Evidence of meeting #8 for Public Accounts in the 39th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was space.
Deputy Minister, Department of Public Works and Government Services
The rules of the operation, if we want to talk about them, are that Public Works responds to the clients. We just had a case where the department of defence decided they didn't want to move and we went through a lot of work there. It does happen from time to time. We have to try to respect what--
Conservative
John Williams Conservative Edmonton—St. Albert, AB
You will recall the chair's request that you be brief and focused in your answers. I have a limited amount of time.
Let me ask who the secretary of state for the Economic Development Agency of Canada was at the time.
Deputy Minister, Department of Public Works and Government Services
It was Mr. Claude Drouin.
Conservative
John Williams Conservative Edmonton—St. Albert, AB
And who was the Minister of Public Works at the time?
Deputy Minister, Department of Public Works and Government Services
The Minister of Public Works was Mr. Ralph Goodale at the time.
Conservative
John Williams Conservative Edmonton—St. Albert, AB
And this is after the sponsorship scandal, if I can say that, when the Minister of Public Works was making all kinds of protestations that now we're going to live by the rules. Now we find that the rules were not being lived by, because when something came along such that a politician wanted to ensure that friends, or whoever the landlord was, continued to enjoy a government lease, he made it happen, and it cost the taxpayer $4.5 million.
This, Mr. Marshall, is not excusable. The rules are there. We went through the sponsorship scandal about how the politicians became involved in the administration of programs in the Department of Public Works—you know all about it—and here we have the same again. I don't like it, and I want to have the assurance it will stop. Can I have that assurance?
Deputy Minister, Department of Public Works and Government Services
I can give you my full assurance that we will do whatever is right, Mr. Chairman, if the case comes up. But certainly we're very conscious of not doing anything that would be injurious to the taxpayer, that's for sure.
Conservative
John Williams Conservative Edmonton—St. Albert, AB
But this cost the taxpayer $4.5 million because the minister's whim was satisfied and the rules were bent to ensure that the minister's whim was satisfied. That is not acceptable in Canada today. I want you to know that.
Deputy Minister, Department of Public Works and Government Services
I accept that.
Conservative
John Williams Conservative Edmonton—St. Albert, AB
Again, going back to your very careful analysis between buying and leasing, I'm looking at exhibit 7.5 regarding Centennial Towers in Ottawa, here in Ontario, where you decided to keep on leasing the space. By your own calculations, $81 million of taxpayers' money was wasted.
What is the point of having very careful analysis if you don't follow through and make the decisions based on these very careful analyses? Why aren't you following through?
Deputy Minister, Department of Public Works and Government Services
Mr. Chair, I think the Auditor General has used this as an illustration of when from time to time there are decisions made, either because of budgetary constraints or other priorities of the government, where the lowest-cost option isn't always followed. These are very exceptional situations, but they do occur.
Conservative
John Williams Conservative Edmonton—St. Albert, AB
But $81 million? Is this again a situation of political involvement, telling the administration to waste taxpayers' money so that they can get what they want?
Deputy Minister, Department of Public Works and Government Services
No, not at all. I believe this was a very legitimate trade-off that was made at the time.
Conservative
John Williams Conservative Edmonton—St. Albert, AB
Then a legitimate trade-off that cost the taxpayers $81 million was acceptable to you?
Deputy Minister, Department of Public Works and Government Services
Tim, do you want do discuss that for a minute?
Acting Assistant Deputy Minister, Real Property Branch, Department of Public Works and Government Services
In this case we analyzed a number of options. Certainly the first option, the most cost-effective one we looked at, was purchasing the building. The second was to have two tender calls, one on the Quebec side and one on the Ontario side, out of the downtown core. And the final one, which you see, has been accepted.
