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Proceedings of the Standing Senate Committee on
National Finance

Issue 10 - Evidence - Meeting of April 15, 2008

OTTAWA, Tuesday, April 15, 2008

The Standing Senate Committee on National Finance met this day at 9:33 a.m. to examine the estimates laid before Parliament for the fiscal year ending March 31, 2009.

Senator Joseph A. Day (Chair) in the chair.


The Chair: Good morning and welcome to this meeting of the Standing Senate Committee on National Finance. My name is Joseph Day, I represent the province of New Brunswick in the Senate, and I am the chairman of this committee.


The committee's field of interest is government spending and operations, including reviewing the activities of officers of Parliament and those various individuals and groups that help Parliamentarians to hold the government to account. We do this through the estimate process of expenditures and funds made available to officers of Parliament to perform their functions and through budget implementation legislation and other matters referred to this committee by the Senate.

Today we are continuing our examination of positions and offices created or modified as a result of the implementation of the Federal Accountability Act, formally known as Bill C-2.

On February 12, 2008, the committee heard from Mr. Shahid Minto, the Procurement Ombudsman Designate of Canada. As a result of this meeting with Mr. Minto, there were a number of outstanding matters concerning his appointment and the establishment of the Office of the Procurement Ombudsman that this committee wished to explore.

It is, therefore, my pleasure to welcome today the minister responsible for the Office of the Procurement Ombudsman, the Honourable Michael Fortier, P.C., Minister of Public Works and Government Services and Senator for Rougemont, Quebec.


Honourable Minister Fortier was appointed to the Senate on February 7, 2006. Before that time, Senator Fortier had worked in the legal and banking sectors.


Accompanying the minister today is Mr. François Guimont, Deputy Minister. Minister Fortier, thank you for being here. We look forward to your opening comments and then honourable senators will engage in a dialogue with you.


Hon. Michael Fortier, P.C., Minister of Public Works and Government Services: Mr. Chair, I am happy to join you and your colleagues here this morning. I know that your time is valuable.


The topic today is the Procurement Ombudsman, issues around that office, its activities and its ambit. I will be happy to answer your questions with my deputy, François Guimont.

The Chair: One of the areas we wanted to talk to you about, and you made comment of it in the introductory written remarks forwarded to us, is the limitation with respect to the ombudsman in terms of the financial band under which the mandate of the Procurement Ombudsman operates. The ombudsman can review complaints from potential suppliers with respect to contracts awarded for goods less than $25,000 and services less than $100,000. Perhaps you could explain to honourable senators the contracts for goods greater than $25,000 and services greater than $100,000. Are you satisfied that the same scrutiny of those contracts, which would likely include most government contracts, exists?

Senator Fortier: In terms of numbers, you would be surprised; there are quite a number of contracts within the ambit of the Procurement Ombudsman's jurisdiction. There are close to 200,000 contracts under $25,000 that departments sign regularly. He will have the ability to review a number of contracts if people are interested in him reviewing them.

The reason the legislation points to those contracts is that above those monetary thresholds, suppliers can go to the Canadian International Trade Tribunal, CITT. There is a conduit for them to complain, to debate and to air their grievances. However, south of those monetary thresholds there was nothing, except for common law tribunals, small claims courts or things of that nature. Therefore, we thought that it would be good policy to have the Procurement Ombudsman catch or address that basket not otherwise caught by the CITT.

The Chair: Did that tribunal have an existing lower limit of $25,000 for goods?

Senator Fortier: No, that tribunal does not review anything on goods lower than $25,000. They do not. The Procurement Ombudsman will.

The Chair: I am sorry to interrupt you, was that limitation of $25,000 for the Canadian International Trade Tribunal in existence before the creation of this ombudsman?

Senator Fortier: Correct.

The Chair: Likewise, with respect to $100,000 for services?

Senator Fortier: Correct.

The Chair: How are we coming along and what do you see for timing with respect to fully implementing this position? When we had Mr. Minto before us, he indicated that he was the Procurement Ombudsman Designate. Does he still have that adjective attached to his title?

Senator Fortier: Indeed he has. We are hoping to finalize the regulations by late spring. As soon as we have them in place, we can formalize the position of Procurement Ombudsman. We appointed Mr. Minto Procurement Ombudsman Designate last fall. We had a professional firm assist us to find someone and Mr. Minto was selected after this search.

Once the regulations are finalized, he will hit the ground running. His office will have been set up, he will have hired a few people and he will be ready and willing to undertake his responsibilities under the act.

The Chair: How do you see the process of the regulations evolving? Can you give us a rough date when you think he will no longer be a designate?

Senator Fortier: The draft regulations were published in December. The commentary period ended in February. We have been tabulating comments and hopefully the final regulations will be published by late spring, at the latest.

The Chair: Could you explain to us what happens now, and what happened before the decision to create, under the Federal Accountability Act, the position of the Procurement Ombudsman? What happened with the complaints in this monetary area of less than $25,000?

Senator Fortier: From a legal perspective, a conduit did not exist. However, suppliers could call the department and voice concerns. That was taking place; they were calling our procurement officers and complaining about an issue that dealt with a particular contract. However, they could not go to the CITT. Common-law tribunals and small claims courts were left to them. Frankly, very few of them would take their grievances there.

Therefore, we did get calls; Mr. Guimont's procurement officers would get calls and would try to deal with the issues. However, having the Procurement Ombudsman and his office ready to go as soon as we finalize these regulations will make a huge difference. We can then have a one-stop shop where people will be able to complain and address the grievances and have them dealt with accordingly.

The Chair: There was an informal mechanism to deal with complaints by suppliers who felt they were not dealt with fairly under the bidding process. Is that correct?

Senator Fortier: Basically, suppliers could phone the department and speak with a procurement officer. It was dealt with at that level.

The Chair: Independence is an important theme that is running through all the various positions that are being created. In order for someone like the Procurement Ombudsman to have credibility with your clients, with the suppliers, there has to be a perception and the existence of independence; they need to know that their complaint will be dealt with fairly and objectively.

