Public Accounts Committee on Nov. 21st, 2023

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

[Tobi Nussbaum]

Often, too, the NCC will ensure that there is an independent examination of the cost estimates to get accurate portrayals of what the budgets will be.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much.

In your remarks, you mentioned that costs exploded, in part because of the COVID‑19 pandemic, but also because of inflation in general. Even so, you said the project was delivered on budget.

What was the initial budget? What was the final budget?

I realize that, when contracts are awarded, there can be changes, which can increase the budget. I would like to know what the budget was going in. Let's keep in mind that the total cost ended up being a little over $8 million.

[Tobi Nussbaum]

Importantly, within the project budget there are budget lines for risks and contingencies. In this case, the project budget authority was $8.6 million. The project was delivered at $8.04 million, but included in that $8 million of the projected budget was about $1 million in contingencies and risks.

What you hope is that you don't have to spend all of those contingencies and risks, but because you don't know the outcome of the consequence of many of these tenders—it's ultimately the market that determines what the cost of these construction disciplines will be—you need contingencies. Often a project budget is an estimate. It's your best guess as to what those numbers will be.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

I understand that several smaller buildings were also replaced.

Was the scope of those renovations comparable to what was done with the garage?

What was the cost of renovating those smaller buildings on the Rideau Hall site?

[Alexis Michaud, Director, Official Residences, National Capital Commission]

The other buildings in question were demolished, but they weren't replaced. Basically, the new building replaced those four buildings.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

So, costs related to those buildings are included in the roughly $3 million for demolition and decontamination.

Is that right?

[Alexis Michaud]

That's right.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

You said earlier that you'll provide the committee with details about construction, demolition and decontamination costs in a few weeks.

Is that right?

[Alexis Michaud]

Yes, that's right.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

[The Chair, Conservative, John Williamson]

Thank you very much.

Mr. Desjarlais, you have the floor.

You have the floor for six minutes, please.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you, Mr. Chair.

Thank you, witnesses, for being present here, although I would be remiss if I did not mention your absence at our last committee on this subject. We had various members from Treasury Board and Procurement Canada, Mr. Chair, if I'm correct, who were present here with us. We had a few questions at that time that they deferred to you folks ultimately, so I'm very pleased that you made yourself available to us today.

Let me be frank: You're in a unique position here such that through happenstance the name of your project happens to be very polarizing. That name has brought you in front of our committee today.

The second issue is the expenditure. Yes, we've answered the question. I feel satisfied that it's not a barn. As a matter fact it's a large maintenance building that houses an immense amount of equipment on behalf of the government and that replaces the functions of other buildings. That's fair.

The questions I'm concerned with and the questions that I think Canadians are most concerned with in a really legitimate and rational way have to do with the expenditure, the amount of the project. Yes, from my perspective it's likely that a project like this would cost as much as $8 million. Your envelope, for example, made clear the parameters around these kinds of costs, which were estimated to be approximately $8 million. I understand that the estimation process and the construction process towards its final amount were accurate. I don't have any questions about that.

My biggest question is related to subcontracting and the work and process of how the NCC decides how a corporation like Pomerleau, for example, could absorb a contract like this and how many periods of fiscal review—their quotes—came in under for the NCC.

It's important, I think, that Canadians understand the unique difference between a Crown corporation and a private corporation. That's an important differentiation that I would like you to speak to. They should also understand the confusion that your first answer can create in relation to my second question, which would be in relation to why the NCC's own team couldn't have done this work and why you felt subcontracting.... That is a large issue here federally. It falls into a large narrative about how subcontracting since 2006 has ballooned out of control. We see that across the public sector.

I'm very curious as to why a Crown corporation on behalf of the government, that's supposed to control costs on our behalf, which is why in particular you exist, would be subcontracting.

[Tobi Nussbaum]

Mr. Chair, I think it's useful to note that when the decision was made in 2018 to go with a construction manager, that followed two really salient points.

One is that a special examination by the Office of the Auditor General in 2017 concluded that we had a serious deferred-maintenance problem. That meant we didn't have sufficient funds to look after the assets for which we had responsibility. As a result, we were given an additional $55 million in 2018 as part of our 2018 budget. Having determined how best to execute those additional funds and what model of construction should be considered, we decided to go with a construction management contract. It was deemed to be ultimately more cost-effective and lower-risk because ultimately we wouldn't have to hire many of the people we would otherwise have to hire under a general contracting model. That was important.

Second, it is important to note that the construction management contract itself was the subject of a public tender. The NCC went out in 2018 in an open, transparent and public way and asked companies that acted as construction managers to bid to be the construction manager for the NCC. It was competitively tendered. Pomerleau won. The model for construction management is very commonly used. It's being used for the parliamentary precinct project that's currently under way, which I'm sure committee members are aware of.

Then what happens is that the construction manager takes responsibility for tendering its own public bids to get subcontractors. Competition is ensured both in the selection of the construction manager and in the selection of subcontractors.

I hope that answers the question.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

It helps to answer it. I appreciate that. Thank you for that explanation.

It does raise questions about the history of the NCC.

When did subcontracting, particularly on these public contracts, become the norm for the NCC?

When the NCC was founded, did it anticipate subcontracting of this nature? A better way to ask that is had it originally contemplated doing the construction itself?

[Tobi Nussbaum]

Mr. Chair, the NCC was founded, or its precursor was founded, in 1899. I can't go back through the full history but I'm pretty certain that 2018 was the first time the NCC engaged a construction management model since this infusion of deferred-maintenance money presented an opportunity to quickly, efficiently and effectively get going with projects without the need, as I said, to hire additional staff.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

That's a really, really important thing you just said. I want to take note of it for Canadians. Because of deferred maintenance costs, because of cuts to the NCC, you were forced to take, in 2018, an approach that allowed a private corporation to take a profit from rehabilitating our buildings—correct?

[Tobi Nussbaum]

Mr. Chair, the characterization that I would make about the decision of going with a construction manager is ultimately based on value for money. It's not philosophical.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

No, no, I appreciate that. I'm not arguing about that. The value for money is there. I'm saying that the value for money, however, could have been different should you have been capitalized the correct amount of money to begin with. This decision, which was first made in 2018, to bring on board a public contractor that would garnish profits off of a public project was only enabled because of deferred maintenance. You said that—correct?

[Tobi Nussbaum]

The comment I made about deferred maintenance was the conclusion of the Office of the Auditor General, who in 2017 had done a special examination—

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Do you agree with that assessment of the Auditor General?

[The Chair, Conservative, John Williamson]

I'm afraid that is your time, Mr. Desjarlais. I apologize. We will come back to you.

Mr. Nussbaum, if you want to respond, I'll allow that. Please keep it very brief.

[Tobi Nussbaum]

In general, we were in agreement with the fact that we had a deferred maintenance challenge, yes.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you.

[The Chair, Conservative, John Williamson]

Thank you. I appreciate that.

Mr. Nater, good day. You have the floor for five minutes, please.