Government Operations Committee on Feb. 15th, 2007

[The Chair, Liberal, Diane Marleau]

I'll call the meeting to order.

We welcome once again the Minister of Public Works and Government Services, Mr. Fortier. This is not his first appearance before this committee.

Mr. Fortier, you are familiar with the committee's proceedings. You have a few minutes to make your presentation, and we will then move on to questions.

We have new members sitting on this committee. Perhaps they do not know the persons who are with you you today. If you wish, you may introduce them.

[Michael Fortier, Minister of Public Works and Government Services]

Of course.

Thank you, Madam Chair. Thank you for your invitation.

Accompanying me today are Mr. David Marshall, Deputy Minister of the Department of Public Works and Government Services, and Ms. Margaret Kenny,

who runs the office of greening government operations, which we call OGGO.

Again, thank you very much for inviting me.

To begin, I would like to discuss my department's central role in the greening of government and in military procurement—both areas that I know are of interest to this committee. I would also like to briefly mention some other timely developments.

With its wide range of real property, procurement and information technology activities, my department is uniquely positioned to contribute to real progress in protecting the environment.

PWGSC's Office of Greening Government Operations is overseen by Ms. Kenny, and has a mandate to accelerate the greening of government by working closely with other federal departments.

An important milestone was reached when the department partnered with Environment Canada and Natural Resources Canada to develop the Government of Canada's policy on green government. The policy, which came into effect last April, directs that environmental performance considerations be incorporated into all stages of procurement, from planning and requirement definition to purchase, use, and ultimate disposal.

Green procurement itself isn't new. What is new is that rather than being made on a transactional basis by individual procurement officers, environmental performance considerations are now systematically embedded into the procurement processes of all departments and agencies, just as price, performance, availability, and quality are. This represents a fundamental change in how the government determines value for money.

Green procurement meshes well with other environmental initiatives underway in my department. For example, last June I opened a new, energy efficient, environmentally friendly, federal government building on Bel-Air Street in Montreal. This building is named after Normand Maurice, who is considered the father of recycling in Quebec. Built with recycled material from the previous building on this site, it uses geothermics and solar energy for heating and cooling, and rain water for the toilets. Thanks to these and other advances, operational costs will be 35% lower than for conventional buildings, while we expect energy costs to be cut in about half.

I invite committee members who happen to be travelling through Montreal to pay a visit to the Normand-Maurice building on Bel-Air Street.

I also encourage you to see 401 Burrard in Vancouver, a 19-storey office tower that represents a new generation of commercial office space, not only in terms of sustainability but also in terms of providing a healthier and more productive work environment.

All new federal office buildings must now meet the Canada Green Building Council's LEED gold level, and the LEED gold-level standard is also being sought for new long-term leases.

Although my department is not a significant owner of contaminated sites, it offers project management, as well as technical, procurement, and environmental services to federal departments carrying out cleanup projects across Canada.

The $400 million cleanup of the Sydney tar ponds and coke ovens that I announced a few weeks ago is a great example of this program in action, with the federal government contributing $280 million and the province $120 million. Up to 150 workers will be employed at peak construction times. I understand that the committee is considering a study of the greening of government operations; I would endorse such an initiative.

A second matter I'd like to talk about is military procurement, and the significant role my department plays in equipping Canada's military—everything from aircraft to uniforms.

In fact, the Department of National Defence accounts the more than half the business conducted by PWGSC each year. DND is responsible for identifying its requirements and specifications, while my department is responsible for the procurement. It is no secret that, after many years of negligence, the Canadian Forces requires new and better equipment. Given that our military personnel are operating in demanding and dangerous environments, we must ensure that they have the equipment they need.

Last June, the government announced 17 billion in planned procurements for the Canadian Forces, including the purchase of 2,300 medium-sized logistics trucks; 16 medium- to heavy-lift helicopters; four strategic lift aircraft; 17 tactical lift aircraft; and three supply ships.

Two weeks ago, the Government of Canada awarded a contract to the Boeing Company to procure four C-17 Globemaster III aircraft to provide a strategic capability for the Canadian Forces.

I want to assure this committee that all of our procurements are being managed in a fair, open and transparent fashion—in keeping with our government's commitment to accountability—and that they encourage competition by Canadian suppliers.

At the same time, our military's needs deserve to be met in a timely manner. The Department of National Defence has told us it takes, on average, about 15 years to move a major military procurement from the time a need is identified to full deployment in the field. That, you will agree with me, is unacceptable.

The Prime Minister has asked a group of ministers, including me, to review the situation and recommend how the process can be streamlined. In the meantime, we have been clear and open with Canadians about our acquisition priorities, our procurement methods, and the status of major projects. Uppermost in our minds are the needs of the men and women who every day put their lives on the line for Canadians; we make no apologies for that.

I'd like to turn quickly to something discussed during my last appearance. That is the department's new office of small and medium enterprises, set up to ensure that firms have fair opportunities to compete regardless of their size or location.

