Finance Committee on Feb. 12th, 2009

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Wallace.

We'll go to Mr. Mulcair.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you Mr. Chairman. Welcome to our guests.

I would like to address my first question to Mr. Morrison. You alluded to the study undertaken by Pierre Marc Johnson after the collapse of the de la Concorde overpass. It was, in fact, the second collapse, since the du Souvenir overpass had collapsed before that. However, the two situations were different: in the case of the du Souvenir overpass, it was under construction, whereas the de la Concorde overpass had been built in the 1970s.

You spoke about the rules for awarding contracts to engineers. You said that it was advisable to follow the established model. I have a question that does not necessarily relate to a formal examination nor to official rules of attribution. How can you be sure that when you award a $50 million contract, the costs will not go beyond that amount? I know that I will have an opportunity to ask Mr. Atkinson the same question a little later. He said something quite important about the need to include the long-term costs for maintenance and resurfacing in assessing a project.

The public is having a more difficult time understanding how we can announce the construction of an overpass or a highway interchange. There is a well-known case in Montreal. This is not a criticism of the companies involved nor of the engineers; I want that to be very clear. Work began on the Acadie interchange at a cost of some $50 million. The latest construction work cost more than $100 million, and the public can't understand why. There was a call for tenders, but it soon became obvious that a great deal of work was required. The fault does not lie with the contractor. There is something almost akin to a sub-profession besides the engineer and the contractor, and I am referring to the person who is responsible for finding all of the "extras" and negotiating their cost.

How can people who are responsible for guarding the public purse be sure that, once a contract is signed, everything possible will be done to determine the real cost of the work and ensure that the amount will be the same once the dust has settled?

[Jeff Morrison]

Mr. Mulcair, I think the public has an erroneous concept of the way in which contracts are awarded for infrastructure projects in Canada.

If I may, I would like to continue in English.

First of all, there is still a very strong misperception that the cheapest proposal, the cheapest bid for a particular infrastructure project is the best. It brings the greatest value to the taxpayer. What the Johnson commission recognized and what experts across the country have recognized is that this is not the case. Given the nature of infrastructure, given the public trust that goes into any infrastructure project, professionals involved in the development, the design, and the construction of that project need to have a qualifications-based assessment process in place. That is not the way it's done right now, with the exception of the Province of Quebec, which has now recognized that qualifications need to be central to the procurement of any sort of professional.

You alluded to the notion of what I would call life-cycle costing. All too often another misperception is that the upfront cost of a particular project is it, and that once a municipality or a province pays for the design and construction of a particular project, its hands are washed and the project is in place. We of course know that's not the case. Any project, be it a building or an overpass, has life-cycle costing attached to it. In terms of an evaluation of a project, we have always argued that life-cycle costing needs to be a component of the evaluation.

Right now, I can tell you, the federal government rarely does that. At Public Works, Government Services Canada, Defence Construction Canada, when we've asked the question as to whether there is an environmental cost, a life-cycle cost involved, there isn't—

[Thomas Mulcair, NDP, Outremont, QC]

Mr. Morrison, it's never the fault of the interpreters, it must have been something that I said, but I think something was lost in the translation.

I was asking you to address yourself specifically to the following issue. You start a project at $50 million. You've done your call for tenders. You've used a qualifying process to get the best, and it might not even be the lowest, but whether you go with the person who had $50 million, and it was the lowest, or the person who came in at $65 million, but who had better qualifications--you might go to that one--what invariably happens is the dance, the waltz, around the extras begins. On the $65 million project, all of a sudden you realize that what was put into the call for tenders, which was drafted by the engineers, also with their lovely little rings, in the ministry of transport...there's a bunch of things missing, and the dance for the extras begins.

Your $65 million project becomes a $135 million project. We're responsible for looking at how you spend public money. How do we avoid that?

[Jeff Morrison]

I'll refer to one study that I think answers that question. A study is going to be released next month out of the United States, by two university researchers, that looked into the benefits of a qualifications-based approach. One of the results of that study will show, once it's released, that in fact with respect to this dance for the extras, as you call it, using a qualification-based system dramatically reduces that dance.

The number of change orders, the number of extras, and the number of modifications to a tender are dramatically reduced when you can procure a professional consultant based essentially on the qualifications, the background, and the level of knowledge of the professional.

