Evidence of meeting #34 for Public Accounts in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was contract.
A recording is available from Parliament.
4:15 p.m.
RAdm Tyrone Pile
After we do a file assessment, Mr. Chair, of all of the files, and if there are members we feel should be reimbursed who are in that situation, I believe that an adjudication process would be necessary afterward to determine who pays.
4:15 p.m.
NDP
David Christopherson NDP Hamilton Centre, ON
I wouldn't, but I'm not an accountant. Okay, thank you.
I want to move to the broader picture here. We still seem to be at the point where the ministry is arguing not so much that there weren't things that happened that were big, but more that those things were inconsequential to the final outcome; this is basically what I'm hearing. I don't pretend to understand the formula, but what you're saying is that even if you had applied the worst-case scenario, it wouldn't have changed the outcome, and therefore your position that it was a fair and equitable contract stands--the process.
4:15 p.m.
Deputy Minister, Public Works and Government Services Canada
Yes, for that reason and the other reasons that I outlined in my note to the—
4:15 p.m.
NDP
David Christopherson NDP Hamilton Centre, ON
—which of course the Auditor General rejects too, and said so in her original report. So the fact that you put more detail on them doesn't change anything as I've seen it, it just puts us further into it.
If I can, we've had an opportunity to hear from the ministry, the Auditor General, and from Royal LePage. Can I ask for comments from—I'm sorry, sir, I want to pronounce your name right: Bruce....
4:15 p.m.
NDP
David Christopherson NDP Hamilton Centre, ON
I'd like to hear from Mr. Atyeo. We've had all these experts say that nothing would change for him. I'd like to hear from him, what he thinks about whether or not that would have changed the scenario.
4:15 p.m.
President, Envoy Relocation Services Inc.
Thank you, Mr. Christopherson.
Actually, I'd like to impose on your question very briefly to ask a question of order, because I don't know what the rules are here. I received this letter from Mr. Marshall to the committee about an hour before the meeting started, so I've only had a chance to read it briefly. My question for Mr. Chairman is, as a witness, would we not be entitled to receive this kind of documentation at the same time as the rest of the committee?
4:20 p.m.
Liberal
The Chair Liberal Shawn Murphy
Not normally, it wouldn't be the practice, but you obviously have it.
4:20 p.m.
President, Envoy Relocation Services Inc.
Then the answer to your question, Mr. Christopherson, can be summed up by saying that even with the brief review I've had of this letter, it is full of inaccuracies. Mr. Badun's explanation is incomprehensible to me. I'd join the Auditor General and Admiral Pile and Mr. Marshall on that.
If Mr. Marshall believes what's in this letter, and I presume that most of what's in here was told to him by somebody, he's being lied to. Therefore, this committee is receiving incorrect information from Public Works.
Now, I can go through it, but I don't think you want me to do that.
4:20 p.m.
President, Envoy Relocation Services Inc.
So that's my answer. The bottom line is when I do the calculations, Envoy won the CF contract, and I'd be more than willing to share those calculations with Public Works.
4:20 p.m.
NDP
David Christopherson NDP Hamilton Centre, ON
I can suggest to you that at the very least if you want to submit a written analysis we would receive that. Whether there's time or not, that remains up to the chair and the committee, but I'd certainly want to see an analysis if you have one.
I'm going to take another step back and pick up again where my friend Mr. Williams was, on whether it's a big deal or not. As I recall, the number we're dealing with is pretty close to $50 million, correct?
4:20 p.m.
Deputy Minister, Public Works and Government Services Canada
Yes, close to.
4:20 p.m.
NDP
4:20 p.m.
Deputy Minister, Public Works and Government Services Canada
Yes, but you have to—
4:20 p.m.
NDP
David Christopherson NDP Hamilton Centre, ON
Yes, it is. No, no, I'm not asking your opinion, I'm telling you I think it's a big deal. I think $50 million is a lot of money.
The whole premise of this has been that that $50 million has not been properly represented in the process, so there was an unfairness. The one on the inside who currently had the contract was aware of what the real numbers were, and the ones that were bidding had to bid on a number based on a formula that was inaccurate and didn't show actual costs, which were much less than what the formula provided.
We keep coming back to this main point of whether or not we're going to side with the deputy minister that this is a fair and equitable contract and should be allowed to stand, or with the Auditor General, who has said it's not. It seems to me that if we agree with the Auditor General we're going to have no choice but to recommend to the government that this be cancelled and re-tendered. I'm not hearing anything to give me confidence that there's enough question in what the Auditor General has done that we should set her work aside in favour of the department.
Now, I'm wide open, Mr. Marshall, for you to find a way to convince me. Please don't use a lot of formulas and details; you'll just waste your breath. But if you can, summarize where we would be serving the public not to act on the words that we're getting from our own Auditor General.
4:20 p.m.
Deputy Minister, Public Works and Government Services Canada
You've asked me for a tall order, but let me honestly try.