Can you tell us what has been built into the system, how you are going to assure that independence and, therefore, that level of credibility?

Senator Fortier: Starting at the top, we have selected someone with superb credentials who as you know, worked with the Office of the Auditor General. He has experience in accounting and in reviewing contracts and I think he will do a great job heading that office.

The act itself gives the Procurement Ombudsman powers to look at the contracts and to review the contracts and complaints that we have been talking about. It also gives him the ability to assist in alternative dispute resolutions and to assist suppliers who have succeeded in getting a contract from the federal government, regardless of the threshold, and, who for example, cannot get paid or have an issue with a current contract. They can go to the Procurement Ombudsman and try and seek a solution to their issue.

He must also deliver a report within four months from year-end. There is every indication having spoken with the gentleman — I know you have met Mr. Minto — and, if you read the act, I am very confident that he will run this office professionally and that suppliers will now have a conduit to voice concerns for that large basket of contracts for which there was not really a formal conduit.

The Chair: If there was some allegation or suggestion of impropriety in the media, for example, will he have the authority and the mandate to investigate without a complaint having been filed?

Senator Fortier: His powers are broad enough that, for example, if he had concerns about sole sourcing in a particular department, he could actually focus on that department and seek answers to try and understand whether the complaint or the allegation is valid.

The Chair: Sole sourcing is a typical issue that we would read about in the media. He has the authority to investigate that issue, does he?

Senator Fortier: Yes.

The Chair: Does he have the obligation to make that public so the public can be satisfied that everything was above board?

Senator Fortier: He will deliver an annual report to Parliament on the past year's activities. If he has done investigations, I assume that he will want to address in a chapter those investigations on whatever topic. If it is sole sourcing, then he will address sole sourcing.

Senator Eggleton: He would report annually as opposed to periodically, is that correct.

I remember, when I was Minister of Defence, we set up an ombudsman in the Department of National Defence. If there were pressing issues, we provided in addition to the annual report, an opportunity for the ombudsman to report those issues separately. Again, he submitted it to me and it was made public. It is the same kind of routine that you are talking about here.

Is there a provision for a separate report if a significant issue comes up that deserves some airing, particularly if people are hollering and screaming about it and it needs to be aired before an annual report comes out?

Senator Fortier: Yes, he reports directly to the minister, so he will come and see the minister and we will address it together. Ultimately, I am accountable. If there is something out there, I will want to address it and not wait 16 months for it to be resolved.

Senator Eggleton: That is fair. Again, he must also have the credibility of being independent.

If he submits a written report to you that says, ``This and that are wrong,'' yes, you deal with it. You are the minister. However, is there an obligation to make that report public? Putting something in his report makes it public, but does putting it into a special report create an obligation to make that public as well?

Senator Fortier: No. Is there an obligation under the act? No, but is there nothing that prevents him from doing so. I do not want to be lawyerly with you, but there is not an obligation to. It does not mean that he cannot.

Senator Murray: Mr. Chair, I do not know whether anybody has ever written a history of the Department of Public Works and Government Services Canada. I may get at it myself. It would be a fascinating history, a little bit of which I know.

I think we all know that Public Works was the site of political mischief for generations, indeed, for almost a century. It was one of the last departments to be introduced to objectivity and professionalism in public administration. Such names as Sir Hector-Louis Langevin, after whom the Langevin Block was named, were prominent in the early history of the place.

Prime Minister St. Laurent, in the early 1950s, put an end to what had been going on. Mr. St. Laurent put an end to it when he appointed the late Robert Winters as Minister of Public Works. Mr. Winters was an engineer, MIT educated from Nova Scotia. He appointed Major-General Hugh Young, who had recently retired from an important position in the Canadian Army, as the deputy minister. The two of them turned the place upside down, shook out the cobwebs, and put an end to the bad practices.

I think it is true to say that, since that time, the department has operated on a professional basis; in fact, outstandingly so. There have been a few lapses, but the lapses are important only because they have proven to be the exception to the rule, in my humble opinion.

All I know about the department is that it has operated on quite a professional basis for a good long time.

The Honourable Howard Green became the Minister of Public Works under the Diefenbaker government in 1957. He immediately shocked and dismayed all of his party's supporters, who had been waiting for more than 20 years to get their hands on the levers of power, by announcing on day one that there would be no patronage in Public Works.

Forty-five years ago this year, I was executive assistant to another of your Progressive Conservative predecessors as Minister of Public Works, so you can give me whatever deference you think that background deserves, which is none.

Nothing personal about this, but I said several years ago that I would have cheerfully voted against two thirds of the Federal Accountability Act, believing that most of it was a solution looking for a problem and that it was unnecessary and would simply make governance more difficult.

The questions I have are along those lines. I see that when the regulations are passed and sections 306 and 307 of the Financial Administration Act are brought into force, the Procurement Ombudsman will review procurement practices across government, handle complaints from potential suppliers, review complaints regarding contract administration and manage an alternative dispute resolution process for contracts.

Somebody must be doing most of those things now. There must have been a complaints process for many years. Who has been doing these jobs? Will they and their budgets, their staffs, come under the umbrella of the ombudsman? What is going to happen? Is the ombudsman's role duplicating functions already performed somewhere in your department or somewhere in the government?

Senator Fortier: No.

Senator Murray: There is nobody who reviews procurement practices. It has never been done. There is nobody to handle complaints from potential suppliers. There is nobody who reviews complaints regarding contract administration. There is no alternative dispute resolution process for contracts. Is that your testimony?

Senator Fortier: My testimony is that there was no formal conduit for any of these issues to be properly addressed. I gave the example to Senator Day a few minutes ago. Remember, this covers contracts that would not otherwise be reviewed by the CITT.

This is very important. There is a large number — this basket is quite significant — of contracts where potential suppliers do not have the ability to go to the CITT and complain. Their only prior conduit was to call the department relate their complaints to the procurement officers who could look into the issue. Frankly, the procurement officers could look into the issue but could do little to help the suppliers with their complaints.

