Government Operations Committee on Feb. 15th, 2007

[A voice]

It may be IT and computers.

[David Marshall]

Yes, a large number of computers now are manufactured in Asia, so it's that kind of procurement, but it's very typically going to Canadian companies that may, in fact, source them outside.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Yes, so I suppose you have two situations: you have a company like IBM, a foreign-owned company that could in fact produce here, or you could have a Canadian company like Nortel that sources offshore. I assume that's all tracked through our procurement process so that we can tell where things are actually manufactured.

[Michael Fortier]

It may be tracked, but perhaps not as much as we'd want.

[David Marshall]

No, I must say that we don't, because it would require us to decompose everything we buy, but we do make sure that we comply with international trade agreements. On all major procurements there are interdepartmental consultations to try to ensure that Canadian companies get their share. We invoke national security exemptions when possible. Also, Madam Chair, the emphasis that our minister has been placing on us to increase the small business share of our procurements inevitably leads us more toward Canadian companies.

[Peggy Nash, NDP, Parkdale—High Park, ON]

All right. I think I have more questions, but maybe I have to do a little more homework and come back on this another day. Thanks.

Do I have more time, Madam Chair?

[The Chair, Liberal, Diane Marleau]

Yes, you have two minutes.

[Peggy Nash, NDP, Parkdale—High Park, ON]

I would also like to ask a couple of questions about the real estate. Of course it was in the news, and certainly buildings that have been neglected are not good for the environment. They are not good working conditions for the people who are there. There may in fact be, and I am sure there are, cases in which it makes absolute sense to dispose of certain properties.

There was one media report by a person from the Schulich School of Business who said the sale and leaseback deal will almost certainly increase costs for taxpayers: “On the face of it, it looks good--the government is going to get $1.5 billion, but you don't make money out of nothing. In the end, it's going to cost them more.” How would you respond to that media criticism of the leaseback proposal?

[Michael Fortier]

We haven't made a decision yet. I'm happy to answer that point directly, but we haven't made a decision yet on the direction we're going to go.

However, on sale and leaseback, if you take it in the abstract — if you have a brand-new building and you're committed to behaving as a normal owner would, which is to maintain the building — I don't disagree with the statement. The issue is that we as owners have not behaved as we should have over the past several years, so we are facing this large recap arrears of close to $4 billion. It could actually be higher, but I think $4 billion is already quite significant.

The trend that one can see, tracking it over the years, is that when faced with expenditure priorities, governments have not put down elevator replacement, roof replacement, window replacement, or structural upkeep--

[Peggy Nash, NDP, Parkdale—High Park, ON]

Normal contingency and maintenance moneys that one would assume in a real estate program were not in place. Is that what you're saying?

[The Chair, Liberal, Diane Marleau]

Madam Nash, I'm being very strict today. Your time is up.

Mr. Bélanger is next.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Thank you, Madam Chair.

I would like to say good afternoon to the minister, the deputy minister and Ms. Kenny.

I'm sure you appreciate, Minister, that the minister and the Department of Public Works and Government Services are very important to a member of Parliament whose riding is located in this region. I was wondering whether you would agree to meet with me in a month to discuss a whole range of issues of interest to me. That was my first question.

[Michael Fortier]

Have you not been told that I was always available? I have met with your colleague, Mr. Rodriguez. I've always been available. I have seen Mr. Proulx, who used to be on this committee, but may no longer be.

Yes, I will meet with you.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Thank you.

The next question relates to procurement policy. My understanding is that the department has now issued a request for standing offers on the temporary help and the professional services sectors, and that they're out there now. There are some questions as to the timing of these, Mr. Minister, in the sense that this last quarter of the fiscal year is usually the busiest time for many of these small businesses. The timing has been rather brutal for them, but so be it; it is done and it's out there.

My question relates to the next request for standing offers from the sector that deals with servers, desktops, and notebooks. The department apparently was planning to issue that on March 15 — the ides of March, incidentally; it would have been the death of them. Can I get a commitment from you that such a request for proposal will be delayed past the end of the fiscal year?

