Public Accounts Committee on Nov. 2nd, 2017

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you, Chair.

Thank you, all, for your attendance today.

As a first thought, I was struck exactly the same as Mr. Lefebvre. Folks need to give their head a bit of a shake and think about it. When you're going into an audit, do you walk in and the first thing you say is that you're going to say how great you are before we go on? I leave that with you.

Having said that, it's not a bad audit. As you know, I'm not exactly a soft touch on these things. I pulled the previous audit that was tabled on December 4, 2008. Colleagues who have been with me for some time know this is where I launch into the bloody stratosphere where we've found in previous audits there are problems and there are recommendations and promises to fix them and we go back in 10 years later and it's the same problem, same promises, and somehow they expect things are going to be okay. I didn't find that here, and I have to tell you, it's been a long time. It was refreshing.

Staying in a positive vein, the remarks in that audit were exactly what we want to hear. On page 2 of that report the then auditor said, “We found no significant deficiencies in the systems and practices we examined. We found sound systems and practices in a number of areas we examined.” For example, they noted some areas for improvement.

The key thing that struck me, colleagues, was—and I looked at this carefully—none of the issues that were raised in the 2008 audit are repeated in this audit. Colleagues, I try to be fair-minded. When things are offside, boy, I'm going to come down like a ton of bricks. But when you're doing a fairly good job and meeting the standards, and doing it consistently over a period of time.... This now speaks to about a decade and a half that's been looked at carefully and each time it's come up not perfect—but I haven't seen a perfect audit yet—but not bad, pretty good, even.

Often I'll say, “having said that” and then I'll launch into something. I don't have that here. A couple of things struck me, though, and it's not just your entity; it's others too. In this day and age where fraud and risk and security are so important, they loom large. Of all the areas where you could have had some weaknesses, do you have any sense of why, in that area? Normally that's where we gravitate. I will note—and then I'll give you a chance to respond—that you had already started to act on those things before the auditor came in, and that's good. But I just leave it with you that of all the things where I thought there might be some softness, I'm always surprised when....

Data we know is an ongoing issue and we're trying to stand on that. My friend Mr. Lefebvre talked about that and your accountability on it, but it throws me that of all the areas where there was a little deficiency, it was like risk. Just help me understand a little how that might have been.

[Robert Presser]

I'll invite our president Mr. Paul to answer that question because the current risk management framework was developed under his management for the past nine years.

[James Paul]

Thank you.

I appreciate the comments and thank you.

I came in, in 2009, so for the past almost a decade I've been responding to the recommendations in the previous audit. We take the recommendations of the Auditor General very seriously, and it has helped us in the management of our business.

There is no report here from the Auditor General that we were doing nothing on fraud. It says that the corporation should better define fraud risk, etc. We absolutely agree with that. To answer your question, and I put it back to you, the reason that has been pointed out is fraud detection and prevention is such a priority for the government right now. We monitored all the Charbonneau commission of inquiry. The question from the other member of the committee.... Absolutely, that came to light first and maybe only because it was first exposed in Quebec. That's not to say there aren't issues like that potentially anywhere in the country.

We followed that very closely and have been taking steps from day one on that. Fraud has been on our corporate risk register that I report to the board on every quarter at our meetings, and as a management team we review monthly, and even weekly in our ad hoc meetings, so we have made that a priority.

The Auditor General has said that we can do more on this and be better, and we agree. We're a corporation that's constantly improving our systems. We have a great strategic planning annual process. Fraud detection has been on our agenda for the last nine-plus years, I can assure you, and we're making it better all the time.

[David Christopherson, NDP, Hamilton Centre, ON]

Great. Thank you.

I have to tell you again that when I looked at this, I thought anything that starts with “defence” is not going to be good, especially when we're dealing with procurement, so it was a pleasure.

In the third paragraph on page 1 of the report I read—this is the Auditor General now:

Essentially, the Corporation is a procurement and contract-management agency that serves as an intermediary between its government clients and the consultants and contractors.... This arrangement allows the Corporation to work at arm's length from the government....

Can you just describe for me a little more thoroughly what that arm's-length relationship is between you and the department?

[Robert Presser]

Well, it's interesting that we have, as it were, split masters. I report to the Minister of Public Services and Procurement, but our client in fact is the Department of National Defence. Most specifically, we work for the associate deputy minister of infrastructure and environment.

There are two parts to our mandate, which is interesting. There is the work we do for the Department of National Defence and the Canadian Forces, and there's also a second part of our mandate which allows us to undertake certain projects for the defence of Canada, which is why we were allowed to build the Communications Security Establishment. We built CSE under a P3. We're currently working with Service Canada on the new data centres across the country. There's a consolidation of 35 down to six data centres, I believe, more or less.

There are two parts to the mandate, and so it would make no sense for us to be completely beholden to or be a part of the Department of National Defence. The reason that was done, when we were created in 1951, is that defence procurement, and specifically infrastructure building and management, is different from the work that, say, Public Services and Procurement does for all kinds of building, all kinds of services across the country. It allows us to develop specialized processes and highly trained personnel who are familiar with the rigours of military procurement.