Remember, many of these $25,000 or less contracts are handed out directly by other departments, not the Department of Public Works and Government Services. That is very important. Those of you who have been ministers would know that every department has the ability to engage the Crown for certain levels. Under $25,000, as we speak, five departments may have done a catering contract, a translation contract, a personal services contract to write a speech, et cetera.

Senator Murray: The question, minister, really is how much abuse do you think has been taking place.

Senator Fortier: Do you mean ``abuse'' in terms of people not having a conduit to complain?

Senator Murray: No, abuse in terms of abusing the prerogative that departments now have to let contracts for $25,000 or less. What is the problem that this measure seeks to solve?

Senator Fortier: If I may say so, I think we are addressing two different issues. One issue is how many of these contracts are actually signed and how many of them engage the Crown. Would we consider them good contracts? The other issue is disgruntled suppliers who are looking for a conduit to complain about a contract they did not get. To me, that is a very different issue.

I am the Minister of Public Works and Government Services and we do our own contracts under $25,000. Mr. Guimont has procurement officers that are very professional, and these contracts have several people checking boxes to make sure that the goods or the services that are required are indeed required and we are getting value for money. In other departments, the same takes place, but we do not manage the procurement process for those contracts in other departments.

Senator Murray: Has there been a great demand by suppliers for this kind of what you call ``conduit''? Is there a sense of it?

Senator Fortier: That is a good question. I opened small- and medium-enterprise offices across the country so that we would engage more of these small businesses to do business with us. I have held fora with them, and they have several complaints; but many were happy to see that we now have a Procurement Ombudsman.

You alluded to this earlier, Senator Murray, about responsibilities to draft or think about procurement guidelines, procurement initiatives, and make sure we are proactive on all sorts of rules and regulations in order to make this a user-friendly system for suppliers. I would say the supply community is quite pleased that this Procurement Ombudsman exists. Obviously, they are looking forward to seeing how it is going to work in real life. On paper it looks fine; but I am very confident, with the gentleman we have heading this, that this will be a well-run office and it will deal with complaints in a timely manner.

Senator Murray: When are the regulations coming in, minister?

Senator Fortier: As I said earlier, at the latest, by late spring.

Senator Murray: You have your deputy minister with you, and I think it is fair to ask; he does not need to be too specific about the source of the information, but there are concerns within the system that initiatives such as this are going to complicate governance considerably. Have potential administrative problems and complications been brought to your attention by your counterparts in other departments of government?

François Guimont, Deputy Minister, Public Works and Government Services: Not really. I have been dealing with Mr. Minto, supporting him in getting his office organized. We also have developed a memorandum of understanding between him and the department for administrative matters.

Senator Murray: The department?

Mr. Guimont: Yes.

Senator Murray: What about the other departments that are involved? Is there an interdepartmental committee?

Mr. Guimont: Not that I am aware of. I know that Mr. Minto has been around, in his preliminary work, in terms of getting a feel of what is happening out there in departments. He sat down with a number of deputies. We have had regular discussions. Beyond that, I am not aware. However, I know that he had discussions with deputy ministers a few weeks ago.

Senator Murray: Are they implicated in the drafting of the regulations, for example, or is that being done entirely in- house?

Mr. Guimont: No, there was interdepartmental consultation on the regulations. That is a standard process for regulatory development as per the regulatory process, so that did take place. However, you are right; Department of Justice lawyers did the actual drafting, which was supported by central agencies. There is a standard process for regulatory development.


Senator Ringuette: My first question is about the complaints process. I do not recall, when we were studying the bill, having wondered whether or not complaints could only be made by Canadian citizens, or if, because of NAFTA, American and Mexican individuals and entities are also able to file complaints.

Senator Fortier: No, only Canadian suppliers. There is a practical reason for that. We must not forget that Mr. Minto, the procurement ombudsman, must operate within certain parameters. These are low-value contracts. Take, for example, a law firm that is hired by a department to provide an opinion. It would not be a Mexican or an American firm.

These are low-value contracts that are usually awarded to Canadian companies. Therefore, only Canadian companies and individuals will have access to the procurement ombudsman.

Senator Ringuette: But there is nothing in the act that precludes an American or a Mexican entity from filing a complaint.

Mr. Guimont: Yes, it is in the act.

Senator Fortier: I believe that the deputy minister has a copy of the act. It applies to Canadian suppliers.

Mr. Guimont: There are no exclusions, but the text clearly states ``Canadians.''

Senator Ringuette: You said that you had opened two regional offices. According to Senator Stratton, that is what I should be asking you about, and I should be happy.

Senator Fortier: Is that what he told you? Did he whisper a question in your ear?

Senator Ringuette: Absolutely. He is an excellent colleague. Can you give us more information about the regional offices? Where are they located? How many employees are there? How did you decide on the location of these offices? How did you staff them?

I understand that you do not have all of this information at hand. Could you provide this to us through our clerk?

Senator Fortier: We can tell you where our offices are located. Each one has a small staff. There is one in Halifax, Montreal, Toronto, Ottawa, Edmonton and Vancouver. Just to give you an idea, if these offices are to run smoothly, then the employees should not be there; they should be out meeting with small suppliers to explain to them how they should go about dealing with the federal government.

Since I became a minister, I have had an opportunity to speak with a number of medium-sized companies. These suppliers tell me that it is complicated to deal with the government, that there is too much paperwork, that they find the interaction intimidating. It takes too much time for the small number of staff members in these small and medium- sized enterprises to understand all of the procurement rules that they must follow if they want to act as suppliers to the federal government. Therefore, they simply ignore us. That is bad news for us, because we would like to do business with them. With a large number of suppliers, the prices will be more reasonable and there will be more creativity around the table. People have solutions to offer us.

I have represented a number of small businesses. I know that they can be creative, they can come up with solutions and they have a short turnaround time. We do not want to discourage them, we want to encourage them to look at the opportunities that the federal government can provide.

