Government Operations Committee on Sept. 23rd, 2025

[The Chair, Conservative, Kelly McCauley]

I call the meeting to order.

Good morning, everyone. Welcome to meeting three of the House of Commons Standing Committee on Government Operations and Estimates, also known, as the Auditor General calls it, “the mighty OGGO”.

Before we continue, just as a gentle reminder, everyone, keep your headphones away from your microphones at all times so we can protect the hearing of our very valued interpreters.

Pursuant to Standing Order 108(3)(c), the committee is holding a briefing session with the Auditor General and her team on three reports she tabled, in June 2025, on jet fighter capacity, the use of federal office space, and contracts with GC Strategies.

We now welcome back to OGGO AG Hogan.

Traditionally, we do five minutes, but because there are three reports, feel free to go past the five minutes if you need them.

The floor is yours.

[Karen Hogan, Auditor General of Canada, Office of the Auditor General]

Thank you. I'll try to be succinct.

Good morning, Mr. Chair. Thank you for the opportunity to appear before the committee today to discuss some of our recent reports that were tabled in Parliament on June 10.

I would like to begin by acknowledging that we are gathered on the traditional unceded territory of the Algonquin Anishinabe people.

With me today are Andrew Hayes, deputy auditor general, and Nicholas Swales, Markirit Armutlu and Sami Hannoush, the principals who are responsible for the three audits.

First, our audit of Canada's future fighter jet capability examined the large multi-year project aimed at maintaining a strong fighter jet capability to protect the safety and security of Canadians. We found several risks that could jeopardize the timely introduction of the new CF-35 jets. Estimated costs for the future fighter capability project reached $27.7 billion in 2024, which is almost 50% more than National Defence's original $19 billion estimate, a figure that was based on outdated information.

In addition, estimates did not include key elements, such as infrastructure upgrades and advanced weapons, which would add at least $5.5 billion to the total estimate.

Other significant risks include the possibility of a shortage of qualified CF‑35 pilots and a delay of more than three years in the construction of two new fighter squadron facilities. This will require additional costs to build temporary facilities. Active and ongoing risk and cost management is essential to ensure that the CF‑35 fleet is brought into service on schedule.

Let's now turn to our audit of federal office space. As part of this audit, we examined the government's efforts to reduce its office space portfolio to the ideal size in order to lower costs and leverage underutilized space that could be converted to affordable housing. In 2017, Public Services and Procurement Canada estimated that half of federal office space was underutilized.

We found that the department had made little progress in its multi-year effort to reduce office space by 50% by 2034. In particular, efforts between 2019 and 2024 resulted in a reduction of less than 2%, mainly due to a lack of funding. The department estimates that reducing federal office space will result in savings of approximately $3.9 billion over the next 10 years.

The Canada Mortgage and Housing Corporation, or CMHC, supported by Housing, Infrastructure and Communities Canada, is tasked with converting surplus federal office properties into affordable housing through the federal lands initiative. The audit found that CMHC is on track to meet the initiative's 2027-28 target of securing commitments to build 4,000 new housing units. However, the target is based only on commitments, and only 49% will be ready for occupancy by 2027-28. Public Services and Procurement Canada and federal tenants must accelerate efforts to help increase stock for housing that is sustainable, accessible and affordable.

Our last audit examined 106 contracts awarded to GC Strategies Incorporated by 31 federal organizations from April 2015 to March 2024. We found these organizations frequently disregarded government procurement rules meant to ensure fairness, transparency and value for Canadians.

In 21% of the contracts we reviewed, organizations did not have documentation showing that they had confirmed the security clearances of the individuals performing the work. We also found that organizations often did not monitor the work performed by individuals working under contract. Organizations did not have documentation showing what work had been performed, who had performed it, or whether those individuals had the required experience and qualifications.

These findings echo those of previous audits, which also identified deficiencies in how public servants applied federal procurement rules.

Our report does not contain any recommendations because I do not believe that the federal government needs even more procurement rules. The existing rules must be understood and followed.

Mr. Chair, this concludes my opening statement. We are happy to answer any questions from committee members.

[The Chair, Conservative, Kelly McCauley]

Thank you very much, AG Hogan.

We'll start with Mrs. Block for six minutes, please.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much, Ms. Hogan.

