Government Operations Committee on June 8th, 2006

[The Chair, Liberal, Diane Marleau]

Ladies and gentlemen, we will start the meeting. Today we are hearing from the Honourable Michael Fortier, the Minister of Public Works. We are meeting to discuss the estimates, which are the main task of our committee. I believe the budget of Public Works and Government Services Canada appears at Votes 1, 5 and 10. Thank you for accepting our invitation, Mr. Fortier.

In the first round, members will have seven minutes to ask questions. That will include response times. If a member asks a question that is too long, the witness will not have time to answer. We will start with the Liberals.

Minister, do you have anything to tell us? I'll allow you 10 minutes.

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

First, thank you for inviting me. I want to apologize. I was supposed to be here a few weeks ago, but that was the day Mr. Howard, the Prime Minister of Australia, was here.

[The Chair, Liberal, Diane Marleau]

With the consent of the whips, we cancelled all the committees. It wasn't really your fault.

[Michael Fortier]

I want you to know that I would have cancelled in any case. At least I'm honest.

Thank you very much for inviting me here today. I have a brief statement to make.

As you know, this is my first appearance as Minister before a Committee of Parliament. I can assure members of the committee that I will answer their questions to the best of my ability and I will, of course, carefully listen to their views.

Several senior officers of my department are in attendance with me today. They include Mr. Marshall, who is the Deputy Minister, Ms. Aloïsi, who is Associate Deputy Minister, Mr. Bennett, who is Acting Assistant Deputy Minister, Acquisitions Branch, Mr. McGrath, who is Acting Assistant Deputy Minister, Real Property Branch, and Mike Hawkes, who is our Chief Financial Officer.

Madam Chair, I know that many of the members of this committee have been in Parliament for several years and will have surely formed their views of Public Works and Government Services Canada. As I informed my opposition critics, who are focussing mainly on my department, those that I have had the time to meet since I became minister, I will always be open to suggestions aimed at improving the Department of Public Works.

I would also like to say that I was very honoured last February when Mr. Harper called on me to serve in his Cabinet as the Minister for Public Works and Government Services and the minister responsible for Greater Montreal. The Speech from the Throne, as you know confirmed the five priorities our government will pursue in the coming weeks and months. Cleaning up government is at the top of the list. The Federal Accountability Act, with which you are quite familiar, will be the cornerstone of our efforts to change the way business is done in Ottawa.

The reforms contained in this bill are comprehensive. They will have a particularly positive impact on my own department, but will be felt in all institutions and in all corners of government.

Members know a legislative committee is currently studying the bill, but I believe it is important for this committee to be seized with two elements of the proposed FAA that will have direct implications on my department.

Bill C-2 contains a number of measures to clean up federal contracting, an important common service role provided by Public Works and Government Services Canada. We are the government's experts in procurement, and we will lead the way in reforming the process to ensure it is fair, open, and transparent.

Once Bill C-2 is proclaimed, it is the government's intention to create the new position of procurement auditor with a mandate to review, on an ongoing basis, the government's procurement process to ensure fairness and transparency, and to make recommendations for improvements. The procurement auditor will also establish a process to review complaints from vendors and will manage an alternative dispute resolution process for contract disputes. Bill C-2 anticipates the procurement auditor will be appointed by Governor in Council and will report to the Minister of Public Works and Government Services. An annual report will be tabled in Parliament.

In addition, I will soon be launching the consultation process with industry associations, research institutes, and other stakeholders on a code of conduct for procurement. This code, which I hope to have in place by this fall, will consolidate all existing conflict of interest and anti-corruption measures into a comprehensive and transparent statement of expectations for government employees and suppliers alike.

As another measure to clean up government contracting, integrity provisions will be included in all bid solicitation and contract documents to provide a clearer statement of the existing obligations of contractors under the Criminal Code, the Competition Act, and the Lobbyists Registration Act. Taken together, the code of conduct and integrity provisions will clearly define, for public servants and suppliers, acceptable conduct when contracting with government.