We have six offices that are dedicated to providing small and medium-sized businesses with a better understanding of the opportunities that exist within the federal government and to supporting them in their bids for contracts with the federal government.

Senator Ringuette: Are the contracts posted on the MERX system?

Senator Fortier: Yes.

Senator Ringuette: An employee in the Halifax office will check the MERX system and will see the contracts. Then he will get in touch with small companies in the Halifax region.

Senator Fortier: No, the employee is not an agent representing small businesses. The employee will go to the Halifax Chamber of Commerce, and may even go to New Brunswick, to Prince Edward Island or to Newfoundland. He will meet with the members of the chambers of commerce, he will provide information briefings with the help of every means that is available to inform the small and medium-sized enterprises that MERX is available, for example, and that it might be of interest to them. Who is not connected to the Internet today? Even a small company with two or three employees is connected to the Net. There is room for improvement to the MERX system, and we are working on that, but it is already very effective. There is a system that notifies users by email.

Take, for example, a furniture manufacturer — and there are still some in Canada — if an opportunity that would be of interest for this manufacturer is posted on the MERX website, he will receive a notice by email. Rather than waste his time surfing the web to see if there are any openings in the furniture sector, he will receive a notification. That is the type of communications method that we have devised. However, it is not enough. But we still need to be proactive and attract small and medium-sized companies.

The work of these employees is therefore to ensure that the world of small and medium-sized companies is aware of our existence and of the opportunities that are available here in Ottawa.

Senator Ringuette: When did these offices open? I remember you telling us about your intentions last year. Did these offices open last year?

Senator Fortier: No, we opened them in the spring and summer of 2006.

Senator Ringuette: Almost two years ago?

Senator Fortier: Yes.

Senator Ringuette: How efficient are these offices?

Senator Fortier: That is a very good question. Do you want to know how we measure success?

Senator Ringuette: Yes.

Senator Fortier: Effectiveness is based on the information that is provided, on meetings, on the number of calls. We receive a lot of calls. At first, people were not aware that the service existed. All six offices did not open in the spring of 2006. We started with the office in Halifax. I attended the opening early in the summer of 2006. The other offices opened a few months later. Unless I am mistaken, I believe that all six offices were up and running by mid-2007.

The deputy minister regularly measures success according to the number of calls and the meetings that the employees have. There is a small staff in each office. We only need one person and a few assistants to answer questions and help people to master the tools that are required to do business with the federal government.

Senator Ringuette: How many people work in the Halifax office?

Mr. Guimont: I would say that we have either four or five employees there. The regional offices have four or five people doing the bulk of the work.

Senator Ringuette: I am looking forward to having more information.

Mr. Guimont: I will be happy to send it to you.

Senator Ringuette: I am having a hard time understanding how one person can provide a service to all of the SMEs in the four Atlantic Provinces, unless you hire a superman or a superwoman. I wonder how effective it can really be. Because of their mandate, should these offices not in some way be connected to ACOA in order to better connect with the businesses in the region?

I have quite a number of questions and I am expecting answers on staffing, et cetera.

Mr. Chair, must our questions only deal with the ombudsman?

The Chair: The main point of this meeting and the reason why the witnesses are here is to discuss the ombudsman, but go ahead and ask the question, and we will see.

Senator Ringuette: My first question relates to the sale of government buildings that were then leased to the department. I believe that this question has already been asked at committee, but all the same, I have my doubts when it comes to the cost effectiveness of this decision. Is it not always better to own rather than rent, be it a home or a commercial property? Could we be provided with the information relating to the sale and the leasing back of the same buildings where government employees work?

I have another question that relates to the Parliament buildings. Minister, I arrived on the Hill in 1993 and even at that time members had been told not to get too comfortably ensconced in their offices because they would soon be moving to make way for up-coming renovations.

At that time, the government had a deficit and they were playing catch up with the budget. We are now in better financial shape, but the Parliament buildings continue to deteriorate and there are nets installed on the buildings to keep the stones from hitting pedestrians who are walking by.

Can you tell us when this work will be proceeding? When are we going to repair the buildings in the parliamentary precinct?


Senator Stratton: Point of order, Mr. Chair. I leave it to the minister to answer the question, but it has absolutely nothing do with the ombudsman or procurement officer. I leave it to the minister to decide whether he wants to answer.

The Chair: Why not leave it to me to ask the minister if he should or should not answer? The question was posed with the qualification that it does not relate specifically to these items. I said: Pose the question and then I will ask the minister and the deputy minister if they wish to engage in this discussion. It is outside of the parameters of the invitation we sent to you.

Senator Fortier: Senator Day, it is part of my job and I am happy to answer both questions. Thank you, Senator Stratton, for trying to defend me.

Senator Ringuette: He whispers questions to me, but then he does not want me to ask them.

Senator Stratton: It had to do with the procurement officer and regional offices.

Senator Fortier: Regarding the sale of the buildings, Mr. Chair, this was absolutely necessary. The state of our office building apparatus is alarming. We have basically under-invested in these assets for decades. This is not a partisan issue; it is just a fact. Senator Ringuette spoke about people wanting to own their homes. No one owns their office. People own their homes, but no one owns their office.

There is not a more for-profit institution or industry than banks. They have all shed their downtown towers. Real estate is a specific niche that has to be run by people who know what they are doing. You need to invest in and maintain buildings. Governments around the world are revisiting whether they should own office buildings. We are not talking about museums or military bases but about office buildings. If we were to start with a blank sheet of paper today and wanted to house 250,000 public servants, we would not own the buildings. We do not need to own the buildings.

I am very proud of the transaction we struck, because in terms of the financial transaction, we got the best terms that anyone can remember, a vendor obtaining what people call the CAP rate, over the past 20 years. There are real estate conferences taking place where people are complimenting the federal government for the timing of the transaction.