Welcome to you and your staff who have joined you in helping us understand the reports that you've tabled. We're talking about fighter jets, we're talking about service contracts and we're talking about federal office space, so there's a wide range of topics that we're covering today.

Getting right to it, your ”Report 3: Current and Future Use of Federal Office Space” says that the Treasury Board plays “a key role” in providing co-operation across government. What, if any, rationale was given for why the Centre of Expertise for Real Property, which was created in 2021, was dissolved only three years later?

[Karen Hogan]

The Treasury Board Secretariat actually plays many roles when it comes to federal office space. As the employer, they do set the tone for in-office presence. That is a key element to understand when you look at how federal office space is being used and how much is needed.

When it comes to the Centre of Expertise for Real Property, that was put in place to look at a horizontal review of all the fixed assets of the government. It issued 119 recommendations, and we did find that it was dissolved in March 2024. We were told that was because of a lack of funding and that now the responsibility rests with the organizations that had received the recommendations to ensure that the recommendations had been implemented. However, we found that only 21 of the 119 had been implemented by the time the centre was dissolved.

I am concerned that some of those recommendations may be forgotten, but it really now rests with all of the departments that received them to act on them.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you.

According to your report, with this dissolution, the government-wide oversight for implementing recommendations on the government's conversion of the federal lands initiative disappeared, leaving 82% of recommendations not implemented, as you've just pointed out.

Based on your report, had the government kept in place its oversight, do you believe there would have been more progress in their efforts to create affordable housing?

[Karen Hogan]

I'm not sure that one element of oversight is the thing that would have kept this on track or increased the pace of it. We found in the report that the larger departments that occupy a lot of federal space had not yet signed on for space reduction agreements. They cited to us a lack of clarity around the return-to-office mandate: Would there be an increased presence needed or not, in terms of the space needed to deliver on their mandate?

There are many elements. While oversight is always a good mechanism to ensure that people stay focused on recommendations and the endgame, I don't think I would say it's the only reason that there's been a lack of progress.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Based on your audit, how much would it have cost to keep the oversight program running? I believe they were given $5 million in 2021. How much would it have cost to keep the oversight program running, compared with the cost of delays since its dissolution?

[Karen Hogan]

I'm not sure I could give you a number. The funding that was received was funding done over three years, and it was meant to do the heavy legwork of doing the whole fixed asset review and then coming up with the recommendation. It would stand to reason that you would need fewer people to continue with oversight. I think the question of what would have been needed to maintain a more consistent level of oversight would be better asked of the Treasury Board.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Did the government provide any rationale for why it did not implement the recommendations on its own?

[Karen Hogan]

No, I don't think there was one reason. There are 119 recommendations, and it stands to reason that some of them have long lead times.

When you're looking at disposing of underutilized buildings, it's not as though there was a building sitting vacant. They had to figure out which was the best building to be in and consolidate departments and agencies into a building, which meant they had to retrofit or renovate those buildings.

Some of these recommendations have very long tails, so I'm not sure that there would be just one reason that oversight was no longer there.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

According to the CMHC, the federal lands initiative gives discounts on the government property purchase based on “the level of social outcomes”.

Did your audit reveal what kinds of discounts federal land is being sold at? If so, what were they?

[Karen Hogan]

We didn't look at what the property was sold for. That wasn't really the focus. Our focus was more on whether the properties were being freed up in locations with the greatest needs for housing. We found that this wasn't always the case. Buildings were being freed up in places where there wasn't the greatest need in a community. That really comes down to Public Services and Procurement Canada having the information to know which buildings it wants to target and then how it moves federal tenants out of them.

I think our biggest concern was around affordability, meaning the endgame, the outcome. What we found is that the homes being built were really not affordable enough for those most in need.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much.

[The Chair, Conservative, Kelly McCauley]

Thanks very much.

We'll go to Mr. Gasparro, please.

[Vince Gasparro, Liberal, Eglinton—Lawrence, ON]

Thank you, Chair.

Thank you for the presentation. It's greatly appreciated. There's a very wide breadth of reports in front of us for sure.

I'm going to focus on the fighter jets, if you don't mind.

In one of the reports I read, you mentioned the need for training personnel. I think pilots were obviously one of them, but it's personnel more broadly.

