Government Operations Committee on April 26th, 2010

[Richard Nadeau, Bloc, Gatineau, QC]

How much time is left, Monsieur?

[The Vice-Chair, Conservative, Chris Warkentin]

There's just over a minute.

[Richard Nadeau, Bloc, Gatineau, QC]

Mr. Beaulieu, we learned last March that outrageous prices had been charged for odd jobs and services that should never have cost as much. A journalist from the La Presse daily had asked SNC-Lavalin, in fact, Public Works Canada, to review all the invoices in order to determine whether those prices were the exception or the norm. Public Works Canada has denied that request. And yet, this is taxpayers' money.

I now better understand the situation in which you find yourself as an entrepreneur. You have shown much courage in coming here today. We thank you for that. If the truth be told, you are publicly exposing a situation that is unacceptable, to say the least. We are talking here about public tenders versus invited tenders.

[The Vice-Chair, Conservative, Chris Warkentin]

Mr. Nadeau--

[Richard Nadeau, Bloc, Gatineau, QC]

I'll just finish my question, Mr. Chair.

In order to obtain government contracts, do you have to guess what work is to be done? It's a good thing these are not the only contracts you can get. Do you have to gaze into a crystal ball, or go knocking on doors? What exactly do you do?

[The Vice-Chair, Conservative, Chris Warkentin]

We have time for just a short answer, if you could.

[André Beaulieu]

That is exactly what we have to do. The work and services offered by Ricky are known only to the SNC-Lavalin project managers or directors. This is why we have to contact them regularly to ask them if any work or services are required in our field of expertise. This is how we have to proceed in order to offer our services, but especially to ask them to send us documents that will allow us to offer our services.

As for contracts that are granted directly by SNC-Lavalin project managers, you have to do a lot of door-knocking and show up there cap in hand. For contracts under $25,000, the contract can be granted directly by the project manager without calls for tenders, whether the contract be public or by invitation. You just have to do a bit of schmoozing, be friendly with the SNC-Lavalin project managers, invite them to your receptions or to good restaurants in order to obtain more contracts.

[The Vice-Chair, Conservative, Chris Warkentin]

We'll move along.

Ms. Coady, from the Liberals; you may start with a five-minute round. I believe you'll be sharing your time with Mr. Murphy?

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

Yes, thank you very much.

Thank you very much for appearing here today. I think you've done quite well in explaining yourself. You said you're new to this process, but we really do appreciate you coming here.

I have a couple of questions, and I'm hoping you're going to be able to assist me with this. I think you said you were a fairly new company. Were you around prior to 2005? I know that there was another party that had the contract prior to 2005, prior to SNC-Lavalin. Were you in business then?

[André Beaulieu]

Yes. The company that managed government buildings before 2005 was Brookfield LePage Johnson Controls. Between 1999 and 2005, this company gave us about 200 contracts. However, we only got 10 of those through calls for tenders. The other 190 were obtained by speaking directly with Brookfield LePage Johnson Controls projet managers.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

So there's been a change, you feel, between the contract prior to 2005 and today.

I think you mentioned earlier that you want to see buildings being managed at a reasonable cost. I think your comment earlier was on reasonable cost.

I think there are two components to the SNC-Lavalin contract, one for property management and the other for project management. I'm assuming that you have been tendering on some of the project management work. I think I'm hearing correctly--and I'd like your verification--that you have concerns around the tendering process and concerns around transparency. How would you ask that they be improved to ensure we get reasonable cost?

[André Beaulieu]

In fact, all that is required is for government contracts tendered through SNC-Lavalin to be known publicly. This way, professionals could offer their services. This is how the Government of Quebec proceeds. They ask companies to register in the field in which they are specialized. When contracts are offered, these companies are called to tender for these contracts and to state what price they would charge. When a company is chosen, the names of the other companies are kept in the database and the name of the winning company is removed. The next contract is then offered to the remaining companies and so on and so forth until the hat is empty. Then, you put all the names back in the hat and the process starts all over again. This ensures fairness. You ensure that all companies obtain contracts and the costs are always reasonable.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

I think the key words here are “at a reasonable cost”. Just going back to.... I think it was Mr. Nadeau who talked about $5,000 to fix five light bulbs. That's exorbitant, and obviously we don't want to have those kinds of costs. Do you think the system that you're describing will actually bring that kind of reasonable cost back into the contracts? That's what you're considering?

