Government Operations Committee on May 26th, 2015

[The Chair, NDP, Pat Martin]

Good morning, ladies and gentlemen. Welcome to the Standing Committee on Government Operations and Estimates.

We're very pleased today to be here in regard to the main estimates for the Department of Public Works and Government Services. We'll also be looking at the report on plans and priorities at Shared Services Canada.

We're very pleased to have with us today the Honourable Diane Finley, the Minister for Public Works and Government Services. You're always welcome here, Minister Finley, and we thank you for being here with us today. I see we have you here with us for the first hour. It's only a couple of billion dollars, so it shouldn't take us more than an hour or so to do our due diligence and examine it.

We'll begin without delay then and ask you for opening remarks, and then we'll go to questions.

[Diane Finley, Conservative, Minister of Public Works and Government Services]

Thank you very much, Mr. Chair.

I am pleased to be here today to talk about my two departments' main estimates and reports on plans and priorities for the 2015-16 fiscal year. With me from Public Works and Government Services Canada are the deputy minister, George Da Pont, and the chief financial officer, Alex Lakroni.

From Shared Services Canada I'm joined by the president, Liseanne Forand, and Elizabeth Tromp, the acting senior ADM, corporate services, and chief financial officer.

Both PWGSC and SSC provide essential services to other departments and support our government commitment to creating jobs, growth and economic prosperity.

For the 2015-16 main estimates, Public Works' net spending is expected to increase by $30.6 million over the previous year. This is primarily due to the transfer of responsibilities to Public Works from the former Enterprise Cape Breton Corporation, as well as to the rehabilitation of the Parliament Buildings, including interim accommodation for the Senate.

For Shared Services Canada, the 2015-16 main estimates represent a total of $1.444 billion and show a net decrease of $127.8 million compared to the previous year. This is due mainly to savings achieved across various key transformation initiatives and a $63.4 million reduction in funding for partners' projects and initiatives.

Over the next year, PWGSC is looking forward to reaching several milestones.

Last week my colleague Tilly O'Neill-Gordon, member of Parliament for Miramichi, officially kicked off the construction of the new public service pay centre, showing just how far we've come on the transformation of pay administration initiative. The construction of this building will create an estimated 200 jobs in addition to the 550 employees currently working in the interim pay centre. In fact, by the end of the year, over 140,000 pay accounts will be administered at this new centre.

By consolidating pay services into a single building, we will generate approximately $70 million in savings each year starting in 2016-17. Obviously that's good news for taxpayers, and it's good news for the people of Miramichi.

Another great Public Works initiative with which you might be familiar is the build in Canada innovation program, or as we fondly refer to it, BCIP. Through this program our government is kick-starting Canadian businesses by helping them get their innovative products and services from the lab to the marketplace.

One of the biggest hurdles that companies face with new products is making that first sale. As you all know, it can be tough to get someone to take a chance on an untested product or service.

I've heard the story from business owners a hundred times that when Canadian companies try to sell their products internationally, the first question they're asked is if the Canadian government is one of their customers. Let me tell you, it is a pretty tough sell when the answer to that question is no. It's through this program the federal government acts as a first buyer of new technology. I'd like to stress that this is not a subsidy or a grant. Companies and their innovation are matched with government departments that could use their innovation to fulfill a business need.

But, the government departments are not just customers. After test-driving the innovation, they provide real-world evaluation and feedback to suppliers who can then make refinements. We hear all the time that companies find this feedback very useful.

Having made a sale to the Government of Canada, businesses can demonstrate the value of their products and services to potential customers in Canada and indeed right around the world. With 100 contracts issued since 2010, this program is a great boost to innovative Canadian companies.

We're also looking forward to making further progress under our national shipbuilding procurement strategy. Over the next month, Vancouver Shipyards will begin construction on the Canadian Coast Guard offshore fisheries science vessel. Irving Shipbuilding in Halifax will cut steel on the Arctic offshore patrol ship for National Defence.

