Public Accounts Committee on Jan. 29th, 2007

[Sheila Fraser]

Absolutely, and I think that's one of the things that can be learned from this one.

And in all fairness, Mr. Marshall and his group have been getting a lot of attention about the errors in the business volumes, but those business volumes were given to them—at least our understanding is that they were—by the departments. They do the procurement on behalf of departments, so the departments, when they establish the business volumes, should be spending much more time and care.

Anyway, Public Works might want to consider what kind of assurance they receive from the departments on business volumes that can have a pretty significant effect in the contracts.

[Judy Sgro, Liberal, York West, ON]

I'm going to give Mr. Proulx the balance of my time, Mr. Chair.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Thank you, Mr. Chair.

Mr. Badun, has your company ever had any pressures from anybody at Public Works or from the government to sign deals with subcontractors, whether companies associated with your own company or other companies?

[Graham Badun]

Not to my knowledge.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Okay.

Mr. Marshall, do we agree that there is a section in the contract that says that there has to be a sharing of independent contracts that are given through this process among real estate companies?

Let me explain. With all of these different moves, there have to be quite a number of real estate listings that are given out. Is there not a section in the contract that requires the main contractor, in this case Royal LePage, to report to Public Works how that particular aspect of sharing is being done or has been done?

[David Marshall]

My understanding is that any qualified subcontractor, say an appraiser or a lawyer, is entitled to the business. An individual who's moving can nominate their own lawyer, and as long as the fees are within the limits the government has agreed, that lawyer has a right to that work.

As to whether they have to report and be monitored, perhaps I can just turn to Mr. Goodfellow on the detail.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

I want to make sure we understand my questioning here. I want to know whether there's anything at all in the contract that forces, in this case Royal LePage, to report to you, on a monthly or annual basis, who has benefited from contracts—in this particular case, through real estate listings, whether it be to sell a house or to rent it.

Is there anything in the contract that says that Royal LePage has to report these statistics to Public Works?

I'll tell you where my question comes from. I've looked at the contract. My understanding is that it exists. I happen to live across the river in Hull-Aylmer. There are a lot of military personnel, a lot of RCMP personnel, a lot of government personnel who move in and out. I don't understand why, but none of the companies I know of—and I know just about all of them—has ever been approached by either the forces, the RCMP, the government, or Royal LePage to handle any of these listings. So I'm trying to find out from you whether they are supposed to report, and then I'll go to Mr. Badun to ask him what he's done with the reports, if you haven't received them.

[David Marshall]

Okay, go ahead.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Maybe they got lost in the mail, but we'll find out later.

[A voice]

Let's have a regular post office.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Maybe. Then we'll get Minister Cannon in here.

[Richard Goodfellow]

There is a provision within the contract whereby Royal LePage does have to track when business is given to a particular third-party service provider. That is called a referral. It would only be in the instance in which I'm a transferee and I go to Royal LePage and ask them for a suggested name of a supplier--for example, a realtor. They have to track that. They have to distribute it according to the market share within that region. They report it on a quarterly basis, but it happens very infrequently. The selection of any third-party supplier--

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Excuse me--what happens infrequently, reporting or referrals?

[Richard Goodfellow]

No, sir, it is the referrals.

There have only been five documented cases in which somebody has asked Royal LePage for a suggested name of a supplier. When you're relocating, you get an information package from Royal LePage. It has all the participating third-party suppliers within that area. You choose the person you want to use. You can pick from that directory or go through the yellow pages or pick through word of mouth. It's your choice.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Thank you.

I'm short on time. Mr. Badun--

[The Chair, Liberal, Shawn Murphy]

You are actually over time.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Well, on the second part of my question, Mr. Badun was getting ready to reply.

[Graham Badun]

I'm not sure I know the second part of your question.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

You're being a bad boy. It's your business. It's referrals. To whom do you refer all of these different real estate listings?

[Graham Badun]

We don't manage referrals, except in the instance Mr. Goodfellow was just mentioning. Members receive a package that has a list of all the qualified suppliers for the area they're moving into, and they select them. In fact, I'll go further and say that each of the members signs a piece of paper acknowledging that in fact we didn't ask them to go anywhere and direct business anywhere. We are prohibited from managing that part of the contract unless specifically asked.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

It won't happen because it's private business, but if Mrs. Fraser were to look into your books, there wouldn't be any referrals and there wouldn't be any listings kept by your company?

[Graham Badun]

That's correct. Well, there will be, by nature. I assume you're referring to the residential part of the Royal LePage business, so there is going to be by nature, because there are certainly elements of them in parts of it, but none that we've handed them. They've earned every file. Whether it be RE/MAX or Century 21or Royal LePage, those people are local business people who earn every file they receive.

[Marcel Proulx, Liberal, Hull—Aylmer, QC]

Unbelievable. Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Proulx.

Mr. Poilievre is next.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Why is the government in the business of paying property management fees in the first place? I ask that question because we have this incentive program that covers 80% of the transaction costs someone would have paid if they sold their property, up to a cap of $12,000. If you go on MLS and look for an income property, you'll find on the fact sheet that one of the basic expenses of an income property is management. If you can't manage it yourself, you test whether the income from the property is sufficient to cover the management fee you might have to pay. Sometimes they charge 3%; sometimes they charge 6%. In any event, it is one of the expenses property investors always expect to incur unless they can manage the property themselves.

I think the responsibility of the government here is clearly to help the transferee with the costs associated with the transfer--that is to say, to pay their real estate fees, their legal fees, etc., and the cost of transportation--but if that individual wants to own a property and have it produce income for them while they're gone, it is not the role of the government to pay a property management fee. It is the role of the individual to decide whether or not they believe a given property lives up to the economics of an investment, is it not?

Why is the government paying property management fees? That's what I don't understand. Why would they?