Public Accounts Committee on March 4th, 2008

[Gary Polachek]

I went back into the file. I asked our head of leasing to prepare this file for me in advance of this meeting.

We ourselves were notified on or about April 1 that we had not been retained, based on the initial bidding process. We received I guess what I would call a surprise, a pleasantly surprising phone call, a few weeks later from the national manager of lease acquisition processes of PWGSC, who invited our head of leasing to come down to Hull for a meeting to see if we were able to negotiate a transaction. In fact, a meeting was held in Hull.

[David Christopherson, NDP, Hamilton Centre, ON]

I'm out of time. Can I ask one quick question?

Did you or anyone that you know of in your organization have any discussions at all with anyone from the government about this issue, about going back?

[Gary Polachek]

No.

[David Christopherson, NDP, Hamilton Centre, ON]

So you contend that it all happened within government, that there was no external influence whatsoever from any representative of Place Victoria?

[Gary Polachek]

Correct.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you.

Thank you, Chair.

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

On a point of order, Mr. Chairman, can we get the name of this national manager of leasing from Public Works?

[Gary Polachek]

I'll share it with you right now: Pierre Haddad.

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

Pierre Haddad. Thank you.

[The Chair, Liberal, Shawn Murphy]

Mr. Hubbard, you have eight minutes.

[Charles Hubbard, Liberal, Miramichi, NB]

Thank you, Mr. Chair.

As you know, I'm new to the committee and have missed a lot of the evidence and the information to date, but when I hear of buildings and hear of leases and rents, of course it's a very complicated process. A group has had a lease for quite a long period of time, the lease is coming up, there are concerns, maybe, about the quality of the building, and then, of course, they go to Public Works, and Public Works puts out a request, and you get all this back in and decisions have to be made.

I guess the original assumption we have is that the CED always wanted to be in Montreal. It's a regional agency, but for some reason, someone in the crown, probably 20 years ago, decided that the headquarters would be in Montreal. So you're into very expensive office space. Then we find that the Auditor General did an audit on this, and she came up with figures that would indicate that mistakes were made.

But it's not unusual for companies to make mistakes when they're buying things. In fact, most of us as individuals make mistakes. I think I probably get at least a bad deal once a month. I pay too much for something that I could have got at a better price somewhere else. It never happens to John, of course. These Scots are always up on their business.

But, Ms. Cochrane, it can't be the only building that the Government of Canada leases or rents that if you look back and reflect upon it.... I think here in Ottawa, even today, there are quite a number of buildings we don't use that we're paying rent on.

In your experiences as deputy minister, you must have seen other situations where you had to gain a bit and lose a bit. In terms of your time in office, is this the only one that somebody made a mistake about?

[Janice Cochrane]

In fact the department's record with respect to managing vacancy overall is quite low compared to the industry standard. I think it's 1.2% out of the total portfolio, versus 5% that is the industry standard.

So, no, it wouldn't be the only time. In fact, in this case there were, I think, valid assumptions made that the space would be able to be filled much more quickly than it was. There was demand in Montreal, and that was one of the factors that led to the advice to the minister that he could accede to the wishes of his colleague in leaving the agency in Place Victoria. Other departments and agencies had determined that they would be willing to move into Place Bonaventure quite quickly, and it didn't happen, for various reasons.

[Charles Hubbard, Liberal, Miramichi, NB]

This business of moving--when you move, you change everything, from your stationery to your office equipment. You have to do all this, and that's a big part of the cost that somebody has to bear. When we look at the Auditor General's report, we see $2 million or $4 million, but when we look at the the overall good and the overall problem, have they all been costed in when we're listening to this today?

For example, with advertising, you have to tell all your clients that you've moved from here to there. There's a cost there. A lot of offices have to be rearranged, and there's a cost of hiring moving companies to move everything from one place to another. There's downtime for the employees.