The two shipyards are employing hundreds of highly skilled workers, while some 256 companies across Canada have already been engaged in contracts valued at $900 million. This is all thanks to our national shipbuilding procurement strategy, which is helping rebuild a strong Canadian shipbuilding industry and a marine industry that will create an estimated 15,000 jobs over the next 30 years.

This long-term approach to building ships will ensure strong jobs and economic growth, stability for the industry, and vital equipment for our men and women in the Royal Canadian Navy and in the Canadian Coast Guard. We are also looking forward to making further progress on our government's new defence procurement strategy.

This strategy marks the most significant shift in the federal government's purchasing of military equipment in 30 years.

It aims to achieve three important objectives: deliver the right equipment to the Canadian Armed Forces in a timely manner; leverage these purchases to create jobs and growth; and streamline our procurement processes. While we've made progress on the implementation of this strategy, I am looking forward to taking further steps to its implementation. Value propositions are beginning to be applied to procurements and will continue to be applied on a systematic basis going forward.

If I may, I would now like to turn to Shared Services Canada. SSC continues to modernize and consolidate our government's IT infrastructure.

Our data centre consolidation will also continue over the course of the fiscal year, as aging data centres are closed and replaced by a small number of modern, secure and highly efficient ones.

Fewer data centres will eliminate duplication, will standardize processes, and perhaps most importantly, will tighten security. We have established three enterprise data centres already and closed 57 data centres over the past two years. Savings of $14.5 million have been achieved already through consolidation and renegotiation of data centre contracts under economic action plan 2012.

In the course of executing this part of the plan, SSC has identified over 200 additional existing data centres, the vast majority of which are small rooms within office buildings. While we initially planned for 485 aging facilities to be replaced by no more than seven modern, secure, reliable centres, opportunities that include better-than-expected pricing and the use of cloud computing will allow Shared Services Canada to now consolidate over 700 data centres to no more than four or five by 2020.

SSC is also helping to modernize our telephone system by moving away from conventional, and quite frankly costly, desktop phones to cellular service or voice-over-Internet protocol phones where possible. Believe it or not, this has already generated ongoing savings of approximately $28.8 million a year.

The safety and security of Canadians continues to be one of the government's top priorities. Shared Services Canada is building a secure, centralized communications infrastructure that directly supports Canada's Cyber Security Strategy. SSC works closely with government security partners to protect government systems from cyber threats and intrusions.

As new products are brought forward, Shared Services will work with industry experts to identify best practices and approaches by providing secure, cost effective, and robust IT architecture.

SSC is making it possible to partner departments to achieve their priorities and better deliver services and programs to Canadians. The total amount the government has saved since SSC's creation is now $209 million each year. That's $150 million for the consolidation of existing services and the reduction of overhead, $50 million through email transformation, and $9 million through the consolidated procurement of hardware and software for workplace technology devices.

Mr. Chair, PWGSC and SSC are tasked with very broad and complex responsibilities. While difficulties can and do arise, overall I am pleased with the progress that has been made by both departments over the last fiscal year.

I anticipate another year of steady progress in achieving cost savings, better services, and greater security for the Government of Canada and for the citizens that it serves.

Thank you very much. We now look forward to your questions.

[The Chair, NDP, Pat Martin]

Thank you, Minister Finley, and I'm sure the questioners look forward to questioning you equally.

Beginning for the official opposition, Mr. Mathieu Ravignat.

[Mathieu Ravignat, NDP, Pontiac, QC]

Thank you, Minister, for being here. We don't always have the best of luck getting ministers to come here to protect their plans and priorities or their estimates, so I'm happy to see you today.

I'd like to ask a question about the search and rescue RFP. Mr. Perry is, as you know, a well-known expert. He said that the fact that the request for proposal, the RFP, is out is a good sign. But that RFP has been out before and nothing has moved on it. Can you give us assurances that something actually will be done about search and rescue vehicles in this country?

