Government Operations Committee on May 26th, 2015

[Alex Lakroni, Chief Financial Officer, Finance and Administration Branch, Department of Public Works and Government Services]

Thank you, Mr. Chair, for the question.

If you compare main estimates to main estimates, you will see there is an increase. In fact, there is an improvement in the way we are funding our portfolio for real property. We used to seek funding and do another set of exercises and supplementary estimates to seek more funding based on forecast usage, etc. The formula has changed now. We are funded up front in the main estimates. It's more transparent. It's more complete. That's one dimension.

The other dimension is that if you look at the operating vote, it has significantly decreased by about $250 million. The reason is there was an AG recommendation a couple of years ago where the funds do not need to be in the operating vote, but in the capital vote because the expenditures are deemed to be of a capital nature. That $250 million you see is in capital. If you look at capital, you think there is an increase, but in fact there isn't.

What I would like to talk about from a general perspective is that the funding remains stable. In fact, there are significant savings in the real property portfolio, specifically with regard to two initiatives my colleague Pierre-Marc Mongeau could elaborate on. One is space recapture. We are recapturing space from surpluses that exist everywhere. Two, we are modernizing the space by using best practices and industry standards. These two initiatives alone are going to yield about $129 million to $130 million in 2017-18. Those are not small savings in the real property portfolio.

[Chris Warkentin, Conservative, Peace River, AB]

Savings of $130 million.... What I'm hearing is that we expect the supplementary estimates with regard to this to be less this year than they have been in the past because it's reflected in the main estimates.

[Alex Lakroni]

Definitely.

[Chris Warkentin, Conservative, Peace River, AB]

Thank you.

Moving on, one of the biggest infrastructure projects that Public Works has undertaken with regard to real property is the parliamentary precinct. There is a request for additional funds for the rehabilitation work that is ongoing. I think all of us are fully aware there's a lot going on with the precinct.

Can you give us an update in terms of the planned expenditures for the precinct and what we might expect to have completed in the next year with regard to the rehabilitation?

[George Da Pont]

Thank you very much for the question.

In fact, a lot of that is laid out in the report on plans and priorities.

Let me start with the West Block rehabilitation. We're now about 72% complete. Our expectation is that it would be completed by March 2016.

As you are aware, I'm sure, since it may have disrupted some of your operations, we have been undertaking the evacuation activities as the first part of establishing a new visitor welcome centre. That work is also scheduled for completion in March 2016.

Similarly, for the Wellington Building rehabilitation, the fit-up and the installation of the building is about 92% complete. Again, we'll be ready next year.

We've started work on the Government Conference Centre, which includes fit-up, design, and the beginning of some of the interior work. As you're aware, that will become the temporary home of the Senate. Again, we're expecting that to be finished in 2016.

The final part is the East Block exterior rehabilitation. We expect it to be about 15% complete by March 2016.

We're making good progress on all of them. The various estimates in front of you reflect the funding for those projects.

[The Chair, NDP, Pat Martin]

Thank you, Mr. Warkentin. You're well over the time allocated.

Next, for the Liberal Party, is Mr. Gerry Byrne.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

I'll make a quick observation, which I cannot leave without noting. The government and the Conservative caucus have made a very strong and compelling case that taking $30 billion out of the back pocket of taxpayers, putting it in the hands of the government, and getting the government to spend it on a big megaproject is really good for the economy and for everybody around us. I wanted to make that observation. The government and the Conservative caucus have made a very strong and compelling case for that.

On that note, could the expert witnesses before us please give us an update on the procurement of Canada's replacement of the war fighter project? What's the current status? Are you anywhere near moving toward a final tender?

[George Da Pont]

Yes, I can give you an update.

Just a couple of weeks ago, we launched the first step in that process. We have started a process to qualify a small number of warship designers and a small number of combat systems integrators who then would be in a position to bid for the actual work. This is a critical first step. We hope it will be done by the early fall. Then we would proceed into the type of industry engagement and engagement that would be built around a draft request for proposal. That process would take a few months.

So we have started the process.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

You say there's a very small number. Would you be able to further elaborate on that, saying specifically who those are?

[George Da Pont]

I can't, because the whole intent of the process is that whatever companies present themselves will be evaluated in terms of their overall capacity, and all that meet it will be in the qualified pool.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

I'm missing something here. You say you've identified a small number, but now you say you can't—

[George Da Pont]

No, I said we've started a request for qualification that will lead to the identification likely of a smaller number of—

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

—likely of a smaller number. Okay, thanks very much.

Basically you are confirming again to this committee that it will be an open bidding process, based on what you anticipate will be a very small number.

[George Da Pont]

This will be the qualification exercise that will qualify those firms that will then be able to bid in the process.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Could you elaborate on what some of those qualifications might be?

[George Da Pont]

I think I'll ask Lisa Campbell, the ADM of acquisitions, to take you through that detail.

[Lisa Campbell, Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services]

Good morning, and thank you for the question, Mr. Chair. I'm happy to talk about the national shipbuilding procurement strategy. I think it's worth—

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

No, this is the war fighter we're talking about.

[Lisa Campbell]

Yes, and if I may just give a bit of an opener, we're three years into a 30-year strategy. This is the biggest project, as you noted. The budget is $26 billion for up to 15 ships.

As my colleague pointed out, we recently announced a procurement strategy that in our view is going to maximize competition. We've had 15 industry engagement sessions to get a better idea of Canadian capacity, what designs are out there, seeing where it's possible to buy off the shelf so that we don't spend wasted months in a competition when in fact there are existing designs available to meet Canada's needs, but also assessing where there's Canadian capacity not just to contribute on this project but also to become part of a global supply chain and supply worldwide.

We announced the procurement strategy on May 13, and over the course of the summer we're going to be talking to firms, as my colleague mentioned, to see which firms have built designs before and have proven capacity in this area, and then we'll be running a competitive process in the fall for combat systems integrators and warship designers.

I would highlight, as was noted earlier, that the ship is one thing, but the real complexity now is what's on the ship, all of the complex systems to allow them to integrate with satellites, with radars, and to have interoperability with our allies. That's where there's a lot of value; that, plus in-service support.

One reason we want to use competition throughout the process is that the first ship might not look like the last one. These are going to evolve over time, taking advantage of innovations, of reduction in prices that we should see as benefits over time, and quite frankly, also the shipbuilding expertise that will develop in Canada.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

So you're telling us that we will be fully operational with a replacement aircraft by 2020.

[Lisa Campbell]

Do you mean replacement ships?

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Aircraft, I said the war fighter.

[Lisa Campbell]

Forgive me. I thought you were asking about the Canadian surface combatants.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

No, the war fighter. We're not talking about the same thing. The aircraft replacement strategy is deemed the Canadian war fighter aircraft.

[Lisa Campbell]

Yes.