Yes. Thank you, Mr. Chairman.
Members of the committee, we appreciate being here to discuss with you the subject of the leased office space at Place Victoria in Montreal, as it was reported in the Auditor General's report of May 2006.
As you mentioned, I have with me today Mr.Tim McGrath, our acting assistant deputy minister for real property, and Mr. Mario Arès of our department, who is the regional manager in the Montreal office of Public Works and Government Services.
To begin with, I'd like to mention that we have carried out a very extensive search of all our paper and electronic records in order to serve the committee as best we can. We are confident that all the documents requested that we have in our possession have now been submitted to the committee.
In addition, we took the time to prepare a flow chart that tied together the various documents and other recollections of our staff over a chronology of events relating to this transaction. I believe this is before the committee in both languages, with a key indicating wherever there is a document that relates to that particular point in the chronology. We would of course be prepared to walk through it with you to the extent it would be helpful to you.
Let me summarize what we have determined. In December 2000, Public Works and Government Services and our client, the Economic Development Agency of Canada for the Regions of Quebec, began the process of finding the agency suitable premises, as their existing lease in Place Victoria was coming up for renewal and the premise was due for an extensive fit-up, as well as lacking space for expansion.
That was the requirement. Between December 2000 and May 2001, our two teams worked closely to finalize the requirements and develop a plan.
The recommended option, which was approved internally at Public Works and Government Services, was to go out to tender in the Montreal market for the requirement. Public Works officials proceeded on that basis and set in motion a series of steps that culminated in qualifying six bids, amongst which were included Place Bonaventure as well as Place Victoria.
Following an evaluation, on March 12, 2002 the bid from Place Bonaventure was judged to be the best value to the Crown.
Our Public Works and Government Services director general in Montreal personally called the deputy minister of the agency and received assurances that everything was still as originally planned and nothing had changed. On that basis, Place Bonaventure was informed that they were the winning bidder, thus committing the government to leasing that space. Shortly after this, on April 4, our assistant deputy minister for real property, who at the time was Carol Beal, who is here with us today, was advised that the client had changed its mind. The additional space was no longer needed, and they wished to stay in premises more suitable to their program. She was told a letter from the minister would follow.
On April 15 a letter was indeed received, signed by Minister Drouin, the minister for the development agency.
Our staff at this stage considered the request to be very late in the process, but clients have from time to time changed their minds, and we have tried as best we can to be helpful if at ail possible and to minimize the cost to the taxpayer in doing so.
In this case, at the time there was an anticipation that office space in Montreal would be rising in price; also, that there were other clients who needed new space in the downtown area. We made the decision that if we could get an acceptable rate for the Place Victoria space, the economics of leaving the agency in its current space and filling the Place Bonaventure with other tenants could be a viable option. If we could not negotiate a good lease renewal rate from Place Victoria, then we would have to insist that the agency move as originally planned.
As it turned out, we were able to negotiate a good rate with Place Victoria—30% lower than they had bid in the competitive tender process. In addition to not expanding, the agency agreed to forgo the fit-up they were due to receive.
Our analysis showed that with these factors and moving costs taken into account, the cost of letting the agency remain in Place Victoria was economically viable, and we'd be happy to walk you through that calculation. And in that sense it did comply with our rules to only allow clients to remain in situ if it was economically viable and advantageous to the crown.
Public Works was optimistic it could move other government tenants into the newly leased Place Bonaventure space. Despite best efforts, the process to backfill with other departments seeking additional space in Montreal's downtown core took longer than we'd hoped, resulting in a cost of unproductive rent of about $2.1 million to the taxpayer. I should point out that Public Works' vacancy rate at any time in its portfolio averages just 1.2% of available space, compared with an industry average of about 5%. So Public Works does, overall, have a very good record in maintaining full occupancy of the space it pays for.
This, Mr. Chairman, is as close to what happened as we can reconstruct at this time. As you may be aware, our practices have evolved since the above transaction took place. We have strengthened our oversight and risk management of such accommodation arrangements. Today we're more stringent in enforcing our real estate standards. We also ensure that clients and our minister are informed as early as possible of any incremental costs arising from a change of plans, and that these costs are properly assigned to those incurring them.
On a somewhat separate matter, we also intend to fully implement your committee's recommendations to disclose to Parliament each year the details of the additional costs incurred by any of our clients from the lack of adherence to policies and standards.
Mr. Chairman, I'd be pleased to answer questions the committee may have.
