Evidence of meeting #20 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 space.
A recording is available from Parliament.
Liberal
Charles Hubbard Liberal Miramichi, NB
Claude Drouin was the minister, or the secretary of state, responsible for the CED. We had on Tuesday discussions of a letter he had written. Did he make any recommendations to you in terms of your decision to maintain two buildings in Montreal at the same time?
Liberal
Ralph Goodale Liberal Wascana, SK
His inquiry was contained in the letter he had written to my predecessor, Mr. Boudria. To the best of my recollection, I first became aware of that when it was sent up to me with the deputy minister's recommendation. The two were attached together, but that was it. I don't recall any other representation by Mr. Drouin. He was secretary of state for the affected department and made the request, as I read the letter, to stay put in the existing premises where the department had been for the previous 30 years, if that were possible; the department did the analysis and concluded it was possible from both an economic and obeying-the-rules point of view.
Liberal
Charles Hubbard Liberal Miramichi, NB
This morning some members tried to paint Mr. Gagliano as being someone with almost a vested interest in this project. Mr. Gagliano stated this morning that by the time the process had gone towards the minister's office, he in fact was in Denmark. It wouldn't be unusual for a minister leaving a department to leave notes or concerns or major projects they were working on. Did Mr. Gagliano send you or forward you any information or any requests in terms of the contracting in Montreal?
Liberal
Ralph Goodale Liberal Wascana, SK
No, sir. Remember that Mr. Gagliano was in fact two ministers before me. He was the minister up until the middle of January 2002, then it was Mr. Boudria from January until May 26, and then I took over on May 26.
Liberal
Charles Hubbard Liberal Miramichi, NB
Yes, I recall that. So neither Mr. Gagliano nor Mr. Boudria drew any type of information to you on this file.
Liberal
Ralph Goodale Liberal Wascana, SK
There were no carry-forward recommendations. It was entirely in the hands of the officials, and the officials are the ones who presented it to me.
Liberal
Charles Hubbard Liberal Miramichi, NB
With your deputy, were you confident in the recommendations she was bringing to you as minister? Were there any concerns that she was not acting with due diligence, in the best interests of the crown?
Liberal
Ralph Goodale Liberal Wascana, SK
No. I thought in this portfolio and in fact in all the portfolios in which I had the honour to serve that I was very well served by competent and professional and honourable people as deputy ministers as well as others in the broad scope of the public service.
Liberal
Charles Hubbard Liberal Miramichi, NB
So when the Auditor General's report came out, to the public it sounded like a lot of money to have paid $4 million to lease a property that you weren't utilizing, and for the Government of Canada, of course, it didn't look good. When you reflect on that, you mentioned in your beginning statements that there is justification in that we did get a good deal. Rather than losing money in the short run, maybe in the long run the crown was just as well off by what the deputy minister had recommended.
Liberal
Ralph Goodale Liberal Wascana, SK
The two deputies who appeared before the committee, Mr. Marshall and Mrs. Cochrane, went through the factors that influenced their assessment of the economic value of Place Victoria. There were several factors.
If you didn't have to move, that would save money. If you didn't have to fit up the space or bring in new IT systems, that would save money. If your space requirements were lower than originally anticipated, that would save money. But most important--the way I read the testimony given to this committee--information may not have been in the hands of the Auditor General in a timely way that the lease rate changed dramatically. It was originally contemplated to be $430, and after negotiations it turned out to be $308. That's about a 28% difference. It obviously led them to the conclusion that the Place Victoria space was good economic value.
The other side of the equation was the anticipation of how quickly the new space in Place Bonaventure could be leased to other government offices. That's where the expectations of the officials were not fulfilled.
Liberal
The Chair Liberal Shawn Murphy
Thank you very much, Mr. Hubbard.
Thank you, Mr. Goodale.
Mr. Laforest, you have eight minutes.
Bloc
Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC
Thank you, Mr. Chairman.
Mr. Goodale, you are saying, in a way, that this decision is justified by the fact that the needs for office space were finally—
Liberal
Ralph Goodale Liberal Wascana, SK
One moment please, Mr. Laforest. The interpretation is not working.
Bloc
Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC
You said that the decision to sign two leases for the same agency, at two different locations, was justified by the fact that the needs for office space had changed, that they were ultimately reduced and that the price had been changed. This is more or less what you said:
At the department, they gave me a recommendation because, in a certain way, the initial needs that had been envisaged for Canada Economic Development, in terms of office space, because we were expecting more employees, these initial needs no longer existed and moreover, the cost of rent, that had been stipulated in the tender, had been decreased.
Do you think that it is normal for a department or an agency to make a forecast for expansion based on 25 extra employees, namely the new positions that will be created, at the outset of the tendering process whereas, at the end of the same process, there is no longer any need for extra space?
Did this occur frequently while you held that position?
Liberal
Ralph Goodale Liberal Wascana, SK
It certainly wouldn't be a frequent experience nor totally isolated. From the evidence contained in the minutes of previous meetings, it appears that the biggest single difference in the plans for CEDQ was whether or not the regional office in Montreal would be consolidated with the headquarters office. If that were to happen, a bigger space would be required.
