Government Operations Committee on March 9th, 2017

[Kevin Radford, Assistant Deputy Minister, Real Property, Department of Public Works and Government Services]

With respect to the remediation of the Esquimalt graving dock, there are actually two components where it was mentioned.

The first component was the remediation work through the contaminated sites action plan, where we completely redid the south jetty, worked into the harbour, and cleaned up the site. The work that Madame Lemay mentioned in the opening remarks was around the reconstruction of that station.

[Erin Weir, NDP, Regina—Lewvan, SK]

That's what I'm asking about, yes.

[Kevin Radford]

However, it was mainly in and around the following projects, which I will go over for you.

The first was the service entrance in the pumphouse substation, which was $14.6 million. Another component was for a main substation replacement. There was also the north landing wharf substation, and these substations are where the heavy electrical equipment and switching equipment is in place.

Another component is the planning work on the caisson life extension, but I want to emphasize that it's for planning. The caisson is the large floating hull, if you will. If you're familiar with the doors that open and close on the Rideau Locks, this one is a similar type of door but it actually floats. We fill it up with water and it locks in place. That allows us to drain the dry dock. It's preplanning work on that particular part of the structure.

The following money is actually on the preplanning for the south jetty reconstruction. We're just in the preplanning phases of that particular work.

[Erin Weir, NDP, Regina—Lewvan, SK]

Is it too soon to say where the material will be sourced?

[Kevin Radford]

Yes. I believe it's too soon.

[Erin Weir, NDP, Regina—Lewvan, SK]

Okay.

[Kevin Radford]

The initial money was $1.2 million to plan out, design, and scope how the south jetty will be constructed.

[Erin Weir, NDP, Regina—Lewvan, SK]

In making this plan will you look to source Canadian steel?

[Kevin Radford]

From a procurement perspective, we will work very closely with our colleagues in acquisitions and procurement. We will look at that as it moves forward from conception through preplanning and planning to execution.

[Erin Weir, NDP, Regina—Lewvan, SK]

Another item that is in the supplementary estimates for your department that I do not believe was in the opening remarks is an additional $18.7 million for increased non-discretionary expenses associated with the leasing of buildings as well as crown-owned buildings.

I am wondering what that cost reflects. Does it arise from these lease-back deals whereby your department is selling off buildings and then leasing them back from the private sector?

[Kevin Radford]

In 2014, we worked with the Treasury Board to establish what we call price and volume protection. A component of the monies that we asked for in the supplementary estimates (C) was around price and volume protection in the non-discretionary component of our overall portfolio.

We have 7.1 million metres of space under roof, and all of the non-discretionary component, a large component of the spend, between 80% and 90%, is around rent and utilities. As there are fluctuations in market rental rates, as there are fluctuations in utility rates, as there are fluctuations, as well, in just how cold the winter is, there is a built-in process whereby we work with central agencies to ensure that we can pay those non-discretionary bills. This is part of that process. We look at price and volume. We look at our non-discretionary—

[Erin Weir, NDP, Regina—Lewvan, SK]

Could you tell us which of those elements account for the $18.7 million?

[Kevin Radford]

Sure. I can get into that in some detail if you wish.

[The Chair, Conservative, Tom Lukiwski]

If you can squeeze it into 30 seconds, Mr. Radford, I'd appreciate it.

[Kevin Radford]

I'll go quickly.

We have roughly two billion dollars' worth of expenses in the area of utilities. We are asking for an $18-million increase, which is less than 1%. As we forecast at the beginning of the year what the market rates will be, utility rates, etc., we come less than 1% in our ask. The good news for you is that when we're asking for more money, it usually means it's a good reflection of the economy as well, that the economy is good because the market rates are going up, etc. If we were asking for less money, it usually would have a negative connotation. We're within 1%, if that answers your question.

[Erin Weir, NDP, Regina—Lewvan, SK]

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Our final intervention will be Madam Ratansi, for seven minutes.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Thank you all for being here.

You run a very complex department. You're managing $2.2 trillion of the cash flow between the treasury and the CRF. I'm trying to figure out, when you talk about risk management, what sort of risk assessment do you do with the $2.2 trillion, the 18 billion dollars' worth of procurement, or the $7 billion of real estate? How do you assess risk? How do you manage risk? How do people understand that the data integrity, for example, is solid, because you're producing public accounts as well? How do you ensure they flow up, which is a financial risk, an operational risk, and perhaps a human resource risk, and you have these complicated IT systems?

