Public Accounts Committee on March 6th, 2008

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

July 5, 2001.

He stated:

More than a month ago, we informed the Minister's office of our accommodation strategy for CED, our client. On June 8, after a meeting with J. M. Bard, we were told to put the CED file on hold. Since then, there have been no developments or questions, and we are still on hold.

Subsequently, we had Mr. Gladu saying, about Mr. Drouin's letter:

After being made aware of Mr. Drouin's letter, I met him at a regular meeting. I told him that, in my opinion, it was a mistake to have sent that letter, because this was an administrative matter and he simply should not have got involved.

So these were the kinds of things that were racking up during this whole process, yet subsequently, you signed for the lease.

So with all of these facts known, do you still think the process was fair? Do you think it was fair to the other two bidders in this process, who were given no consideration at all and were in fact ahead of Place Victoria? And do you not think you should have spoken to Janice Cochrane about this issue before you signed off, because in her testimony she said she had no conversations with you?

[Ralph Goodale, Liberal, Wascana, SK]

The first e-mails you were referring to, except the one from Mr. Arès, were from 2001. I would obviously have no knowledge or recollection of that period of time at all.

Regarding the one e-mail you referred to from Mr. Arès dated May 3, as I believe he explained to the committee—or, at least, that's what his testimony says—his view as of May 3, 2002, was based upon the assumption that the same square footage and the same lease rate were applicable, that is, the $430 per square metres and the larger space. What changed after that memo—and I think Mr. Arès explained this in his testimony—was that the size of the lease and the cost of the rent went down. That resulted in a situation where the department was, in effect, renewing an existing lease on terms that were more economical or advantageous and which clearly fell within the rules of Public Works and Treasury Board at that time.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

You did not really answer my question regarding the other two bidders and whether that was fair, but--

[Ralph Goodale, Liberal, Wascana, SK]

Just briefly, Mr. Sweet, I won't take long on this, but--

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

--for the process to be fair, Mr. Goodale, it should also appear to be fair. The number of circumstances I explained to you and the fact that Ms. Cochrane didn't have any conversation with you and should have briefed you on all of the complexities of this is really concerning. I think the public view of this would be one of grave concern as well.

[Ralph Goodale, Liberal, Wascana, SK]

Well, I think the one problem in terms of the economics of the transaction is that the anticipated lease-up of the Bonaventure space did not occur as rapidly as the professionals in the Department of Public Works had anticipated.

Generally speaking, their track record on these matters is a good one and in fact better than the private sector. As I think both Mr. Marshall and Mrs. Cochrane explained, the general vacancy rate in the private sector is in the neighbourhood of 5%, whereas the vacancy rate for space held by the Department of Public Works is more like 1.2%. So generally they do pretty well.

I think both Ms. Cochrane and Mr. Marshall indicated to the committee that contrary to their best economic analysis and professional advice in the summer of 2002, it took longer than they had expected to fill that extra space at Place Bonaventure.

At Place Victoria the deal was actually an advantageous one for the crown, because the space requirement was smaller, the rent was cheaper, there was no move, and there was no fit-up cost.

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

Again, Mr. Goodale, I appreciate the fact that you wanted to give me some information on Place Bonaventure, but I was asking you about the nature of the fairness of the process; the nature of the other two bidders that were paid no consideration on this; the optics of this with all of this disparity in communication with holds, etc.; and the fact that quite plainly, Mr. Gagliano, with five years experience in that position, said he had never seen anything like this.

So this wasn't common; to go through that process wasn't something that was regularly done, and we have the graphic here of the process. I have no idea of the millions of dollars it costs to have PWGSC actually walk through to make sure that a fair tender happens. But after the whole process happened, it was then shelved. That's the concern, and up until now it has not been addressed.

All that has happened is that opposition members have tried to mitigate the damages by saying the Auditor General was incorrect and in fact it was less. She stands by her words as early as 2007.

[Ralph Goodale, Liberal, Wascana, SK]

Based on the information that was available to her at the time, Mr. Sweet. I think it's important to bear in mind her own qualification.

