Evidence of meeting #107 for Transport, Infrastructure and Communities in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was project.
A recording is available from Parliament.
Conservative
Dan Muys Conservative Flamborough—Glanbrook, ON
Thank you, Mr. Chair.
I go back to questions that my colleague Dr. Lewis was asking.
In the fiscal year that ended, 2022-23, the CIB had $46 million in operating costs, and of that, $8.1 million were bonuses. That's 18% of your operating costs for bonuses. That seems like a very excessive amount. Do you think that's justifiable? That can't compare to what the private sector is paying.
Chief Executive Officer, Canada Infrastructure Bank
In that same fiscal year—let's start with a general sense—the CIB made investments of $4.3 billion of our money into projects that had a total capital value of between $12 billion and $13 billion. We did that with an internal staff of just over 100 people in offices in Toronto, Montreal and Calgary.
Our compensation structure is benchmarked rigorously to the private sector. We hire from a pretty wide sector of Canadian banks and professional industry groups. We hire engineers and investment professionals. People who work at the CIB come because they believe in the public sector mission of the bank, and they take compensation that does not match what they can get in the private sector. However, it does need to be, at least, competitive, and that's why we benchmark it. It's a mix of the base salary and bonus that is benchmarked. We're extremely transparent in what our performance goals are and if we meet them or not, and that's what our performance compensation is linked to.
Conservative
Dan Muys Conservative Flamborough—Glanbrook, ON
I find that 18% of your operating expenses being used on bonuses to be excessive. We disagree on that.
When you were here in May 2023, just about a year ago, I asked you about internal audit processes and transparency. You talked about the need to improve transparency, yet we're looking at a project today that's been shrouded in secrecy. We had to ask questions in question period and submit Order Paper questions to draw out some of those details and find out the volume of taxpayers' money that's been wasted. Is this what you view as an improvement in transparency?
Chief Executive Officer, Canada Infrastructure Bank
In answer to the follow-up, just to be clear, at the CIB our internal costs are made up of only salary and staff costs, some office rent and some computers. We are a knowledge-based organization, so the fact that salaries make up the majority of our expenses is actually not, in my mind, surprising. The balance between base and variable compensation, as I said, is designed to make our performance transparent and our compensation linked to actually meeting the tangible goals we set, not only in dollar deployment but in achieving outcomes like the number of new homes connected to broadband, the number of indigenous communities with access to better infrastructure, etc.
Now to the question about transparency, I think the CIB has made a significant investment in its transparency. Monsieur Duguay, who is our general counsel, also leads much of our work around transparency and can speak to this. Our publishing, whether it's on our internal expenses or salary costs.... You're quoting to us our salary costs. We try to always provide up-to-date, accurate and transparent information around all of the money we're spending, including on projects and third parties, which you can also see in our reports.
Conservative
Dan Muys Conservative Flamborough—Glanbrook, ON
Sure, although we had to produce Order Paper questions to extract some of that information.
Let me switch gears and go to Mr. Winfield.
You talked in your opening remarks about audit practices and grounding for projects. It seems to me, from what you described here, that it was fairly obvious quite some time ago that this particular project was not one that was going to be successful, and that the assumptions that were being made were off base. Here we have a million dollars of taxpayers' money wasted—the majority of which, by the way, on lawyers and not engineers—for a project of this type.
What's your comment on that? This seems to be avoidable.
Professor, Faculty of Environmental and Urban Change, York University, As an Individual
It's a little complicated because sometimes you have to spend a little bit of money up front to recognize that there's a problem, which does potentially avoid a much bigger expenditure down the road. There's obviously a rationale for spending some money on a project if you're going to take it seriously.
The question that arises, though, is: What do you do with that initial analysis? I would have thought anybody looking at the Ontario electricity system at that stage would have had some pretty serious questions about where this was going and where it fit. The fact they proceeded anyway is the part that worried me more.
As I said, sometimes that upfront investment and due diligence makes sense to avoid the bigger loss down the road. Some people might point in the direction of Muskrat Falls, where the problem was that the upfront assessment was ignored.
Liberal
The Chair Liberal Peter Schiefke
Thank you very much, Professor Winfield.
Next we'll go to Mr. Iacono.
The floor is yours for five minutes.
Liberal
Angelo Iacono Liberal Alfred-Pellan, QC
Thank you, Mr. Chair.
I think the witnesses for being with us today.
Mr. Cory, I really liked your statement. You said that, even if a project is suspended several times, there’s always the hope that it will be reactivated.
A cat has nine lives. It's a bit like that.
My colleagues on the other side asked you if other projects followed the same scenario, and you answered directly that there were two others.
Could you explain the reason for suspending this project? Is it because the project is no longer good or viable, or is it because the costs associated with implementing the project came up unexpectedly afterwards?
Chief Executive Officer, Canada Infrastructure Bank
Thank you very much for the question.
“Every project has nine lives” is a more eloquent way of stating my earlier points, so I appreciate that.
What's interesting, of course, is construction projects in this country went through a significant challenge in and around the time that this project was suspended due to cost escalation. Committee members here would know better than anyone what has happened with regard to the tightness of our labour markets and global costs of materials, whether it's steel or concrete that went into these projects. There have been huge increases.
There's a trend I could point out, and it's true for the Lake Erie connector and for sure it's true for the Whapmagoostui hydroelectric project. Between the time the idea was launched and there was an alignment between parties and we signed a term sheet, between then and final investment, what happened in those cases was significant cost escalation.
To Dr. Winfield's earlier comment, it's much better to discover that in the due diligence phase than to discover it later.
