Government Operations Committee on Feb. 4th, 2022

[Yves Giroux]

I don't recall any of my predecessors performing such an independent cost estimate. However, I may be wrong, because in 2013, I was busy doing other things and I don't remember such an estimate. Again, that doesn't mean that it doesn't exist. It probably refers more to my failing memory if it does exist and I don't remember it.

[Anthony Housefather, Liberal, Mount Royal, QC]

I'm sure you don't have a failing memory.

I'm going to assume at this point that they don't exist, so we really don't have any idea whether the estimated costs were accurate or not from 2008 to 2013.

Let me move to section 7 of your report, where you spoke to the fact that the assumed timelines, project specifications and, to a lesser extent, ship characteristics are still subject to change, and that your estimates are tailored to the specifications provided by the Department of Fisheries and Oceans in April of 2021.

Did you ever compare those specifications to the specifications that were used to develop the estimated costs of $720 million in 2008 or the $1.3 billion estimate in 2013?

[Yves Giroux]

We didn't look at the cost estimate and we did not gather evidence, intelligence or information as to how the government came up with its original estimates in 2013 or before. We asked for information from the Department of Fisheries and Oceans to help us estimate what we provided to you a couple of weeks ago, but we didn't look into how the government came up with the original estimate of $1.3 billion.

[Anthony Housefather, Liberal, Mount Royal, QC]

I appreciate that, because there are people claiming that there's been this drastic escalation of costs. From your testimony—from what I understand, anyway—we're not comparing apples to apples when we're looking at the 2008 or the 2013 estimates, because in both cases we don't know that those estimated costs were ever independently validated, and we have no idea to what extent the specifications that were used to create those estimates are different from the specifications that you used in 2021.

Would that be a relatively fair statement?

[Yves Giroux]

My colleagues, Chris and Eskandar, may have more information as to the potential change in the specifications that took place between 2013 and now.

I see Chris is opening his mike.

[Christopher Penney]

There has been some advance in terms of what the planned design was, certainly between 2013 and now. I haven't seen whole lot of change in terms of some of the major features of the polar icebreaker. There has been an increase in light ship weight. That's one thing we've observed.

As Yves has alluded to, we didn't try to reconcile what was going on it terms of the cost estimates in 2013 and now.

[Anthony Housefather, Liberal, Mount Royal, QC]

Thank you.

I want to delve into the ancillary costs that you reference in your report. Based on what you had also answered to Madame Vignola before, would I be correct in assuming that—as opposed to what people perceive, which is that you are assuming the government will pay out approximately $7.25 billion—much of the ancillary costs are actually internal costs where we're assigning portions of existing salaries paid to government employees working on the project management and design of the project into the total amount? Based on the way I read your report, this also includes some costs of salaries paid for previous years because you're using a very long time frame to estimate this $7.25 billion amount.

[Yves Giroux]

Yes, that is right. Some of the project management costs—in fact, the vast majority of project management costs—are costs incurred by government departments that relate to the management of their projects. I don't know the extent to which these are incremental costs versus costs that would have been incurred anyway. I doubt that, to be honest.

This is consistent with estimating methodologies of other budget institutions across the world. It's consistent with budget estimates for other big procurement projects, such as the surface combatants, the CF-18s and so on.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Housefather.

We are going into our third round. We will start with Mr. McCauley for five minutes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thanks, Mr. Giroux.

I think this will probably be more for Mr. Penney.

In terms of the $7.25 billion estimate, I'm wondering about the design fees and whether that's based on one set design fee for both. I'm hearing stories out of the industry that Seaspan and the other possible contractor are working with separate design teams and perhaps building, in effect, separate designs.

[Christopher Penney]

I've heard of that as well, but at the time of this estimation, we were working with the assumption that both ships are going to be quite similar, but of course built at different shipyards.

As to how we estimated the design costs, we looked at comparator vessels that we selected and what the design costs were for them—in particular, the AOPS. We made adjustments for capability and the light ship weight, for instance.

That would be how we arrived at our estimates.

[Kelly McCauley, Conservative, Edmonton West, AB]

What do you think we'd be looking at if reports that they're going to be designed to be similar but quite separately are true?

[Christopher Penney]

I'll let Yves answer that one.

[Yves Giroux]

Thanks, Chris.

If that were to be true, we would probably be looking at slightly higher design costs.

[Kelly McCauley, Conservative, Edmonton West, AB]

What's the ballpark of “slightly higher”?

[Yves Giroux]

I don't know, honestly.

[Kelly McCauley, Conservative, Edmonton West, AB]

Could the cost change considerably by the time you added design and construction?

[Yves Giroux]

Design costs are already quite high at $820 million, so I'm not sure they could go that much higher, even if there were two different design teams.

[Kelly McCauley, Conservative, Edmonton West, AB]

I want to ask a question that gets back to the public accounts.

Would the PBO care to weigh in on what he thinks of the staggering $11 billion spent by the government on outside consultants, while at the same time, the public service cost grew to an even more staggering $59 billion last year? I think we've grown the public service to 400,000, yet we've doubled or tripled the amount of money we're spending on outside consultants. We found one—of course, one of the big ones—who got a million dollars to audit the strawberry festival.

I'm wondering if you care to weigh in on such efficiencies.

[Yves Giroux]

We have put a tool online for parliamentarians such as yourself to look at the personnel costs in the public service by department. You can see the evolution over the last several years of total personnel costs and FTEs.

We don't, however, have such a tool for contractors and consultants, which are sometimes substituted for one another. To be honest, I haven't looked at the issue of consultancy fees in the last public accounts, but I'm sure that would lead to interesting nuggets.

[Kelly McCauley, Conservative, Edmonton West, AB]

I'll bet. I've read the Auditor General audits, and then these departments, some of them tiny little offshoots of departments, are also spending hundreds of thousands of dollars to audit their books at the same time that their own internal staff are auditing the books. Does that make sense as a practice?

[Yves Giroux]

Maybe they're auditing recipients of grants and contributions. That could be why they are giving out contracts—or it could be the internal audit and evaluation functions. These are possibilities, but no certainties.

[Kelly McCauley, Conservative, Edmonton West, AB]

I'd like to get back to the Treasury Board. I've been a very outspoken critic of the Treasury Board and their quite often not following Treasury Board rules. On the wage subsidy, the $80 billion, the president admitted that they hadn't gone through the process.

The departmental results say that they follow their rules only three out of every four times on doing financial risk assessments. Considering the hundreds and hundreds of added spending, is this an acceptable practice to be ignoring one out of every four proposals?

[Yves Giroux]

When we're looking at expenditures in the dozens of billions of dollars, following the rules 75% of the time, or auditing a smaller proportion of expenditures, is increasing the risk that the amounts will not be fully traceable. I'd have to look more into that specific issue, but that sounds a bit concerning.

[Kelly McCauley, Conservative, Edmonton West, AB]

A senior member of the government yesterday stated that it was acceptable, because there was so much money going out the door they couldn't look at it all.