Public Accounts Committee on June 12th, 2007

[John Williams, Conservative, Edmonton—St. Albert, AB]

Thank you.

[The Vice-Chair, Conservative, Brian Fitzpatrick]

Ms. Pell.

[Francine Pell]

Mr. Chair, I am honoured to appear before the committee on behalf of Morneau Sobeco.

[The Vice-Chair, Conservative, Brian Fitzpatrick]

What's your position with the company, by the way?

[Francine Pell]

I am currently a principal with the company. I will address that.

I am honoured to appear before the committee on behalf of Morneau Sobeco as the committee continues its study related to the administration of the RCMP pension and insurance plans.

First, allow me to provide the committee with some brief background information about Morneau Sobeco and my tenure at the company.

For more than 40 years, Morneau Sobeco has provided integrated human resource solutions for all types of pension, group benefits, and compensation plans for both private and public sector clients. We have grown to become a leader, and have the distinction of being the largest Canadian-based company in our field, with approximately 1,000 employees in 11 offices across Canada and the United States.

I have been proud to be part of the Morneau Sobeco team over the course of two decades. I first joined Morneau Sobeco in 1987 as a student. Following my graduation in actuarial mathematics from Concordia University, I was hired as a full-time employee in 1988. I continued to work for the firm in its pension practice, and was appointed partner in 1997. In September 2003 I left Morneau Sobeco to spend more time with my children; however, I returned in late 2006, on a part-time basis, and in 2007 I assumed my current role of principal. I would also note that I am a fellow of both the Society of Actuaries and the Canadian Institute of Actuaries.

With regard to the matter before the committee, I would like to begin by emphasizing that Morneau Sobeco's client relationship with the RCMP was first established through an extensive competitive and transparent process led by the Department of Public Works and Government Services.

In 2000 Morneau Sobeco was contacted by the RCMP and was requested to provide information about the various types of service models available for the administration of pension plans. This is a normal practice by organizations contemplating outsourcing. Further to that request, Morneau Sobeco provided to the RCMP indicative pricing and other information for service models ranging from partial to full outsourcing.

In 2001 the Department of Public Works and Government Services issued a competitive request for proposal, or RFP, for pension administration services for the RCMP. The RFP indicated the RCMP would be moving towards a full outsourcing model, which is in line with overall market trends among large organizations in Canada. This was one of the most complex RFPs we had ever come across, and required considerable effort on our part to respond.

Following our submission, we were advised that the RFP had been rescinded. When another RFP for this work was issued by PWGSC a short time later, Morneau Sobeco once again submitted a bid. And, in March 2002, PWGSC awarded the pension administration services contract to Morneau Sobeco.

Around the same time, we were approached by the RCMP with questions relating to outsourcing insurance plan administration. And, as before, we were more than happy to provide the RCMP with information on the potential outsourcing models. Sometime following these discussions we were asked to provide insurance plan administration services to the RCMP as a subcontractor to its insurance underwriter, Great-West Life. Morneau Sobeco subsequently entered into a contract with Great-West Life, which came into effect in May 2002.

Since entering the contractual agreements with Public Works and Government Services Canada and Great-West Life, Morneau Sobeco has been committed to providing the highest level of services to RCMP pension and insurance plan members, in accordance with our contractual agreements and service standards. Our fees are flat monthly fees that are commercially reasonable and competitive with market rates. Additional fees are only approved based on contract amendments.

In 2003 we were surprised to learn about the concerns surrounding the management of the RCMP pensions. Since that time, Morneau Sobeco has been committed to working with the RCMP and all oversight bodies to ensure there is a complete and transparent understanding of our relationship with the RCMP and the services we provide.

Morneau Sobeco has carefully examined all of the reported concerns about the management of the RCMP pensions. Following an internal review, I can firmly say that we are satisfied that our company has acted appropriately in all instances and in accordance with the highest standards of our industry.

We continue to proudly serve the RCMP as an important client. Last year we answered 35,000 calls from RCMP plan members, and 77,000 members visited our RCMP branded pension and benefits website.

To the best of our knowledge, our services have been well received by the RCMP and the RCMP plan members, from whom we have received generally positive feedback.

