Evidence of meeting #19 for Public Accounts in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was bonaventure.
A recording is available from Parliament.
11:10 a.m.
Liberal
Borys Wrzesnewskyj Liberal Etobicoke Centre, ON
Okay. Thank you.
I'd now like to go to Mr. Polachek.
That was quite a drop in the rental rate. It went from $430.80 to $308. What happened? We're looking at a significant drop of 25% after tendering.
11:15 a.m.
As an Individual
I think two principal things happened. One was the tenant improvement allowance and base building works that were initially required as part of the tender were effectively eliminated or significantly reduced as part of the new transaction.
You will recall that in the tender we were treated like all other competing buildings, which meant that we had to demolish everything that existed and rebuild the premises according to the new government standards. In the proposed negotiated transaction, which ultimately was concluded, that effectively was eliminated, so we were able to lease on an almost nil cost basis. That saving was passed on in reduced rent.
11:15 a.m.
Liberal
11:15 a.m.
Bloc
Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC
Thank you, Mr. Chair.
Welcome, Mr. Polachek, Ms. Cochrane.
Ms. Cochrane, you stated earlier that the signing of the lease for Place Victoria was, in your opinion, part of a routine call for tenders. While you occupied the premises as Deputy Minister, was it routine practice for a client, such as a department or agency, to seek to move and to set criteria for that move, stating that it needed additional space, and for a letter to be sent by the minister responsible for that agency stating that their current premises suited their needs perfectly? Was this routinely done?
11:15 a.m.
As an Individual
Mr. Chair, there were no situations that were exactly the same as the situation that we experienced in Quebec, but there were other instances. It was not unusual for client requirements to change during the process of either extending leases or acquiring new space, but we did not have a situation like this one, in which we were able to complete the tender process, sign the lease, and then resolve the situation so that the client could remain in the old space in a manner that was still in the public interest.
The other situations that I can recall resulted in the tender process being completed and the clients moving, notwithstanding the desires of senior officials or ministers to change their minds later on, at the very end of the process.
11:15 a.m.
Bloc
Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC
Therefore, you agree with me that this was not necessarily a common occurrence. As you have just said, this was a completely new situation. It did not occur frequently, it was really unusual.
In the notes, it is stated that on April 2, 2002, senior officials at Public Works in Montreal approved the lease for Place Bonaventure. On April 4, the Assistant Deputy Minister, Ms. Beal, who reports to you, instructed the director general of the department for Quebec to take the steps required to renew the lease for Place Victoria.
What happened between April 2 and April 4 to cause these people to change their mind?
Senior officials with Public Works and Government Services Canada in Montreal approved the lease for the Place Bonaventure offices, but two days later, an assistant deputy minister instructed the regional director general to renew the lease for Place Victoria. That is completely contradictory. Did something happen on April 3?
11:15 a.m.
As an Individual
First, let me clarify this, Mr. Chair.
When I referred to the transaction being a routine transaction, I was talking about the period starting in December 2000, up to the period of April 2002. Up until that point it was a routine tender call for a lease.
What happened in April 2002 was that the assistant deputy minister for real property services had received a heads-up.
I'm going from the record here, because I don't have a personal recollection of this.
The record demonstrates that she received a heads-up and that the minister responsible for economic development in Quebec was concerned about the move and wanted the department to explore other alternatives. There was no direction given to renew the lease at Place Victoria, but rather to explore whether other options might be possible to allow the department to stay in Place Victoria. The assistant deputy minister's direction to the region at that time was simply to begin to explore what options might be available.
11:20 a.m.
Bloc
Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC
In fact, the minister responsible for the Economic Development Agency of Canada for the regions of Quebec at the time, Mr. Claude Drouin, appeared before the committee. He told us that at the end of the day, it was not the agency that decided, but rather Public Works and Government Services Canada. Is that how things work?
11:20 a.m.
Bloc
Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC
Officials from PWGSC provided you with an analysis that recommended a fifth option to the department. This study proposed five different options, the first being to stay in Place Victoria, but this option was considered the most costly. A fifth option recommended moving the offices to Place Bonaventure.
Why did you not opt for this solution, if the decision was up to PWGSC?
11:20 a.m.
As an Individual
There were a number of reasons, one of which was that the space requirements given to us by the client at the beginning of the process of tender had changed. They had decided not to co-locate their Montreal office with the headquarters in Place Victoria; therefore, the total amount of space they required was less.
The minister's letter to the Minister of Public Works, I believe, also demonstrated his desire to be in a building that he considered to be more commensurate with the role of economic development in Quebec, a building that was more prestigious. At that time, the department had a role or responsibility to consider the operational requirements of the client, even though they had changed. That was what resulted in the process of examining the other options.
11:20 a.m.
Bloc
Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC
If you are saying that, that means that it was not PWGSC that decided, after all. It was the minister who, through his intervention, decided that the requirements had changed and that he would be satisfied with Place Victoria. So then, it was not PWGSC that decided. You made this decision because a minister expressed a wish that was the contrary to what had been said earlier. That's what I understand.
11:20 a.m.
As an Individual
Well, that's partly true.
It is always up to the client to determine the operational requirements. Public Works does not determine the operational requirements to meet the client's needs. Public Works then assesses what space would be appropriate to meet those needs. In this case, although it was very late in the day—and I agree this was highly unusual—the client had indicated that their operational requirements were different from what they had been at the outset of the tender process.
When the options were reviewed, had we not been able to fill that space in Place Bonaventure with other tenants—we believed at the time that we would be able to backfill that space with other tenants—we would have required them to move, because the loss to the crown, as foreseen based upon the assumptions available to us at that time, would have been so significant that it would not have been in the public interest to leave them at Place Victoria. That's what the minister would have told his colleague, the minister responsible for economic development in Quebec. But as things turned out, our analysis led us to believe that we could meet the client's operational requirements, allow them to stay in Place Victoria if they were willing to make certain concessions on the fit-up, and at the same time fill the space that we had leased in Place Bonaventure with other needs that were being expressed by other clients in the Quebec region at the time.
11:20 a.m.
Conservative
John Williams Conservative Edmonton—St. Albert, AB
Mr. Chair, may I interject and ask for a clarification here?
11:20 a.m.
Conservative
John Williams Conservative Edmonton—St. Albert, AB
Did you say, Madam Cochrane, that you asked the landlord of Place Victoria to lease the space in Place Bonaventure to mitigate the cost? Is that what you said?
March 4th, 2008 / 11:20 a.m.
Conservative
Pierre Poilievre Conservative Nepean—Carleton, ON
I know there have been a lot of varying numbers thrown around and various justifications used to explain away this very unusual course of events.
There are two things we must keep in mind. One, Place Bonaventure finished first and Place Victoria finished fourth in a competitive bid. Two, the Auditor General says that the way this transaction was carried out led to the waste of $4.6 million. Those are the two hard facts that have led us to where we are today.
So I open with some questions for you, Mr. Polachek. Can you please provide the committee with a list of all corporations, partnerships, or individuals who held an ownership position in 800 Place Victoria between January 2001 and August 2004?
11:25 a.m.
Conservative
