Works and Government Services Canada conduct with small businesses that subcontract for SNC-Lavalin ProFac? First of all, is there an audit and are there bids?

[François Guimont, Deputy Minister, Department of Public Works and Government Services]

Mr. Chairman, I will give you an overview of our relations with SNC-Lavalin ProFac. I think it's important so that members of the committee can understand this a little more clearly.

[The Chair, Liberal, Derek Lee]

Excuse me, just as a point of order, it might be appropriate for the record to introduce the officials who are here today, because we have been working with the minister. I'll just read the list. I appreciate your being here.

There's Mr. François Guimont, who is already at the microphone. He is the deputy minister of the department. There's Jean-Luc Caron, acting chief financial officer of the finance branch. We also have Tim McGrath, assistant deputy minister, real property branch, and Mike Hawkes, special advisor of the accelerated infrastructure program.

Welcome.

It's back to you, Mr. Guimont.

[François Guimont]

If I may, Mr. Chair--and maybe I missed it--there is also Madame Daphne Meredith, who is the associate deputy minister of the department.

I will describe the relationship we have with SNC-Lavalin ProFac, give you a few figures and tell you how we will use and are using the contract that this company has to do the work that we have to do under the Accelerated Infrastructure Program. We signed an agreement with this company through a call for tenders. The contract was awarded in 2005 and covers a period of four years and includes options. We are in the first option period. The total value of the contract was...

[Tim McGrath, Assistant Deputy Minister, Real Property Branch, Department of Public Works and Government Services]

The total value is $5.3 billion.

[François Guimont]

Five point three billion, so it's a substantial contract. The purpose of the contract is to maintain our buildings. The buildings in question, to which the minister referred, represent some 350 buildings in Canada. SNC-Lavalin ProFac looks after 80% of them. It's not 100%, but it's still a very large percentage. The department looks after the other 20%. What we would call maintenance is done by the department for 20% of the buildings, and in 80% of the buildings, that is the majority of them, are handled by the contractor.

The way we work in the department, the company has a design program, things that have to be done. There are always more projects than money to carry them out, and that's more or less the reality. You know this, you saw it in a document that was made public, our capital expenditure budget is about $350 million. The first point I would make is that the $350 million consists in a series of projects that are categorized. You will recognize that: there are type A, type B and type C projects. The most important ones are those with the greatest demand in terms of security and workplace health. If things have to be solved quickly, that will be the first stratum of projects implemented by SNC-Lavalin ProFac.

There is one other point. I'd like to open a parenthesis here before I answer your question directly. The $300-million accelerated infrastructure program will be increased by $200 million this year. But we keep the reports that we will make to Parliament very separate. There's the standard money, approved, if it is approved, that we have in our hands as opposed to what is done by AIP. I would like to emphasize that the execution mechanism is the same; that's very important.

With regards to the contractual relationship and the type of measures in place, we don't tell SNC-Lavalin ProFac how to do their job. The company has a responsibility for execution. I will allow Mr. McGrath to explain how SNC-Lavalin ProFac normally proceeds to implement projects. However, according to the terms of the contract, we have a responsibility to be satisfied that the work is executed properly in accordance with the money paid to SNC-Lavalin ProFac. Mr. McGrath will explain the mechanism. Obviously, we won't simply hand over money to the contractor without ensuring that the work that has to be done has been done properly.

Mr. McGrath will touch on these points, perhaps starting with the way the company proceeds with small and medium-size business in terms of competitions, as well as the issue of the audits we conduct.

[Tim McGrath]

Thank you.

In the contract we have with ProFac, we outline the methodology they must use for securing contractors. ProFac use a rotational list for projects under $25,000. They pre-qualify contractors.

For jobs greater than $25,000, they call tenders, again from a qualified list of companies. Any company can register with ProFac at any time. There's a predetermined form for registration, and anybody can get on the ProFac registration list, provided they meet the qualifications.

In the real property industry--and these stats come from the Construction Sector Council--over 90% of firms are small and medium enterprises within the industry itself. So the industry lends itself to small and medium enterprises.

Does ProFac operate coast to coast? Absolutely. The other specific thing about ProFac is that the small and medium enterprises we're using in the delivery of those services are very localized, so they use the contractors from those specific communities where the buildings are located.

In terms of audit and verification, we work in a key performance indicator approach where ProFac must submit their performance indication to us on an annual basis. We have the right to go in and audit their books at any time, based on the contracts. Very few complaints have come through to our department as a result of our contract with ProFac and subcontractors since ProFac has undertaken the work on behalf of Public Works over the past year.

[The Chair, Liberal, Derek Lee]

Thank you.

Over to Mr. Brown.

[Patrick Brown, Conservative, Barrie, ON]

Thank you, Chair.

I had two questions I'd hoped to ask the minister, but I will pose similar questions to the remaining witnesses. The first one relates to small and medium-sized enterprises. As you know, this committee has had several meetings about their access to federal procurement opportunities. As you look toward drafting recommendations, I wanted to ask the minister if he wanted to highlight anything to us that should specifically be in those recommendations, that more focus should be put on for enhancing access. I give that same opportunity to whoever would feel it appropriate to respond to that.

[François Guimont]

Thank you for the question.

Mr. Chairman, frankly, I am very keen to get your report. We've discussed this. We are looking forward to seeing the types of observations and recommendations you're going to make. That's the first point I would make: I am welcoming your input.

The second point I would make is that we are in continuous improvement. Procurement is not static, even less so with SMEs. It's very organic: they're smaller organizations, they're across the country, they have various types of specialization. Why do I put emphasis on continuous improvement? We're learning through the dialogue we have with them.