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

We've made it very clear that we want to make sure that our men and women in uniform have the equipment they need to do the job that we ask of them, and that's right across the range. We've invested in the defence procurement strategy in the Canada First program significantly in getting that equipment for them. There have been some false starts on the fixed-wing program. We have made a point though, and I've personally been involved in this, in engaging industry so we can develop a better RFP. That was one of the problems in the past.

Our new RFP has been issued. We have every intent of seeing that through and expect that in the fall of 2016 the first contract award will be made.

[Mathieu Ravignat, NDP, Pontiac, QC]

Can you give us a sense of what exactly is going to be delivered in the next year?

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

What we're doing is, in March we released the RFP. This is quite a complicated procurement because we're asking the proponents to essentially design a system. We're expecting the three different regions of Canada for search and rescue, and we're asking them to come up with not just equipment, but a plan that would be effective and efficient in doing search and rescue so that citizens get the best service possible at the most efficient price. There are a lot of possible configurations for this. It's going to take the proponents some time to do the analysis and put together what they believe would be the best solution.

[Mathieu Ravignat, NDP, Pontiac, QC]

Obviously, this is an important issue. We're talking about the safety of Canadians. Can you say anything to reassure Canadians that there will actually be vehicles in operation in the near future?

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

We do have vehicles in operation, as you know, the Buffalo fleet.

[Mathieu Ravignat, NDP, Pontiac, QC]

In operation.

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

The Buffalo fleet has been renovated. But we do work with our other partners as well on this to make sure that the service is provided and when it is, to make sure that going forward we do get the right equipment in the right configuration.

[Mathieu Ravignat, NDP, Pontiac, QC]

Moving on to personnel, necessary expertise in the Canadian military, there seems to be money there, but there doesn't seem to be a lot of hiring going on. For example, industry watchers have said that the military has lost many skilled workers in cutbacks in the previous decades.

Can you tell me if there's a strategy in place to come to some kind of analysis and some kind of progress with regard to making sure that we have the expertise necessary in the military?

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

I'm sorry, you're going to have to address that question to the Minister of National Defence. That's not within my purview.

[Mathieu Ravignat, NDP, Pontiac, QC]

Okay.

Regarding the relocation contract that is renewed year after year with Royal LePage and the CIBC, without a call for tenders—we know that the government was to pay $30 million for discriminatory treatment, and that the contract in question was to expire in 2014.

What has Public Works and Government Services Canada done since that decision was handed down? Are there new adjudication practices, for instance with regard to the management of the Integrated Relocation program?

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

Yes, something was done. The contract was extended so that we could assess the state of the market and ensure that there are companies who are able to reply to a bid. Departments are also assessing their own policies in this regard.

[Mathieu Ravignat, NDP, Pontiac, QC]

Did you study the problem that existed in the past? Is the department sure that it will have an open, fair bidding process with reasonable and competitive criteria? Can you give us some ideas of the analysis that was done of that dossier?

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

Of course, we are aware of the Auditor General's comments, but it is very difficult because in this industry, there's only one big company. When there are small companies, a consolidation takes place and this makes everything very difficult. We have to consider all of our options: is it preferable for taxpayers that there be one big contract or several regional contracts? That is the question we are asking ourselves.

[The Chair, NDP, Pat Martin]

Thank you, Minister.

Thank you, Mr. Ravignat. That concludes your time.

Next, for the Conservatives, we'll hear from Mr. Brad Butt, for five minutes, please.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

Good morning, Minister. Welcome to you and all of your officials. Thank you for taking time to appear before the Standing Committee on Government Operations and Estimates, as you always do when we ask. We appreciate hearing of the initiatives within the various departments and of the work that's being done.

I want to ask for some more background, Minister, on the build in Canada innovation program. In my riding of Mississauga—Streetsville we have hundreds and hundreds of small businesses. Often when I meet and talk with them, including the Streetsville Business Improvement Association, as an example, one issue that comes up is how to sell to the Government of Canada, how to get their product, service, or whatever, into the tendering process. They have something innovative that they think the government could use to make systems or things more efficient or more effective. Obviously, as their local member of Parliament I try to get them through the necessary hoops to reach that goal.