It also allows us to work directly with contractors who have to understand that having done something for Public Services and Procurement doesn't mean you can behave the same way when you do something for the Department of National Defence. It allows us to pre-qualify, and our independence really gives us standing. It also allows us to have, shall we say, a consultative relationship with the people we work for on the bases. We work with the base engineers. We work with the base commander.

We get a lot of respect in that back and forth as an independent organization being able to provide advice, when it's solicited, on how to plan this infrastructure work.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much. We're well over our time.

Mr. Massé, you may go ahead for seven minutes.

[Rémi Massé, Liberal, Avignon—La Mitis—Matane—Matapédia, QC]

Thank you, Mr. Chair. Thank you all for being here and contributing to the committee's work. I recognize that your participation requires a lot of work and preparation on your part. You are supported by your teams, so I'd like to thank them as well.

I'd like to pick up on Mr. Christopherson's comments.

Could you give us a general sense of how your organization is structured? We have some information here, in our package, but I'd like you to explain it to us. You have some 800 employees, and I see that your staff size went up. I also read that you managed approximately 2,400 contracts, if I'm not mistaken.

Tell us, if you would, a bit about the structure of your organization, as well as the reasons why your staff size and budgets have risen in recent years. I'm trying to get a sense of the goals you're trying to achieve and the reasons behind the increase in your workload and staff.

[Robert Presser]

Thank you, Mr. Massé.

I'll provide you with some context. When I joined the board in 2007, we had around 400 employees, and we were spending in the neighbourhood of $400 million on contract management, on behalf of the Department of National Defence, or DND.

We eventually peaked at nearly $1.2 billion with a staff of more than a thousand employees.

How many employees we have and where in the country they are located depends on what DND plans to spend on infrastructure. The large-scale work we were doing in Trenton meant that we needed a good many employees on site. That is the case whether the work is being carried out in Valcartier, Gagetown, or Esquimalt: when we conduct a major project, we hire people locally.

The variations also depend on the government's agenda. When projects were added to DND's infrastructure program in 2014-15, we received $450 million in additional funding and we had to hire people quickly to use that money.

[Rémi Massé, Liberal, Avignon—La Mitis—Matane—Matapédia, QC]

Correct me if I'm wrong, but I believe, in terms of your cost structure, you operate on a cost recovery basis.

Do you require that clients pay a percentage of the value of the contract?

Could you describe how you operate?

[Robert Presser]

It depends on the project. The cost for some projects is lower. It depends on the complexity and location of the work being done. Sometimes the cost is higher. I think Mr. Paul can comment further on that.

[James Paul]

We basically respond to the service requirement with the necessary professionalism and expertise. Depending whether it's a construction service, a facilities management or property service, or the procurement service, we charge fees to contract. It's not based on a percentage of the dollar value. It's based on the skill set and the effort performed, the number of hours to deliver that project.

Just so you're aware, we benchmark ourselves not only against other government service providers, but the private sector in terms of what they charge for comparable services. We report the results of that. That's part of our corporate KPI, key performance indicators, in the performance management framework that we operate under. We very closely monitor this, so the growth in employees, for example, will respond to program. If we go from $800 million in program to over $1 billion, as we did last year, we add staff in order to deliver that.

It's not a linear equation. We measure the efficiency and effectiveness of service delivery. For example, we grew the program over 20% in delivery, but the staff grew far less than 20%, although more than 10%. It depends on the service line, what's needed. We're leveraging technology, best practices in industry, and our close consultation with the Canadian [Inaudible—Editor]

That's how we manage the business, basically, but we get no appropriation. We're not able to run deficits, and we don't. We have to manage very closely, because ND's infrastructure program could change tomorrow morning. We're in the middle of the fiscal year, but we'd have to respond to that, and we've proven that we're able to do it.

[Rémi Massé, Liberal, Avignon—La Mitis—Matane—Matapédia, QC]

Thank you very much. You covered my next set of questions.

I have about two minutes left, and I'd like to discuss the Auditor General's recommendation concerning the management of documents. The Auditor General flagged this weakness, and obviously, it's of concern to us. Describe, if you would, the measures you have taken to address that recommendation, given the number of contracts you are responsible for. You have regional offices that you manage.

In his report, the Auditor General noted the significant challenges around accessing the final versions of documents and amended documents. He also noted that documents stored in one regional office were difficult to obtain elsewhere.

Can you tell us about the mechanisms you put in place to improve your contract and information management processes, further to the Auditor General's recommendations?

[Robert Presser]

I'm going to let Ms. Nycholat answer that, since she is the one currently overseeing the modernization of our document management practices.

