Public Accounts Committee on Dec. 7th, 2006

[Ian Bennett, Acting Assistant Deputy Minister, Acquisitions, Public Works and Government Services Canada]

Thank you, Mr. Chair.

Allow me to introduce Liliane Saint Pierre, who is the executive director of operations at the acquisitions branch of Public Works and Government Services. As well, I'm accompanied by Christianne Laizner, the senior counsel to Public Works and Government Services.

Mr. Chairman and members of the committee, I would like to thank you for inviting us to discuss chapter 5 of the Auditor General's report entitled "Relocating Members of the Canadian Forces, RCMP and Federal Public Service."

The integrated relocation program provides a variety of administration and relocation assistance to federal public servants within the Canadian Forces and the Royal Canadian Mounted Police. It is a mandatory program for members of the Canadian Forces and the RCMP, public service executives, deputy ministers, Governor-in-Council appointees, and public service employees represented by unions. In fiscal year 2005-06, the program handled over 17,000 relocations. The total flowthrough costs of this program, Mr. Chair, are approximately $280 million annually.

Historically, each department has been responsible for administering and managing its own employee relocations in accordance with the Treasury Board relocation directive. In 1999, a four-year pilot program was initiated to consolidate all relocation services with one service provider. Following a competitive procurement process in April 1999, Royal LePage was awarded a contract to administer this pilot program.

Due to the success of this program, TBS approved making it permanent, and in June 2002, following a competitive process, PWGSC awarded a five-year contract to Royal LePage. For ease of reference this could be called the first Royal LePage contract.

Following a CITT complaint and allegations from an unsuccessful bidder regarding a potential conflict of interest, Public Works and Government Services decided in August 2003 to conduct a new procurement process. This competitive process resulted in two new contracts being awarded to Royal LePage in 2004, one for National Defence and one for the Government of Canada, as a whole, and the RCMP.

It is worth noting that both the first and the second contracts awarded to Royal LePage have brought significant benefits to the government in terms of cost savings of over 25% over previous costs, as well as improved services. In addition, some 15,000 small and medium enterprises benefit every year from some $150 million in business opportunities, which are dispersed in an open and transparent manner throughout towns and cities across Canada.

Mr. Chair, the roles and responsibilities for issuing contracts are complex. It is a joint effort between the department requesting the service and Public Works and Government Services. In this case, the Treasury Board Secretariat acted as the program authority.

When the first relocation contract was re-tendered, the team took several steps to ensure a fair and open process. The Auditor General has stated that due to an inaccuracy in one estimate in the RFP, namely, the expected business volume for property management services, the contract was not tendered in a fair and open manner. As such, the incumbent provider had an unfair advantage over other bidders. It is important to note the Auditor General also stated that in her opinion, this inaccurate estimate was due to a process issue and there was no evidence of malfeasance.

While we strive to ensure that our RFPs are free of inaccuracies, they inevitably arise from time to time. Our processes attempt to catch them or, at the very least, minimize their impact on the outcome. The Auditor General has reported that PWGSC followed its established processes in awarding the contracts.

In relation to the estimate for the RFP for property management services, it's important to note that this was only one of six elements on which bidders were being asked to provide pricing. The other elements were appraisals, legal services, real estate commissions, building inspection, and rental search services, which accounted for approximately 88% of the overall financial evaluation.

As well, the RFP called for the financial bid to account for only 25% of the overall evaluation, while 75% of the points were granted for quality of service being proposed. This structure was used to emphasize the value of service when employees are moved as well as to reduce any advantage an incumbent might have had in pricing its bid.

The project team also introduced additional features designed to open the RFP to as many new bidders as possible. A fairness monitor checked the technical elements of the bid, which accounted for 75% of the evaluation, and certified that the process was done in a proper manner. The Auditor General has also reported that this part of the evaluation was done in a fair manner.

When making financial bids, different bidders frequently propose different financial strategies. Some will bid higher than their competitors on one element and lower on another. It is hence not possible to isolate one element and speculate as to how a bidder may have reacted had this been the only element in the overall bid.

In our view, which we have expressed to the Auditor General, the process we followed, taken as a whole, sufficiently compensated for any error in the one element of the RFP information, and has resulted in a fair and open competition.

Having said that, we are open to examining our roles and responsibilities in conjunction with our clients and with the Treasury Board Secretariat to make improvements.

