Public Accounts Committee on June 12th, 2007

[Peter Foley]

First of all, we didn't recommend Morneau Sobeco. When we bowed out of the exercise on December 13, we did, I recall, have a discussion about what options there were. One of the things, as I mentioned in the opening statement, that we probably said and have a recollection of saying was that you could look at your pension outsourcer. There are several firms that do this type of work. At that time, we didn't know who their pension outsourcer was or would be. There are a number of firms, as I say, that do that work, and we left it at that. The next we heard was around the middle of February, and that was that there had been a determination of who that was.

So that's the history. But your question was more about how we were convinced.

[Judy Sgro, Liberal, York West, ON]

Yes. Why would a company with your reputation be persuaded to act as the go-between. It doesn't make sense to most anyone who's watching.

[Peter Foley]

They are a long-term customer of ours, and we did recognize that we were part of a failed process, perhaps, and we wanted to assist our customer.

We, at that time, didn't see anything wrong with that. We had our legal people look at the matter. We suggested that the RCMP have their legal people look at it. When we were put in contact with Morneau Sobeco, it was the same thing. We worked together. We had much legal discussion. There was talk here today about indemnity issues. We were very concerned that proper indemnity be identified in the contract, that the RCMP be protected by this indemnity, that we be protected, and that Morneau Sobeco protect themselves. We had lawyers working on this.

[Judy Sgro, Liberal, York West, ON]

Mr. Crupi, there were six different outsourcing firms interested in bidding on that original contract. Why did it end up with only two firms bidding? Morneau Sobeco, of course, was the one that had a superior bid. How did you judge that they had a superior bid, as well?

[Dominic Crupi]

First of all, I've answered this question before. There was a clause, which was requested by our security people, that the data not leave the country. That's why most of those companies fell by the wayside. They process their data in the U.S. The second company that bid and subsequently was rejected also said that their data is processed in the United States. Our data could not go to the States, and therefore, they were rejected.

[The Vice-Chair, Conservative, Brian Fitzpatrick]

We'll go to Mr. Sweet.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Just to be clear, there was no bid process on the pension outsourcing. Was there no bid process?

Mr. Foley, we have in an e-mail that it was indicated by the RCMP to your company that they would like to avoid signing an agreement, as it would require the involvement of the commissioner and RCMP legal. Are you aware of that e-mail?

[Peter Foley]

I don't have a copy with me.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Were you aware that there was a concern regarding keeping the commissioner and legal out of the loop?

[Peter Foley]

No.

[Frank Pattie]

When we had discussions with Pat Casey, we advised them to seek discussions with their own legal people within the RCMP.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Now there's another e-mail that says everybody from your legal “understands that Great-West Life is merely a conduit for payment”. So I'm wondering how, if these suspicions were coming up, if you were concerned about the legal aspects of it, you ever thought that this kind of agreement, which was simply circumventing contracting for the crown, would ever pass public scrutiny.

[Frank Pattie]

As Peter had indicated earlier, we were simply asked by the RCMP to do this, and it was our understanding that it was a timing issue, that it wasn't really kind of a legal issue. We were being asked by our national police force to do something, so we were not thinking that we were being asked to do something illegal by our national police force.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Let me ask you a question. Do you have an agreement like this in any other circumstance?

[Frank Pattie]

We use subcontractors for various services.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

And do you usually put the agreement together like this: the client puts together the whole deal, and you simply have to sign it?

[Frank Pattie]

Well, the client didn't put together the whole deal. We were instructed to do the subcontracting with Morneau Sobeco, and then we proceeded to have the discussions with Morneau Sobeco to put the agreements in place.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

I would think generally you're in a process of finding the subcontractor to do the work. You normally don't have a client who comes in and says “Here--just look after this, and we want to use you as a conduit to put payments through”.

[Frank Pattie]

Correct.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

I guess I really have the same question as well to Ms. Pell, given that Great-West Life legal sent this e-mail to your corporation. You said in your opening remarks that you were committed to acting in the highest standards, and yet obviously there is some very clear notion in this e-mail that the whole contracting process is being circumvented. You're not billing directly. You're going through Great-West Life.

[Francine Pell]

We, as providers, have other life insurance companies who actually subcontract our work. So providing this service to Great-West Life I wouldn't say is an everyday occurrence. It has happened in the past with other insurers. In fact in our pension administration contract with the RCMP, we subcontract part of that to another company as well. So there are a number of subcontracting issues we've dealt with. We deal with insurance companies as well, other than Great-West Life, on this.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

I concur with that, but generally speaking, a subcontracting arrangement means that another corporation is picking up an aspect of a contract you're already engaged in. In this case, Great-West Life is not engaged at all in that pension administration; it's simply a conduit for the payment. I just can't see why two very respectable companies would enter into that kind of agreement, knowing that regular contracting rules were being circumvented before the crown.

[Frank Pattie]

A point of clarification. We are not involved at all in the pension outsourcing.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Forgive me. I mean the insurance outsourcing.

[Francine Pell]

We were not aware that this was a circumvention per se. We knew that there were people on the RCMP side who dealt with contracting and who were looking into this. So when we were asked by the RCMP to subcontract with Great-West Life, we provided that service, based on their request, as we would provide a service to any other client.