Government Operations Committee on April 30th, 2013

[Denis Blanchette, NDP, Louis-Hébert, QC]

Thank you, Mr. Chair. I will be sharing my time with Ms. Duncan.

Ms. Forand, we were talking about capital expenses just now. So now we are going to talk about operating expenses. We will go in logical order.

In the 2012-2013 main estimates, there is a slight increase in spending over what had initially been planned. However, because you are increasing capital spending by a large amount, there is a draconian decline in operating expenses. In fact, there is a more than $200 million difference between what you actually spent in 2012-2013 and what you plan to spend in 2013-2014. That amounts to a reduction of more than 15%.

Apart from the best practices that exist and all that, what are you going to do, to cut your budget by 15% without cutting services to users, who are the ones who provide services to the public? I have a problem with this. I see it as a bit of a steep decline. Thank you.

[Liseanne Forand]

Thank you for the question.

Obviously, the difference between the spending initially planned in the 2012-2013 budget and our final expenses can be explained by the fact that there were some increases during the year. They were the result of transfers between the departments and Shared Services Canada, in particular. You will understand that after we set the budgets for Shared Services Canada, some calculations were reviewed to find projects or money that should or should not have been included. That is why we ended 2012-2013 with a surplus, if you like, as compared to what we had the year before.

As I said in my opening remarks, we are starting this year with a reduction of $121 million dollars, compared to last year. That is attributable to the $89.6 million in cuts that we made after the 2012 budget, in particular. We planned those reductions precisely to avoid repercussions on services to partner departments. The cuts are made through contracts and cost reductions.

For example, a new cell phone contract for the Government of Canada has cut the cost of using cell phones to $5 per month. Since we are responsible for that contract, unlike all the departments, we can collect that money, which represents savings. That is how we have been able to realize major savings.

[Denis Blanchette, NDP, Louis-Hébert, QC]

I will yield the two minutes I have left to Ms. Duncan.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Mr. Chair, at this time I'd like to move a motion related to the testimony we've heard on the integrated relocation program. That motion is:

That, the Standing Committee on Government Operations and Estimates invite the Minister of Public Works and Government Operations and officials to appear before committee to provide an update on any specific measures taken, if any, to address issues and concerns with procurement for Relocation Services under the Integrated Relocation Program, including:

1. Revisions to policy and practice in response to concerns and recommendations in the November 2006 Report of the Auditor General,

2. Revisions to policy and practice in response to the judgment and award against the Government of Canada in the case of Envoy Relocation Services Inc. vs. The Attorney General of Canada, which held that the Crown breached express terms of the RFP, breached its duty of fair and equal treatment in the conduct of these procurement process in relation to property management component of the RFP, that the weighting in the selection formula was intentionally amended to one particular bidder and that the Crown's conduct on the issue of amending the selection formula constituted in bad faith.

3. Any additional changes to the relocation program procurement processes.

[The Vice-Chair, Conservative, Peter Braid]

Mr. Cannan.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair.

I think all of us around the table have concerns about this specific contract and it is a legal matter that's being reviewed. I think it's most appropriate that we don't comment until all the officials have had a chance to review and come back. The specific request should be dealt with in future business so I move to adjourn debate.

[The Vice-Chair, Conservative, Peter Braid]

We have a motion before the committee at this time to adjourn debate on this particular matter, which is immediately votable, so I will ask for those who are in favour to adjourn debate on this motion to raise their hands.

(Motion agreed to)

[The Chair, NDP, Pat Martin]

We return to the questioning of witnesses with approximately one-and-a-half to two minutes remaining.

[Denis Blanchette, NDP, Louis-Hébert, QC]

You gave me an example of savings, but between you and me, we have to agree that a $200 million reduction means reducing services somewhere. I do not see how you can simply try to optimize things. A $200 million reduction is still a 15% reduction, and that represents a lot of people.

Where did you decide to make those cuts, to achieve that objective? I would like to get a more specific answer on that.

[Liseanne Forand]

Thank you for the question.

Our reductions are limited to the ones I have described, that is, the ones that were made under the budget. The other savings we are going to realize relate much more to changes in how we operate.

Before, some things were done 43 times, but now, we are studying a method of delivering services to the partners that is more horizontal. In other words, rather than managing 485 data centres, one or two at a time, we are doing it on a horizontal operational line. Everyone manages them together.

That is how we are changing our operating method.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Are you telling me that you have already made this change, that these 485 data centres are now being centrally managed?

[Liseanne Forand]

We are initiating the process for changing the way we operate. It is not entirely finished. We are moving gradually, to go from one operating method that is entirely vertical to a much more horizontal service delivery method. We are realizing savings based on this new way of doing things.

As well, as I said earlier in answer to another question, we have discovered a lot of overlap and other cost reduction opportunities.

[The Vice-Chair, Conservative, Peter Braid]

Thank you, Mr. Blanchette.

Next we have Mr. Ron Cannan.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair, and thanks to our witnesses. Thank you, Michelle, for the arm twisting to keep Mr. McBain around. Your wisdom and experience are greatly appreciated.

I have a couple of questions. In your preamble you talked about how Shared Services Canada is 18 months young. You've done a great job. One of the recommendations is to dedicate $20 million of your existing funding to improve the capacity of telepresence and other comparable technologies. Could you maybe explain that a little bit more?