We thank the Auditor General for her recommendations, and we intend to implement them.

I'd be very pleased to respond to questions at this time, Mr. Chair.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Bennett.

On behalf of the Department of National Defence, we again have with us Chief Tyrone Pile, chief of military personnel.

Welcome, Mr. Pile. I understand that you have no opening comments.

[RAdm Tyrone Pile, Chief, Military Personnel, Department of National Defence]

I do not, Mr. Chair.

[The Chair, Liberal, Shawn Murphy]

From the Royal Canadian Mounted Police, we have Alain Séguin, the assistant commissioner, finances.

Do you have an opening statement?

[Alain Séguin, Assistant Commissioner, Finances, Royal Canadian Mounted Police]

I have no opening comments.

[The Chair, Liberal, Shawn Murphy]

From the Treasury Board Secretariat, we have Mr. Dan Danagher, the executive director, labour relations and compensation operations.

Mr. Danagher, do you have any opening statements?

[Dan Danagher, Executive Director, Labour Relations and Compensation Operations, Treasury Board Secretariat]

I have no opening remarks.

[The Chair, Liberal, Shawn Murphy]

We will now go to the first round.

Monsieur Proulx, for eight minutes.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Good afternoon, Ms. Fraser.

If we keep seeing so much of each other, my wife may start asking questions.

[Sheila Fraser]

I hope we do continue to see each other regularly.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Your report makes rather depressing reading. It deals with contracts involving National Defence, the RCMP and the Government of Canada as a whole.

Given what you have discovered, do you think that the contracts should have been awarded or do you think that they should have been cancelled?

[Sheila Fraser]

Mr. Chairman, I cannot really answer that question. I believe that it is up to the government to decide, on the basis of our findings, what measures it wants to take.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

If you were to advise the people at Public Works and Government Services Canada, would you tell them to continue or to start over again?

[Sheila Fraser]

I would advise them to do a careful assessment of the possible consequences of this mistake, to determine, if necessary, whether the end result could be changed and, keeping in mind the need for justice and fairness, to take the steps they deem necessary.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Thank you, Ms. Fraser.

Good afternoon, Mr. Bennett. Welcome to the committee.

Mr. Bennett, in your opening statement, on page three, you say:

Following a CITT complaint and allegations from an unsuccessful bidder regarding a potential conflict of interest, PWGSC decided in August 2003 to conduct a new procurement process.

That entailed cancelling the second contract.

I'm numbering the contracts in the sense that the first one was the original pilot project, the second one was the one in 2002, and the third one, the one after you cancelled the second one and started over again. Is that right?

[Ian Bennett]

Correct.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Okay.

Why did you cancel contract number two? To my knowledge, PWGSC does not act on allegations unless there's absolutely something to them. We've heard rumours and reports about sunshine, about water; we've heard of trips. How did it go?

[Ian Bennett]

Mr. Chair, the 2002 contract and the allegations stemming from it about potential conflict of interest were fully investigated and taken very seriously by the department.

At that time, and overlaid on that investigation and those allegations, representations had been made to the CITT. Based on the findings of that, it was concluded that the perception of a conflict of interest was appropriate in terms of the potential that there was a possibility of some bias in terms of the assessment, and it was decided to re-tender.

As I said, the comments about sunshine and water and golf were fully explored and dealt with appropriately within Public Works and Government Services, both with respect to the contract itself and with respect to the individuals involved.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

What I'm hearing from you is that these allegations were found to be serious enough by Public Works to restart.

[Ian Bennett]

Mr. Chair, I need to make sure the committee understands that there are two parcels to the allegations here. One is personal gain—the sunshine, the water, the golf—and those were fully investigated and found really to be without foundation.

But the issue that there were individuals who were looking at the bid and were involved in socializing—that relationship—was more on the side of looking at whether this contract could be considered to be objectively tendered, etc. It was on that side that the decision was made to re-tender.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Okay. I'm curious: was there any type of police investigation into this, Mr. Bennett?

[Ian Bennett]

I am not aware. There was a full internal investigation. I would have to follow up. My understanding is that the investigation found that, on the personal gain, part of those allegations were without foundation, and to the best of my knowledge, it was not referred to the RCMP.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Excuse me, I just want to understand. Who carried out the investigation? Was it an internal investigation or a police investigation?

[Ian Bennett]

It was an internal investigation.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Okay. Between the second contract and the third contract, the third contract was to replace the second one.