Now that the government has committed to increase defence spending to 5% of GDP by 2030, do you have any thoughts on how best to deploy that increase in capital to meet the objectives that you laid out around personnel? That's part one of the question.

Part two is this: Are there any best practices from some of our partners within the program in terms of what they're doing to deploy capital to meet the operational objectives while being as cost-effective as possible?

I'm sorry for the two-part question. I guess I could have broken it up.

[Karen Hogan]

That's okay. I wrote them down.

That's a big question, and I'm not sure that we tackled all of that in the fighter jets report. We did look at whether or not there were enough trained pilots, because a concern that my office found in 2018 when we did work on the CF-18s was that there was a shortage of trained pilots.

The finding here, while very similar, highlights that the training program anticipates that it won't have enough qualified pilots. It's a little different here, because you're going to need pilots who can fly both types of aircraft, and then you need to upskill. I know that National Defence is looking at how to adjust that plan, and it's going to need to.

When it comes to my thoughts on where to invest and not invest, and best practices on training, I'm not the one to tell the government where to spend its money. I'm the one who comes in and says, “You made that decision. How did you do in spending it?”

What I can tell you is that in October we will be releasing a report on training and recruitment of new members to the Canadian Armed Forces. That will speak to some of the concerns that we found there.

There is no shortage of places where National Defence can invest this funding. It's about finding the right place and making sure that you always have the personnel to support that sort of investment. Here you need not only trained pilots, but technicians to maintain the planes and individuals to work on the bases.

There's no shortage of places for DND to invest in.

[Vince Gasparro, Liberal, Eglinton—Lawrence, ON]

That's for sure.

Where I was going with the best practices piece is that there are some examples of our defence partners on this project who have already deployed capital, have deployed resources and have bodies in place. There might be some best practices there.

[Karen Hogan]

What I would add to that is that Canada is part of the joint strike fighter program office, and in that office, we benefit from what other countries are doing. That office does set minimum standards for the facilities and the training expectations. Canada is benefiting from the best practices of its allies in that program already, but they need to stay focused on it.

One of our findings was really about costing. That program had issued updated costing, yet Canada hadn't been using it in its estimates. Not losing sight of the fact that there is some intel there that we could use would be a good step forward.

[Vince Gasparro, Liberal, Eglinton—Lawrence, ON]

That's for sure.

How much time do I have, Mr. Chair?

[The Chair, Conservative, Kelly McCauley]

You have two minutes.

[Vince Gasparro, Liberal, Eglinton—Lawrence, ON]

I don't know if you're going to have the full time. Maybe on the way back, Mr. Chair, you can follow up. I don't want to completely geek out, but to the eight people who are watching on TV, I hate to put you to sleep, so I apologize in advance.

I have questions on the methodologies and research you used when coming up with this specific report. What information and data do your office and team researchers rely on? I'm sure it can't be necessarily easy when you're not dealing with fully open-source information, so I'm just curious.

[Karen Hogan]

We have access to a broad range of information that is at times protected and that we can't talk about. I always love talking about audit, so if you really want to geek out on audit, I would encourage you to go to the back of our audit reports, where we have an “about the audit” section. It does list for you our audit criteria.

We follow Canadian auditing standards, which means we have to gather sufficient and appropriate audit evidence. What that might look like will depend on the topic we're auditing, but the expectations that we hold the department to are listed in the back. They're agreed to with the department, and then we look to their information, the databases they may have and the contracts they may have. We will go to other countries to look for examples and other sources. We always try to have criteria that are outside of the federal government to be able to identify gaps and talk about best practices when we can.

It's a little more complicated in the defence space, given that a lot of it is protected, but rest assured that we've seen the information we need to see. It's rigorous enough that you can follow up. You can rely on it.

[Andrew Hayes, Deputy Auditor General, Office of the Auditor General]

I might just add that we do get access to Treasury Board and cabinet documents, so we see the internal analyses that are performed for decision-makers to have the best information possible to make decisions. It is much more than open source. We get pretty much broad access to almost everything. There are very, very small limitations to the information that we can see.

[Vince Gasparro, Liberal, Eglinton—Lawrence, ON]

That's great. Thank you so much.