We sold seven buildings. The transaction was supported by the bankers we hired to do the transaction, plus a third- party, independent opinion, so someone who was not hired to sell the buildings and had no incentive, someone who just looked at the financial terms. Any way you look at this, the book value of those buildings, in our books, was south of $1 billion. It was more like $500 million or $600 million. We sold the buildings for $1.4 billion.

Any way you slice the onion, we did a great transaction. We signed a lease with Larco Investments Ltd., which is a well-known, professionally run, B.C.-based company that will be around for a number of years. We do not need to own our buildings. It is complicated. When we attempt to invest in our buildings, it is not like the private sector, where the boss says ``get it done'' and someone gets it done. We have many boxes to tick. We have to go to Treasury Board, it comes back to the department, goes back to Treasury Board, and costs creep up. This is what happens. Taxpayers won a big victory when we sold those seven buildings.

We are actively working on the parliamentary precinct, Senator Ringuette. When you ask when we will get going on this, we are. There are people working on various buildings in the parliamentary precinct.


I will resume in French, since your question was in French. I apologize.

The West Block, for example, will be totally empty within 18 months, so that we can do the necessary work. As you know, these are heritage buildings, and this type of renovation requires the kind of attention and skill that would not be necessary for your house or mine because they are newer. Our government is committed to continuing with this work. Money has already been invested and set aside by Treasury Board so that the renovations can go ahead. The work will be done. I am sure that you will see the results within the next few years.

Senator Ringuette: I am delighted to hear that. If I am not mistaken, the renovations may take 20 years or so, because these are heritage buildings.

How many employees do you have? You must have a ``real property'' unit?

Mr. Guimont: Yes.

Senator Ringuette: How many employees work in that unit?

Mr. Guimont: I believe there are about 3,000 employees.

Senator Ringuette: You said earlier, minister, that the real property part of the department required a certain amount of expertise to ensure that it is properly managed. You have 3,000 employees working in a ``real property'' unit in your department. Are you saying that there is no expertise in that unit?

Senator Fortier: I am not only referring to human expertise. We must also be able to work quickly and stay on budget. The funding approval process is complex, which is understandable since we are spending taxpayer's money. There are a number of stages in the approval process before the work can even begin.

You don't really want to own any office buildings; you want to own your museums and your heritage assets. Twelve-story office buildings in downtown Montreal, Vancouver, and Toronto are not something to which you want to become attached. The banks no longer hang on to their buildings, everyone is getting rid of the bricks and mortar. It is too much trouble to manage, you need a special type of expertise and you have to be able to react quickly because it is too easy to lose money with them.

For example, as a former banker I can tell you that the taxpayers are on the winning end of any transaction that involves selling office buildings. When the lease is up, if we take the proceeds of $1.4 billion and invest them at a conservative rate of interest, then 20 years down the road, not only have we managed to pay the rent, but we also have a large balance of many hundreds of millions of dollars.

Now, you will say that you no longer own any buildings. That is true, you no longer own them. We kept buildings that no longer have any current value. I said earlier that the book value of some office buildings represents only the value of the land that they are sitting on. Bricks and mortar have lost all of their value. Some office buildings in Calgary had problems with their drinking water, problems related to asbestos. Here in Ottawa there are buildings with the same type of problems. Bricks are falling off and the mortar is disaggregating.

We are not necessarily very good at managing of all that. When the mortar starts to disaggregate, we have to act quickly. When you keep putting off the repairs, then not only does the mortar start to fall off, but the roof starts to leak, and repairs have to be made, and the federal government is not in the business of managing real estate.

Senator Ringuette: Does your new policy mean that the rest of the federal government buildings throughout the country will be sold off?

Senator Fortier: So far, we have sold seven buildings, a transaction worth $1.4 billion, which is enormous. I think we need to use our heads and let the dust settle before we proceed. The deal has just been signed, I made the announcement last summer but legally, the transaction was completed in October, which is less than one year ago. We will let that sit for a while, and see what happens to make sure that everything goes as planned.

For the time being, I have no intention of selling any other buildings. In any case, in view of current market conditions, I would not recommend to the Prime Minister or to my cabinet colleagues that we undertake another transaction, which would not be to our advantage at this time. But last year's sell was a spectacular home run, from a financial point of view and in many other respects as well.

Senator Ringuette: I will wait to see the figures and all of the information before agreeing that your transaction was spectacular.

Senator Fortier: All of the documents are public. I prefer to call it a ``home run'' which is related to sports.

Senator Ringuette: Okay, then.

Senator Chaput: I have two questions for the minister. The first one is a follow-up to the questions asked by Senator Ringuette about the regional offices. You said there would be an office in Ottawa as well as regional offices.

My question relates to the relationship that I believe should be created with the agencies for economic development that we have throughout Canada. For example, we have Western Economic Diversification Canada, which deals with the SMEs.

Could there not be some tie-in with regional offices in order to properly connect with small and medium-sized enterprises throughout Canada?

Senator Fortier: I think that you and Senator Ringuette have made very good suggestions. I am sure that our employees are in touch with the development agencies. We will make sure that it happens because the development agencies have a broader mandate, and in this area there is a lot of overlap. You are right when you say that people should communicate with one another.

Senator Chaput: I would go even further, minister. I would like to ask you to see whether or not there could be a more official link with the chambers of commerce and others, since these agencies have been there for a number of years and are very familiar with the environment.

Senator Fortier: We will take a look at that.

Senator Chaput: My second question is about official languages. You hire an ombudsman, you have support staff and executives. You have regional offices, you provide information and you will also table an annual report.

Do the regulations and policies provide for this to be done in both official languages?

Senator Fortier: No matter where we are located, we must be able to provide service to Canadians in both official languages. I am not saying that everyone who speaks both languages will be as bilingual as you are, or as are Senator Ringuette or other senators here, but there will be at least one person in each office who will be able to answer the telephone.

For example, in Edmonton we will have someone who speaks French and in Montreal, we will have someone who speaks English.

Senator Chaput: As I understand it, a complaint or a letter that is written in French will be reviewed by someone who speaks the same language?