But again, because of the issue the Auditor General points to, of the split accountability, the department has the right to make the assessment of where they should be located from an operational requirement point of view. This client sent us a letter suggesting they needed to be in the downtown core of the city of Ottawa. We take that as part of their operational requirement, and as a result, a tender call in the downtown core at that time was going to be more expensive than renegotiating the lease at Centennial Towers. So we went with the renegotiation of the lease at Centennial Towers.
Conservative
John Williams Conservative Edmonton—St. Albert, AB
I think that's just mumbo-jumbo to try to confuse the issue, because you didn't move; you just didn't exercise the best possible transaction of purchase versus lease, and you've been there for many years—since 1983 you've been in the building. To take 25 years to make up your mind isn't good enough.
Acting Assistant Deputy Minister, Real Property Branch, Department of Public Works and Government Services
To speak to the situation of buying the building, Mr. Chair, we approached the landlord to see if they were willing to sell the building. They did not want to sell the building to us. The operational requirements were to remain in the downtown core, and this was the cheapest-cost solution available to us at that time.
Conservative
John Williams Conservative Edmonton—St. Albert, AB
Well, it seems the Auditor General has a different opinion.
I'm going to move to a more general issue, going back to the last time we dealt with this issue, Mr. Chairman, where I think the public accounts committee recommended that Public Works be the landlord and owner or lessor of all property and that it lease it out to the various departments. We are doing accrual accounting now, Mr. Marshall, and therefore this concept of charging occupancy space to departments, even if the government owns the building, seems to be a very rational thing for this particular committee. Why isn't it being done?
Why are departments still sitting in cost-free accommodation because you're not charging them for the occupancy of the space because the Government of Canada owns it?
Acting Assistant Deputy Minister, Real Property Branch, Department of Public Works and Government Services
Mr. Chair, I think the question is referring to a user-pay regime, where we would collect money directly from client departments occupying the space.
Acting Assistant Deputy Minister, Real Property Branch, Department of Public Works and Government Services
We do have a de facto user-pay regime in place—we call it a space envelope regime—where we allocate a certain amount of metres to various departments, based on approved growth by Treasury Board.
Should a department wish to exceed that allocation, they have to pay us under what's called the expansion control framework. We work it very diligently every year with the client departments, and they know exactly how much space they should be occupying. We have introduced standards in terms of how much space is allocated to each department. The departments have reacted extremely well to that program, we have increased the utilization rate from 21.4 metres to 20.5 metres per person, and our target is 18 metres. Just that one movement over the past two years has saved taxpayers over $45 million, and we're continuing with that program of using space standards to manage the amount of occupied space.
Very quickly, if people were on a full user-pay regime, we'd have competition among 101 departments, primarily in Ottawa, which would drive rates up through the ceiling. In their last quarterly report, Colliers noted that the actions of Public Works and Government Services in leasing transactions are actually driving prices down in the city of Ottawa, which has the tightest central business district in North America.
We're certainly achieving the results under the current regime we have in place and under the improvements to the regime we put forward.
Liberal
The Chair Liberal Shawn Murphy
Thank you very much, Mr. Williams and Mr. McGrath.
Mr. Christopherson, please.
NDP
David Christopherson NDP Hamilton Centre, ON
Thank you, Mr. Chair. Thank you all for your presentations.
I'd like to move a specific item—and I'm sure it won't come as a surprise to anybody. Exhibit 7.4 speaks to the new federal building in the heart of Hamilton, in the heart of my riding. The auditor's report says that the investment analysis report—the document Mr. Williams was able to establish and that gets so much work and attention—did a ranking of what should happen in this case. According to the Auditor General, apparently it took the most expensive option. Why? Why was the most expensive option chosen there, at a cost of $13 million?
Deputy Minister, Department of Public Works and Government Services
I'm going to let Mr. McGrath answer specifically on this property, but I think the Auditor General's report citing these examples is really pointing to decisions made based potentially on the availability of funds, whether you buy or lease, and certain decisions are made, I think the report points out, sometimes sub-optimally on a specific transaction. On the other hand, we have to consider what the government's own priorities are.