Evidence of meeting #22 for Government Operations and Estimates in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was contract.
A recording is available from Parliament.
4:55 p.m.
President, SNC Lavalin Operations and Maintenance (O & M)
It really is face value. It's exactly what I talked about to this committee. That's what is in it. We have the validation of what's in there. We think those are reasonable costs, given the complexity of the installations. There is really nothing to hide on them.
4:55 p.m.
Conservative
4:55 p.m.
Liberal
4:55 p.m.
NDP
Pat Martin NDP Winnipeg Centre, MB
Mr. Rate, I still don't see the benefit to the government in any guarantee kind of way. If, for instance, it used to cost us $5 billion to manage all those buildings and you came along on a tender and said, “I can do it for $4.8 billion”, we would know we were going to have a saving. But all you have done is say, “I'll manage it for you, and whatever it costs, it costs, plus my markup.” On a cost-plus basis, you've taken over the management of the maintenance of all our buildings, but there is no guaranteed savings. You're saying that, by audit annually, it has shown there to be some savings. We haven't seen those figures yet.
On April 1, 2005, you entered into a four-year contract with the government to manage the maintenance of these buildings. What was the total value of that contract?
4:55 p.m.
President, SNC Lavalin Operations and Maintenance (O & M)
For the total value of the contract as per the Treasury Board submission at that time, I'm actually not even sure what the number was, Mr. Martin. My guess is that it would be something like $5 billion to allow the headroom for the full 10 years.
4:55 p.m.
General Manager, Public Works and Government Services Canada, SNC Lavalin Operations and Maintenance (O & M)
Actually, it's $5.4 billion, to be precise.
4:55 p.m.
NDP
Pat Martin NDP Winnipeg Centre, MB
Okay, so we do know; it's $5.4 billion to manage the maintenance of those buildings. Now that includes all the maintenance costs.
4:55 p.m.
President, SNC Lavalin Operations and Maintenance (O & M)
Yes, it really is not... And maybe just to clarify, we have a significant maintenance component within our team. We are, I think, the largest employer of building maintainers, electricians, and operators in Canada. We have 1,100 people working on this contract, so it's a significant piece of work.
4:55 p.m.
NDP
Pat Martin NDP Winnipeg Centre, MB
—with your markup. For instance, when a utility bill comes in for $100,000 for a high-rise building, and you pass that utility bill on to the federal government to be paid, do you add the markup to that?
4:55 p.m.
President, SNC Lavalin Operations and Maintenance (O & M)
We pay the utility bill, and we talked about our fee on that.
4:55 p.m.
Senior Vice-President, Facility Management, SNC Lavalin Operations and Maintenance (O & M)
If I can clarify, there's no markup added. If we're paying utilities on behalf of the government or the cost of the electrical-mechanical services in the operations or the cleaners, there is zero markup on that.
4:55 p.m.
NDP
Pat Martin NDP Winnipeg Centre, MB
Zero markup, but the government is paying for it. Surely, you're not doing that out of the—
4:55 p.m.
Senior Vice-President, Facility Management, SNC Lavalin Operations and Maintenance (O & M)
It's a cost that flows through to the government, but it does not carry a markup from us.
5 p.m.
NDP
Pat Martin NDP Winnipeg Centre, MB
So your markup is when... I'm not going to mention any confidential information, but the public has a right to know how you make any money on this. You're not doing this as a charity. I mean, there are billions of dollars' worth of maintenance that has to be done to these buildings, above and beyond the utilities. You have to add a markup to those billions of dollars. That's the business you're in. That's your profit.
5 p.m.
President, SNC Lavalin Operations and Maintenance (O & M)
Well, that's what we discussed in camera.
5 p.m.
NDP
Pat Martin NDP Winnipeg Centre, MB
That's your earnings. Yes. So we understand that.
I'm still having difficulty understanding why that's of any benefit to us. If the actual cost of running the building is $1 million a year, why don't we just do that? Why don't we cut out the middleman? Why do we need you?
5 p.m.
President, SNC Lavalin Operations and Maintenance (O & M)
Well, this is, I suppose, a bit of a philosophical discussion about the value of outsourcing. We do—
5 p.m.
NDP
Pat Martin NDP Winnipeg Centre, MB
When there's a clear business case, it's not philosophical; there's an argument for it. But nobody has shown me a business case, other than a very well-connected--politically well-connected--company, SNC-Lavalin, although I used to have you associated with the Liberals more than the Conservatives. But you're still doing business with Conservatives, and this is an equal opportunity company.
But it's not a philosophical argument and it's not an ideological argument; it comes down to the best value for the taxpayer. If the only benefit Public Works can tell us about it is that it managed to offload 470 employees who used to do what you're doing now, as a tradesman and a former head of the Carpenters' Union, I can't see anything to celebrate in laying off 450 guys.
5 p.m.
President, SNC Lavalin Operations and Maintenance (O & M)
As I mentioned earlier, we actually have about 1,100 people. In fact, Martin was one of the 470 people who were laid off. He is working in this contract 10 years later and is now the general manager of our contract. That seems to me to be quite a success story.
For me, the answer is that we operate more than 100 million square feet of space across Canada. We are able to afford to invest in systems and processes and development of people, and for me, that's better value than the government spending its money on that.
I can't make the comparison of what the federal Department of Public Works saves on this. That's probably a useful question to ask the department.
5 p.m.
NDP
Pat Martin NDP Winnipeg Centre, MB
No, it is a very reasonable question.
But of that $5.4 billion total value of your contract relationship, how much of that is billable? How much of that do you add your percentage markup to? How much of it is gratis and flow-through, and how much do you value-add and then pass along the bill?