Senator Fortier: That would be the case in the ombudsman's office. I thought you meant the regional offices. I was speaking about the procurement ombudsman whose office is different and who has nothing to do with small and medium-sized businesses. The procurement ombudsman's office will receive complaints and, of course, this will be done in both official languages and communications with the potential suppliers will also be in both official languages.

Senator Chaput: Are the regional offices supposed to be providing information?

Senator Fortier: The regional offices will communicate with the small and medium-sized businesses to ensure that they understand what opportunities are available with the federal government. These companies need this information, and it will help them to provide goods and services to the federal government's procurement sector.

Senator Chaput: Therefore, the regional offices will also provide their services in both official languages?

Senator Fortier: Yes.


Senator Nancy Ruth: I want to go back to the topic of regional offices. You said red tape was one of the issues for small- and medium-sized businesses. I am sure it is because they do not have the employees to train up and deal with this issue.

Can anything be done to diminish the red tape in Public Works for these smaller contracts?

Senator Fortier: The short answer is ``yes.'' We are trying to cut down on the volume of paper. Over the years, our standard contracts have grown. Senator Day will not take offence, but it is in part because lawyers have imported into these contracts various decisions and conclusions of judges; this clause is there because of that case and then there is the other clause. Finally, one finds oneself reviewing a very large contract sometimes for a modest type of potential good or service.

This is being reviewed. We are trying to be smarter with the Internet trying to do as much as we can via email. If there are a lot of documents, it is one thing; but if part of these documents could be filed electronically, then that is a big win for some of these small businesses. We are working on various fronts. We are trying to be commercial. As I say in the department, let us be commercial about this.

Yes, we need to protect the Crown and ensure that we have the right clauses in the contracts, but at the same time, I think we need to be practical about some of these issues. Mr. Guimont's team is revisiting this issue.

I think it is also indirectly part of what the Procurement Ombudsman will be doing, in my opinion. At one point, he may want to look at this and look at our standard contracts. He may ask if they are appropriate for small- and medium-sized businesses.

We are constantly trying to improve the system so that SMEs want to do business with us. We want them to want to do business with us. It is very important because everybody wins, and the taxpayer will ultimately win.

Senator Nancy Ruth: That is good to hear because a contract for $250,000 is different from a contract for $25 million.

My other question concerns measurement. You said one of the ways you measure the efficacy of these offices is on the number of calls, training sessions and so on. Will there be a follow-up to include how many of these potential clients obtain contracts?

Senator Fortier: We have that information. We measure the percentage of contracts awarded to SMEs by the federal government. We have been measuring this for years. Currently, it stands in the 35 per cent to 37 per cent range, but our definition of SME is very wide. It is the ``M'' that actually distorts the statistic because the ``M,'' as in ``medium,'' includes companies that have up to 500 employees. That is big. This is a government-wide definition. SME is not our definition. Everyone uses that definition across government. An SME is basically a company that has less than 500 employees. Some of these companies within that bandwidth are huge.

We are focusing more on the ``S'' than the ``M'' because the ``Ms'' have the ability. They are larger and they have more senior officers. Our people are focusing on the smaller ones, those that have less than 10, 15 or 30 employees.

Of the 35 per cent to 37 per cent, I am trying to detwin the ``M'' and the ``S.'' If you looked at just the ``S,'' the small enterprises, that number would be south of 30 per cent. It would probably be closer to 20 per cent. We need to do more work with small enterprises. We need to be smarter in the way we reach out to them and interest them in our business.

Senator Nancy Ruth: In these smaller enterprises, are your officers hearing stories that their clients may be getting excited about ideas to develop a new technology to service some requirement from some department? Is there any expression of creativity in that manner rather than doing what they are already doing, which is expansion?

Senator Fortier: Yes. They are happy to learn that there are SME offices that exist and that they are there to help them. That is the first level of excitement. The second level of excitement is to discover that the federal government actually has a wide range of opportunities for many of them.

This may come as a surprise to you — it came as a surprise to me — that many people out there do not know about these opportunities. With the entire apparatus, including military contracts, in the past 12 months — Mr. Guimont will correct me if I am wrong — we are north of $20 billion in terms of procurement opportunities. You take out the big pieces, but in terms of the smaller pieces, there is still a lot of money being handed out in terms of contracts that would be available to these SMEs. Some of them do not really know about these opportunities. That is why we are being proactive with these offices, meeting as many as we can through chambers of commerce and other groups to ensure they know we exist and they visit our MERX website to see if there are opportunities for them.

Senator Nancy Ruth: Do your officers go to universities, to business schools, engineering faculties, the new kids coming up on the block?

Mr. Guimont: Yes, there is a push in the federal government to re-engage with universities. As an example, I am the champion for the University of Ottawa, and a number of other deputies are champions for other universities. With that said, my commitment is not only to the University of Ottawa; I want my folks to be present on university campuses and colleges, frankly, in order to interact with people, with a view to ensuring that the federal government, Public Works in my case, is seen as an employee of choice. We need the talent. There is a recruitment prerogative, if you wish, to always get the best and the brightest. In doing so, we establish a relationship.

In the case of Ottawa U, the trust is not only one of recruitment. We will also be doing joint ventures. The same thing is true for co-op students. The programs you may be aware of are in Waterloo or in Vancouver. We take quite a few co-op students. I do not have the number, but it is in the hundreds. We have a relationship with universities, but there is an ongoing effort being made to augment that relationship.

Senator Stratton: My question to the minister goes back to the topic of regional offices, which in my day did not exist. We would try to compete for federal contracts. It was a lesson in frustration until one of our partners actually took a great deal of time to learn the process. It cost a fortune to do so because it virtually took a year to learn the process of how to properly put in a federal bid for work. It is good to hear that we have broken this down into regional areas now where the educational process can take place within the regions.

If someone puts a bid in and follows the process, or they think they follow the process but as a result do not succeed, can they come back to you and ask how they failed? Is that process in place in most or all cases?

Senator Fortier: It depends on the size of the contract.