So to answer your question, I would agree with you that there is a certain dance that goes on. There are a number of change orders, there are a number of amendments that always happen and that add to a project cost. But I think if you can procure a professional consultant, who really is a bit of a steward of any infrastructure project, and if you can do it in the right way, I think you can dramatically reduce those costs.

[Thomas Mulcair, NDP, Outremont, QC]

I have the same question for Mr. Atkinson.

[Michael Atkinson]

Well, we're about to release a study in a couple of weeks that we did jointly with federal government contracting agencies and others on cost predictability for projects. There are a number of factors that go into that.

In the construction industry, the last thing we contractors want to see is change orders. If we can proceed from start to finish on a project based on the design and specifications, we would much prefer that than the other factors that come in.

The other thing that I think has been a problem is the contract award period. We've seen situations, not just with the federal government but with other contracting authorities, where instead a prompt award being given within 30 days, for example, these things go on for 90 days, for 120 days. To expect contractors and their suppliers to keep their prices fixed and firm over that amount of time, particularly when you have material prices escalating quite substantially, is just not in the cards. So there are a number of things that can be done on both sides to try to keep those costs in line.

[The Chair, Conservative, James Rajotte]

Thank you. Merci.

We have Ms. Hall Findlay.

I'm advised by the clerk that I need the unanimous consent of the committee, because there has not been a formal substitution. Do I have unanimous consent, just this once?

:Some hon. members: Agreed.

Ms. Hall Findlay, you have five minutes, please.

[Martha Hall Findlay, Liberal, Willowdale, ON]

You are all such gentlemen. Thank you.

I would like to thank everyone for taking the time to appear before us today.

I have two quick questions.

Mr. Perrault, there has been much discussion about the ability of municipalities to participate in this, given the matching requirements. I've heard you say that for 2009, because budgets have already been set, unless you have a commitment of money flowing into 2010 and perhaps even beyond, it will be difficult to engage in this right now for the 2009 construction season. And you've talked about the need for some flexibility in some of that commitment.

Is that correct, and if so, what would you ask the government to do that's different from the current structure to provide you with that flexibility?

[Jean Perrault]

Well, I said it a few minutes ago. I think flexibility is the word that should be used. You know that there is $15 billion already committed, that has been accepted in all municipal budgets. You were a city councillor before. When it's passed, it's very difficult, and it takes a lot of time.

For instance, if tomorrow I have an acknowledgement from the federal government and the provincial government that I have $2 million, and I have a project for $6 million, and I have to put in $2 million and borrow $2 million, it will take, as a city, at least three to six months before getting approval to borrow the money.

When you make a demand for money.... Well, in Quebec, and in other provinces it should be the same, you have to put in your request what you are going to do with it, what your plan is, and what the details of your project are. Then you will get approval from the Quebec government saying, okay, you have your money. Then you can start.

So if I put in the request now, February 12, and it takes between three and six months to approve that funding, I'm almost at August. Then I have to put out tenders, and that will take at least four to six weeks. Then I have the decision, maybe in October, and snow will start in November in this country. So it's very difficult for us right now to say okay, just....

The minister says that he has 1,000 projects on his table and says they acknowledge this. Well, I have to talk about my 1,720 members, which are small communities of 200 and cities like the City of Toronto, which is the biggest one. Right now we need flexibility to say to the ones that can't, the ones that have not had the one-third approved by their city councils because of the long process, yes, you're in accord right now; make your investment, and next year, by resolution of the city council, you can borrow the money and put it in.

I would be disappointed if the

municipalities in this country would not have access because they do not have the opportunity now, like the others. Some municipalities are richer. You were talking about the city of Mississauga. It's a little bit different from other cities. They have some money, from what I gather, and so on. But I don't want to take an individual example. Smaller municipalities have the right to access this federal funding, even if they don't have it this year.

So flexibility could be for next year.

[The Chair, Conservative, James Rajotte]

Make it a very brief question.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Can I just take it on the record that for a number of the municipalities, if the process were similar, not necessarily on a per capita basis as the Gas Tax Fund is now...? Given the time requirement, the speed we need for a stimulus now, and the concerns that you've raised about 2009, and possibly even there, is it correct to say that municipalities across the country would be able to do this much more quickly if the funding came through a gas tax fund type of process?