I am pleased to report that the response to this new initiative has been very gratifying. The office is already fielding more than 500 inquiries a month across Canada. Since April, when I launched the offices, 800 new firms per month have registered to do business with us, and a majority of these firms, I'm happy to report, are SMEs.

Our performance in terms of the value of contracts being won by SMEs exceeds that of the U.S., which has an explicit set-aside program for SMEs. While one-quarter of the value of U.S. contracts goes to SMEs, in Canada the proportion has grown higher.

We are also taking steps to address the challenges we are facing in managing the government's real estate. This is another area suffering from years of neglect. Many of our properties are aging and in dire need of work. In fact, our recapitalization needs are an estimated $4 billion.

PWGSC has hired experts from the private sector to study samples of its real property portfolio and to recommend how to meet these challenges more effectively. These firms will help us devise innovative strategies to allow PWGSC to meet accommodation requirements, generate savings, and ensure that these assets are properly maintained.

Madame Chair, the last area I'd like to mention is the development of a code of conduct for procurement. This code is another step forward in implementing the Federal Accountability Act and the action plan that goes with it. It will consolidate existing legal, regulatory, and policy requirements into a concise and transparent statement of the expectations government has of its employees and suppliers. The draft code can be found online and through MERX, and we invite the public to comment any time before March 7, 2007.

Madam Chair, there are many other developments I could talk about, but I'm sure that I will have the opportunity to do so during questions.

[The Chair, Liberal, Diane Marleau]

I am certain of that as well. Thank you.

Mr. Rodriguez, the floor is yours.

You have seven minutes.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Thank you, Madam Chair.

Minister, I'm very pleased to see you. We don't often have the opportunity to see you at the House of Commons. I will take advantage of your being here to talk about a variety of subjects. The first concerns procurement, which you have touched upon briefly. There is an impression that the bidding rules in the C-17 aircraft contracts were changed to benefit one single bidder, Boeing. It's quite obvious.

However, that is not what my question is about, it is about ITAR, the International Traffic in Arms Regulations, that is forcing Canadian companies that obtain defence-related contracts from the American government to comply with certain rules. These Canadian companies are subject to highly rigid constraints. One restriction prevents the company from deciding who it wishes to hire. There is a list of countries, and if an employee comes from one of those countries listed, their services cannot be used. This is what I call discrimination based on birth place, which to my mind is in clear violation of the Canadian Charter of Rights and Freedoms, and undermines Canadian sovereignty as well.

I'm wondering how you can accept such a situation.

[Michael Fortier]

Firstly, allow me to respond to the first point you raised. I would ask you to revisit the premise upon which you say that procurement was not carried out fairly or transparently, because it was.

Mr. Rodriguez, the awarding of the contract that was ultimately given to Boeing was preceded by several meetings with suppliers working in the aeronautics industry. Once it was agreed upon that there was only one single supplier that satisfied all criteria, after having received word from other suppliers who also thought they could meet the requirements, a committee concluded that Boeing was the only company that could supply these aircraft. We then entered into discussions with Boeing.

Contrary to what you were saying and what others are alleging, I believe that the process was very transparent.

With respect to ITAR, I agree with you completely. When a private Canadian company deals with an American company, and in this case is forced to transfer an employee in order to keep the contract with the U.S. company and be in compliance with American legislation, the law is being applied extraterritorially, something that the Prime Minister of Canada and my colleague, the Minister of Foreign Affairs have objected to and rejected. They have indicated to their U.S. counterparts that we do not agree with the extraterritorial reach of ITAR.

Fortunately, Mr. Rodriguez, these cases are still isolated incidents. But one case is one case too many. Canada continues—and will continue—to remind the Americans that we will not allow private Canadian companies working in Canada to be forced to hire only persons designated by Americans, or by U.S. legislation, because this is what is deemed to be acceptable in their eyes. We reject this premise, and will continue to reject this premise.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Today, can you give us a formal commitment that this contract will not be subject to ITAR and that no individual, no Canadian citizen, will be the object of discrimination? Can you make such a formal statement?

[Michael Fortier]

Your question was more general in nature: you were asking me what I thought of ITAR.

With respect to the purchase of the Boeing aircraft, the good news is that we are buying already manufactured planes. Therefore, the acquisition of these aircraft will not be subject to the ITAR provisions. We will take delivery of these planes and then pay the agreed-upon amount. Since the plane has already been built, this contract is very different from past examples which involved Canadian companies that had contracts with large American companies and were left out of the procurement process.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

I understand that the aircraft have already been manufactured, but as regards their maintenance or any other type of upkeep, I want to know whether or not Canada's sovereignty will be fully respected. Will our charters, laws, values, and societal choices be fully complied with?

As for the C-17 contract, even if the aircraft are built elsewhere, can you state that the ITAR will not be applied in any way, shape or form, and that we as Canadians, as well as our societal choices, will be respected?

