Government Operations Committee on Nov. 27th, 2014

[Bernard Trottier, Conservative, Etobicoke—Lakeshore, ON]

Thank you.

The other area I'd like to talk about briefly is software licences. You mentioned that the government spends about $660 million a year on software licences. I presume these are annual costs. The savings you've identified are about $8.7 million a year and some of that is through some standardization and also bulk buying.

To me, that seems a little low. We're talking about the saving of slightly more than 1% of the base line. I imagine there are some forces that would limit the savings we're able to obtain in this area. Could you describe some of those for us? I know software changes over time also, so it's not only standardization and bulk buying.

Could you describe those forces that limit savings? Perhaps there are some more ambitious plans to increase the savings in the area of software licences.

[Elizabeth Tromp]

Thank you for the question.

Mr. Chair, I will start by saying that yes, the savings that we've reported are from an initial consolidation of software procurement and entering into enterprise-scale contracts, which has produced some immediate savings and efficiencies. That is the piece that we've already been able to save, but to your point, there is more that can be done over time.

I'll turn to my colleague, Peter Bruce, to see if there's anything to be added in that space.

[Peter Bruce]

The only comment I would make is that the actual software component of the $660 million is about $100 million. That initial consolidation of only the software procurement, there is still an initial benefit from that, but you shouldn't be measuring the benefit against $660 million because that includes all of the costs associated with end-user technologies. The benefit is actually only from the $100 million software consolidation acquisition.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you, Mr. Trottier.

Mr. Martin, your turn for five minutes.

[Pat Martin, NDP, Winnipeg Centre, MB]

Thank you, Mr. Chair.

As an observation, it seems that committee members of our oversight committee have worked really hard to try to better understand the continuum of government financing through estimates, budget, and public accounts, etc. It seems that you just learn the game and they change the rules on you, because lately, there has been a real expansion in both dollar value and frequency of lapsed funding in a number of government departments. It's almost right across the board. It's either really bad budgeting, or it's a deliberate subversive attempt to cut budgets without telling Canadians, or without telling oversight committees. Then the minister has this wonderful surplus at the end, pulls a sedated bunny out of a tattered top hat and declares. “Shazam! I have a surplus”.

Can you tell me if this lapsed funding issue is going to be something we have to watch for in the public works area? Do you anticipate this notion of lapsed funding popping up as something that we have to deal with in this committee?

[Alex Lakroni]

Thank you, Mr. Chair, for the question. It is, indeed, a very good one.

With lapsed funding, when you look at the number, the number doesn't say much. In order to conclude whether it's a legitimate lapse or not, I think we need to look at the program and whether the program is project driven, a program for grants and contributions, or an operational program. For instance, in PWGSC, we run a budget of over $6 billion and our forecasting, in terms of lapse at year end, is over 99% precision from period nine to year-end.

[Pat Martin, NDP, Winnipeg Centre, MB]

That's exactly the type of answer I was looking for, Mr. Lakroni, so I'll interrupt you there. Thank you for the specific answer to a specific question.

Along the same lines, you're asking for $136 million for increases in non-discretionary expenses. Can I ask, with regard to crown-owned buildings, leases, etc., why we are so far off in non-discretionary items? Could we not have anticipated and foreseen...? For the other category I can see this, but it should be pretty predictable and pretty accurate.

[Alex Lakroni]

In a stable environment in which we don't have inflation and we don't fluctuations in demand—

[Pat Martin, NDP, Winnipeg Centre, MB]

Inflation is virtually non-existent for these purposes, is it not? I mean, it's low....

[Alex Lakroni]

Well, there is inflation involved in the number—let me deconstruct for you very quickly—

[Pat Martin, NDP, Winnipeg Centre, MB]

You could anticipate inflation though. That is predictable. It's been 1% or 2% pretty constantly for the last 20 years.

Actually, if you don't mind, I'm going to drop that line of questioning. I think I understand where it's going, given your lead-up.

My last question, in the time I have left, has to do with one of the most thorny public works contracts we've dealt with in this committee over the last decade, and that is the relocation contract through public works for RCMP, military, public servants, etc.

I understand the Government of Canada has now had to pay out to the griever, the guy who maintained all along that he got screwed. We just paid him $35 million. Are we now ready to admit that the Government of Canada was wrong and that he was right, and that Royal LePage should never have got that contract over and over again and that Envoy had a legitimate claim to damages because Public Works did not treat the contract fairly? Also, where will that $35 million come from? Will it be from your budget, or from the RCMP, or from National Defence or whichever the members were being located from?

[Alex Lakroni]

Thank you, Mr. Chair, for the question.

This contract involved three departments. National Defence's share is $28 million; the RCMP portion is $4.2 million; the Treasury Board Secretariat portion is $2.8 million. A settlement with Envoy was reached on October 25, 2013 and—

[Pat Martin, NDP, Winnipeg Centre, MB]

What was the reasoning? Was it just costing too much to keep fighting, or did the government admit that they were wrong and awarded damages?

The minister should be here to answer a question like that. It's actually unfair to ask the chief financial officer a legitimate question that we deserve to have an answer to, but it's putting you on the spot. I ask it partly to illustrate how unfair and untenable this situation is.