Thank you, Mr. Chair. I would be pleased to answer any questions from the committee.

[The Vice-Chair, Conservative, Brian Fitzpatrick]

Mr. Pat Casey has a statement. Go ahead.

[Pat Casey]

I want this committee to understand that I am a computer person. My expertise is in computer systems and using the computer programs to analyze information and report on the analysis of that information. As an outside computer analyst, I had no authority to make decisions, nor did I make any decisions.

I initially commenced work with the RCMP on pension administration, but was approached by Mr. Crupi to coordinate work in the area of insurance administration, which was initiated by an employee who was stricken with a heart ailment. I agreed to help, but made it clear that I was not an insurance expert and would need to work with experts in the insurance field.

Those experts were provided as follows: Mr. Garry Roy, as the manager to provide direction; Ms. Liz Ballantyne, as an insurance policy analyst; and Mr. Stephen Taylor, as an insurance systems analyst.

Following the decision made by others that Great-West Life and Morneau Sobeco were going to be the administrator of the insurance plan, l was involved in detail work, such as plan rules, names, addresses, dates of birth, benefits, beneficiaries, and other data that would need to be set up in the administrator's systems and files.

One of those duties was to set up meetings as directed by my superiors. In such capacity, I was in frequent contact with Great-West Life and Morneau Sobeco representatives. As result of my frequent contact, l was often c.c.'d and sometimes telephoned on matters that did not relate to my area of work. When this took place, l passed the information on to others, such as Liz Ballantyne for policy issues, Stephen Taylor for insurance data issues, and Garry Roy, my manager, for decisions.

In regard to questions about the cancellation of the meeting of January 7, 2002, may I repeat that following the news from Great-West Life that it could no longer meet the time requirements of April 2002, the working group, of which I was a member, was required to prepare a business case that would examine different options to the problems presented.

Time was needed to prepare the business case, which left the working group with scheduling problems in regard to attending the January 7 meeting. I have no recollection of alleged e-mails responding to the cancellation. The e-mails referred to happened more than six years ago.

In regard to alleged conversations within four days of my e-mail cancelling the January 7 meeting, I have no recollection of any conversation wherein I stated it was a “done deal”. In fact, I was working on options, and had no idea that any decisions had been made.

As l have stated before, l had at no time explored the option of Morneau Sobeco being a subcontractor of Great-West Life, nor did I ever recommend it. Only after the decision was made did l become involved in the details of the project under Great-West Life and Morneau Sobeco administration.

In fact, in Mr. Crupi's testimony of June 4, he states the following:

First of all, it was Great-West Life who came to us and said they felt bad that they couldn't do their obligations and that they would have no problem going to a subcontractor. From my recollection, it was never us who brought that up; it was Great-West Life, because they couldn't fulfil their original mandate.

The work l was doing was not related to which administrator ended up with the administration contract. This work had to be done regardless of whether it was Great-West Life, Morneau Sobeco, an administrator chosen by the insurance committee of the RCMP, or any administrator, however chosen. None of the work l did, including the business case and contract option analysis, could have eliminated the need for work l did for the balance of my contract period. This work had to be done. As such, the business case for the insurance administration, which is also what l was questioned on, contains no information that would assist Casey Computing Solutions.

I was made aware that Great-West Life and Morneau Sobeco were negotiating an agreement. I had been advised by Mr. Roy and Mr. Crupi that the RCMP legal department would not get involved in a contract negotiation between Great-West Life and Morneau Sobeco.

On one occasion, I was telephoned by Mr. Pattie of Great-West Life, and he explained that they would not indemnify the RCMP on behalf of Morneau Sobeco. I advised them that I had no expertise in indemnity agreements, but I had been previously advised by my supervisors that the RCMP legal department would not get involved in a contract negotiation between Great-West Life and Morneau Sobeco.

I was asked at the last hearing if I'd seen certain e-mail material that this committee had been studying. I had received no material, nor was I advised that I could or should get copies of any material. I wish to state that I have very little memory of events that happened going back seven years ago, with no material to study. It's just my memory.

[The Vice-Chair, Conservative, Brian Fitzpatrick]

Thank you, Mr. Casey.

