Government Operations Committee on Nov. 26th, 2009

[The Chair, Liberal, Yasmin Ratansi]

You have some time left if you wish.

[Martha Hall Findlay, Liberal, Willowdale, ON]

I'm still a bit confused, because we are dealing with large amounts of money, and I'm just wondering if.... No, I think I'll actually hold back on that line of questioning.

Thanks very much.

[The Chair, Liberal, Yasmin Ratansi]

Thank you.

Madame Bourgeois.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Thank you, Madam Chair.

Ms. Jolicoeur, gentlemen, good afternoon. It is always a pleasure to have you appear before us.

What caught my attention in the supplementary estimates is of course everything related to the lease-back agreements and federal government buildings. That brings back memories, Mr. McBain. In fact, I think that it was with you that we had a lot of discussions about the lease-back agreements.

Mr. Lakroni, you state the following in your opening remarks: “As was the case last year, the greatest portion of the funds requested, $80.2 million, addresses increased volume of office accommodation [...]”. You also state that you have “higher rental rates for leases being renewed, additional fit-up costs, [...] increases in municipal taxes, utility prices and building maintenance costs”.

However, a few years ago, the government undertook many of what we refer to as “lease-backs”. How come there are many lease-backs, and yet there has to be such an increase in the estimates? What is going on?

[John McBain]

Thank you for the question.

Public Works and Government Services Canada is mandated through the Department of Public Works and Government Services Act to provide accommodation for public servants. We have more than 1,800 locations where we do that from coast to coast. We use a range of solutions, which include crown-owned buildings, leased, and lease-purchased buildings. The leased and lease-purchased together are more than 1,400 of those locations, so the vast majority of the accommodation we provide is through leased accommodation.

The amounts that are included in this supplementary estimate reflect the increases we have to bear as a tenant in terms of increased costs for taxes and for utility costs that come with that space. I'm sure you're aware that many pieces are renewed at different times, and while we may have a lease that may be in place for ten years, when we renew it for the next ten years, there is an increase in the price, in the cost of that lease. That is part of the cost.

As we accommodate or move through a competitive process to a new lease, we are required to prepare the space, which is called fit-up. That's another cost we must bear. Those costs increase and they are additional each year.

We do a thorough analysis of all our leases and prepare estimates that forecast where we think we are going to be. That is then confirmed by our clients, who give us their actual demands.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Let us be clear about something. When you lease a building under a lease-back agreement, there should, theoretically, be no increase in the cost of the lease.

[John McBain]

It depends on the nature of the individual lease. Some have built-in escalations during the term of a lease because a landlord isn't prepared to give you a fixed price for a 10- or 15-year duration. Others include the pass-through of certain costs because they are subject to union agreements or they are subject to the minimum wages. Of the $80 million that my colleague Alex spoke of, part of it is the increases that come from leases, but also another part of it is due to the increased costs we bear, as a custodian, as well because we are paying energy costs, we're paying labour costs, and we're paying taxes or payments in lieu of taxes, and these increase as well. So this gross number Alex referred to, the $80 million, includes five major elements that comprise that cost.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

I see.

We have studied a variety of contracts, including lease-back contracts. I was under the impression that when the government sold a building, but undertook to lease it back for a certain number of years, it only had to pay expenses relating to the building's interior, and that the buyer, under the terms of the lease signed with the government, had to pay for the general upkeep of the building.

Mr. McBain, could any of the lease-back contracts signed by the government over the past years have been renegotiated? Are the lease-back contracts in question the ones that were signed over the past 3 or 4 years, or are they pre-existing contracts that were renegotiated and that now cost us more money?

That could be a factor as well. Do the buildings the government leases cost more than the buildings it owns? Would it be possible to have a breakdown of the costs? I understand that labour costs and tax costs come into play. But I would like to know what our biggest expense is at the moment? What is costing us the most?

[John McBain]

There are several questions there. I'll do my best to answer them.

In the first, you referred to the sale and lease-back that was conducted a couple of years ago. Those contracts are in place and have not been changed. That is a 25-year lease, which includes an escalation clause every ten years. So that is set.

What I was referring to, in the most part, were the large number of leases we have throughout the country. In any given year we may be renewing several hundred of those, depending on when they expire. When that happens we will be looking, normally, at an increase in the cost of the space alone.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Very well. I think I still have a minute remaining.

You have asked for funding for the Secure Channel Network, which will come from the Telecommunications and Informatics Common Services Revolving Fund. Is the total increase in funding requested in the supplementary estimates related to the implementation of PWGSC's Secure Channel Network?

[Alex Lakroni]

Are you talking about Government Enterprise Network Services?

The answer is no, what we are seeking in the supplementary estimates is an increase in our spending authority as relates to the revolving fund, which is, to put it simply, like asking for a line of credit. The $1.2 million that the project will cost is not a recoverable expense. The spending authority in question is not related to Government Enterprise Network Services; it only ensures that the revolving fund itself is operational.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Thank you, Madam Chair.

[The Chair, Liberal, Yasmin Ratansi]

Mr. Anders, for eight minutes.

[Rob Anders, Conservative, Calgary West, AB]

I think that Mr. Holder or Mr. Warkentin wanted to ask a question.