When you think of the long-term costs of this lease, did we lose that much in the short run, in the long term? Are you comfortable with the fact that we lost somewhere between $2 million and $4 million--or really, maybe we gained? Maybe Gary can tell us. Maybe we gained money, because it's a lease for eight or ten years. Did the Government of Canada really lose the money that the Auditor General or somebody in her department says it did? Do you think that's a fair assessment of the overall benefits or losses to the Government of Canada?

[Janice Cochrane]

The only figure that I know with some certainty the department stands behind is the $2.1 million in unproductive rent. That's just the rent that was paid out to Place Bonaventure for empty space, essentially, but I'm not aware as to whether other costs were factored in.

You're absolutely right: including no fit-up costs in Place Victoria was a gain for the crown in a sense as well. I'm not certain whether anybody has been able to quantify the lost productivity in terms of staff when you do move. There are usually periods of time, although I think public works has become much better over time at staging moves so that the amount of lost productive time is mitigated.

The short answer is that I don't know if there's been a quantification, but I think it's fair to say that the net benefit, had other tenants moved into that space as quickly as we had thought they would in 2002, would have probably been in favour of the crown.

[Charles Hubbard, Liberal, Miramichi, NB]

In terms of the long-term costs of the lease, if you compare what happened at the two places, are we better off or worse off as a result? Now, you have to figure out a long lease in each place. You're going to have an opposite side of the account....

Everyone makes mistakes. There are a few perfect people in this world, but whether you're a deputy minister or a member of Parliament or some poor citizen buying a new TV, you make mistakes. It costs somebody money. But it's difficult to see, Mr. Chair, why we're making such a big issue over somebody's mistake.

Brian is surprised, because he's never made a mistake.

[Brian Fitzpatrick, Conservative, Prince Albert, SK]

“What's a couple of million?”--is that what you're saying, Charlie?

[Charles Hubbard, Liberal, Miramichi, NB]

I suppose we really don't know the long-term implications. We're looking at it in terms of one report by the Auditor General, but whether we benefited or lost is for us to assume before we write our report, Mr. Chair.

Thank you.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Is there time left?

[The Chair, Liberal, Shawn Murphy]

There are two minutes left.

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

Just following on Mr. Hubbard's questioning, I think we're getting at two issues. One is whether there was a cost to the taxpayers. The Auditor General said there was, and that it was $4.6 million, but we know that it was based on incorrect square footage, or square meterage, and on an incorrect assumption about the cost per square meter. You stated earlier that the Auditor General's numbers are wrong on that aspect.

What we need to do is, first, get at whether there was a cost to taxpayers as a result of this process. Second, the process wasn't the usual process, so was there some sort of nefarious intent, or were there extenuating circumstances? Those are the two questions.

I'll come back to the first one, the question of whether there was a cost. When you go through the calculations, I think it's very important that we get an actual number--I know you can't nail it down to the penny--on the cost of moving. Ms. Cochrane, could you provide this committee with a number? The previous number we heard was between $500,000 and $1 million. Could you provide us with a number for that?

There was also a reference made by department officials that the move would entail a one-week loss of productivity. I understand there were 300 employees. Could you quantify the cost of losing one week of productivity from those 300 employees, and could you give us a number more accurate than between $500,000 and $1 million? That would be tremendously helpful.

[Janice Cochrane]

Okay.

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

On a point of order, Mr. Chairman, I don't think it's appropriate to ask an individual to make that kind of calculation, especially when they have no access to actual numbers. The question would be more appropriately directed to the department.

[The Chair, Liberal, Shawn Murphy]

As Mr. Hubbard said, no one is perfect. I was talking to the analyst on another matter and I should have been listening more closely.

What is the gist of the question?

[Borys Wrzesnewskyj, Liberal, Etobicoke Centre, ON]

There are two numbers we need to have a better comprehension of this whole issue of whether or not taxpayers benefited or lost as a result of this. One, what was the cost of moving? The previous sum for this was stated as half a million dollars to a million. Two, it's been noted that one week of productivity would be lost by the 300 employees. What would be the cost of that one week in lost productivity?

[The Chair, Liberal, Shawn Murphy]

You have to bear in mind that Ms. Cochrane is appearing here as an individual. She is a retired deputy minister.