I want to make two points very quickly, Mr. Chairman--

[David Sweet, Conservative, Ancaster—Dundas—Flamborough—Westdale, ON]

She stood by those words in 2007, Mr. Goodale.

[Ralph Goodale, Liberal, Wascana, SK]

Based on the information that was available to her at the time she did her audit. That's the information that's included in the transcripts that I looked through in the last number of days.

Mr. Sweet, I also want to make one other point. On the issue of holds, I think you would have to acknowledge there was no hold on any process imposed by me. There's nothing in the record anywhere that suggests that.

Secondly, with respect to the process, at least for a portion of it, I'm told, looking at the record, there was a fairness monitor in place examining how things were unfolding. After the fact, while unhappy bidders are normally very quick to express their unhappiness if they don't think a process was conducted properly, in this case, to the best of my knowledge, no complaint was received.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Sweet.

Thank you, Mr. Goodale.

Mr. Christopherson, up to eight minutes, please.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you, Mr. Chair, and thank you very much, Mr. Goodale, for appearing today.

I'm sure you can appreciate why we're continuing to pursue this. It's that nugget of a question that remains about why would a government knowingly waste so much money, and we have not yet found anyone who has said they made the decision and here's exactly why. So in that absence we're continuing to work at this. In the interest of fairness, I think it should be said that your reputation, particularly among parliamentarians, is one of the highest in the House. To me that's a pretty big standard. It's one thing to be popular with the public, but when you can earn the respect of colleagues.... And you were put in this position for that reason, in large part because there were problems and they wanted you to go in there.

Here's my concern. You're an experienced minister, you're an honest man, and you're looking at this and the thing is a go for umpteen million dollars. Your deputy is briefing you--and I'm keeping in mind that you're new--and here you're being told this whole package has come along, and a mere six weeks earlier the secretary of state sent a letter that Mr. Sweet has referred to. Let me also bring in that on March 21, the same meeting Mr. Sweet was referring to in response to a question from Mr. Rodriguez...all that ended with the decision to move. Who made the decision to move? Mr. Gladu? Initially Public Works took responsibility for that decision. Following a letter from Mr. Drouin, which you have read and heard about, Public Works began negotiations with owners of Place Victoria.

So you're an experienced minister, a veteran, and you get there and you find out this whole deal is ready to go, but a few weeks previous a rookie minister sent one letter and suddenly the whole deal is upside down. It would seem to me that a man like you would have a lot of questions of that deputy, both because you're new to the file and because alarm bells would be going off. How are you going to defend someday, sitting right where you are, having made this decision? Help me understand why you didn't just say to a new, young rookie minister, who wants to upset a multi-million dollar deal where tens, if not hundreds of thousands of dollars have been spent, not to mention the time to get the deal in place.... This new minister comes along and says he's not happy with everything and would like it all turned upside down.

It would seem to me, sir, that your reaction behind closed doors would be to turn to your colleague and ask if he were nuts, absolutely crazy. I'm surprised you would even give him the time of day, for the simple reason that if there's not something shifty going on here, there is something definitely wrong that this kind of decision can be taken. You refuse to say there's anything problematic, sir. You want to leave us with the impression, as does your colleague, that everything was just tickety-boo, and if we have any questions they're just a couple of little wrinkles and you can answer them. But when you add it all up, this still stinks.

[Ralph Goodale, Liberal, Wascana, SK]

Mr. Christopherson, I've looked at it. The advice from the department to me at that time was very straightforward and very clear. In response to my two broad precepts, did this meet the test of the rules, yes, and did it meet the test of good value for money.... On the Place Victoria side, I think the answer to that is obviously yes because of the lease rate dropping and the other factors we've referred to. The part that didn't come through as expected was the lease of the space in Bonaventure. That's where both Mr. Marshall and Mrs. Cochrane indicated their expectations were not fulfilled.

[David Christopherson, NDP, Hamilton Centre, ON]

Sir, after the contract was signed, why wouldn't you as the minister say to wait a minute because either something is going on that shouldn't be or somebody screwed up? How do we get to the point where six weeks before...?

Not only that, let me put this before you. Please understand we're trying to get to the bottom of this; it's not persecution.