Senator Stratton: Let us say for small contracts.

Senator Fortier: Yes. They will speak to the department.

Now they have the opportunity with the Procurement Ombudsman if they feel that there was a flaw in the process — I think there are two paths. First, if the person believes there is a flaw in the process and that he or she has been wronged, he or she can see the Procurement Ombudsman. If he or she lost the contract and is not alleging any wrongdoing but just wondering why, then he or she can speak to the department, depending on the size of the contract.

If Public Works awarded the contract, the person would speak to a procurement officer in Public Works. If Health Canada awarded the contract, because that department can award smaller contracts, the person would speak to someone in Health Canada.

Senator Stratton: Could you visit, email or phone the individual in the regional office?

Senator Fortier: You could, but ultimately that person would do what I just explained.

Senator Stratton: Would they help the person through the process?

Senator Fortier: Most definitely.

The Chair: I have a few questions that go to clarification of points that have been raised, and I am still interested in this issue of independence. A very important part of our work is to explore each of the agents to understand the degree of independence.

Just to put some of my questions in perspective, Bill C-2 received Royal Assent on December 12, 2006, and then September Mr. Minto was appointed as the designate. At that time, you came forward with a code of procurement. Is that why it took nine months? Were you working on that code at that time? Was that a widely consulted process? Did you talk to all the departments and industry?

Senator Fortier: Is your question why Mr. Minto was named as designate in the summer, or are you asking me why it took nine months?

The Chair: I am focusing more on the code of procurement. The law received Royal Assent in December of 2006. It was not until September of 2007 that we had any action on the file, and the Code of Conduct for Procurement was announced about September 19.

Senator Fortier: Mr. Minto, you will recall, was chosen after a search, so the search needed to be conducted, and I think it was conducted within a reasonable time period.

The code of procurement, and I am happy you raised it, is an important tool for public servants and for suppliers. We have the rules of engagement on paper. Again, this required consultation. We do a lot of the procurement, but we do not do 100 per cent of the procurement. Many departments still do their own procurement for small and in some cases not just small contracts, so there needed to be a wide consultation between departments on what the code would include.

Taking six or seven months to draft and take comments and then ensure that we have the right product, because it is will be there for a long time, is not unreasonable.

The Chair: Was that a public consultation or an interdepartmental consultation?

Senator Fortier: It was an interdepartmental consultation.

The Chair: The regulations came forward on December 22, 2007. We are anticipating that the regulations will be concluded, as you have indicated, in late spring of this year.

Will there be a public consultation process?

Senator Fortier: When the regulations were published in the Canada Gazette, we received several comments. They were published, as you indicated, December 22, 2007 and at that time, we received several comments from various sources within and outside of government. We extended the period, as Mr. Guimont reminds me, so there was wide consultation.

The Chair: I think it is important for the public to understand the reason behind the delay, and that is why I am giving you the opportunity to explain the process.

From the point of view of dollars spent, can you tell us what you anticipate the steady state will be for this Office of the Procurement Ombudsman once you have it set up?

Senator Fortier: The annual budget for the Procurement Ombudsman will be approximately $5 million.

The Chair: How much has been spent setting up this office?

Mr. Guimont: I believe $3.7 million was identified in the estimates. We re-profiled $1.4 million simply because the ombudsman was not consuming the cash at the rhythm the ombudsman would, since he was designated and the regulations were not place, for a total of $5.1 million essentially. This will be the ongoing budget of the office.

The Chair: The $3.7 million was anticipated in the estimates.

Mr. Guimont: Yes, and $1.4 million was re-profiled because it was not consumed. That is normal. That has been done through supplementary estimates.

The Chair: Of the $3.7 million, you did not spend $1.4 million.

Mr. Guimont: No, it is the other way around. Of the $5.1 million, $3.7 million was consumed as the ombudsman designate was setting up office, and $1.4 million was re-profiled. Therefore, the total ongoing budget for the office is $5.1 million.

The Chair: That is what we would be looking for ongoing, subject to any extraordinary things that might happen.

Can you tell me why the Canadian Space Agency has been excluded in the regulations?

Mr. Guimont: If I may, I think you are referring to the schedule, which is covered under the Financial Administration Act. My understanding is that as of this morning, pretty much everyone, including the space agency, is covered by the ombudsman provision.

Senator Fortier: It can be found in Schedule 1 to the FAA.

The Chair: I am looking at section 3 of the regulations that you generated December 22.

3. The Procurement Ombudsman shall not perform the duties and functions referred to in subsection 22.1(3) of the Act in respect of the following departments:

(a) the Department of National Defence for contracts for the Communications Security Establishment;

(b) the Canadian Security Intelligence Service;

(c) the Canadian Space Agency; and . . .

Can you help me with that?

Ian McLeod, Counsel, Legal Services Branch, Public Works and Government Services: I think we can respond that the reference to the Canadian Space Agency will probably, and I cannot speak for cabinet, of course, be reconsidered. I will leave it at that.

The Chair: Perhaps you should let cabinet know that we think it should be reconsidered. There is no reason for being excluded in the regulation that we had not seen when we accepted the legislation.

Senator Fortier: We received numerous comments from within and without government after we published this document. It will be taken into account, and I do not think you will be dissatisfied by the final regulations.

The Chair: You will forgive us for making inquiries about them.

Senator Fortier: You have an inquiring mind.

The Chair: When we had Mr. Minto before us, he pointed out that his authority to review the procurement of accommodations does not exist with respect to accommodations through leasing, lease purchase or outright purchase. Much of the discussion that we have had with respect to the work that Public Works or other departments might be doing with respect to leasing or accommodation will not fall within the purview of the Procurement Ombudsman of Canada.

Senator Fortier: That is correct, and the reason for that is those activities do not fall under the purview of the CITT. The logic was that in terms of a monetary threshold, we would basically mirror the CITT in the sense that those contracts that could go before the CITT would keep going to the CITT. Those contracts that could not go to the CITT could find a home in terms of complaints with the Procurement Ombudsman.

