Public Accounts Committee on Jan. 29th, 2007

[David Marshall]

The department is, Mr. Chairman. This was an administration issue. It was handled by departmental officials. So as the accounting officer, I would take responsibility for it.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

If I understand you correctly, sir, if this committee recommends it and the government listens to us and we re-tender this whole process, from a taxpayer standpoint, you're quite sure it would cost the taxpayer a fair amount more in the way of dollars to rectify.

[David Marshall]

I do indeed, sir.

This is a big contract. It involves many people. The contract finishes up in 2009, which is not that far away.

To start now, re-tender.... We have a contractor, through no fault of their own, holding a valid contract with the government. You have issues of termination for convenience. You have issues of the cost of bidding. It would cost a large sum of money to re-tender.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

Have we learned anything from this experience that we can use going forward?

[David Marshall]

Yes. I must say that we issue tens of thousands of contracts every year. We can't claim that there will never be a mistake. We do feel that here there was confusion that should have been avoided, and we've learned a lot from this. We will certainly improve our processes. We may ask for more certifications of numbers and improve things that way.

In my view, when you take it as a whole, when you look at all the things we did to make sure things were fair, an administrative error or an administrative misunderstanding persisted. I really feel that in the interest of the taxpayer and service--and Royal LePage has given very good service--there's no purpose served in re-tendering this thing.

We should consider not exercising the option years, perhaps. I've been discussing with my minister the option of running a new process so that when the contract normally ends, in November 2009, we will have the result of a new tender. I believe, taken as a whole, that's the right thing to do.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Fitzpatrick.

Thank you very much, Mr. Marshall.

Just before we go to Mrs. Sgro, I have a few questions, if I may.

Going back to you, Mr. Danagher, this thing has been going on for a couple of months now. We've heard a lot of witnesses. This is our third hearing. And this is the first time we've heard of this so-called “logic model”. I'm surprised that you and Mr. Goodfellow came....

Nobody ever mentioned this before. In fact, it actually conflicts with some of the remarks in the auditor's reports. During the proposal process, certain bidders questioned Public Works and Government Services as to the veracity of the information in the request for proposals, and they were told.... I'll just read it:

PWGSC subsequently communicated to all bidders that actual volumes were not available for the past five years but the estimated number of annual moves could be found in the RFP.

This is elaborated further, and to a certain degree contradicts what you're saying here now.

It seems to me, Mr. Danagher, this was a major mistake that was set out in the request for proposals. And you're saying that the mistake emanates from this so-called “logic model” developed by the Treasury Board Secretariat. If that is the case, does your secretariat accept responsibility for this mess?

[Dan Danagher]

I have to clarify a few things. It was a logic model that was developed by an interdepartmental working group of which the Treasury Board Secretariat was one member. So for our part in that, yes, we accept all responsibility.

It was a predictive model. When predictive models are examined after the fact, many of them don't withstand the test very well. This one was off by several orders of magnitude. We acknowledge that.

We do, however, stand by the point that the number of property management services actually purchased was different from the ones that would have been funneled through Royal LePage itself. If we use, for example, the people who opted for the personalized fund approach that the member, Mr. Fitzpatrick, just referred to, if we use that as a proxy for that number, it would be some ten- or twenty-fold higher. I think the numbers that we're looking at right now are about 440, or a number in that magnitude, versus 32.

We did our best. We had certain information that was available at the time. I can't speak for what was given to the auditors at the time. Unfortunately, I wasn't part of it. I can tell you that it hasn't been well documented. We acknowledge responsibility for that as well, and we are taking steps to ensure that sort of thing doesn't happen again.

[The Chair, Liberal, Shawn Murphy]

Finally, Mr. Goodfellow, from the evidence, one of the prospective bidders questioned the number of 9,000 clients who would need property management services. They basically said that based upon a lot of things, that didn't seem right. They wanted more accurate information, and you told them that the information was accurate. Do you have anything to elaborate or explain on that?

I think the mistake was made, and in life sometimes it's how you handle mistakes. It really should have been caught at that point in time. If someone had been looking at what was going on, they would have said, “Listen, this is crazy; it's not 9,000. Let's get the right information. Let's get the right information into the hands of all prospective bidders so that the bidding process can be done fairly, transparently, and openly.” But no, that was not the case. What you did was say that the information, the 9,000 clients, was correct and that they were to rely on that information in preparing and submitting their bids.