[Michael Fortier]

Earlier, I talked to you about our choices as a society. I agree with that statement, and I repeat it again. We will continue to condemn the extraterritorial scope of ITAR.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

Pardon me for interrupting you, but I also condemn it. I want to know whether or not the ITAR provisions will apply in any manner, whether it be to aircraft maintenance or other services, or whether ITAR will not be applied here at all.

What I am seeking from you is a formal commitment. Otherwise, I am—and we are—left with the impression that we are subject to ITAR, that it is being applied extraterritorially, and is in violation of our charters.

[Michael Fortier]

What I am telling you is that the acquisition of these aircraft is not subject to ITAR.

As for aircraft maintenance, this will be done in two stages. As you know, we signed a contract to have the American Air Force do the maintenance of the C-17 aircraft. The U.S. Air Force is in fact a subcontractor for Boeing and already is responsible for one aspect of the upkeep. These aircraft have been in existence for some time now, and there are service points throughout the world, including in a few places in the U.S.

When the maintenance of these aircraft is done in the United States, the work will be done by people living in the U.S., and hired by the American Air Force.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

I understand, Minister.

I want a formal answer from you. I'm going to ask you the question again. Is it possible that some people run the risk of not being hired by certain companies in Canada, because their work is somehow related to these aircraft?

[Michael Fortier]

As we speak, I am unaware of any circumstances in Canada under which a Canadian could not be involved or associated with the aircraft we have just purchased. I believe I am being clear enough.

[Pablo Rodriguez, Liberal, Honoré-Mercier, QC]

You say "as we speak'', but it still remains a possibility.

[Michael Fortier]

At this point in time, as we speak, I am unaware of any situation in which a Canadian could not work in connection with this aircraft.

[The Chair, Liberal, Diane Marleau]

Thank you. Your seven minutes are up.

Ms. Thibault.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Madam Chair.

Mr. Fortier, Ms. Kenny, Mr. Marshall, thank you for appearing before us once again. You will be meeting with us again, as we will have the opportunity to invite you once again.

Minister, in your statement, you raised several issues that are of interest to members of this committee. These issues warrant our attention and the questioning of government representatives: this would be you, as it happens. The matter of contracting practices is one issue. Your department's intentions concerning the sale of government buildings and greening are another two issues. If I have enough time, I also want to talk about accrual accounting.

With respect to the Boeing contract, I will continue along the same lines as my Liberal colleague. Does the government also have the intention of making sure that the foreign companies we do business with are not engaging in practices that violate Canadian values? For example, some companies use child labour, or methods or materials that we disapprove of, reasons which should discourage us from dealing with them.

As Minister of Public Works and Government Services, are you not concerned by the fact that we could potentially encourage a foreign company which engages in practices that fly in the face of our values?

[Michael Fortier]

I believe that is an entirely hypothetical question. I believe I already answered that question the last time I appeared. Obviously, we have just finished talking about the C-17 aircraft, but if we exclude military goods and material, which are exceptional goods, the very large majority of goods that the state purchases are bought from Canadian suppliers, Canadian companies operating here.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Even if my question is hypothetical, is this issue of concern to you?

[Michael Fortier]

You are raising a very interesting point. I am willing to consider it, but I prefer to focus on the real issues.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

In that case, we'll make sure to give you concrete examples, if there are any, since this topic is of interest to you.

As regards the Boeing contract, at another standing committee, we heard Mr. O'Connor reply to colleagues that the transaction had to be done quickly in order to equip our armed forces, so on and so forth.

Did the expeditious nature of the transaction influence our negotiating power? Was our negotiating power at all compromised? We did not have 25 options, there was only one single one, and that was Boeing and the C-17 aircraft. How could we have any negotiating power with only one single option in play?

[Michael Fortier]

In any negotiation, there is a gradual narrowing of possibilities. Regardless of the number of those who bid on a contract, whether there are 4 or 25, Public Works chooses one potential supplier and begins negotiations with it. With respect to the C-17s, I can reassure you, in that the total amount paid for the four aircraft was 8% lower than the calculations made by PWGSC experts. We even compared prices—those we managed to obtain, obviously—with those paid by other countries who purchased the same aircraft. If I'm not mistaken, we are one of the countries that paid the lowest price.

I believe that Canadian taxpayers emerge as winners in this deal.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Therefore, you think that this is a good thing for taxpayers.

[Michael Fortier]

Yes, this is a good thing.

[Louise Thibault, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

But you still have the power to make decisions.

You obviously know that the topic of economic spinoffs has been much talked about. I come back to this issue, because for myself, as well as for many other colleagues, and the people living in Quebec and Canada, economic spinoffs are important.

For what reason did you not require that there be economic benefits throughout Canada, and in particular in Quebec? I was under the impression that this issue was very important to you, since you are currently the minister who answers to Conservatives in the region of Montreal.

Does this mean that in all future contracts, regardless of their nature, the current Conservative minority government will no longer ensure that the regions benefit fully from the economic spinoffs of these transactions?