[Mélinda Nycholat]

The biggest challenge when it comes to the adoption of an electronic document management system is the change in culture that is needed. That's something we've had to deal with over the past few years. We have to work really hard to motivate employees to store information properly. They still have a tendency to print out documents and keep them on their desk.

First of all, we've endeavoured to improve the speed of the electronic system. If the system is too slow and employees find it quicker and easier just to keep the documents in their desk, they won't want to use the system. We've made the system much faster to use to eliminate that barrier.

Second of all, we set up a new committee to examine all aspects of the situation and identify potential weaknesses affecting the system's effectiveness and efficiency. We've made changes to the way documents are filed to make the process easier. The committee looks at the issue as it relates to all our regions and local offices. In addition, instead of waiting for the annual verification process to review our documents, we are going to implement ongoing verification in the next year, to stress to staff the importance of being disciplined in ensuring that documents are filed properly.

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Massé.

We'll move to Monsieur Généreux. Welcome.

Mr. Généreux, you have five minutes. Please go ahead.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Chair.

Mr. Ferguson and Ms. Bédard, we haven't forgotten you. Again, thank you for being here this morning.

Mr. Ferguson, I'd like to begin by saying that your French skills are to be applauded. I can remember when you were appointed, our government drew sharp criticism because you were a unilingual anglophone. Today, you are bilingual, so hats off to you. You're a prime example of the fact that you're never too old to learn. Of course, you're not old. Ha, ha!

You are the Auditor General, and your job is to audit government institutions. In the case of this institution, the audit findings were rather positive, so congratulations are in order. Anytime taxpayers' money is involved, it must be managed with the utmost integrity and responsibility. The audit findings seem to indicate that that was the case here.

That said, Mr. Ferguson, can we draw any lessons from the reports you and your predecessors have produced, so that, when we create new agencies and entities, and introduce practices and policies, we do so in a more effective and efficient way? For example, the government just established the infrastructure bank. In that case, do we run the risk of finding out five years down the road that we failed to implement a certain control mechanism or some other process we should have?

Do you see what I'm getting at? Is there some sort of guide we can use? You recommended that the organization represented here, this morning, improve its system for monitoring collusion, potential risks, and so forth.

Shouldn't that sort of thing already appear in the original statement of work, as soon as a government body is created? Shouldn't these practices be in place from the get-go?

[The Chair, Conservative, Kevin Sorenson]

Go ahead, Mr. Ferguson.

[Michael Ferguson]

The first thing I would say is that it's very important for such an organization to consider all of the aspects related to management. In the type of audit we conducted, we listed all the criteria used to evaluate the organization. I do think, however, that any new organization can evaluate the criteria we used in this examination. The criteria can be used to establish best practices for a board of directors, be it in the case of a new crown corporation or one that is very mature.

I believe that the criteria are similar for all such audits and that any organization can use them to introduce best practices.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

In terms of the newly created infrastructure bank—the most recent institution introduced by the government, I believe—were you consulted on how to structure the organization properly from the outset?

[Michael Ferguson]

It's not standard practice for us to be consulted in a situation like that, but we are, of course, always happy to discuss the criteria we use to evaluate organizations. It's not one of the normal steps in setting up a new organization, but we are always happy to discuss relevant best practices.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Paul, Defence Construction Canada just awarded a military training contract worth a billion dollars to a Montreal company. Were you the person who awarded the contract? Did you oversee the process?

[James Paul]

Is this an actual question or a hypothetical? We don't award defence projects that have to do with equipment. We award the infrastructure projects that would be associated with them. For example, if it's an interim fighter jet program that the government launches, then we would support that program with whatever the infrastructure is. That would be hangars, runway changes, communications, air traffic control, and whatever types of infrastructure and environmental programs would support that.

The contract you're referring to, we wouldn't have been involved in that. That would be our colleagues at Public Services and Procurement Canada working with National Defence. They do the equipment and materiel side, and we do the supporting infrastructure. It's the same with the Arctic offshore patrol ships. We're currently doing the jetty replacements in Esquimalt, which is overall more than a $500-million infrastructure project. That's to support the ships for their arrival. We have all the specifications and everything, but we're not involved in any way in the shipbuilding, as an example

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Ms. Nycholat, I used to be a mayor at the municipal level. As Mr. Deltell mentioned earlier, events in Quebec prompted the government to set up the Charbonneau commission a few years ago. Quebec has professional bodies, or associations, that represent municipal court clerks and chartered professional accountants, among other groups.

At the federal level, are there professional associations to which practitioners have to answer, either within or outside the government?

[The Chair, Conservative, Kevin Sorenson]

Go ahead, Madame Nycholat.

[Mélinda Nycholat]

I'm an engineer by profession. To keep up my licence, I have to adhere to certain requirements in accordance with a code of ethics. As far as the procurement community is concerned, I would say that we aren't there yet. It's a fairly young field. Major changes are, however, happening. There are communities and organizations working on the skill requirements and job profiles in this field of practice. It's still a fairly new profession, though, when you compare it with accounting, engineering, or even law.