[Ralph Goodale, Liberal, Wascana, SK]

Sure, I appreciate that.

[David Christopherson, NDP, Hamilton Centre, ON]

This is a memo, an e-mail--

[Ralph Goodale, Liberal, Wascana, SK]

Sometimes I appreciate that; sometimes it's a thin line.

[David Christopherson, NDP, Hamilton Centre, ON]

I appreciate that, and I'm trying to stay clear of that demarcation.

There is an e-mail from Rachael Morneau—we've had that name before, if it's the same person, to be fair—and Carole Beal. This is April 2, 2002. It reads:

URGENT

As per our conversation of last week, André Gladu of “DEC” [...]

--the deputy--

[...] has confirmed to me, on Thursday, March 28, his agreement to move to Place Bonaventure. He has advised me that this has been cleared up with Mr. Drouin, Secretary of State for DEC.

Our Minister's office, as I understand it, has not given us the OK to proceed. The offer from the lowest bidder expires today [...] .

And then they go on to put an extension in. So the minister's office, up until that point--your predecessor--was deeply engaged in this whole process, and this is another go.

Then we get the letter from Mr. Drouin out of the clear blue, and the best I ever heard him say was that staff were upset. It would seem to me if that is such a huge criterion, and I wish it was taken into account more often, you would have done it at the front end, not at the rear end. Certainly, people complaining six weeks after a multi-million dollar contract is signed, in the normal world, is not going to turn things upside down.

I am still having trouble understanding why you wouldn't ask more questions and be concerned--red alarms going off. This was not a normal process. A junior minister has upset a public tender process and you okayed it. You gave it the sanction of your signature.

[Ralph Goodale, Liberal, Wascana, SK]

There are three things, Mr. Christopherson.

First of all, in your opening sentence you talked about knowingly wasting money. I don't think there is anything in the record that shows that any waste of money, if there was some here, was deliberate or conscious or some kind of a premeditated scheme. In fact, in renegotiating the rent from $430 million down to $308 million, the real property division of Public Works made a very substantial saving. They also, as I understand it, applied their very best professional judgment to whether or not they could satisfy the request from the Secretary of State and at the same time successfully lease the Place Bonaventure space. They concluded that it was possible to do both.

[David Christopherson, NDP, Hamilton Centre, ON]

I appreciate that. What I'm trying to get at, sir, is why you even allowed it to go that far. Why didn't you just say, “Look, this deal is signed, and some junior minister is not happy with something”? That is not about to upset an entire public tendering process that's already signed. Your predecessor's office had extended the deadline, presumably so they could look at it more closely. I'm having trouble understanding why you didn't have more trouble with this. You should have, sir.

[Ralph Goodale, Liberal, Wascana, SK]

At the time it was Ms. Cochrane, but I'm thinking of the testimony of Mr. Marshall when he described this to the committee. If the deputy had said to me at that time that it was just not possible to meet Mr. Drouin's expectations in an economic way that met the rules of the department, if that had been the advice from the department, then obviously my letter back to Mr. Drouin would have been, “Sorry, can't do it”. But the advice from the department was actually the other way around, saying, yes, it can be done--

[David Christopherson, NDP, Hamilton Centre, ON]

That was initiated by a minister, not by the bureaucrats, sir.

[Ralph Goodale, Liberal, Wascana, SK]

One interesting thing in the testimony is that there was some sort of official communication among officials in DEC and among officials in Public Works prior to Mr. Drouin's letter. That was the testimony, I think, from Mrs. Beal.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Christopherson, and thank you, Mr. Goodale.

Mr. Holland.

[Mark Holland, Liberal, Ajax—Pickering, ON]

Thank you, Mr. Goodale, for appearing before the committee today. You have gone a long way to answering whatever questions may have been there, although I'm not sure there were that many questions to begin with.

I'm going to ask a few questions just to establish the role you were playing at that time, for the sake of clarity.

I was wondering if you can tell us this. When you were public works minister, did you ever meet with or did you personally know anybody who was with WPBI property management, the owners of Place Bonaventure, when the lease at Place Victoria for CEDQ was up for renewal?