Mr. Jeff Molson has a statement as well.

[Jeff Molson]

I'm pleased to have the opportunity to attend and give evidence at the committee and to clarify my role in the RCMP pension administration outsourcing project. My background includes over 30 years' work experience in the compensation area of the public sector. I have a masters of business administration, and I am a project management professional, certified by the Project Management Institute. I'm an accredited faculty member at two U.S. universities.

Through a competitive process, I was awarded a contract to provide services as the project budget and risk officer for the pension administration outsourcing project. My role included activities such as determining the financial requirements for the project, developing a risk management strategy and framework for the project, conducting the initial and periodic risk assessments over the life of the project, and providing project management advice based on globally accepted project management processes endorsed by the Project Management Institute and the Treasury Board on behalf of the Government of Canada.

My role did not include the outsourcing of insurance administration, and to the best of my recollection, I did not participate in any activities associated with the insurance outsourcing, except for the two items I mentioned at this committee last week, namely, reviewing the text of the agreement between the insurance committee and the pension advisory committee, and determining the numbers, the approximate 60-40 split between the active and retired members, based on stats I had available to me.

I want to clear up any misunderstandings and misrepresentations stemming from various testimony given before this committee alluding to the fact that proper approvals were not sought by the NCPC, the National Compensation Policy Centre, for pension administration outsourcing costs. To the contrary, in my role as the project budget officer for the project, I drafted five formal submissions to the ministers of the Treasury Board to secure approval of funding for the RCMP pension administration outsourcing project. I also drafted the submission to the Treasury Board ministers for the approval of the devolution of pension administration activities from the RCMP to the outsourcer.

Each of the funding submissions and supporting documentation included a very detailed description of the activities that would be performed to support the project, the anticipated costs, as well as the authorities under which the funding approvals were being requested.

Prior to being presented to the Treasury Board ministers, each submission and accompanying supporting documentation and rationale was routed through the formal approval process for Treasury Board submissions for sign-off at each stage. For all of the pension administration outsourcing submissions, this routing and approval included the human resources directorate, RCMP; the corporate and financial services directorate, RCMP; the commissioner's office; the Solicitor General of Canada; the Treasury Board Secretariat, submission unit; the Treasury Board Secretariat RCMP analyst, Mr. Robert Dykstra; and finally the ministers of the Treasury Board. Corresponding TB minute references are provided in the hard copy of my statement.

I want to make it perfectly clear that every nickel of every proposed expenditure associated with pension administration outsourcing was covered off in the authorities of the submission approvals. Additionally, every activity related to a chargeable expenditure was fully described in the submissions and supporting documentation.

Mr. Robert Dykstra, the Treasury Board analyst assigned to the RCMP, was consulted at every stage of the process and participated fully as the TBS representative in extensive discussions and meetings, and provided agreement on behalf of the Treasury Board Secretariat to the RCMP. This participation, in addition to discussion and explanation of the financial numbers, included extensive TBS analyst input into the actual wording for the submission documents and accompanying rationale.

The Treasury Board Secretariat analyst and officials within the corporate and financial management directorate of the RCMP, as well as all others in the formal document approval chain, agreed, via their review and sign-off, that all items of proposed expenditures that were to be charged as pension outsourcing administrative costs against the RCMP pension fund were in fact legitimate items based on the rules and charging principles established by the Treasury Board for acceptable administrative charges.

The Treasury Board Secretariat and the Treasury Board ministers established the rules, and these rules were applied in an equal manner to the three federal pension plans: RCMP, Canadian Forces, and the public service superannuation.

At no time did project expenditures exceed the approved funding levels. In fact, in each year of the project, actual expenditures fell below the approved funding levels set by Treasury Board. The RCMP was required to provide a formal submission annually that included firm estimates for the current year and projections for the three following years. As with any project, future year projections are subject to change as project requirements get further refined year after year.

The RCMP pension administration outsourcing project was no different in this regard, and the annual funding submission supported the progressive elaboration of the project specifications and requirements.

Project activities were also delayed for valid reasons, thus requiring the reprofiling of funding over various fiscal periods to correspond with the timeframe of when the actual work was to be completed. Again, all of this was fully covered in the Treasury Board submissions and supporting rationale documents.