[Chris Warkentin, Conservative, Peace River, AB]

Thank you, Madam Chair, and thank you, Mr. Anders. I appreciate the opportunity to lead out.

I represent the back of the province of Alberta. We have the distinction of being the link up to the Alaska Highway. There are many people travelling through my community and they often come back from Alaska with a bumper sticker that reads “I survived the Alaska Highway”, but it's a frazzled cat that has hair sticking up, and people often comment that they lost a good portion of their nerves on that trip. I know that the folks who head in that direction and people who utilize that highway often will be very excited to hear about the $12.6 million that's going to be invested, at least in our portion of the highway. Having driven at least a part of it, I know that the area is in need of it. I thank you for that, on behalf of my constituents and the many people who will be travelling it.

In terms of this committee's business, one of the things that we have often discussed in this committee is the need to modernize the pay system within government services. I'm very excited to see the $4.4 million. We know that there are many people within the respective departments who are going to be very excited to see the modernization of the pay system happening.

Can you give us a bit of an outline as to where that now stands in terms of the process? Obviously the money is being asked for. What is the intent for that money, and what will we see as a result of that $4.4 million investment?

[Alex Lakroni]

I'll turn to my colleague, Renée.

[Renée Jolicoeur, Assistant Deputy Minister, Accounting, Banking and Compensation Branch, Department of Public Works and Government Services]

Thank you for the question.

Last summer, 2009, the project was approved. It consists of replacing the 40-year-old system with a commercial off-the-shelf new system. It also consists of modernizing the services and the processes, including the increased use of the web. It also includes the consolidation of the compensation services presently provided by the departments to PWGSC.

Where are we at now? We started the project on October 1. The project will last about five years, because it's a long project. We are at the preliminary phase of the projects.

We call it the pay administration transformation initiative, but there are two projects. One is the pay modernization, which is the replacement of the systems and the business transformation. The second project is pay consolidation, which is the centralization of services.

[Chris Warkentin, Conservative, Peace River, AB]

Thank you.

I know that members who have served on this committee for any length of time will have been part of a report this committee brought forward that specifically asked for this to happen. We really appreciate your speedy response to our request. More importantly, we know that there are folks within those departments or those areas who will really appreciate this money. I know these resources will go where they're desperately needed. We appreciate that you've done that as well.

In terms of the $4.7 million allocated for the cleanup of contaminated sites, I know that the government unfortunately has inherited many cases, but owns contaminated sites from coast to coast. There are some that are more toxic than others.

I'm wondering if you could give us a brief outline as to what the $4.7 million will go to. Are there specific initiatives for those, and are they outlined as of yet? Could you give us a brief update on that?

[John McBain]

Certainly. Thank you for the question.

The federal contaminated sites action plan is led by the Department of the Environment and all federal custodians input into the preparation of that plan, which sets out priorities based on assessed need and urgency of the cleanup. Prior to the economic action plan, the plan for this year for PWGSC included 26 projects. There are seven identified in Atlantic, seventeen in our Pacific region, with one in the NCA and one in the western region.

Through the economic action plan, additional funds were made available and departments re-queued their requests. As a result of the economic action plan funding, PWGSC received enough funds at present with our plans in place to address another 31 sites. These include sixteen in Atlantic Canada, one in Quebec, six in Ontario region, one in western region, and another seven in Pacific.

[Chris Warkentin, Conservative, Peace River, AB]

I don't know if it's fair to ask you to....

I appreciate those numbers. In most cases, are these military sites? Are they sites that were inherited by the government for one reason or another? Are they industrial sites?

[John McBain]

These are sites that would be in the portfolio of the Department of Public Works and Government Services Canada, so they would include wharves in a lot of cases. You can see the strength of the Atlantic and Pacific representation. There are a lot of wharves and dock areas. Part of this includes the Esquimalt graving dock. There is some remedial work being done there.

It's not military, in our case, as much as it is industrial or light industrial.

[Chris Warkentin, Conservative, Peace River, AB]

I appreciate that. We all know that many of these sites, if they are contaminated, are effectively sterilized or unable to be developed or used, so I know there will be economic benefits not only in creating the jobs here today in terms of the cleanup but also in the renewal of those sites as time goes by. We appreciate that as well.

I want to ask also about the status of the rebuilding of the historic sites in Quebec City. I see there is an allocation of funds for that. Could you give a brief outline as to what the status of that is right now?

[John McBain]

As you know, this asset, Musée du manège militaire, is a custodial asset that belongs to the Department of National Defence, and Public Works has been asked to facilitate the consultation with the public and the development of plans for consideration by the government for the future of the manège militaire. To date we have had public consultations, launched a website, had an extensive communication process, and entertained presentations on potential uses for the site. Those have all been collected and gathered by a consultant with a government interdepartmental panel. We have now engaged a specialist in real property to evaluate those proposals and make a presentation to the government on the best possible uses.

[Chris Warkentin, Conservative, Peace River, AB]

I appreciate that. I know that the folks in Quebec City especially appreciate the sensitivity in the way this is being approached. I was actually there following the fires and saw the devastation. We appreciate the fact that there is lots of community and stakeholder input into the process of renewal.

Thank you very much.

[The Chair, Liberal, Yasmin Ratansi]

Thank you.

We now go to the second round of questions.

Ms. Mendes, you have five minutes.