Government Operations Committee on June 14th, 2010

[The Chair, Liberal, Yasmin Ratansi]

Members of committee, it's 3:30 and we have before us witnesses from the Department of Public Work and Government Services. We are doing a study on the freeze on departmental budgets.

We have Mr. Andrew Treusch, the associate deputy minister, as well as Mr. Alex Lakroni, Madam Diane Lorenzato, and Madam Weber.

Do you have any opening remarks, Mr. Treusch?

[Andrew Treusch, Associate Deputy Minister, Department of Public Works and Government Services]

Yes, I do. Thank you, Madam Chair.

Good afternoon. My name is Andrew Treusch. I am the associate deputy minister at Public Works and Government Services Canada.

With me are Alex Lakroni, chief financial officer; Diane Lorenzato, assistant deputy minister of human resources; and Caroline Weber, assistant deputy minister of the corporate services, policy, and communications branch.

We are happy to be back before the committee following our department's last appearance for main estimates a few weeks ago. I'd like to note as well that PWGSC tabled its report on plans and priorities on March 25.

Thank you for giving us the opportunity to talk to you about the role Public Works and Government Services Canada plays in supporting the government's approach to returning its budget to balance, as outlined in Budget 2010.

PWGSC is a large and complex department, and it plays an integral role in the daily operations of the Government of Canada. Our vision is to excel in government operations, and our strategic outcomes are to deliver high-quality services and programs that meet the needs of federal organizations and to ensure sound stewardship on behalf of Canadians.

As a common service provider for the Government of Canada, PWGSC acts as the government's principal real property manager, central purchasing agent, banker and accountant, as well as providing services in payroll, pensions, IT, and translation, among others.

Under the government's Economic Action Plan, we received more than $400 million over two years to accelerate our plans to repair and restore federal buildings and bridges, and enhance the accessibility of buildings where federal services are provided. PWGSC is also providing support in areas such as procurement to other government departments and agencies that are delivering on their own commitments under the Economic Action Plan over two years.

PWGSC has undergone many changes in recent years, and we believe we are well positioned to absorb the impact of the freeze. A few years ago we embarked on an ambitious program of renewal and transformation, seeking efficiencies and adopting common business practices, particularly in the areas of acquisitions, real property, and information technology.

Having also strengthened our financial planning, we promote strict discipline in budget management to ensure adherence to sound, standardized financial principles. As well, we have a forward-looking integrated human resources plan with numerous strategies to ensure a solid workforce and healthy workplace.

In keeping with our culture of continuous improvement, PWGSC is currently looking at options to generate the targeted savings of 5% over three years under the current round of strategic reviews. PWGSC was highly rated in its most recent assessment under the Treasury Board Secretariat's comprehensive measure of departmental performance, the management accountability framework.

PWGSC has a robust governance structure to monitor our functions and support strategic decision-making at senior levels. To deliver on our mandate, PWGSC will spend a gross $6.3 billion this fiscal year.

Unlike most other departments, PWGSC provides both mandatory services and optional services to other government departments and agencies. For optional services, we operate on a user-pay system and thus depend on revenue, primarily from our client government departments, to cover 56% of our expenditures—or $3.5 billion. Our funding by Parliament is $2.8 billion, or $6.3 billion of gross expenditures less $3.5 billion of revenues. Examples of optional services include auditing, consulting, translation services to departments and telecommunications and informatics services.

As committee members are aware, the freeze announced on March 4 primarily targets operational budgets, while allowing collective agreements to be funded within those levels. We estimate the impact on our operating budget of $3.4 billion to be $8.7 million in 2010-11, which is less than 1% of these funds. In response, we're planning to exercise tighter control of expenditures and increased rigour in all of our financial management; to mitigate potential risks to revenue by closing agreements earlier in the fiscal year; to continue to carefully manage spending on travel, hospitality, and conferences, as prescribed by budget 2009; and to decrease demand in certain areas, such as professional services.

These measures are consistent with our commitment to ongoing improvement in every area of our business.

Madam Chair, in addition to a copy of my opening remarks

in both languages, I am pleased to provide a one-page overview

which would explain our vote structure and our level of funding.

Madam Chair, this concludes my prepared statements. We are here for your questions.

[The Chair, Liberal, Yasmin Ratansi]

Thank you very much.

We will go to the first round of questions.

Ms. Hall Findlay, you have eight minutes, please.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you very much, Madam Chair.

Thank you very much, everyone, for being here with us this afternoon.

I note that the budget for the Department of Public Works over the last five or six years has remained pretty consistent--a little bit up, a bit down--and then all of sudden, this year, we see a jump from last year of almost 20%. There are several questions from that. First, what exactly does that cover, and why? What does that mean in terms of the announced freeze and indeed the additional strategic review for reductions?