Of course $49 million is a large number, but there are so many speculations on which conclusions are being based here. First, there's the speculation that Royal LePage used insider knowledge and bid zero. We know they've been very consistent, I have to tell you that. From the pilot project to the 2002 and the 2004, they bid consistent with the understanding that they didn't want the government to pay twice. That's why they bid zero. So it's not that they knew a real number.
The other question I want you to consider is yes, of course $49 million is a very large number, but you have to put it into the context of a billion dollars a year for all the other services flowing through. So when you want to look at the impact and whether it swings a result, you have to look not just at the absolute number but its relationship to the total being evaluated. Then you'd see that it's only 25% of the total evaluation, and so on. I know that it's hard for you to see this, but that is what in fact happened.
We recognize that confusion existed around this number, around why it was put as an estimation of the future instead of the past, and how each of the bidders interpreted it.
Also, please understand that we affirm—and I think the Auditor General would agree—that there was no bad faith involved here. There was an attempt to do the right thing. We'd already rebid the original contract, because we wanted to be sure it was good. When I looked at the cost to the crown—from the disruption of service and unwinding an existing contract, and so on—it seemed that there was no egregious error in the existing contract, which expires in 2009, sufficient to require anyone to rebid it. That was my advice to the minister.
4:25 p.m.
NDP
David Christopherson NDP Hamilton Centre, ON
I'm glad you were able to take the time you needed.
We've had this come up before when you talked about the fact that you did a pilot, reviewed it, and yet there were mistakes in the first application that remained in the final one, in terms of transposing the 60% and the 40%. As I understand it, this concern was transmitted to you in writing, and yet in the final report it's still wrong.
So I have some concern with the due diligence that your ministry claims to have done, when such a glaring error remained all the way through.
4:25 p.m.
Deputy Minister, Public Works and Government Services Canada
It may be helpful to ask my colleague from the Treasury Board Secretariat to give you a bit of insight into how this number was put into the RFP. You might get a better sense of whether there was an attempt to see the historical number or some projection.
However, whether we got it right or not, there was an honest attempt made to project the needed number. So if you'll permit—
4:25 p.m.
Liberal
The Chair Liberal Shawn Murphy
Yes, Mr. Marshall, I think that would be very beneficial, because we've had three hearings and I've asked the question myself.
Nobody has really come forward to admit why or how the mistake was made, or to take responsibility for it. So if the Treasury Board can bring some light to this situation, we would certainly be glad to hear from them.
Then we'll to go to Mr. Rodriguez.
4:25 p.m.
Dan Danagher Executive Director, Labour Relations and Compensation Operations, Treasury Board Secretariat
It's important to point out that the policy for relocation services changed in 1998, and this was a national joint council policy. For those of you who understand, this is where the bargaining agents and the government get together.
At that time, we wanted to put some controls on government expenses, plus we wanted to encourage people to hang on to their homes, because it was a more cost-effective way to manage relocations. The policy changed in 1998 to give an incentive to employees to hang on to their homes.
Ergo, we had no historical data prior to the pilot contract. An interdepartmental working group was established at the time, and they developed a logic model based on two facts that they knew.
From the experience of the forces at the other end of a relocation, they knew that 40% of people purchased homes and 60% rented. The logic said that if people bought homes at the receiving end, the destination of a relocation, they wouldn't keep a home at the originating end.
The logic model that was used in place of actual past business volumes was that a maximum of 60% of people would exercise the home retention scenario and that had to be balanced with 40%. If the number turned out to be 30%, then the other number would be 70%. It always balanced out. For example, for all of the fees for all the services in the RFP, if one would go down, another one would go up in percentage.
It speaks to what Deputy Minister Marshall was talking about a little earlier. It's difficult to look at any one of these things in isolation. But that's a little of the history of it.
From 1998 to 2002 this was a pilot for a smaller population of the government. It was forces personnel, RCMP personnel, and only GIC appointees and EXs. It was not the whole public service.
Again, in 2002 we still didn't have enough data, and we felt the incentives hadn't had an impact at that point. It was again decided that we would not use past data in the bid evaluation.
You need to understand that in the RFP it does not represent these numbers as business volumes. It never did that in any of the RFPs. It's for the purpose of evaluating bids. The bidders are to set prices or fees for different services, and this is how we would evaluate them. There was never a representation at any point that these were business volumes. It was a logic model the crown came up with, based on the knowledge and the data that it had.
The model was reused again in 2004, partly because there was such a short lead time after it had been previously used in 2002 and partly because the data hadn't yet moved up to where the target was.
But a key thing here—and I think Graham Badun referred to it before—is that most of the employees did not avail themselves of services from Royal LePage for property management. Therefore, we as the crown had no way of capturing the number of people who availed themselves of property management services. It was a database wherein people weren't obliged to tell us. They could have a neighbour manage the home during their absence. They could shut up the house. We'd have no way of knowing.
Obviously, through surveying and the attention that has been focused on this issue in the last few months, we will probably change that focus for a future one, but that's where we've been in the past.
A logic model was used. We never represented those as business volumes, and it's consistent with the fact that when people asked for business volumes, we told them that they weren't available. In a sense, we've been consistent all along.
I tried to keep it brief. It's a little more complex than that, but I kept it.... I'm sorry.