[Michael Fortier]

We can do this, but I want to make sure I understand. You're talking about the supply chain being worried about the end of the fiscal year. Their fiscal year has nothing to do with our fiscal year.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

I'm talking about our fiscal year.

[Michael Fortier]

Correct, it's our fiscal year.

Let me ask you — why do you want it to be delayed?

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

I want it to be delayed because the small and medium enterprises that the department claims to be so concerned about are asking for this. They are the ones saying it would be very, very helpful if you could delay the call for two weeks so that they could then take the limited resources they have and redirect them to making sure they can be competitive in the proposal call.

[Michael Fortier]

I'm not aware of that issue. I'll speak with the deputy and our people, and if it's an issue, we'll try to address it.

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Thank you.

I have a whole series of questions on this, but limited time, so I'm going to go on to the sale of buildings.

I'm happy to hear that no decision has been made yet. You were read one quote from James McKellar. Incidentally, Mr. McKellar, who was quoted earlier, is the co-author or assembler of this book called Managing Government Property Assets: International Experiences, one of the very few books of this nature, so he has some authority. He has concluded that this would almost certainly cost more to taxpayers.

There was another quote in the press not too long ago, from a professor of economics in the Department of Economics at the University of B.C. He said, “The stated argument in favour of the plan is that the new owners would foot the bill for renovations. Nonsense: The purchaser will incorporate the costs of renovations in the rent. The government will pay for the renovations either way. The question is whether this scheme reduces costs.” It goes on and concludes by saying, “Either way, this seems like bad public policy and lazy thinking.”

Now, if the decision has not been made, Minister, would you consider an option along the lines that I will describe now?

First, I acknowledge and I accept that since this country entered into a deficit situation more than 25 years ago, there's been neglect in maintaining our buildings. I don't question that. The previous government, once we'd eliminated the deficit, had started recovering some of the... But the problem is huge, and officials will confirm that. There was the rust-out program. We were starting on a priority basis, but there's no denying that we have a problem. It's been built up over the years.

But if we just rent out with a repurchase scheme for 25 years, I would argue that we're freezing ourselves — because once you've rented, you're eliminating some of the flexibility we would otherwise have — and 25 years later we're no further ahead, in the sense that those buildings will probably need renovations at that time, if not a complete retrofit.

Instead of doing that, would the government consider creating a crown corporation with a legal mandate to charge what it costs to the users, with the ability to borrow, backed up by the government, to do the retrofitting necessary and acquire or hire the expertise that currently the government doesn't have, so that 25 years from now we would have that expertise and could become a model to other governments and other countries on how to a manage public real estate portfolio?

Is that under consideration, Minister?

[Michael Fortier]

We're waiting for the experts to finalize their report and we'll make a decision in due course.

Let me just address your statements before your question. You said that the Liberals, once they addressed the deficit, were now going to address the real estate deficit. I'd like to believe you, and I think you probably believe this, but then that doesn't explain why Mr. Brison wanted to sell 372 buildings two summers ago.

He issued the mother of all RFPs. When I leave this place, whenever I leave, I'm going to take it back with me, because this is something you should read. It is the most confusing document I have ever seen in my life. At the end, what it wanted to do was basically put those 370 buildings into a real estate income trust. It is very confusing to me when you tell me that your government, or the party you belong to, was going to address the real estate deficit, but Mr. Brison, who held this position, wanted to spin off 372 buildings into a real estate income trust.

Having said that, I totally disagree with the premise that you're bringing about with respect to a sale-leaseback. In a sale-leaseback, if you negotiate a good lease... Again, I'm not saying we're going to do this, but if you negotiate a good lease —

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

Minister, I was asking--

[Michael Fortier]

I'm answering your question. The building--

[Mauril Bélanger, Liberal, Ottawa—Vanier, ON]

No, I was asking if you would consider another option. What I'm hearing you say is no, the government would not consider such an option.

[Michael Fortier]

Well, every option is on the table. I answered your question, and I want to address issues you seem to have with sale-leaseback. Do you want me to address sale-leaseback for you?