So let's start with the first question, on why there is such a significant increase this year, and then hopefully we can ask more on that.

[Andrew Treusch]

Thank you for the question.

I can give you our overall main estimates figures for five years, beginning in 2006-07.

[Martha Hall Findlay, Liberal, Willowdale, ON]

No, I've already seen all of those numbers. Everything I've seen has shown fairly consistent numbers. My question is focused on the significant increase from last year to these main estimates, the ones we're dealing with now.

[Andrew Treusch]

Very well.

Main over main, 2009-10 was $2.387 billion, going to $2.847 billion this year. That's a significant increase. The largest part of that increase would be explained by our department's participation in the government's economic action plan, in particular the accelerated infrastructure program, where we have committed an additional amount of over $400 million over two fiscal years--the one that just closed and the one we're just entering.

In addition, our department has other project funding. A good example of that would be the funding that's moving through our department in relation to the G-8 and G-20 summits.

Over the five years, you will find an increase. In the earlier years, you'll find some decline in our main expenditures, largely related to the economies associated with “The Way Forward”, which were in the real property side. In the last couple of years, indeed, as a result of the economic action plan, you'll see growth.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Thank you for that.

So then my next question does relate specifically to the freeze and then the strategic review. Economic action plan expenditures are temporary in nature, as well as, I'm hoping, G-8 and G-20. There's lot of opportunity to go down there, but we're hoping that, as bad as it is, it's going to be temporary.

In both of those cases, then, can you tell me what the number will be that will actually be frozen? I'd like to have a commitment that the freeze will in fact be on the numbers that would take out economic action plan numbers and G-8 and G-20 numbers, which, as you've just said, are significant increases. What's the number that will actually be frozen?

[Andrew Treusch]

The number that would be frozen impacts our regular operating budget. It translates in 2010-11 to $8.7 million--less than 1%.

The amount excludes budget 2010 actions. In other words, the funding for G-8 and G-20 is excluded from that number, as is our participation in the government's economic action plan.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Maybe I'm a bit confused, but I'm looking at main estimates numbers of total expenditure last year--this is after revenue is taken out--of $2.4 billion, and then we have $2.8 billion. That's not the part that is being frozen? You're saying that none of the accommodation and real property assets management piece is actually part of this freezing?

[Andrew Treusch]

Our operating expenditures are being frozen. There would be operating expenditures in the real property part of our department. For example, you would also find there a lot of capital votes, and they are not affected.

[Martha Hall Findlay, Liberal, Willowdale, ON]

Okay. Thank you.

If it's all right, I'm going to share my time with my colleague.

[The Chair, Liberal, Yasmin Ratansi]

Go ahead.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

First of all, thank you very much for being here today. We appreciate your time and your attention to the details. I can see one area that did not receive additional funding year over year and that in fact probably saw a reduction of $32 million, and that was the information technology infrastructure services.

We know that the Auditor General has commented on this very important issue and has said that while you've made some steps to manage the risks relating to aging IT systems, much work remains to be done. Since the Auditor General has identified this as an area of concern, could you explain why it looks as though funding for the IT infrastructure services has been cut, and perhaps comment on where you see this going and how you're going to address this very serious issue when indeed you're looking at a freeze and a further 5%?

[Andrew Treusch]

Certainly. Thank you for the question.

IT is an important part of our department, and indeed we were before a parliamentary committee in the recent past on the issue of aging IT infrastructure.

A lot of IT funding is project-related. Project-related funding has its own lifeline. The two major IT projects under way within the department right now are the transformation of pension administration and the transformation of pay initiative. These are both major undertakings. One initiative involves a $246 million investment by the government. That's on the pension side. On the pay side there will be an investment of $298 million. That will take place over many years, and we're at the very start of that as well.

Across the department, we are now putting together an investment plan in response to the Auditor General's report so that we can provide assurance that we're putting our investment on the priorities of the department. We will then be ensuring that we have a department-wide plan, which is what the Auditor General's report was attesting to.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

How much time do I have remaining?

[The Chair, Liberal, Yasmin Ratansi]

You have a minute and a half.

[Siobhan Coady, Liberal, St. John's South—Mount Pearl, NL]

I have two final questions.

The first is a general question. You had an increase, and my colleague has indicated that you are levelling off and you're not putting in the increases that you've had in terms of the budget freeze. So first you have a budget freeze. Second, you talked about how a few years ago you had this ambitious program of renewal and transformation and efficiency-seeking. Now you're about to embark on another plan to look at another 5%.

What services or indeed human resources are you going to have to target in order to achieve the savings that are required now?