Could you take a bit of time to talk in a little more detail? In your opening comments, you said, “Through this program our government is kick-starting Canadian businesses by helping them get their innovative products and services from the lab to the marketplace.”

Maybe you could take time to explain a little more about that program and then generally what is being done to help small businesses in particular sell their goods and services to the Government of Canada.

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

I really appreciate that question, because small business really is the backbone of our economy. Nine out of ten jobs are in small and medium-sized enterprises, SMEs, and those same companies create three out of every four new jobs, so it's really important to us that we support them. In fact, some 39% of all the procurement that Public Works does for the government is done with small business. I'm really proud of that, because there was a day when it wasn't that high a number, but we respect small businesses and we try to make sure that we include them. In fact, that's why we set up the office of small and medium enterprises, OSME.

It's OSME that actually administers the build in Canada innovation program, BCIP, to which you referred. This is an exciting program that was trialled a couple of years ago. We've since made it permanent and doubled the funding for it so it's now $40 million a year. There's a $20 million component just for the military.

As I mentioned in my opening remarks, this is a program, not a subsidy, in which we identify companies that have really interesting products or services that are then procured, purchased, by a government department to match real business needs. These are products that probably aren't quite ready for prime time yet, but when companies work with the department, the department trials these products or services and identifies where they could be improved. It goes back to the company and says, “Okay, here you go. This is what we see as opportunities for improvement.” The company fixes things up, goes back to the department, and the department tries it again. At least nine times out of ten there's success. The company benefits by getting that real-world exposure and the trial to perfect its product or service. The government department gets a real business need met with something that's brand new. The company gets the benefit and the cachet, if you like, of having the Government of Canada as a customer, which adds a lot of credibility, especially when they're trying to sell worldwide.

I met with a number of the owners of these companies that have come up with these products. Some of them truly are innovative. Some of them are world-leading in their field, so it really feels good to be able to support companies that are now receiving perhaps 80% of their revenue from offshore. It's a real kick-start program and it's a win-win all the way around.

I would point out that the next call for proposals on this will be this summer, so people can check it out on the website.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

Minister, in your opening statement you said, “from the lab to the marketplace”. Can you expand on that? What exactly does that entail? Is it someone coming forward with a new innovation and running it by officials in the government or in your department to sort of say, “This is what it is and this is what it does”? You mentioned that this isn't a subsidy program or a grant program, that it's a program designed to help and support these small businesses.

Can you clarify that one line? I want to get more clarification on exactly what role the department is playing.

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

I'd be happy to. In fact, I'll give you an example.

One product was developed just across the river in Gatineau. It's very innovative. I won't go into too much detail for security reasons, but it's a security device that DND decided to purchase. They tried it out and found that there were some temperature issues, believe it or not, and this particular product couldn't operate in all temperatures when they tried it. They went back to the manufacturer and the manufacturer made some adjustments, more than once, in fact. They got it so it did work. Now the military is using that particular device. There is a huge international market for this product, both in the military and in the commercial sector. To me it's a really exciting program, because it will help overcome a lot of problems in this particular field in terms of security and even in terms of business and international exports.

[The Chair, NDP, Pat Martin]

Thank you, Mr. Butt. That concludes your time.

Thank you, Minister.

Next, from the NDP, we have Tarik Brahmi.

[Tarik Brahmi, NDP, Saint-Jean, QC]

Thank you, Mr. Chair.

Madam Minister, a little over a year ago you announced the creation of the Defence Analytics Institute, involving quite an interesting mixed group of business people and academics.

What is the status today regarding the creation of that institute?

[Diane Finley, Conservative, Haldimand—Norfolk, ON]

We set up an interim institute to help determine how the institute would be structured. This work is being done at this time and consultations took place with the government, the industry and all of the companies in the defence industry. In the Economic Action Plan we included $2.5 million to launch the institute. These people are in the process of determining an appropriate structure for it.