[The Chair, NDP, Pierre-Luc Dusseault]

Thank you, Mr. Martin.

You are out of time, but I can allow a few more seconds if you would like to add something.

[Alex Lakroni]

Situations like this happen. PWGSC processes over 60,000 contracts a year. We are sued for all kinds of reasons. Sometimes we win and sometimes we don't. In this situation the contract that followed was based on a competitive process awarded in 2009 to Brookfield Global Relocation Services and the process was open, fair and transparent.

[Pat Martin, NDP, Winnipeg Centre, MB]

Royal LePage changing their name—

[The Chair, NDP, Pierre-Luc Dusseault]

Your time is up, Mr. Martin.

It is now over to Mr. Butt for five minutes.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

Thank you very much again, Mr. Chair, for giving me the floor to ask a few more questions.

Prior to being elected to Parliament, I spent almost two decades in the property management real estate sector in the greater Toronto area. I'm certainly fairly familiar with the advantages of leasing versus owning space, the importance of renovating space to make sure that it's appropriate for the use, and at the same time making sure we're getting the best bang for the buck out of those changes. Anyone who has been around here for the last three and a half years as I have has certainly seen the bustle of construction and different things going on.

How prevalent is moving people around and making decisions to move different offices and departments around in different buildings whether they're owned or leased? What are the factors that go into making that decision? I'm fairly sure you do a cost-benefit analysis on what works best for any given department or ministry and the functions of its individuals. Is there a difference between how you look at this within the national capital region and how you do this for other offices and services we have across the country?

[Alex Lakroni]

You're touching here on the fundamentals in terms of planning of the programs and the reallocation of space resources, so I would turn to Monsieur Mongeau to answer the question.

[Pierre-Marc Mongeau]

Thank you for the question.

What factors enter into the big decisions when it comes to our portfolio?

Let me first say that decisions regarding other departments' mandates are not made by PWGSC, clearly. Departments receive their mandates and are instructed to deliver certain programs. Then, they come to us with a list of everything they need, in terms of equipment, personnel and space. Essentially, that is how the process starts.

So from there, how do we make our decision?

As I mentioned earlier, our decision-making is based on certain factors. We begin by looking at the region in which the services will be delivered. We also take the environment and sustainability into consideration. We try to incorporate environmental criteria in our decision-making.

Furthermore, we always take into account value over the long run. We look at how much we are going to invest today and how much we are going to invest down the road, and whether we are dealing with a short-term or long-term program. We may opt for a different solution in the case of a short-term program.

The markets also play a major role in our decision-making. In the Ottawa area, for instance, our portfolio used to be heavily concentrated in the downtown core, but in the last few years, we have been moving out towards the suburbs. That is why we purchased the Carling campus a few years ago. It was a business decision. The building was for sale and it cost less. It made good business sense.

We take all those factors into account. To keep costs low, we consider suburban options, as I just said. We assess whether we can move away from the downtown core without affecting the downtown market. In Ottawa, we are also taking a serious look at Tunney's Pasture. We plan to significantly develop that area.

We have another promising property in Ottawa, 530 Tremblay Road. We take into account what we have in our portfolio and the market conditions. In each case, we carry out a detailed analysis of the investment. As I mentioned earlier, the situation can vary from market to market. The market in Toronto or Vancouver is completely different from the market in the Maritime provinces, which means the prices will be different and, in all likelihood, so will the solutions.

We look at all those considerations before doing our financial analysis. And what we end up with is the value of the investment over a 25-year period. So those are the factors that motivate our decisions.

We are no different from a bank or other large institution that owns equipment and buildings, Mr. Chair.

[The Chair, NDP, Pierre-Luc Dusseault]

You have 30 seconds left.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

I have a very quick question then. If I look at the Service Canada stand-alone building in the city of Mississauga, for which, obviously, a lease was entered into, is that through an RFP? I assume that's through an RFP and landlords would bid on securing that lease, and then you would determine it.

I don't expect an answer today. You might want to get back to me.

In the case of the building in Mississauga, one of the controversial issues there is that the landlord who owns the building charges for parking. It's not a free parking area. I just want to know when you are evaluating the value of a bid on a lease like that, do you take into consideration all of those extra factors, not just the actual lease cost to the Government of Canada but also these other extenuating factors when you're looking at securing a lease agreement for Service Canada, or any other department?

[The Chair, NDP, Pierre-Luc Dusseault]

Keep your answer brief please.

[Pierre-Marc Mongeau]

Thank you, Mr. Chair.

In their requests to us, departments list their requirements, properly speaking, things like the number of square metres and the equipment they need. Departments also have the option of requesting a certain number of parking spaces. But the job of managing additional spaces often falls to the department.

Since you've asked the question, what we can do, if it is amenable to the committee, is get back to the committee with an answer once we have had time to look into it. I am not totally familiar with that file. I believe Shared Services Canada is in charge of that.

Mr. Chair, I think we could get back to the committee with an explanation.

[The Chair, NDP, Pierre-Luc Dusseault]

You can answer now.