Public Accounts Committee on June 8th, 2006

[Blair James, Executive Director, Assets and Acquired Services Directorate, Government Operations Sector, Treasury Board of Canada Secretariat]

Mr. Chair, I think you've hit on an important issue about the government's appropriations and how they are provided on an annual basis. As noted in the report, the Treasury Board has undertaken a series of pilot projects with departments focused on capital expenditures, because of the problems the government runs into at the end of the fiscal year, whereby if money is not spent, it lapses.

What we have done through the Treasury Board is we've provided departments with assurances that their capital money only--this is the money that is brought to bear when they make these large, expensive decisions--will be allowed to be reinstated in the following fiscal year. That way, if departments run into unexpected delays with the purchase of a building or the renovation of a building, they're not penalized and left at the end of the fiscal year with huge amounts of money that they have no way to get back in the next fiscal year. We've undertaken that with a number of departments. We expect that will give us lessons that we think can apply to all departments.

[The Chair, Liberal, Shawn Murphy]

I think the committee would benefit from a full explanation of that and where that issue is going.

[Blair James]

Okay.

[The Chair, Liberal, Shawn Murphy]

Mr. Wrzesnewskyj, you have five minutes.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Thank you.

Public Works is informed of needs for space, and based on those needs that government departments request, you go out and try to find the best possible deal. Now in a couple of days it appears that this JDS contract may or may not be signed, and it will be signed by your political master, the minister, is that correct?

[David Marshall]

Yes, it would be approved by the ministers of the Treasury Board and then executed by our minister.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

So it'll be a decision by the minister. It's a political decision. The politician involved will be the one signing off on this particular deal.

[David Marshall]

Yes. That is who is accountable to the department, yes.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Thank you.

A couple of years ago, when Defence was looking at this property, it decided that, and I have a quote here, “it wouldn't look good to spend millions on a new headquarters rather than on the troops”. So they made a political decision. Now if they had unlimited budgets, perhaps they would have decided to do both, spend the money on troops as well as on this new headquarters. But they made a decision a couple of years ago that it wouldn't look good, so they made a political decision, and they seemed to be fine in the facilities they continued to have.

At the time--it's not that long ago--you said this is a unique facility. It didn't appear that any other department had the need for this very unique facility. Let's assume that they had actually taken that space. What would the RCMP be doing today? The space wouldn't have been available. We have this amazing coming together of circumstances, a unique facility and a unique need that find each other, and unsolicited proposals by Minto came into the department. At the same time we read that the member of Parliament for Nepean--Carleton, Pierre Poilievre, has been lobbying very hard for this to take place.

So how is it that recently the need wasn't there? The RCMP wasn't interested when Defence decided politically it would not be a good thing to do, yet things have changed and there's a political decision now to, within a couple of days perhaps, sign off on this?.

[David Marshall]

Perhaps I can help with a little more information on the various needs departments have.

As a matter of fact, the RCMP, Defence, and others have talked to us over a long period of time about their needs. There's a very long cycle of trying to locate appropriate space, trying to locate appropriate funding, and then trying to make the needs meet what the departments have. We are constantly working with departments to either get rid of space or add space.

In this case, the RCMP's requirement didn't just show up; it has been on the radar screen for quite a long time. For example, had the Department of National Defence taken up the space that we are now earmarking for the RCMP, we would have had to find other space for the RCMP or renew what they had in situ, which would have been a much more expensive option than the one we have now.

That's still an option, and ministers of the board might look at it and instruct us to do that, but it would be a more expensive option.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Mr. McGrath had stated that Public Works' involvement in the marketplace here is actually depressing the market--and I do have qualms about the government getting into markets and depressing markets artificially, but we'll leave that for a different discussion. How does that match up with some of the numbers around this? You were offering $65 million. It was actually bought for $30 million when the government stepped away from the table. What that seems to tell me is that your involvement in the marketplace actually brings up the value of office space here in the Ottawa area.

[David Marshall]

Perhaps I can add one thing. I think what Mr. McGrath was referring to was the fact that we are negotiating much more aggressively on leases, and taking longer-term leases is reducing the average cost of leases in this market, which is good for the taxpayer.

On the issue of the value that finally was acquired in the JDS situation, you have to remember, first of all, that at the point that we were looking at it--again, it's a unique property--the price that we were able to negotiate, because there were other interested parties, was what we arrived at. You've quoted it at around $60 million, $62 million, or $65 million.

When we stepped away, of course, the property value dropped, because who is going to take such a big property? So Minto--

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

So you're in fact driving prices up, not down.

[David Marshall]

Well, you have to look at it long term. We're in this market for a long time, and had we been able to acquire it at a certain price that would have been good value.... You know, markets change, so we have to go with it.

One thing I should point out--

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Would you just agree, though--

[The Chair, Liberal, Shawn Murphy]

Your time is up.

Do you have anything further to add?

[David Marshall]

The thing is that as a government agency we can't speculate in real estate. We can't bank land or say, “Let's acquire greenfield sites and wait for things to happen.” This happens in the private sector. In this case, a private sector developer took a risk, and so on, but overall, over a long period of time, we try to make sure good value is obtained.

[The Chair, Liberal, Shawn Murphy]

We're going to move now to Mr. Lake for five minutes.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Thank you, Mr. Chair.

You live in a complex world, I can tell, reading this, with all the different departments involved, but some of the suggestions in the report seem to indicate ways that you can help yourself simplify what you're doing in terms of information, in terms of standards. All the information and the most well thought out standards in the world aren't going to help you, though, if you don't use them when the deals are done.

Just returning to the issue of 800 Place Victoria, I have a couple of other questions.

First, who owns 800 Place Victoria?

[Tim McGrath]

At the time we did the transaction, it was a company called Magil Laurentian. Since that time, it has been sold to a Mr. Saputo. I'm sure you've seen the trucks, Saputo foods. His family is now the owner.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Do you know when it was sold?

[Tim McGrath]

Sometime in 2004.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

Mr. Goodale decided to overrule you. I'm new here and I want to get a little bit of clarification in terms of roles. First of all, who has the final authority on that decision?

[David Marshall]

The final authority is the minister's. In this case, Mr. Goodale acted on a recommendation from our staff that this transaction be done the way it was done. So he acted on our advice.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

So it was your advice to actually...? Even though you'd gone through the process and had actually selected a bidder, after the fact you advised him that he should take this property anyway?