[André Beaulieu]

The point is to ensure that a maximum number of companies perform the work through SNC-Lavalin. A greater number of companies fosters competitiveness. And of course, if you increase competitiveness, you decrease prices. If there were only two companies offering services in a particular field, they could easily fix prices. However, if there are 150, it is a lot harder for them to fix prices. So, the more competition there is, the lower the costs are, and the better off the federal government is.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

I'll share my time with Mr. Murphy. Thank you.

[The Vice-Chair, Conservative, Chris Warkentin]

You have half a minute left.

[Shawn Murphy, Liberal, Charlottetown, PE]

I have just one point I'd like you to elaborate on, Mr. Beaulieu, and that is with regard to the certification process. Anytime in the construction industry, especially with the private sector, one would expect to see someone from Public Works, or an independent agent employed by Public Works, certify that the work has been done, it has been done in accordance with the plans and specifications, it meets building code requirements, and the price is commensurate with the work that was done.

Was that independent third-party certification done on any of the work that your company did as a result of this Lavalin contract?

[The Vice-Chair, Conservative, Chris Warkentin]

The time has expired, so if you just want to give a short answer, that would be fine.

[André Beaulieu]

You raise an excellent point. There are no reports or assessments of the quality of work performed by professionals since the private sector took over the management of government buildings, whether it be Brookfield Lepage in 1999, or SNC-Lavalin right now. There are no assessment reports on the quality of work or services provided to the government through these companies.

So, if we get no contracts, it's not because we do not have good relationships. We have no assessments. Our companies are not assessed. So, we do not know what the assessment of our work is and we do not know what the criteria are for granting contracts to professionals because there are no assessment reports.

[The Vice-Chair, Conservative, Chris Warkentin]

Thank you.

Madame Bourgeois, for five minutes.

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

Thank you, Mr. Chair.

Mr. Beaulieu, first of all, thank you for coming here. Thank you also for being so frank with us in explaining the difficulties you are facing.

Last year, our committee studied the way the government dealt with small and medium-sized businesses, particularly with respect to information technology. In the future, the government may want—it should be noted that at present everything has been put on ice—to award large IT contracts.

Our committee looked into the way small and medium-sized businesses participate in government contracts. We feel—the committee was unanimous on this—that small and medium-sized businesses, both in Canada and in Quebec, are what drive the economy. The government has the moral obligation to encourage these companies and to enable them to live, to exist and work in accordance with a clear process.

Back then, we studied the MERX process. We were told, here in the committee, that there were no problems, that MERX operated very well and that small and medium-sized businesses had access to government contracts.

However, we were not told about the matter you raised; namely, that when a large corporation, such as SNC-Lavalin, has sole responsibility for managing a contract, it is impossible, unless I am mistaken, for anyone to see how and to whom it offers these contracts, because it has the authority to keep all of this a secret. Is that correct?

[André Beaulieu]

Absolutely. We do not know the process used by SNC-Lavalin to manage and award contracts, be it to private firms, professionals or whomever. We do not know the process and the mechanisms that govern it. So we do not know whether SNC-Lavalin has to go through MERX. We do know that it goes through MERX on occasion. However, we know absolutely nothing about the rules governing SNC-Lavalin, namely, whether it is obliged to go through MERX, the basic amount and the reasons.

What we do know is that, when it comes to professional services, MERX is seldom used.

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

You have just told us about SNC-Lavalin and I am eager to meet with their representatives. In your opinion, are there other companies that operate in this way?

[André Beaulieu]

I believe that there are other companies that manage certain parts of the federal governments' real estate inventory. The part that they manage is, however, very small. These companies have a much smaller demand for our services. Nevertheless, I would be very surprised if the mechanisms and operating modes are much different from those governing SNC-Lavalin.

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

All right.

To your knowledge, how many companies are currently, like you, grappling with this opaque management?