Government Operations Committee on June 7th, 2010

[John McBain]

I can speak to part of that. Probably for a more fulsome answer, our colleagues from acquisitions branch would need to be here.

We engage in briefings. We have an Office of Small and Medium Enterprises set up in the department, with an office in each of our regions. We provide bidders' conferences and orientation sessions to the work we undertake.

Further, SNC-Lavalin O&M allows contractors and suppliers to add their name to their list at any time once they make themselves known to the contractor. So they would become part of the resource and bidding pool.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

What measures are in place to ensure that Canadian taxpayers get the most bang for their buck in the awarding of contracts?

[John McBain]

There is oversight on the contracts that we provide in PWGSC, but taking into account the objective of this appearance, I assume you're referring to the contracts awarded by SNC-Lavalin O&M.

As I mentioned in my opening remarks, there have been reviews of this contract in four successive years, plus we provide a function centrally and a national office to oversee the monthly payment of invoices and the scrutiny of the work orders and the projects performed. We assess the work delivered versus the estimates provided before the work is authorized.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you very much for your answers.

[The Chair, Liberal, Yasmin Ratansi]

Merci.

Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Thank you very much.

We thank our guests for your attendance today. This is very helpful.

I'm trying to understand. Mr. McBain, in your earliest comments you talked about core and non-core activities. It would seem to me you have farmed out the non-core activities to various service providers, and that's been a function that you've handled, it would seem, since 1998.

What's the distinction between core and non-core services, the distinction between those things that you might farm out relative to those things that are maintained internally? Could you clarify that for me, please?

[John McBain]

Certainly.

It starts with the fundamental principle that government should not be in competition with the private sector. If the private sector can deliver something the government requires, then we should be enabling that, to take advantage of their innovation, their capacities, leveraging their abilities. In terms of looking at an assessment of what we did, in terms of our execution of our mandate, what do we need to keep in-house? So it's strategic decisions over where we want to be located. Do we want to own, do we want to lease--those sorts of decisions were considered to be core to our program. But for the execution of building operation and maintenance, projects, repairs, etc., it was determined that the private sector could provide them with greater ability, agility, and efficiency.

[The Chair, Liberal, Yasmin Ratansi]

Please make your question brief, Mr. Holder.

[Ed Holder, Conservative, London West, ON]

The question I have, actually, I might ask in the second round. I'll ask you to think about this. I have some curiosity around those core items that you maintain as internal and departmental functions. How do you self-audit those? In other words, when you make that decision to lease versus buy, those are fairly significant decisions for a government. I'd be curious, and again, time may not permit at this particular moment, but I'd like to get a sense of how you verify your own decision-making. How do you audit yourself? I'm trying to tie into a comment that was made a bit earlier.

[The Chair, Liberal, Yasmin Ratansi]

Don't answer; think about it, because his time is up.

Mr. Martin you have eight minutes.

[Pat Martin, NDP, Winnipeg Centre, MB]

Thank you, Madam Chair.

What is the total value of the contract awarded to SNC-Lavalin?

[John McBain]

If all options are exercised and the contract is run out to its full amount, it would be $5.9 billion.

[Pat Martin, NDP, Winnipeg Centre, MB]

How much is that per year, roughly?

[John McBain]

Per year, it's roughly about $1.7 billion or $1.8 billion. It depends on the year, with the repair work.

[Pat Martin, NDP, Winnipeg Centre, MB]

Billion?

[John McBain]

Billion, yes. To date, I can tell you that we have spent $2.2 billion of the $5.9 billion.

[Pat Martin, NDP, Winnipeg Centre, MB]

You're not paying SNC-Lavalin to maintain the buildings. You're paying them to manage the maintenance of the buildings. You're talking about the total global amount to operate and maintain and manage the buildings. Is that right?

[John McBain]

Correct.

[Pat Martin, NDP, Winnipeg Centre, MB]

What is the amount you're paying SNC-Lavalin just to manage the maintenance of the buildings? You're still paying for the repairs, etc.

[John McBain]

We pay for the projects. We pay for pass-through costs such as utilities and operations, etc.

[Pat Martin, NDP, Winnipeg Centre, MB]

And their markup on all of that?

[John McBain]

And their markup.

[Pat Martin, NDP, Winnipeg Centre, MB]

What would be their markup on average?

[John McBain]

Well, that's proprietary information, but I understand from my colleagues that they are prepared to share that with the committee in their testimony.

[Pat Martin, NDP, Winnipeg Centre, MB]

I come from a building trades background, and a standard markup on a cost-plus contract might be 14% or 15%. Is that in the ball park?