When people think it's political, you guys are not political. You have to do your work. In doing your work, how do you ensure that everything is balanced, when you purchase the jets, for example? How is the risk assessment done, the IT risk assessment? Can you can give me some idea of how you do it?

[Marie Lemay]

There are actually a number of levels of risk determinations and exercises, I would say, because at every level a risk assessment is done and is different. Then, it's escalated to come to the corporate risk, which is what you find at the end of the day in the DPRs and the RPPs. That's the high-level risk, but for each project there's a process to do it.

We even look at it at the director general level, at the ADM level. Regarding the corporate risk, one of the things we've been talking about and looking at is adding a component in our process to maybe even start with the management executive committee table in setting the frame of the risk, and then bringing it down and bring it back up.

On an ongoing basis, we're perfecting our approach to risk. It is very much right now bottom-up and tested as it goes up. We're in the process of adding that layer at the same time with regard to the top-down and bottom-up to make sure we capture all of it because, as you pointed out, we are a huge organization with a lot of money. We want to make sure that we have the best risk approach.

I don't know if Marty, our CFO, would want to add something to this.

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

In addition to Madam Lemay's remarks, one of the other aspects is that combination between governance of risk and management of risk.

You raised a couple of really good points. We're responsible for the Public Accounts of Canada. Our track record has been zero errors with the public accounts, and that takes a tremendous amount of control over, say, governance and management to ensure that all of the public accounts arrive with that accuracy of data and information. The 2.2 trillion dollars' worth of payments is just one aspect under the Receiver General.

In the Receiver General hat, for instance, there would be the entire cascading of control and management that the deputy just spoke to. In every other program, we would have that similar environment.

Two or three years ago, we introduced a modified financial management framework. We were basically seeking a greater integration between the management accountabilities and responsibilities for control and administration, and in my hat, the controllership and stewardship responsibilities, a greater integration, so that it wasn't just about compliance. It was much more about shared responsibility to control, govern, and manage.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

If I were to look at the insurance industry, they would look at the age, nationality, not the culture, the tradition, whatever, and say here is the risk associated with a nation that will be diabetic or have a heart attack, etc. You must be doing a lot of permutations and combinations, and it must be very complex.

My question is to Ms. Campbell. When a jet is being purchased or when army procurement is made, what sorts of risk assessments do you do?

[Lisa Campbell]

In our procurement processes, we actually employ a risk matrix to assign files based on complexity, the volume of money, and what's being purchased. As I think I said before to this committee, our department focuses on complex procurement, which is the lion's share of the money but actually a small number of contracts, so the people who are trained in doing this focus on the very difficult procurements.

For procurements over a certain monetary value, we also have an interdepartmental governance that looks at them for the procurement strategy, for robust industry engagement, and for maximizing industrial benefits to Canada. There is a lot of governance and oversight. There is also robust industry engagement, which helps us. If the client department comes up with requirements and specifications, we validate those with industry. We make sure that the market can offer solutions. We also look for other solutions that might meet the need, and then we come up with a procurement strategy and solicitation process.

We are looking, with industry, at how to better share risks. What we don't want to do is to have the government pay for risks that will never materialize, so we are in continuous discussion with industry to make sure that we are balancing risks appropriately. That applies to both fighter procurements and the shipbuilding strategy, where you gain a lot more information once, for example, the ships are under construction. We now have data about what it costs to build blocks of ships in both of the yards. That helps inform us about which risks are real and which ones we thought would materialize but have not, and it helps us cost those better with industry.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Mr. Radford, I think you had something to say.

[Kevin Radford]

Thank you for the question on risk. I thought I would just bring it down to a few more practical terms.

We follow the Treasury Board guidance on project management and risks assessments, so we actually do an organizational assessment of ourselves. Marty, in the CFO role, leads that across Lisa's branch, our real property business, our pay and pension business, etc. We have a robust governance in and around that.

We are one of the few departments across government that have received an organizational project management risk assessment, OPMCA—it's called complexity and risk assessment—of three. The maturity levels are one, two, three, or four, and we have three.

Because we offer our services to other government departments, sometimes they come to us when they do a project complexity risk assessment on a particular item, like Giant Mine, which was in the news today. INAC would work closely with us to come in and do the stabilization effort and the remediation effort of Giant Mine, because we are known to departments to manage risk really well. There is an internal governance around our investment planning, etc. We could get into a long discussion, but I probably have five seconds.

I just wanted to give some assurance that we manage risk within our department in accordance with the Treasury Board policy, and we do it quite well.

Thank you.

[Yasmin Ratansi, Liberal, Don Valley East, ON]

Thank you.