[Andrew Treusch]

In relation to the operating budget freeze, which is the subject of our call here today, given the size of our budget, which I described in my opening remarks, we believe we can manage the freeze by administrative measures. I outlined some of those in my opening remarks.

With respect to the strategic review process, we are one of several departments that will be looking across all of their programs in a comprehensive way. We'll be looking to eliminate duplication and waste, and programs that are low-performing. Our proposals will be presented to our minister. She in turn will take them to Treasury Board, and in due course the decisions of the government will be announced and will constitute part of the budget in 2011.

[The Chair, Liberal, Yasmin Ratansi]

Thank you.

We now go to Monsieur Nadeau,

for eight minutes, please.

[Richard Nadeau, Bloc, Gatineau, QC]

Thank you, Madam Chair.

Good afternoon, ladies and gentlemen.

We know that there has been a 1.5% salary increase and that the departments are not funded with new money. So you are at the same level as last year.

I am concerned about what this will do to the workload of the public servants, government workers, at all levels. We know that there have been retirements owing to the accumulated years of service. Public Works is a very big department. There has also been some natural attrition as people change jobs or seek employment elsewhere in the government or in the labour force.

How can you manage this situation or, at the very least, manage your staff without increasing the workload, knowing that you do not necessarily have the means to fill positions when people leave?

[Andrew Treusch]

Thank you very much for the question.

Obviously it's a question then of working smarter. It's a very intelligent question. We certainly grapple with increased demands for services. Workload is an issue. We do have attrition rates. We will continue to have retirements. The only way you can match the demand for work and some of the budget constraints we will manage is by re-engineering our business processes and by getting more economies and efficiencies in the tax dollars that we have now. Obviously, new technologies give us possibilities that we did not have in the past. As is the case in the private sector, we're always in search of economies and efficiencies in the way we organize ourselves internally.

One example to illustrate this point would be substituting tele-presence for meetings. Harvesting modern technology is much more economical. We can have a teleconference and avoid all the costs involved in travel.

[Richard Nadeau, Bloc, Gatineau, QC]

I understand your perspective, what you are doing, namely, you need to work smarter, if you like. However, there is nevertheless a limit to what you can do. We all agree that you can stretch an elastic band, but there is a limit as to how far you can stretch it without it snapping back. You wind up putting a band-aid on a wooden leg rather than treating the problem or remedying the situation.

As for the other aspect, I do understand the principle, I come from the teaching world. It was already difficult to find new teachers before I became a member of Parliament. There is a great deal of competition—I am changing fields—in the public service, there is fierce competition with other public services, whether they be at the provincial or municipal level, or with private enterprise, for similar jobs. At one point, we thought we had what was a solution—today we know that this is not true—in order to save some money: subcontracting.

Will Public Works turn to this pool of subcontractors, who are not public servants, in order to staff positions which, in the long run, are going to wind up costing us more money because we have not found the individuals who will officially replace public employees?

[Andrew Treusch]

I well understand. That's an excellent question. The question of whether in some way the operating budget freeze would disincent regular staffing and as a consequence foster greater use of outside consultants is often raised. It's important to be alert to the fact that just as public service salaries are part of our operating budget, so would be the costs of outside consultants. Insofar as there would be $8.7 million less in the pot for the Department of Public Works for operating purposes, there would certainly be less money for engaging consultants. In fact, the use of consultants is one of the areas where we plan to be more diligent in the coming years.

As far as what the numbers show regarding our ability to recruit goes, which is at the heart of your question, sir, in the year that just closed, we brought over 1,000 people into our department. We brought in 1,000 people the year before that, the year before that, and the year before that. So we're very competitive. We're able to recruit to our department. We can do that at the same time as we can improve our demographics and close the gap, whether it's with respect to women, persons with disabilities, aboriginal Canadians, or visible minorities. We've met three of those four targets. On the fourth one, we're quite close as well.

[Richard Nadeau, Bloc, Gatineau, QC]

I recall a certain time when Mr. Fortier was the minister responsible for Public Works—and Ms. Lorenzato was present at this meeting—and we discussed the whole issue of pay management. This committee was looking into this issue because there were significant delays in the issuance of pay cheques, delays that were even disturbing as same people were not getting their pay on time.

At that point we did uncover one problem, in particular, and we met with the union on the matter: the people who work in payroll were well trained, but they were being paid less, in the federal government, than others who did similar work. So, after one, two and a half or three years of training, people would disappear and seek employment elsewhere.

You have just told me that you are very competitive. Did you change the pay scales, for instance, in this very specialized field in a department the size of Public Works? Did you change the pay scales in order to better retain employees in these types of positions, such as compensation and pension analysis, etc., a field that is quite broad?