At one point--as I understand from the record--the plan was that consolidation would bring in those extra people. Then the plan changed and the decision was taken to have the regional office in the east end of Montreal, where it was perhaps closer to the clientele it would serve in the public of Quebec.
Bloc
Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC
Is it not somewhat amateurish to be playing around with hypotheses of this kind so that ultimately you sign up for two different places without any prior certainty of renting that space? You might have presumed that you would subsequently rent space at Place Bonaventure, but you were not certain of that.
Therefore, the department took a chance and rented space in a second location. From the outset, we have tried to find out what exactly happened. My hypothesis is that the people working at Canada Economic Development in Place Victoria did not feel like moving. In the Department of Public Works, the regulations oblige the department to put out tenders, so that if you formulate the hypothesis whereby you need extra space, you can subsequently say that you no longer need that and you negotiate with Place Victoria.
That is exactly what happened. You went from $430 per square metre or square foot to $308 per square foot. After concluding the contract, you negotiated by mutual agreement, although Place Victoria had not won the competition. This is not a movie scenario, but I feel that they tried to do things in that way and that it worked for them.
Could anything like that have happened?
Liberal
Ralph Goodale Liberal Wascana, SK
I'm really in no position to comment on the thought processes within CEDQ--what led them in a certain direction at one point, and then to change direction.
In the testimony from Mr. Drouin, he indicated that the new premises in Place Bonaventure were a concern to him because of the concrete nature of the building, the train track underneath, and the concern among employees about the move. He also wasn't anxious to absorb any of the incremental costs associated with the move. He wanted to keep that in the budget of his department to assist enterprise in Quebec.
On what prompted the department to change its mind, that would be a matter for CDEC to respond to. As Mr. Marshall explained, the answer from the Department of Public Works to CDEC would have been that the move must go forward into the new space unless the department could satisfy itself that the economics of the matter brought value to the crown. Having done an analysis in April-May 2002, they concluded that value to the crown could be provided and at the same time meet the concerns that had been raised by Mr. Drouin. It was the function of the officials in Public Works to do that economic assessment to see if they could accomplish both objectives.
Bloc
Jean-Yves Laforest Bloc Saint-Maurice—Champlain, QC
Ms. Fraser said that this redundant lease had cost the government $4.5 million. Mr. Marshall, who was your deputy minister at the time, challenged the Auditor General's figures and said that they had avoided moving, which would have cost about $1 million and that they were able to rent space in Place Bonaventure. Nonetheless, the figures he showed us included substantial expenses; the signing of two leases cost extra money. Mr. Marshall said that this was not $4.5 million extra dollars but rather $1 or $2 million extra dollars.
You said that you had been convinced that this was cost-effective for the government, but nonetheless, $2 million extra dollars were spent. Do you think that paying more money is cost-effective?
Liberal
Ralph Goodale Liberal Wascana, SK
The analysis the department arrived at was that given the factors I've mentioned, especially the lower rent, the Place Victoria space gave the crown a demonstrable economic advantage.
With respect to Place Bonaventure, their anticipation was that with other federal demand for office space in the Montreal area, the newer space for which the lease had already been signed could readily be filled. It was that expectation on the part of the officials that was not satisfied as quickly as they had anticipated. That's where, as I understand it, the cost factor comes in. Mr. Marshall would peg that at $2.1 million and not $4.6 million.
Liberal
The Chair Liberal Shawn Murphy
Thank you, Mr. Goodale.
Merci beaucoup, Monsieur Laforest.
Mr. Sweet, for up to eight minutes.
Conservative
David Sweet Conservative Ancaster—Dundas—Flamborough—Westdale, ON
Thank you, Mr. Chair.
Mr. Goodale, I want to run through a couple of details with you.
You mentioned in your opening remarks that you felt this process was fair. After explaining the circumstances to Mr. Gagliano, or after him obviously briefing himself on this, we have just learned that this was not a normal process. In fact, he said he could never recall a tender going out and the whole process being trashed and then a lease being signed subsequent to that.
Janice Cochrane, whom we heard testify before the committee, totally changed her position in two e-mails. In one e-mail she said:
The financial analysis indicated that the recommended solution is more economical than renewal through direct negotiations.
In this context we had nothing to justify submitting to you a request for approval to negotiate directly with the owner of 800 Place Victoria.
Conservative
David Sweet Conservative Ancaster—Dundas—Flamborough—Westdale, ON
July 31, 2001.
Subsequently, she actually advised that in fact you can negotiate directly. By the way, that was subsequent to Mr. Drouin's letter, which she claimed was simply asking for an inquiry, when it's a direct request to negotiate with 800 Place Victoria.
Then we have one of her employees, Mario Arès, who stated in an e-mail of May 3, 2002, that:
It seems clear enough that the insistence on staying at Place Victoria in this case serves interests other than the sound management of public funds. I cannot agree to cover, in an administrative manner, a decision that is difficult to justify financially, because it is costly (the client, CED, had agreed to move to Place Bonaventure, or as a last resort, we could have signed a lease with the second-lowest bidder [CED agreed], which would have been more beneficial to the Crown).
By the way, this is not the first time Mr. Arès had something very direct to say. On July 5, he said in an e-mail that he was very concerned that the department wouldn't release a hold they had on the whole process, as well—