Public Accounts Committee on June 6th, 2013

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Yes, but if its board of directors comes exclusively from the private sector and if its sole purpose is to finance public-private partnerships with taxpayers' money, isn't there the risk that profits will be private and losses will be public? In other words, losses will be picked up by government financing but profits will go to the private-sector partners.

[Richard Botham]

The purpose of PPP Canada is not to generate a profit for the Government of Canada. It is to enter into P3 arrangements for infrastructure projects, which in themselves have a social good.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Okay.

So here is the key question I would like to ask you.

If the objective is just to set up public-private partnerships, it is very interesting ideologically, but economically, what do Canadians get out of it? If the objective is essentially to provide financing to private companies who would not otherwise be in a position to find sufficient capital on the free market, I have a little problem with it. The little problem is made worse by the fact that the economic objective is excluded, in a way. What I mean is that, under the Buy America program, steel girders must be bought in the United States unless there is a 6% difference in price.

Do PPP Canada's plans include measures like that, measures designed to help the Canadian economy?

[The Chair, NDP, David Christopherson]

A very brief response, please.

[Richard Botham]

It was a long question to have a brief response to. The last part had to do with the “buy America” policy and whether there's a “buy Canadian” policy in PPP Canada. Is that the question?

Greg.

[Greg Smith]

First of all, let me clarify that our funding goes to other levels of government. It goes to the provinces or municipalities that would give the money. They are the ones that actually procure the public asset that they need to provide services to their citizens, and they own those assets. So the ultimate assets that are procured through a P3 model keep ownership in the public sector—not the federal government, but the provinces or territories we're giving the money to.

One of the fundamental principles of the P3 is that there is competitive tension in the procurement process. So the more bidders—and the better—that you have on that will drive the value. In terms of where they come from, there are consortia that are bidding on P3s in Canada from all over the world.

[The Chair, NDP, David Christopherson]

Okay good. We have to end it there. We're way over on time.

Thank you.

Moving along, Mr. Hayes, you have the floor, sir.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

Thank you, Mr. Chair.

Most of these questions are going to be directed to the deputy AG, Mr. Ricard. In your report, in paragraph 10.17, it was nice to see you actually give some recommendations in terms of an approach to minimizing government exposure to financing costs. You gave three recommendations. I won't repeat them verbatim, but there was a response given to the bottom two recommendations, the one being that the corporation's status could be changed from a non-agent to an agent, and the other that the corporation could deposit its advance funding in the consolidated revenue account.

Those were rejected in 2009. The arguments given were that PPP Canada, the Department of Finance, and the Treasury Board of Canada Secretariat considered the last two possibilities and according to government officials, these potential solutions were rejected because they were unduly complex and administratively burdensome, or they were inconsistent with government decisions regarding the status of the corporation as a non-agent of the crown.

Do you accept those arguments? If you don't, how would one go about changing those? I would think it would have to be a legislative change. That's my first question.

The second question is on your first recommendation, which is the one that quite frankly intrigues me. If I had to pick one of the three, this would be the one I would pick. So you guys get ready, because I'm going to be asking you the next question on the first one, which is:

The Corporation could obtain a written guarantee from the government that the P3 funding is available upon request, closer to the time of the Corporation’s disbursements.

That sounds really logical to me.

Mr. Ricard, I think I've been clear on my question.

[Sylvain Ricard]

I think I understand your question. Maybe I'll just clarify one point. Paragraph 10.17 is not quite a recommendation. It's a list of examples of other models that could be used, and we're signalling in paragraph 10.18 that the last two were somewhat considered at the time the organization was set up.

Now, your question is whether we buy—I think that's the word you used—the argument.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

Do you agree?

[Sylvain Ricard]

By the simple fact that we put them here, not really, but one would have to have further discussion with the organization to see to what extent...and what considerations were looked into when one or the other was decided .

One point I mentioned earlier is the fact that when the decisions were made, back then the financing cost was not considered. So to an extent, the financing cost being brought back into the picture may influence the decision.

I don't know if I'm answering your question.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

Yes, indirectly. So let's step back to the first one, your first approach. I would prefer...and I've had this conversation with Mr. Ferguson before. For us and for departments to gain the greatest value from the Auditor General's department, recommendations are nice in terms of how to do things, because when you have a staff of 550 experts.... It's nice that you can identify approaches, but again, I'd prefer to see recommendations.

That being said, your first approach, that the corporation could obtain a written guarantee, is a great idea. Can you comment on why you gave that as an approach?

Then I'm going to go to Mr. Botham, and ask him to comment on that approach.

[Sylvain Ricard]

I'll go back to the first part of the question. Those are three examples that for us are models that could be considered. Yes, the first one makes a lot of sense, but for us, the three of them make a lot of sense.

To try to explain why there is a list and why we're saying that those are examples and that maybe there are others, it's that at the end of the day we're trying to be respectful of the fact that the policy decision about a given model or another one doesn't belong to us. We're saying, though, please do consider financing costs when you make that decision. That's why we left it at examples of scenarios or models.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

Okay. That being said, I'm going to come back to Mr. Botham in one second, but here's my question for you, Mr. Ricard. Are you recommending a certain optimal level of financing costs that is appropriate or are you suggesting that there should be no financing costs whatsoever?

[Sylvain Ricard]

I suppose having absolutely no financing costs is close to impossible, but again, one would have to look at various models. The reason for this is that at some point there's a need, given the model in place right now with the crown corporations. They need the money in their bank accounts at some point to be able to pay the projects.

Our message is, please don't give that money away too much ahead of time, especially considering the directive that is in place that prevents such advances to crown corporations. It's there exactly for the reason of reducing impacts on borrowing levels of the government.

[The Chair, NDP, David Christopherson]

I'm sorry. Time has expired, and time is rapidly running out.

Thank you, Mr. Hayes.

Colleagues, I just want to point out that, given the time remaining and given the fact that I need this committee to make one quick decision about next week that shouldn't be controversial, we can do two more rounds. I would ask you to keep them to four minutes so we can get in under our timeframe.

For those checking, it would have meant four government questions, two from the official opposition, and one from the third party. That's pretty close to a balance, if you think about our normal rotation as two hours, which we had to artificially chop in half. With your support, that's what we'll do. We'll have two more speakers at four minutes each.

Mr. Byrne, you have the floor, sir.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

How long do I have?

[The Chair, NDP, David Christopherson]

You have four minutes.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Parliament has appropriated, through PPP Canada, a certain amount of funds. I understand the amount to be $1.2 billion. That's over what period of time?

[Greg Smith]

It's over five fiscal years.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Beginning in 2009.

[Greg Smith]

Yes.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Would you be able to inform the committee of your forecast for the disbursement of funds in this fiscal year, next fiscal year, and the year after?

[Greg Smith]

Yes. In fact, we disclose that in our annual report. We're just in the final stages of completing our audit, of finalizing our audit report, but in the management discussion and analysis of our annual report, you'll see the projects and the expected cash flows.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Can you inform this committee at this point in time of what this is?