Evidence of meeting #3 for Government Operations and Estimates in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was inflation.
A recording is available from Parliament.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I don't remember off the top of my head whether there were penalties. We focused on the cost. We didn't focus on the scrutiny of the contract. I'd have to get back to you on that specific aspect.
Conservative
The Chair Conservative Robert Gordon Kitchen
Thank you, Mr. Lobb.
Now we'll go to Mr. Kusmierczyk for five minutes.
February 4th, 2022 / 2:30 p.m.
Liberal
Irek Kusmierczyk Liberal Windsor—Tecumseh, ON
Thank you, Mr. Chair.
Thank you very much, Mr. Giroux, for an excellent discussion on this subject.
On page 8, you make assumptions about the timelines of the project. I wanted to get a sense of what these assumptions are based on, and whether you've had conversations, whether there has been a back and forth with DFO and PSPC, to help inform those timeline assumptions that are made in the report.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We use the timelines based on the government's announcements and statements that the first ship would be in the water by 2030. From that announcement and commitment we worked backwards looking at the experience in building ships of a similar size, a different size, same mission and so on, in the Canadian context. That's how we arrived at a build-start of 2023-24. Knowing that this can fluctuate and there could be changes, we also factored in a delay. That's why we have a sensitivity analysis.
On the question of whether we had contacts with DFO, yes, we did, to ensure that we were not out in left field. We had discussions with them, first, because we needed some data and also because we needed to have some questions answered. We're not experts in everything that we do, but we strive to make the best estimates possible.
Liberal
Irek Kusmierczyk Liberal Windsor—Tecumseh, ON
I apologize if this question was asked before. Are taxes included or calculated for this project? If so, what's the estimate of how much taxes could be?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It's a question that I'm not surprised to have, but I'm pleased to have.
We included taxes in previous cost estimates related to DND, and it led to some side discussions in some quarters about whether it's appropriate to include taxes or not, and whether DND and the government are subject to taxes. It led to a side discussion that was not central to the point of the report, which is the cost estimate.
We decided to exclude taxes from this estimate to avoid a repeat of that discussion as to whether the government does pay tax, should pay tax, gets it back and so on. That easily goes down a rabbit hole that is not the cost estimate.
Liberal
Irek Kusmierczyk Liberal Windsor—Tecumseh, ON
I understand completely.
We've had an exhaustive conversation here on shipbuilding and icebreakers. I've pretty much asked all the questions that I have on this project. They've been answered. Thank you very much for bringing your answers and insights here.
I want to ask some general questions for folks who might be watching the committee.
There's a universe of issues and subject matter that the PBO could study, and time and resources are limited. How does PBO decide what to study? What about this project got your attention, so to speak?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That's an interesting question that I don't often get asked.
There are things that I have to look at, for example, budgets, estimates and so on. I also have to respond to requests from the four committees that are named in my enabling legislation. I tend to also value other committees that request something of me very highly. That's usually top of the list.
After that, I go by interest of parliamentarians. It's a combination of interests from parliamentarians and items that have a big price tag attached to them. There are lots of amounts at stake and big dollars. This qualifies on two counts, with the big dollar amounts and the interest from parliamentarians from multiple parties.
Finally, individual parliamentarians or items that are less expensive or have less revenue-generating capacity tend to be lower down the totem pole, unfortunately.
Liberal
Irek Kusmierczyk Liberal Windsor—Tecumseh, ON
Thank you very much, Mr. Giroux.
I would also like to thank Mr. Penney and Mr. Elmarzougui for being here today and sharing their expertise. Thank you so much.
Mr. Chair, those are all the questions that I have.
Conservative
The Chair Conservative Robert Gordon Kitchen
Thank you, Mr. Kusmierczyk.
I will go now for two and half minutes to Ms. Vignola.
Bloc
Julie Vignola Bloc Beauport—Limoilou, QC
Thank you, Mr. Chair.
Mr. Giroux, earlier, Mr. Paul‑Hus brought up the notion of a systemic problem in estimating the costs of major projects. I won't dwell on the exact wording he used.
That gave me an idea. When a major project is announced or is in the works, would the government do well to seek out your services? The government could give you the specifics of the project in order to have you put together a comparative cost analysis. Wouldn't that be a better use of taxpayer money and a more transparent way of doing things?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That would certainly be possible in relation to the costs.
As for the specifics of the project, that information would have to be provided to us, since we obviously can't determine what the project scope or type should be. That isn't part of my responsibilities; nor would I want it to be.
If the government decided to ask us for a project cost estimate from the outset, we could certainly do that if we had access to solid and relevant information.
When you compare the work that was done in 2021 with the work that was done in 2018 or 2017, say, you see a slight difference because the quality of the data may not have been quite the same. Certainly, it's something we can do, provided we have comprehensive and reliable data to the extent possible.
Would it be a good idea? That is a matter for parliamentarians to decide, not me. Naturally, if parliamentarians asked me to undertake such an exercise, I would give it very serious consideration.
Bloc
Julie Vignola Bloc Beauport—Limoilou, QC
Thank you very much.
