Government Operations Committee on April 24th, 2007

[Michael Fortier]

Well, the decision to mandate the banks to do this, yes, but the decision to sell will be made by cabinet. We'll have to see what offers are on the table, and we'll also seek a fairness opinion from a third party that will address the offer per se.

So we're not there yet, at this stage.

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

So it's still not finalized?

[Michael Fortier]

No, no.

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

Just reading media reports, what I can glean from what's been in the media, this is the largest government real estate deal in decades, $1.5 billion over 25 years. There are two banks involved, the Royal Bank and the Bank of Montreal. The media is speculating that commissions could range from $1 million to $6 million. Those are some of the figures that have been thrown out, and that at this point there are nine buildings being considered out of 370.

I'd like to ask you, is the decision that is made about the sale of these buildings going to offer a way forward for the potential sale of these other 361 buildings?

[Michael Fortier]

As I said to Monsieur Poilievre, some of these buildings would never be sold in any event, just because of the nature of the buildings.

We've suggested this approach--a more modest approach in terms of what was being proposed by the Liberals prior--of why don't we just get this one done? If we get an interesting offer, and it makes financial sense for taxpayers, and it's blessed by cabinet and by a fairness opinion, then we'll do that deal.

I don't want to get ahead of myself and start talking about what we might do with the rest of the portfolio. I think we'll want to digest this, if it goes ahead, and see how it proceeds.

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

Okay. That seems reasonable, I think, from the perspective of those involved in this--from the banks' perspective, for example--to have these nine buildings at such a large amount and see the potential for future offerings. That's certainly quite attractive, and I would think something that could be quite lucrative, potentially, for the banks that are involved in this.

I raise this, Mr. Minister, because of course it's been raised in the media that one of the people involved in this, from the Bank of Montreal, is someone quite well known to you. He's a Conservative Party fundraiser, organizer, and former candidate. He supported your leadership when you ran for the leadership of the party, and supported the former Minister of Public Works. I think people wonder, then, about the details of the sale.

I guess the concern is that we don't have the study that was used to justify the sale in terms of it being a good deal for Canadians. That's still an open question. Because it is such a long-term lease, I guess it's a fair question: is it in the interest of Canadians? We don't have disclosure of the contract with the banks. We don't know what their gain will be. We don't know who chose these two banks to handle this deal. And while you're talking about a fairness assessment, we don't yet have that.

Which of these documents are we going to be able to get? Will we get the fairness assessment over time so that any and all questions about this will be answered?

[Michael Fortier]

Let me take this in sequence. There are many questions along the way.

By the way, Mr. Byers did not support me in 1998. I remember the names of the nine people who did—

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

I'm just going by media reports.

[Michael Fortier]

—and he wasn't one of them.

Okay, so we've dealt with that one.

I think the deputy minister dealt with the process.

As to how these banks were chosen, the banks were chosen through an independent process. I think the deputy has the names of the folks who were on the committee.

I really can't say any more than that. I come from that world. If I stand accused of having been a banker and a lawyer, I plead guilty. But I have conducted myself, Ms. Nash, you should know, with integrity. We're not on the same political side, but if you told me that you wouldn't get involved, and your deputy would say you weren't involved, I'd believe you. I'm asking you to believe me.

I have no interest in who wins what. I want the sale to go ahead. I want taxpayers to get a good deal. Those are the only conditions under which we'll do the transaction. Who was hired didn't matter to me. I'd like you to accept that as really a fact, because it is.

With respect to the different documents, and the study that was prepared on the entire portfolio, if you go back to the RFP, which is public--I invite you to go on MERX and read the RFP that led to the hiring of the Bank of Montreal and the Royal Bank of Canada--we asked them to come to us with advice. We told them what our challenges were. We talked about the funding gap. We talked about the difficulties in certain urban areas, for example in Ottawa; we talked about swing space. We talked about a number of things.

They addressed these issues in the report and also addressed, among other issues, the possibility that we could dispose of buildings. I have explained to Mr. Turner why at this point I don't want to make that study public; it does contain information that I think would be detrimental to taxpayers.

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

I'll ask you one last question on this.

There was an issue about the valuing of these properties. The banks make their commission. We don't know the specifics of it, but their commission is based on the sale of the properties. As I understand it, the values placed on these properties are surprisingly high. Some of the figures have been reported through the media. For the Canada Place in Edmonton, the government is being advised by the banks that they can get $265 million, even though the building was appraised at $145 million just last year; $250 million for the Harry Hays Building in Calgary, which was valued at $87 million; $200 million for the Skyline complex in Ottawa, which Ottawa bought for $91 million in 2003. The question—

[The Chair, Liberal, Diane Marleau]

Do you have a point? You are way over time.

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

I'll wrap up.

Are these valuations potentially high because of the 25-year leaseback, which is really not the norm, according to other reports? Does that impact on the fee the banks are getting for this?

[The Chair, Liberal, Diane Marleau]

Madam Nash, you are way over your time. We'll have to go on to the next questioner.

Mr. Rodriguez.

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

Thank you, Madam Chair. Good afternoon, minister.

On the 16^th of April, I asked questions in the House about the infamous $400 million-contract around which there is an apparent conflict of interest. In your absence, Mr. Moore replied that the contract had not been awarded.

The following day, the 17^th of April, I came back to bat, asking another question about the same $400 million-contract. Again, Mr. Moore said that there could not possibly be any scandal as no contract had been signed.

I would like to know what the status of the contract is today.

[Michael Fortier]

I believe—and I would ask the deputy minister, who is far more experienced than me, to confirm this—that the department does not comment on a contract until it has been awarded. That is my answer. We do not comment on contracts or go public in any way until the contract has been awarded.

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

That is fine. We can therefore assume that the contract has not been awarded.

That brings me to my second question. The tendering process was announced on the 31^st of May 2006. An initial technical evaluation was undertaken in mid-October 2006 and a financial evaluation was run at the end of October 2006. In other words, an evaluation was carried out about six months ago and almost a year has gone by since the tendering process was launched on May 31. Is that a standard timeframe?

[Michael Fortier]

With your permission, I will ask Mr. Marshall to answer your question.

[David Marshall]

Yes, Mr. Rodriguez, the process has been going on for a bit of time. There was an interruption because of the election and also our strategy for changing procurement reform programs. We wanted to make sure that things were lined up properly. This bid has taken a normal course and there's nothing unusual about it.

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

But you do recognize that it has taken a bit long, don't you?

[David Marshall]

Yes. It takes a long time.

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

It took a long time.

Was a technical evaluation carried out? Did you have to start part of the evaluation over again?

[David Marshall]

A technical evaluation was done. The evaluations are almost always done in two parts: the qualification on the technical basis and then the financial evaluation.

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

One took place in mid-October and the other one at the end of October. Did you have two technical evaluations, or one?

[David Marshall]

Just one.

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

I imagine that, eventually, somebody will have to sign and send this contract to the Treasury Board committee.