Government Operations Committee on Nov. 7th, 2024

[Robin Dubeau]

I wouldn't be able to comment. I provided input to two requests from Ms. Nicholson.

[The Chair, Conservative, Kelly McCauley]

I have to cut you off there. We are past our time.

We're going to Mrs. Atwin, please.

[Jenica Atwin, Liberal, Fredericton, NB]

Thank you very much, Mr. Chair.

Thank you so much to our witnesses for joining us again today, and for your patience as we work through, as we often do here in OGGO, some of our housekeeping items.

Getting back to the questions, as part of testimony on August 20, 2024, a Treasury Board Secretariat official explained that the Treasury Board approval threshold for Global Affairs Canada's real property purchases is reviewed roughly every six years. The threshold was increased from $4 million, where it had remained since 2006, to $10 million in 2019.

Did Global Affairs Canada officials request the threshold increase in 2019?

[Robin Dubeau]

I'm not a specialist of that kind of increase of delegation of authority, and maybe Franck can add to my answer, but I would say that those requests are made, as you said, regularly to update and review the delegated authority for a department.

What I know is that we first received our delegated authority in 1993. It was reviewed in 2000 and 2006. It was adjusted in 2019 and, finally, in 2022. It started at $3 million and went up to $4 million. Ultimately, in 2022, it was increased to $10 million for the purchase of official residences.

What I understand from the process is that a thorough analysis is done in a Treasury Board submission to describe how the markets for this kind of asset evolve. I believe, from what I've read, there were 23 different markets studied, and the result of that study showed that the average cost for a building that would be in the category of an official residence was around $9.5 million, therefore explaining why—I assume—the Treasury Board gave us that authority up to $10 million.

[Jenica Atwin, Liberal, Fredericton, NB]

Thank you very much.

Given that Global Affairs Canada purchased a property in Manhattan, one of the world's costliest real estate markets, under that $10-million threshold, can you offer reflections on the appropriateness of this threshold for this and other official residences?

[Robin Dubeau]

Mr. Chair, I would say that what we have observed postpandemic is a sharp increase in the cost of real property, either in the purchases or in any kinds of projects. The kinds of houses or the kinds of apartments, especially in a market like New York's, which is one of the most expensive markets in the world, give enough flexibility for the department to be able to do transactions that are not complex and that can bring good assets into our portfolio.

My reflection is that $10 million in 2024 is probably adequate for the kind of business we're doing.

[Jenica Atwin, Liberal, Fredericton, NB]

Thank you.

Questions have been raised regarding the timing of this transaction in relation to Mr. Clark's appointment in February of 2023. Can you clarify?

[Robin Dubeau]

Yes. Absolutely.

I'd like to offer the committee the way in which I saw the evolution and the timeline of this project.

When I got in the job in 2022, we were coming out of the pandemic. Coming out of the pandemic, the real property world was very affected in two ways. There was a large delay in some of the projects, because during the three years of the pandemic, many projects didn't move forward. There was also a sharp increase in everything that we were trying to do, because of the inflation in many jurisdictions. Remember, we are in 112 different countries. Prices were going up. We basically wanted to accelerate some of the work we wanted to do. We looked at process. We looked at governance. We wanted it to be agile. We wanted to able to catch up a little bit on the backlog and to be able to avoid further increases in costs as we moved forward in time.

The New York residence was exactly one of those properties. We had a project since 2021. We were not able to deliver this project during the pandemic. There were delays in getting the permits. In 2022, toward the end of the year, we were questioning ourselves and looking now at the increasing costs for that project. It all started at close to $1.5 million. Then it was $1.8 million. Now we were looking at $2.6 million.

We went back to the drawing board in 2023. As part of the governance, we accepted to review options. Then we started investigating what the market could offer. That's exactly where we found that the market in New York could offer an option that would not only meet all our requirements but also bring down the cost. That's when we started zooming in on that option very quickly.

My timeline that I'm following is that in 2021, we could not deliver. That dragged into 2022. Then we changed, we pivoted, and finally found a solution. We have resolved the issue of the official residence in New York and we have saved millions of dollars on it.

[Jenica Atwin, Liberal, Fredericton, NB]

Thank you very much.