The proposed Federal Accountability Act also re-enforces the commitment of our government—and my personal commitment as minister—to improve access to government business for smaller vendors and vendors in all regions of Canada.

Small and medium enterprises account for 43 per cent of Canadian GDP, 66 per cent of all jobs in the economy and much of Canada's economic growth. Creating opportunities and rewarding the hard work and innovation of Canada's small and medium enterprises is a key commitment of the government. For this reason, the Office of Small and Medium Enterprises has been established within Public Works. The office has already begun to address the concerns of small and medium enterprises in order to ensure that firms have fair opportunities to compete, regardless of their size and location.

Six regional offices of Small and Medium Enterprises have been established. They are a critical element of the Federal Accountability Action Plan, and represent a major commitment to small and medium suppliers to government. With a presence of these offices across the country, the government can ensure that smaller vendors and vendors in all regions of Canada receive due consideration in bidding for government contracts. The government as a client and, indirectly, taxpayers will benefit from having more suppliers compete for government business. Prices should go down and innovation and creativity rise.

The second aspect of the proposed FAA of particular significance to my department relates to public opinion research and advertising. As a first step in rebuilding public trust in this area, we will make it mandatory that all public opinion research reports commissioned by the Government of Canada be provided in writing, and that a copy be submitted to Library and Archives Canada. As well, Bill C-2 will require departments to make all such reports public within six months of the completion of the project.

I will soon appoint an independent adviser for a term of six months to review, assess, and report on government procurement practices for public opinion research, including issues raised in the Auditor General's 2003 report, and to recommend whether further action or inquiry is required. This individual will be selected pursuant to the special appointment regulations issued under the Public Service Employment Act and will report to me as minister. His or her findings will be made public.

The business transformation agenda that is now under way within Public Works and Government Services Canada shows that the management and staff of this department have only one goal, to serve the public interest in the best way possible by making the right business decisions on behalf of Canadians.

We are committed to developing the most efficient, effective, and lowest-cost accommodation strategy for the Government of Canada—work that I wholeheartedly endorse and will continue to support. Key decisions need to be made about our aging real property inventory, and I have been looking at this issue for a while now. In addition, my department is also reducing the average space per employee, rigorously applying fit-up standards throughout the government, and taking a more aggressive negotiation approach to leases.

I have also endorsed the procurement reforms that are underway in my department. Every year, the Government of Canada purchases over $20 billion in goods and services, the majority of which is bought by Public Works and Government Services Canada. By leveraging the buying power of the government as a whole and taking steps to reduce the cost and time it takes to purchase goods and services, we will achieve better value for Canadians.

Our Shared Travel Services Initiative is an example. This initiative is targeted to reduce the government's annual $1.2 billion travel bill by $375 million over five years.

Madam Chair, members of the committee, I appreciate the opportunity to make these brief opening remarks. I welcome any questions the committee might have at this time.

[The Chair, Liberal, Diane Marleau]

Thank you, Mr. Fortier.

We'll begin with Mr. Alghabra, from the Liberal Party.

Mr. Alghabra, over to you.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

Thank you, Madam Chair.

Thank you, Minister, for coming here.

Thank you, everybody, for being here this morning.

I have several questions for you. I will start by trying to understand the increase in acquisition services by 20%, based on the estimates we have. Those were $127 million and now they're $152 million.

[Michael Fortier]

Ian, would you like to take this one?

[Ian Bennett, Acting Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services]

Madame Chair, the increase in the overall expenditures for the acquisition branch, I think, is in part due to the attribution of full costs, including overhead costs. The actual business volumes and expenditures for the acquisition branch, in terms of incoming work and the size of the branch, has remained reasonably stable. What has happened is that with the government accounting system and the attribution of the indirect costs, some of the corporate costs are now being shown against the acquisition function to give the total cost of the operation, and I believe that increase of 20% is attributable to that accounting transfer.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

Where were these costs accounted for before?