I know my wise colleague across the way, Mr. McCallum, has alluded more than once to the fact that sometimes you have to invest some money up front in order to see those savings down the road. Could you elaborate a little bit not only on the dollar savings but some of the efficiencies of staff and productivity that go into play with this improved technology?

[Liseanne Forand]

Thank you for the question.

As I mentioned a little earlier, we did spend some time further to the commitment that was made in budget 2012 looking at the use of video conferencing across the Government of Canada. One of the things we did as part of that work over the last year was to engage with industry. We issued a request for information, and we met with industry and talked about what some of the new directions for video conferencing or telepresence are and some of the benefits associated with it. That very much informed the proposals we made in terms of further investments.

To your question of productivity, one of the areas that is particularly promising in terms of additional productivity, and it is really where the video conferencing world is going, is not so much room-based video conferencing but desktop-based video conferencing, really to permit ubiquitous video conferencing, whether it's from a mobile device, a tablet, laptop, or from a desktop. That's one of the things that informed our thinking in terms of the kinds of investments that might be required in the future and some of the benefits it might bring.

If I may mention one final plug for our major transformation programs, the network consolidation and network simplification we were talking about will greatly enhance the capacity for ubiquitous video conferencing by giving us the ability to greatly expand the bandwidth available at the desktop.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I appreciate that. One of the analogies that has been shared with me is the fact that if one government official goes up to Toronto for a one-hour or two-hour meeting, it basically takes all day, sometimes an overnight trip, whereas they could have that meeting for two hours, be back at their desk, and have a full productive day. It's a very good investment and I appreciate your perseverance on that.

Going back to the RPPs and trying to simplify understanding the budgeting process is one of the goals of our committee. We've been working on this for over a year. It's still very difficult. On page 13, above the expenditure profile and departmental spending trend, there's a paragraph there. It says:

Figures for 2014-15 and beyond include appropriations only as the Department has no vote-netted revenue authority beyond 2013–14.

Could you explain what “no vote-netted revenue” means?

[Liseanne Forand]

Thank you.

Shared Services Canada does include vote-netted revenue as part of the funding it uses to operate. That's due to two things. Number one, some of the funding that was transferred to Shared Services Canada from the 43 departments is made up of revenue from those departments. To use HRSDC as an example, in terms of the funding transferred to Shared Services Canada it would have included appropriations as well as revenues that it receives. The EI fund, for example, is one such revenue source. We also receive revenue for non-mandatory optional services that we offer on a cost-recovery basis to departments.

When Shared Services Canada was first established, one of the first things we had to do was to go to Treasury Board and get authority to respend revenue. That was done very quickly, within about three months, and at that time the Treasury Board gave us the authority for the first two years only. We are required to go back to Treasury Board this fall and renew that authority to respend revenue.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

You're in a probation period. You're being trusted, and I appreciate the good work you're doing.

Moving over a couple of pages to page 15 of the RPP, it talks about efficient and effective IT infrastructure services being delivered to the Government of Canada having a reduction over to 2014-15.

Can you maybe elaborate on what factors are contributing to increasing your budget?

[Liseanne Forand]

Thank you for that question.

It represents a reduction of $121 million and the bulk of that is the savings and contributions that we're making further to budget 2012. Those savings are due primarily to being able to harvest the savings associated with better contracts, better pricing.

One initiative that we're rolling out this year is called modernizing telephone services across our partner departments. We are doing such things as moving from land lines to cell phones for employees whose jobs are amenable to that, as well as moving from old-fashioned phones to voice over Internet protocol phones, as well as eliminating land lines that aren't being used that are hidden in the walls and that we're still paying for.

Those sorts of things are all included in that reduction. So that's worth about $90 million of the $121 million and the balance is adjustments that are still being made back and forth between some departments that gave us too much money and some departments that didn't give us enough, as well as other funding that we would have received for projects last year, for example, that are not continuing this year, and one-time funding for a wage settlement last year. So they're small items on all those fronts.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you very much. Those savings are music to the ears.

I know the folks in the back row behind you are also working hard fixing the precinct buildings, so I thank you all for working very diligently.

[The Chair, NDP, Pat Martin]

Thank you, Ron.

Next for the Liberals, Mr. John McCallum.

[John McCallum, Liberal, Markham—Unionville, ON]

I'd like to come back to the question of ships, and in particular, how many of them you can buy for a given amount of money. I know this has been a matter of controversy.

First we were told the inflation rate was really low and then we were told there wasn't any inflation, which has a huge impact when you're talking about 20 to 25 years. I know from my time at Defence that the military has a strong tendency to lowball procurement costs, and I suspect that hasn't changed.

Most recently, I think last month, defence minister Peter MacKay was asked how many Arctic offshore patrol vessels could be bought with the money we had, and he said he didn't know. Approximately how many Arctic offshore patrol vessels can we buy with the money we have?

[Michelle d'Auray]

Thank you for the question.

I think we have a significant amount of material in the public domain that we certainly can make available to the committee, but essentially the approach that we are now taking, and have indicated we are taking with the shipbuilding strategy, is to go to a design and then production. So we have issued a design contract to Irving to get at the most effective design, and based on that, we will then be able to ascertain the production costs so we can get a sense as to how many of the ships can be produced with the most effective design.

[John McCallum, Liberal, Markham—Unionville, ON]

Can you tell us what inflation rate is being assumed?

[Michelle d'Auray]

I can certainly provide you with that information. I do not have it on hand with me today.