I'm always looking for the most efficient way of doing things so that the cost estimates we have are as accurate as possible.
It's like building a house, don't you think? Let's say I didn't do a proper cost estimate and I figured the house would cost $100,000 to build, but it end up costing $500,000. That would hurt.
Thank you, Mr. Giroux, for being so patient and answering our questions. You have given us a lot of insight into this matter.
Conservative
The Chair Conservative Robert Gordon Kitchen
Thank you, Ms. Vignola.
We'll go now to Mr. Johns for two and a half minutes.
NDP
Gord Johns NDP Courtenay—Alberni, BC
Thank you both for the important work you're doing. It's very much valued.
I'm really excited about building capacity in Canada, and the national shipbuilding strategy and the implementation of it, but I always want to make sure that we're being environmentally and socially responsible.
In my riding, a big issue right now is around shipbreaking, as we see the retirement of vessels such as B.C. ferries and international vessels come into our riding.
It has been highlighted by a local area director, Daniel Arbour from the Comox Valley Regional District, and an international NGO shipbreaking platform.
We understand that shipbreaking and recycling is necessary, but certainly it's hazardous. It's an activity that bears high environmental and labour risks and we have to establish an emerging international standard, such as the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, the Basel Convention and the EU ship recycling regulation, which point at gaps in Canada's shipbreaking policies and regulations. It really requires public investment dollars to qualified shipbreaking facilities to help them meet new standards and regulations.
In your work, did you cost out the retirement of the Louis S. St-Laurent and also the vessels that we're going to be building? Is that built into the cost to ensure that at the end of life of these vessels, we're shipbreaking in an environmentally sound, sustainable and responsible way and meeting international standards?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We looked at the cost of procuring these two additional ships, but we did not look at the cost of extending the life of the Louis S. St-Laurent nor of its retirement, because that was not within the scope of that report, nor did we look at the cost of operations and maintenance of these two newly acquired ships. I understand these costs would be significant over a 40-year lifespan, but we solely focused on the procurement costs of these two new polar icebreakers, and nothing on the Louis S. St-Laurent.
NDP
Gord Johns NDP Courtenay—Alberni, BC
Do you believe they should be baked in, at least the retirement costs, in these vessels, so that we're not leaving them to future generations in not costing them out and in being irresponsible?
We want to develop [Technical difficulty—Editor] and build more ships here at home, domestically, but this is something that I believe is falling under the radar.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I don't disagree with you at all that these things have to be retired responsibly. I think the retirement costs of these two new polar icebreakers would probably fall into the operations and maintenance over a 40-year expected lifetime, and the lifetime of these ships could be extended by refurbishment. Therefore, we're looking at costs that are, at the very least, 40 years down the road, or maybe 50 or more years down the road.
However, clearly when the decision is made to acquire new ships, the government should take into account the fact that these ships will have to be retired and dismantled properly to ensure that they don't pose an environmental hazard.
Conservative
The Chair Conservative Robert Gordon Kitchen
Thank you.
We'll now go to Mr. McCauley for five minutes.
Conservative
Kelly McCauley Conservative Edmonton West, AB
In regard to Mr. Johns' comments, I think we have to realize that this is Canada. Those ships will probably be in service for 120 years, not just 40.
I saw your report that you released, I think it was this week, on the federal national child care plan. Can you just give me the Coles Notes on that?
On your summary page, it says that with the government-announced funding in the budget, we're going to have 182,000 fewer spaces than would be required to meet the demand for licensed child care spaces.
Can you walk us through that? What exactly does that mean? Does that just mean it's underfunded, that the government hasn't projected enough costs?
That's solely the federal side. What about the matching provincial side?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We looked at what happened in some jurisdictions in the country where child care fees have been lowered, namely Quebec. We also looked at how much demand there is, looking at the demographics for that age group that goes into day care and the expected population over the next several years. We also looked at current costs and the demand, the unmet demand and the demand, and we arrived at an estimate that, with the current funding....
The lower fees will be inducing higher demand, which is what happened in Quebec over the last several years. Taking into consideration the amounts that have been mentioned and set aside and the agreements with provinces, we estimate that the funding will lead to a shortfall of about 182,000 full-time spaces for child care at that price level.
Conservative
Kelly McCauley Conservative Edmonton West, AB
That's 182,000 short. Is that for outside of Quebec or is that including projected added demand in Quebec, even though it has its own system?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I think it's outside of Quebec, if I am not mistaken.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Quickly, I want to get back to the public accounts. We show a $1.4-trillion interest-bearing debt, and we hear the government talk about lowest net debt-to-GDP ratio compared to the G7, but when we consider the gross debt, if you take out the government counting CPP and QPP assets that are already committed for seniors.... When you take the gross stat, we're fourth of the G7 and 25 or 29 out of the OECD. Do you think we should be using the gross stat, considering this money in the CPP and QPP is money set aside for seniors?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That's a good question, and it's been the subject of debates among many economists and those who watch public finances.
The reason for including the assets of the QPP and CPP is that other countries also have obligations to their pensioners in programs that are broadly similar to the CPP and QPP, but they have not prefunded at least in part some of these obligations.