I welcome the opportunity to provide full and complete responses to any questions members of this committee may have.

Thank you.

[The Vice-Chair, Conservative, Brian Fitzpatrick]

Thank you, Mr. Molson.

I believe Mr. Roy has a short statement.

[Garry Roy]

Thank you.

I'm honoured to be before the committee today to present our findings here. My name is Garry Roy. I'm a civilian member of the RCMP. I'm here to assist the committee with its investigation into the pension and insurance administration of the RCMP.

In 2001-2002 I worked with a number of people in the capacity of manager, pension and benefit policies. I worked with certain individuals who have previously appeared or are here today at this committee, Mr. Crupi, Mr. and Mrs. Casey, Tony Koziol, Jeff Molson, and Francine Pell.

I'm here to assist in any way I can. However, my position is that I was never a contracting or procurement person. I do not have a background or any training in contracting or procurement, and I was not familiar with the TB contracting policies. It was not my responsibility, nor did I have the authority to procure consulting services or contracts with any other third-party company.

Thank you very much.

[The Vice-Chair, Conservative, Brian Fitzpatrick]

Thank you, Mr. Roy.

We'll start our questions for eight minutes with Mr. Wrzesnewskyj.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Thank you, Chair.

Assistant Commissioner Gork, on March 28 of this year you emphatically denied receiving a call from Barb George in Lyons, France, regarding Sergeant Frizzell's removal. Let me refresh your memory from the transcripts.

I asked you, and I quote, “I'm asking you if Barb George called”. Your response: “No, she did not. I'm telling you who contacted me. It was Inspector Paul Roy who contacted me, not Barb George.”

I then asked, “So Barb George did not call you to have Mr. Frizzell removed?” And you responded, “No, she did not. Inspector Paul Roy contacted me to have him removed.”

Yet in the 96-page report to the committee on Sergeant Frizzell's removal provided by Acting Commissioner Busson, it states that on June 18 of 2005 Barb George called Dave Gork, and Gork described her as being incensed over the actions of Frizzell and wanting action taken.

Having now had a chance to reflect on your contradictory statements, which of those two statements is correct?

[A/Commr David Gork]

The statement is correct that she did not ask me to remove Frizzell. I've stated that before in the committee here. I have been interviewed about six times, and it is the same issue. She did not ask me. I discussed it with Paul Roy.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Did she call you in Lyons, France?

[A/Commr David Gork]

As far as the record shows, I contacted her--and that may have been through an e-mail--and I ended up speaking with her. Quite frankly, I do not recall the conversation. In the questioning I've gone through on that, what I stated to the investigators, and I hold to this minute here, is that she never asked me to remove Frizzell. In fact, I think if the record shows, that date was a Saturday, and I in fact had talked with Doug Lang on the Friday to have him removed. So it was the day before.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

So the acting commissioner's report states.... I assume you were interviewed for that report. Is that correct?

[A/Commr David Gork]

I've been interviewed six different times.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

It states: “Gork describes her as incensed over the actions of Frizzell and wanting action taken.” Is that a false statement?

[A/Commr David Gork]

As far as I'm concerned, that's not a false statement, but what you have to remember is--

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Okay, so it's not a false statement. I'm just trying to get my head around this.

[A/Commr David Gork]

I know, but I'm trying to respond to your question. From what I've been shown on the timeline, that was the Saturday. I spoke with Doug Lang about the order on the Friday prior to that, so I had already contacted Doug Lang to have him make the order.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Assistant Commissioner, let's not split hairs here. My question was clear. I'm asking you if Barb George called. You stated clearly, “No, she did not. I'm telling you who contacted me.” You're now saying perhaps it was you who contacted her.

From another investigation, we find out that when you spoke with her, she was incensed over the actions of Frizzell and wanted action taken. I had followed up with a question, “So Barb George did not call you to have Mr. Frizzell removed?” And you said, “No, she did not.” It's because you placed the call to her.

[A/Commr David Gork]

Yes. Barb never called--

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

So you weren't fully forthcoming when we were questioning you.