The Chair: The CITT is the Canadian International Trade Tribunal.

Senator Murray: I am curious to know the rationale for excluding leasing activity and that sort of thing. I heard what you said about the CITT. Do you understand the rationale? I do not understand the rationale for excluding leasing activity.

Senator Fortier: Currently, if a landlord has an issue with us as a lessee, he or she can go to the common-law courts. That is what it is. The landlord cannot go to the CITT, but he or she is able to go to common-law tribunals. That option is still available.

Senator Murray: Surely it is available to many other suppliers, too, of goods and services.

Senator Fortier: It is, but those that are over the threshold that we are discussing this morning can go directly to the CITT, which is a unique opportunity for them to discuss and vent their complaints. We wanted, through the Procurement Ombudsman, to catch those activities that were not covered by the CITT because of the monetary threshold.

Senator Murray: I understand. The explanation you have given is that the courts are available to someone who is involved in a leasing arrangement with the federal government, but there must be some other policy rationale for excluding them in the first place.

Senator Fortier: There is that, and also the monetary threshold. We do not sign leases for less than $10,000. Usually our leases are for multi-year, and hence the dollar figures that are involved would be higher than the dollar figures that would otherwise be covered by the ombudsman were this considered a good or a service.

Senator Murray: They are excluded from this ombudsman because they are excluded from the CITT. What I am trying to get at is the policy rationale, in the first instance, for excluding those arrangements from the CITT. I am sure there is a policy rationale. I would just like to know what it is.

Senator Fortier: I am not a CITT expert, unfortunately, but they are excluded from the CITT ambit.

Senator Murray: Do you happen to know, Mr. Guimont?

Mr. Guimont: No, and I would make a distinction between the word ``excluded'' and ``not covered by'' and ``the ambit of.''

I am not a CITT specialist either, but I know the CITT to this point has been dealing with procurement-type issues as opposed to leasing. Since there is a relationship in the act between the CITT ambits of responsibility vis-à-vis the ombudsman, right now the powers of the ombudsman, through the regulations and the act, are tied to procurement- type issues as opposed to leasing.

Senator Murray: There has been a fair bit of controversy — you are aware of that — about leasing arrangements that the federal government undertakes, and I wonder, other than the courts, what the recourse may be.

At some point we will get at the policy rationale, Mr. Chair, with the appropriate witnesses.

The Chair: We will put that on our list of the issues to explore further. We heard the minister's comment and have made note of that.

Could you tell me, please, if the Office of the Procurement Ombudsman of Canada is a separate office from yours, or are you making space available to that group?

Senator Fortier: I do not know what you mean by ``separate from yours.''

The Chair: I am going to the issue of independence again.

Senator Fortier: His office is not on my floor in the building. He has distinct office space that was provided to him by Public Works.

Mr. Guimont: We have provided the ombudsman with a separate office and we are establishing a long-term lease that will continue to be separate from the department. This is something that is important to us, to me, and also to Mr. Minto.

The Chair: I think the senators would be interested in knowing if Mr. Minto and his Office of the Procurement Ombudsman will be independent enough to determine the office size, the staff size, and who helps set the budget for that office.

Mr. Guimont: Mr. Minto has to operate within his set budget, as the minister explained, which is $5.1 million.

The Chair: Who sets that amount?

Mr. Guimont: Treasury Board sets that amount. This is the envelope of cash that has been provided to him, the same way as other ombudsmen are being provided with an envelope of cash to operate.

The Chair: Is there a group that says the Office of the Procurement Ombudsman should have $5.1 million, or does Public Works make that determination?

Mr. Guimont: That has been done through Treasury Board as opposed to Public Works.

Senator Fortier: There are precedents. Veterans Affairs, DND and CRA all have ombudsmen, offices and budgets.

Mr. Guimont: Within his budget, he has the flexibility to operate as a senior officer, so he will be doing that, and working within the parameters, which exist for any public servant or operation, human resources management or financial management.

I will be providing him, through the department, through a memorandum of understanding, with these services. I will be supporting him in those functions. The core of his people will be focusing on the core function of the office as opposed to carrying out administrative duties.

The Chair: Does he hold office at pleasure, Mr. Minister, or is he for a fixed term?

Senator Fortier: He will hold his office up to five years.

The Chair: Is that subject to removal for cause or at pleasure?

Senator Fortier: It is subject to removal for cause. He has a mandate. He signed a contract for a set number of years.

The Chair: It is going to the issue of independence again.

Senator Murray: Good behaviour?

Senator Fortier: At pleasure of up to five years.

The Chair: It could be two years?

Senator Fortier: No, it does not mean he cannot, but it is not provided.

The Chair: My final question goes back to your regulations, which I have had the opportunity to review. You may want to bring your lawyer in again. Section 16 and 17 of the regulations restrict the eligibility for making a complaint about contract administration only to the people involved in the contract, and so no third party can say there is something going on here.

Is there a reason for excluding third parties with respect to making a complaint in relation to the administration of contracts?

Senator Fortier: Because the regulations are under cabinet confidence, it is difficult for us to comment on these issues, because some of these issues have been addressed. In answering your question, I will tell you that we are trying to cast as wide a net as possible in terms of what the Procurement Ombudsman should be reviewing and how the complaints originate. When the final regulations are released, I think you will agree that we have done that.

The Chair: Thank you. I will take that as the fact that you are taking notice. This committee wondered about those particular sections that exclude the mandate of the Procurement Ombudsman with respect to contract administration. It is an interesting restriction that did not appear in the bill when it was being debated and passed and brought into law.

Honourable senators, are there any questions that flow from the questions that I have asked?

Seeing no questions, it is to me, on behalf of the Standing Senate Committee on National Finance, to thank you, Senator Fortier and Mr. Guimont, for being here and answering directly and forthrightly questions of this committee. We look forward to the full implementation of this important new statutory agent who will help not only the public and the public service, but also parliamentarians, to hold the government to account. Thank you very much.

The committee adjourned.

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