The reason those projects have nine lives and are suspended is that the underlying rationale for them remains very strong: The need for new sources of clean power in northwestern Quebec didn't go away, and the need for better transmission connectivity between Canada and the U.S. did not go away. In the long term, the project still has real viability, in our view.
Liberal
Angelo Iacono Liberal Alfred-Pellan, QC
It’s interesting to note that my colleagues from the Conservative Party and the NDP who sit on the committee are questioning the value of the Canada Infrastructure Bank. In the meantime, Ontario’s conservative Premier announced that the province will create its own infrastructure bank in the fall.
Would you agree that announcing the creation of the Ontario infrastructure bank represents approval of our model?
Chief Executive Officer, Canada Infrastructure Bank
I always try not to get involved in certain political issues.
The role of the Canada Infrastructure Bank is to increase investment in infrastructure in Canada.
Liberal
Angelo Iacono Liberal Alfred-Pellan, QC
Does the fact that Ontario will have its own infrastructure bank mean that your work will be easier and allow for more projects in Ontario?
Chief Executive Officer, Canada Infrastructure Bank
That is a good question. The answer is yes, absolutely.
We think there’s a real partnership opportunity between the Canada Infrastructure Bank and Ontario’s own bank. It will lead to a higher number of projects for us and, I hope, for them.
Liberal
Angelo Iacono Liberal Alfred-Pellan, QC
Thank you.
I really liked your comment in response to one of my colleagues that all of us need more infrastructure. I look at that and say that all of us need love.
You've been in this field for quite some time. Since 2015, has infrastructure doubled compared to the previous 10 years, and, if so, is that due to the CIB?
Chief Executive Officer, Canada Infrastructure Bank
To be clear, the idea of an infrastructure bank is a tool in the tool kit. We don't presume, and we're pretty humble about this. It takes all of us.
To answer your earlier question about the Ontario bank, someone once asked me if we would be competing for the same deals. There is enough to go around. We need all hands on deck to build the infrastructure we need. We are one tool and I think there's a great opportunity.
To directly answer your question, yes, the projects that the CIB has invested in during the last three years, since I joined, or during the last five years, since we staffed up, represent $35 billion of infrastructure projects that were stuck on the sidelines. The math didn't work, the risk was too big or the term was too long. There was something broken and the market wasn't doing those projects on their own.
The CIB, by entering, helped facilitate those projects. Yes, we've played an important role in accelerating infrastructure investment in the country.
Liberal
Angelo Iacono Liberal Alfred-Pellan, QC
Thank you very much for your involvement with the REM in Quebec.
Liberal
The Chair Liberal Peter Schiefke
Thank you very much, Mr. Cory.
Thank you, Mr. Iacono.
Mr. Barsalou‑Duval, you have the floor.
Bloc
Xavier Barsalou-Duval Bloc Pierre-Boucher—Les Patriotes—Verchères, QC
Thank you, Mr. Chair.
I’d like to come back to the infamous $900,000 in consultation fees. That seems like a rather significant amount to me, and I want us to keep talking about it.
Of these $900,000, $800,000 is for legal fees. I think that $25,000 was spent to get financial expertise and $70,000 to get information on electricity markets and greenhouse gases. The $800,000 for legal fees applying to Canadian law and American law represent the lion’s share.
When we talk about government expenditures and billing, we always have in mind the scandals where invoices were paid without even being looked at, as was the case for ArriveCAN. I don’t claim it’s the case here; I don’t know. Like it or not, concern should be our reflex when we see such high numbers. I think that at some point, when we are facing such high numbers, our sense of reality gets a little distorted. It’s disorienting. When we talk about $80,000, $800,000 or $800 million, what does that mean for everyday folks?
Let’s look at the $800,000. Obviously, your consultants aren’t paid $20 an hour. They are usually rather well paid. Let’s say they are paid 10 times higher. That would mean they worked 4000 hours on the project. It might be less, it might be more.
Can you give me an order of magnitude for the average hourly cost, the number of contracts, the number of firms involved and the number of work hours they actually invested in this project? It seems quite astronomical to me, and I want to better understand.
Chief Executive Officer, Canada Infrastructure Bank
I will let Mr. Duguay tell you more on this subject.
General Counsel and Corporate Secretary, Canada Infrastructure Bank
Thank you.
The question includes different elements. Let me respond first to the general question regarding procurement, legal services and technical services.
Let’s start with legal services. When an investment goes through our investment process and we’re coming to the start of the negotiation phase, legal drafting and due diligence for the project, that’s when we determine if we need to call upon our internal expertise. Within the CIB, a team of half a dozen lawyers works in partnership with the investment team to structure projects. However, for a major project, for example $1.7 billion in this case, we simply do not have the staff required to manage the project within the CIB. We therefore need to call on external expertise.
Now let’s talk about procurement. We have a procurement policy and, as per our commitment to transparency, this policy can be consulted on our website.
As for legal fees, we have a tendering process. On average, we retain the services of three to five law firms, first to gain an understanding of the expertise required for a project and hourly rates, and then to make sure there is no conflict of interest regarding the spending of public funds.
Bloc
Xavier Barsalou-Duval Bloc Pierre-Boucher—Les Patriotes—Verchères, QC
More specifically, how many billed work hours are we talking about? Legal bills always include the number of hours of work as well as the hourly rate. I would like to have an idea of the average hourly rate and number of hours.
General Counsel and Corporate Secretary, Canada Infrastructure Bank
You are entirely correct.
When it comes to the connector project, for example, I think the CIB became involved starting in 2019. In 2021, we gave our approval for our $655 million investment. Important negotiations occurred over several months…
General Counsel and Corporate Secretary, Canada Infrastructure Bank
—not only with third parties, but also to ensure due diligence.