References were made to the furniture issue. We had 14 or 15 meetings. And it's good to have them—this is an observation. I encourage good dialogue with SMEs and with other industry, for that matter, and we learn from it. We take an approach by which in the past certain things have worked correctly. When we renew our supply arrangements, our standing offer, we want to get input from SMEs to see how we should do them. Sometimes we're a bit off; things happen. It's a two-way street: the dialogue leads to certain suggestions that are made, and we put them in place. But things happen. At the end of the day, these are competitions.

The second point I would make is that we are in continuous improvement based on an open dialogue. As the minister emphasized, we have a work program. Frankly, it does not, as we think about procurement, massively differentiate between small, medium, and big. It speaks to the following. Our contracts can be complicated, and we have to work at streamlining—that's the first point I would make—by taking more an outcome-based approach than a prescriptive approach. The more things you have to meet, the more complicated it is; if you are trying to meet these as a company, you have only so much time you can put into putting a bid forward. We appreciate that. So it's simplification in the context of volume: moving towards more of an outcome-based type of procurement, as opposed to prescribing how to get there.

That was the first point. The second point is, we also have a tendency to not necessarily write in simple, plain language. I have myself looked at certain contracts and clauses, and they are challenging. So we're trying to write in plain language in contracts also.

The third point that the minister mentioned, which is important, is the whole issue of risk transfer. Our people are trying to protect the taxpayer. This is super-important. We take a hard look and we want to make sure that we minimize the exposure of the crown. It's ingrained; it's in our genes. The question then becomes: are there certain areas where there is a low probability of a risk manifesting itself, and can we be more flexible in those areas? We're looking at that.

These are tangible examples that would help SMEs.

[Patrick Brown, Conservative, Barrie, ON]

I have another thing I want to ask about in my limited time. A year ago, one of the things we looked at on this committee was retention rates in the public service. I remember that one thing that was brought up was the effort by the Government of Canada to make sure that public service jobs weren't just in the major hubs but across Canada in small towns as well. One thing that came out was that retention rates in small urban areas are much better than in large urban areas, so the costs of retraining are significantly less in those small hubs, whether it be in the Maritimes or in any small city across Canada.

Are there any updates on that process? Are we seeing that flow of public service jobs spreading out across Canada?

[François Guimont]

I'll make three points on this.

The first point is that Public Works, like most other federal departments, is facing a renewal challenge. This is just a reality. I don't know if committee members know, but our attrition rate through the pensioning of our staff who leave after finishing their careers is almost 9% per annum. So at 9% per year, multiplied by five, you're getting to 50% attrition for a department of 14,000 people.

I'm worried, and so is the minister, about the knowledge that we need to be able to keep. So we're very active at having good planning to give us good recruitment patterns, so we can get the right skills at the right places for the right jobs.

On the issue of public service employment in Ottawa or headquarters versus the regions, I think it is fair to say, speaking for my neck of the woods, that our operations in the regions are.... For instance, we administer pensions out of Shediac. As another example, we also process cheques for reconciliation out of Matane. In the pensions area, we have almost 600 people, so it is not a small unit.

We have evidence to show that the movement in the regions is not as high as in other bigger centres. That is what I would say. Frankly, I've been in the regions on two occasions in my career, and I found that the regional jobs are very close to the citizens. It's a feeling that you don't necessarily have elsewhere. You have a tactile sense of what the job is about, and I'm almost tempted to associate that with a level of satisfaction, because you feel things.

Take, for instance, our OSME operation in the regions. We have six of those offices in the regions, and also one in Ottawa, and now that we've moved it to the ground level, our people will experience that feeling. When you're in a region, you're going to see people; you're going to see OSME, the Office of Small and Medium Enterprises; you're going to relate to provincial officials, and even to other federal departments. There's a proximity that you don't feel as much when you're at headquarters, which I think maybe does point to a level of job satisfaction that can be different from that in bigger centres.

[The Chair, Liberal, Derek Lee]

Thank you.

Ms. Hall Findlay.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you, Mr. Chair.

I have some follow-up questioning based on my earlier question to the minister, and it has to do with asset sales. I guess I would ask Mr. McGrath, because questions of government assets in PWGSC will most likely be in the real property area. I think I said to the minister that our understanding is that for most government assets, the largest numbers are associated with real property and crown corporations. So I'm asking you this in terms of real property.

I understood from the minister, and please correct me if I'm wrong, that either there are no assets with PWGSC that have been identified as potential assets for sale or that he, as minister—or the ministry itself—was not involved in determining which of those assets might in fact be considered for sale. Can you clarify that for me, please?

[Tim McGrath]

Yes, I'd be happy to.

Regarding the initiative put forward by the Minister of Finance, Public Works and Government Services was not asked to contribute to the asset list put forward at that point in time. The minister was concentrating on other custodial departments.

In terms of our own real estate portfolio, going back to the initial sale lease-back, we identified 40 buildings that were under consideration. We did proceed with the sale of seven, but the remaining 33 are just assets that we continue to own and operate within our own portfolio. And we will take investment decisions in our portfolio based on what we think is the best thing to do for that portfolio. As you pointed out earlier, this isn't a good time for us to be selling assets. Market conditions are such that it's probably not a good idea to do so. As a result, we manage our portfolio in the context of market conditions as well. At this point in time, we're not looking at anything.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you very much.

Then can you clarify for me when you knew the minister was not asking PWGSC to contribute to the list of potential assets? I'm trying to pin down when effectively you were not asked to contribute to the list.

[Tim McGrath]

I can't tell you a date when I wasn't asked, because—

[Martha Hall Findlay, Liberal, Willowdale, ON]

When did you find out that you weren't being asked?

[Tim McGrath]

--the department just wasn't asked.

[Martha Hall Findlay, Liberal, Willowdale, ON]

At all?

[Tim McGrath]

Not at all. So I can't specifically pin down a date as to when we were or weren't asked.