[Ian Bennett]

I believe they would have been attributed--and I'll let the CFO speak to this--to the corporate overhead function. Now a portion of that has been attributed to the acquisition function.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

Can you give me an example of what that is?

[Ian Bennett]

An example is the access to information function, which is a corporate function. Each branch benefits a portion of that, so part of those costs are now attributed to the acquisition branch.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

But wouldn't those costs, even though they were part of the corporate costs, have been part of the estimates?

[Ian Bennett]

They would have been part of the total departmental estimates, Madame Chair, but now they are attributed at a much granular level to the acquisition branch.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

Where would they have been in these categories that are in front of us right now?

[Mike Hawkes, Chief Financial Officer, Department of Public Works and Government Services]

They would have been covered under what we call corporate services in the budgets of the previous years.

As a result of the implementation of the new program activity architecture, there has been a decision to charge the full costs of operating programs to the program, so whereas several years ago in the estimates you would have seen a line for finance, for human resources, for IT management for the department, this year we have allocated all of those costs against the programs to demonstrate the full cost of operating--the cost of the acquisition, of the real estate, or any other program.

[David Marshall, Deputy Minister, Department of Public Works and Government Services]

If I may, Madame Chair, we'll be pleased to give you a much more detailed breakdown if you like. There is also the fact that from our own budget we have recently established an office of small and medium enterprises, which is now in the acquisition branch.

If you look overall at our budget, you're going to find that it has actually dropped year over year. What is going forward is $150 million less than the year before. There are some internal allocations and some things we've taken on, but overall, despite our managing much greater volumes, our overall cost has dropped. I have a graph here to show the increased demand versus the cost of the department. I can leave that with you, if you like.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

Sure. Thank you, Mr. Marshall.

Minister, you've talked about making sure the acquisition process for the department becomes more competitive and offers an opportunity to find ways to increase competitiveness and reduce costs for taxpayers. I want to confirm that competitive situations are always the best way, in your opinion, for the department to acquire whatever services or products it acquires. Is that correct?

[Michael Fortier]

It should be the rule.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

I want to share with you a motion the committee passed a few days ago, on Tuesday, and I want to get your opinion on it. If you'll allow me, I will read the motion.

[Michael Fortier]

I've read it. If you want to read it...sure, it's your nickel.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

If you don't mind. It's just for the record--well, it's our nickel.

The motion reads:

That the Committee report to the House that it recommends that the acquisition, by purchase or lease, of any significant property, such as the former JDS Uniphase campus in Ottawa by the Government of Canada for use by its departments and agencies, be the result of a competitive public call for tenders process.

Can you tell the committee how you feel about this motion?

[Michael Fortier]

I understand where you're driving with this concept. I think, as a rule, when we're contracting, whether we're buying pencils or out there seeking additional space, we should always be on the lookout for what the comparables are, and hence try to get the best product at the best price. With real estate one needs to be careful, because having done this myself in a prior career, when you're already in a building somewhere, and your lease comes up for renewal, you're likely to get a better deal from the current landlord—and this is not 100% of the time, but 80% of the time, depending obviously on the vacancy rate in the city you're in—given that you don't have to move and don't have all the inconveniences of moving to another building.

When you take all of that into consideration, plus the fact that at Public Works they have a number of professionals who keep abreast of the costs of particular space in every city, every day, I would say that if we get an unsolicited offer from a landlord in a building where we are, and the offer is attractive, I think we should take it.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

We had the Auditor General here last week telling us how your department has been doing a better job over the last few years in evaluating these properties and measuring whether to acquire or buy them. In fact there was a case study on 800 Victoria Place in Montreal, where the tenants have done an assessment and have decided to stay, even though it is not the most competitive place. In the Auditor General's opinion, there was a duplication of expenditure of taxpayers' money, unfortunately, and they should at least have decided that from the start. I think this makes the opposite case: there are times that by doing a good analysis, you can find better properties and can save taxpayers' money.

[The Chair, Liberal, Diane Marleau]

Thank you, Mr. Alghabra. You're already over time.