[Richard Goodfellow]

Mr. Chair, I'd just like to clarify a bit. As Mr. Danagher said, it was a collaborative effort. I was brand-new to the procurement process in 2004. I did not have any technical expertise in relocations. I had to rely, as did the members of the interdepartmental committee, on that type of information. I was not aware that the volume was not accurate until the Auditor General raised that issue this past summer.

I see the flags that the Auditor General has pointed to. I did not consider, at that time, two questions out of 289 concerning the business volume for property management to be a significant indicator that the number may not have been accurate.

The other thing was that we had a bidders conference. All the potential bidders were there. We went through all the outstanding questions that had been received, and we did not get any comment at that conference about the business volumes for property management. So there was no indication to me at all, and I relied on our technical experts to use that volume. It was the same percentage that was used from 2002, which at that time was only about 18 months old.

[The Chair, Liberal, Shawn Murphy]

I have just one last technical question to the auditor herself.

Mr. Atyeo has made the allegation that the technical points were erroneous. Did you audit that process? I believe you opined that the process was fair, did you not?

[Sheila Fraser]

We'd just note that this is related to a CITT decision where PWGSC in evaluating the technical portion—and I'll ask Mr. Marshall to correct me if I'm not correct in this—had reduced that bid, had taken points away from that bid.

[The Chair, Liberal, Shawn Murphy]

That was in the contract, was it not?

[Sheila Fraser]

It went back to the CITT. The CITT agreed that the department should not have done the comparison that they did, but did not reinstate those points because it was judged at that point that it would not have a consequence on the final outcome of the bid.

[David Marshall]

That is correct.

[Sheila Fraser]

So when Mr. Atyeo says that, it would be not only the question of price that could potentially change, but also those points on the technical merit, and it becomes, of course, very speculative as to what the outcome might actually have been.

[The Chair, Liberal, Shawn Murphy]

Okay, thank you very much.

Ms. Sgro, you have eight minutes.

[Judy Sgro, Liberal, York West, ON]

Thank you very much.

I, as my colleague, am coming into this cold today in trying to follow this complicated procedure.

As just a question for the Auditor General, you pulled ten files on the Canadian Forces members. Did you not think maybe you should have pulled twenty and you would have gotten additional...? Did you have reason for concern to stay just at the ten files?

[Sheila Fraser]

We picked the ten out of those that had property management services, which are about thirty or some a year, to see what was being charged to them, and we noted that they were being charged for property management services. So once we noted that, that was sort of the finding. Then it is up to the departments to go back and actually do a much more exhaustive review and go through, I would say, all the files, because there are so few of them, and ensure that people are reimbursed for this.

[Judy Sgro, Liberal, York West, ON]

Have you heard anything in the testimony in these hearings that would give you cause to change any of your report?

[Sheila Fraser]

There is nothing I've heard today that would change our conclusions. I must admit, though, there is a certain number of supposed information that has been given to the committee, and this is the first time we have heard this. Had we been made aware of that, we would have obviously audited that and would probably have included that within the report and been able to respond one way or another. For example, about the business volumes that were presented in the bid, that was never presented to us.

[Judy Sgro, Liberal, York West, ON]

Do you have any concerns that there are other departments or contracts that are not being monitored as effectively as they should be?

[Sheila Fraser]

I find it hard to answer on the basis of this one particular contract. I think it's very clear that this contract was not managed in the way one would expect, afterwards. We point to such things as the reconciliations and the assurances that the billings were actually for the services. The departments have agreed with these observations.

We will obviously continue to monitor other contracts across government, and I would hope that the conclusions in those cases would not be the same as in this case.

[Judy Sgro, Liberal, York West, ON]

Has there been any way in which you have felt that anybody personally gained out of this, or do you feel that it's strictly an administrative error?

[Sheila Fraser]

We saw no indication that it was anything other than an administrative error.

[Judy Sgro, Liberal, York West, ON]

Quite often, when the various departments are doing a contract involving three or four departments to tender something out.... Is there a way of tightening that up? Quite often someone's relying on someone else in another department, and someone else is relying on someone else's technical knowledge, and it doesn't always come together as tightly as it should.