[The Chair, Conservative, Kelly McCauley]

Thanks very much.

We'll go to Mrs. Vignola, please.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

Mr. Hounzangbé, if I am not mistaken, you are the person to whom responsibility for signing the purchase agreement was delegated.

Is that correct?

[Franck Hounzangbé]

That's right.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Did your responsibilities extend beyond signing the purchase agreement?

[Franck Hounzangbé]

Yes, my responsibilities included overseeing the entire transaction process. I was also the chair of the governance committee that did follow-up, determined needs, analyzed options and ultimately made the decision.

Signing off on this transaction was definitely in line with my delegation of authority.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Did you observe anything out of place about the process?

[Franck Hounzangbé]

Thank you for the question.

Nothing out of place was observed throughout the process.

I have reviewed a number of projects that fell under our governance. They might have involved not only an official residence, but also a chancery or annex, in countries that have relatively complicated markets. I can say that this transaction was more or less classic. This was a situation where we were not able to deliver a project using standard operating procedure and had to change direction.

The interesting thing about this transaction is that we found an opportunity to save money. In the case of a relocation, we generally expect some cost increase. In this case, all steps in the process were rigorously adhered to and documented by my team. However, we went further and were also able to save money proactively.

To answer your question, we adhered to all the steps and we did not observe anything abnormal.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Apartment 12E at 550 Park Avenue was in a co‑op. You can't always do what you want in a co‑op or a condominium. In fact, a co‑op may be more restrictive.

For the repairs that had to be done, particularly in relation to accessibility, would special approvals have had to be obtained from the city council, for example, since this was a heritage apartment and its structure or its architecture needed to be changed a little?

[Franck Hounzangbé]

There are three aspects to my answer.

The first is that since 2021 it has been very difficult for us to obtain various permits for renovations, particularly permits issued by this property management committee.

Second, the other restrictions that were extremely difficult to deal with, in the case of the use of an official residence for representational purposes, were limits on the type and number of events that could be held in the residence.

Third, a determining factor in our decision to relocate the official residence was the Vienna Convention, which provides for a tax exemption if you are outside the model.

[The Chair, Conservative, Kelly McCauley]

Thank you very much.

Mr. Boulerice, go ahead, please.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you, Mr. Chair.

You have told us several times that the process is robust, rigorous and independent.

To help me understand, and also to assist the people listening to us, could you tell me when this re‑assessment process starts, that is, the process by which you determine whether to keep and renovate or sell and buy?

Is it done on an annual basis or does it happen every five years, for example?

Is the process triggered by employee complaints about problems with insulation, heating, water leaks, and so on?

What is the starting point?

[Robin Dubeau]

I am going to let you answer the question, Mr. Hounzangbé.

[Franck Hounzangbé]

I thank the member for the question.

The first step is to establish a portfolio plan for each mission. We have 182 missions in the world. The plan is for five years. In the plan, we identify the needs, the problems to be solved, at various properties, be it a chancery or an official residence.

Once the needs are defined, we prepare documents on a case-by-case basis. That is what we did in the case of the official residence in New York. For example, we explain in these documents that we are trying to solve problems one, two and three. It is then submitted to the governance committee for approval. That exercise enables us to put forward the funds needed for the research.

The second step is to determine how we are going to solve the problems listed in the needs analysis. We have to do that using an options analysis that is based on two factors: costs and benefits. What do we mean by benefit? For example, we need an official residence that includes a portion for representational activities and a portion for living space. So we need an official residence that can accommodate a dining room with a certain number of chairs in order to meet the needs for the representational aspect.

Once that is approved by the governance committee, which includes members of the finance committee and members of our security team, along with architects and interior designers, we make a decision.

Ultimately, it is signed, based on the recommendation by the governance committee.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Might there not be situations where the diplomat says they would like to have a bigger bedroom, because they find it more comfortable?

[Franck Hounzangbé]

As Mr. Dubeau said, and in my experience, that happens with anyone who arrives somewhere and has not had an opportunity to consider the advantages and disadvantages of the place.

A diplomat is a person who has been given a property. So it is very common for us to find that the person has opinions about the options available. However, they may never request that changes be made.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you.