[The Chair, Conservative, James Rajotte]

A very brief answer, sir.

[Jean Perrault]

Yes, a gas tax would be faster, but we'll follow the rules. We want to find a way to simplify the rules right now, and we can put people to work. Like you, we have the objective of putting people to work, and if we can do it faster, the better it will be.

I will finish on this, Mr. Chair. I've never seen so much money from the government--I have the list here--available for infrastructure of all kinds. Let's find a way to put it down so that people can offer the service to the citizens.

[The Chair, Conservative, James Rajotte]

Thank you.

Monsieur Carrier.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Thank you Mr. Chairman.

Good morning Mr. Perrault. Good morning gentlemen.

Mr. Perrault, you are the mayor of a large city in Quebec. I'm happy to meet you. I'm not sure if you were here earlier, when we met with the minister. I told him that I was rather anxious to see some work get started so as to stimulate our economy. This is something that should have been done last fall. In any case, the minister offered his reassurance and told me that he had received a large number of projects and that work could begin quite soon.

However, you said earlier that you were ready to sit down with the minister. That means that there has been no communication between you and the minister, and I would like to ask you why that is the case. You are president of the Federation of Canadian Municipalities. Do you have a role to play? I expressed some concerns earlier. For example, it may be that there are not enough projects that are shovel-ready in any given province, but will each province at least have a guaranteed share of the infrastructure budget?

There is no specific reference to public transit in the budget. However, you said that there were 140 projects ready to go. To come back to your role, can you tell us if there will be public transit projects for urban areas? This type of project is extremely important.

[Jean Perrault]

Yes, Mr. Carrier, public transit is important to all Canadian communities. The Federation of Canadian Municipalities is extremely happy with the astronomical sum that we have before us today. We are talking about billions of dollars. We must find some way to distribute this funding quickly. It has to be done through the provinces, which is fine with me. It has to be done. We would like the money to be transferred from the federal government to the provinces so that we, the municipalities, can work with the provinces to acquire the required funding.

The Federation of Canadian Municipalities is working with Minister Baird. We met him immediately after he was appointed. As I said earlier, we were quick to meet with Mr. Harper. We invited him to attend our board meeting. There are 72 elected members from all of the provinces and territories in Canada. Mr. Baird was very open. I am convinced that he will come up with some flexible solutions. From what I understood, he will need extra staff, but I don't think that is necessary: he simply needs to send the money to the provinces. It will get to us more quickly that way. I think that we currently have some influence over the Canadian government. When I was president of the Union des municipalités du Québec, we tried to influence the government to step up the contributions towards the municipalities. I think we are a good partner. We know how to operate on the ground, how to provide services to our citizens. Moreover, there is the infrastructure side, where the need is extraordinary.

With respect to mass transit, we prefer to use the word “collectif” in French rather than refer to public transit, because small communities want to have a common service, in this case, transportation. This means that people could travel from the Lac-Mégantic region to Sherbrooke, for example, where they could then use the Sherbrooke transit system. A collective type of system is all encompassing.

We have buildings to construct, commitments and financial services to offer our transportation companies, so that these services can be provided to our citizens. As a Canadian federation, we have an important role to play. I am proud to be the president of the federation, because we represent the collective interests of tiny communities as well as those of Toronto, which is Canada's biggest city.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Carriere.

Thank you very much, gentlemen, for your presentations and responses here today. Unfortunately the time has run out.

I have a brief invitation from Mr. Menzies to Mr. Perrault for an event in his riding.

[Ted Menzies, Conservative, Macleod, AB]

I know this is selfless, but from reading your bio, Mr. Perrault, I see you're a former member of the national water ski team. I would personally like to invite you to the 2009 World Water Ski Championship Festival in the land-locked province of Alberta, at Predator Bay in my riding. We would be glad to host you. I'm sure Mr. Bronconnier would welcome you to come to his city. We'll find you a place to stay and we'll actually give you a little run on the water.

[The Chair, Conservative, James Rajotte]

It's the gopher capital of Canada, a very exciting place.

Thank you, ladies and gentlemen.

The meeting is adjourned.