Proceedings of the Standing Senate Committee on
National Finance
Issue 31 - Evidence - May 13, 2015
OTTAWA, Wednesday, May 13, 2015
The Standing Senate Committee on National Finance met this day at 6:45 p.m., to continue its study of the expenditures set out in the Main Estimates for the fiscal year ending March 31, 2016.
Senator Joseph A. Day (Chair) in the chair.
The Chair: Honourable senators, this evening, we are continuing our study of the 2015-16 Main Estimates.
[English]
This evening we are very pleased to welcome officials from three different organizations. We will have the one panel for our designated two-hour period. That doesn't mean that you can ask longer questions; it just means we hope to finish within the two-hour time frame.
From Public Works and Government Services Canada we welcome Alex Lakroni, Chief Financial Officer, Finance and Administration Branch; Pierre-Marc Mongeau, Assistant Deputy Minister, Real Property Branch; and Lisa Campbell, Assistant Deputy Minister, Acquisitions Branch.
From the Administrative Tribunals Support Service of Canada — you will recall that we helped create that in voting for it on one of the budget implementation bills a while back — we have Marie-France Pelletier, Chief Administrator; and Luc Robitaille, Acting Director General and Chief Financial Officer, Corporate Services.
From Agriculture and Agri-Food Canada, we welcome Greg Meredith, Assistant Deputy Minister, Strategic Policy Branch; Pierre Corriveau, Assistant Deputy Minister, Corporate Management; and Kristina Namiesniowski, Assistant Deputy Minister, Programs Branch.
We also have a number of officials in the audience who are available to come forward and who will be introduced in the event that a question is asked, if you would prefer to have one of your support staff come forward. That's fine.
I understand each of the organizations has brief opening comments, and perhaps we can go in the order in which I have introduced the witnesses.
Alex Lakroni, Chief Financial Officer, Finance and Administration Branch, Public Works and Government Services Canada: Thank you, Mr. Chair, members of the committee. Joining me today is Lisa Campbell, Assistant Deputy Minister, Acquisitions Branch; and Pierre-Marc Mongeau, Assistant Deputy Minister, Real Property Branch.
I appeared in February to discuss PWGSC's Supplementary Estimates (C) for 2014-15. Today, I'm discussed pleased to discuss the 2015-16 Main Estimates.
[Translation]
With our broad mandate, PWGSC supports federal departments and agencies in the achievement of their mandated objectives as their central purchasing agent, real property manager, linguistic authority, treasurer, accountant, and pay and pension administrator. Our goal is to manage our business in a way that demonstrates integrity, accountability, transparency and adds value to our client departments and Canadians.
Sound financial management is a cornerstone of PWGSC. The department is committed to delivering high-quality central programs and services that ensure sound stewardship while keeping in mind the importance of prudent financial management. This is demonstrated by an outstanding management accountability framework assessment by central agencies regarding budget and investment management, financial controls and payments being made on time.
[English]
For the 2015-16 Main Estimates, PWGSC's net spending is anticipated to increase by $30.6 million from 2014-15 levels to $2.9 billion.
This increase is primarily related to the transfer of former Enterprise Cape Breton Corporation activities to PWGSC, an increase of $34.2 million, as per the 2014 budget implementation act. With this new mandate, PWGSC will be responsible for delivering and managing a benefits program for former miners, the long-term maintenance and monitoring plans for environmentally impacted lands, and the management of a diverse real estate portfolio encompassing over 800 properties.
Another variance to note is an increase of $57.5 million to cover the planned program of work to be undertaken for the rehabilitation of the Parliament buildings, including the Senate interim accommodation, West Block and its adjacent visitor welcome centre. PWGSC continues to develop and implement the long-term vision and plan on time, on scope and on budget. This important program will preserve our historic and symbolic Parliament buildings.
This increase is counterbalanced by the following decreases: first, a decrease of $28.8 million due to the savings generated from the measures identified in the 2012 budget.
As additional information regarding efficiencies, I would offer the following: The department remains on track to achieve its savings, representing a cumulative impact of $222 million by 2015-16. Furthermore, PWGSC is committed to delivering $178 million in annual savings starting in 2018-19. These savings will be generated by offering best-value services through key initiatives, such as modern government accommodation solutions and standards.
The second decrease is $18.2 million and is related to the completion of project stages as part of Phase II of the engineering assets portfolio. Phase II focuses on the repair and rehabilitation of major federal assets, such as bridges and crossings. PWGSC is the custodian of 19 engineering assets that constitute critical public infrastructure and that provide key benefits to communities and regions across Canada.
Over the last two years, PWGSC has delivered several capital projects and further expanded its understanding of this unique portfolio through a comprehensive and vigorous inspection regime and numerous portfolio studies. The decrease in funding reflects the wind-down of these projects.
Last is a decrease of $10.3 million due to the completion of planned activities for the pay modernization project. This project will replace the Government of Canada's 40-year-old administration system with a modern, commercial, off-the-shelf solution. Once fully implemented, this modern system will save taxpayers $78 million a year and will have created 550 stable jobs in Miramichi.
Keeping with our stewardship responsibilities, we seek whole-of-government solutions that are efficient and cost-effective while striving to deliver high-quality service to Canadians. There are many ways that PWGSC achieves this. For example, through a fair and open contract process, the Build in Canada Innovation Program matches innovations with the needs of federal departments. It helps small- and medium-sized enterprises throughout the country transfer new products and services from the lab to the marketplace.
Also in the area of acquisitions, the Defence Procurement Strategy aims to deliver the right equipment to the Canadian Armed Forces in a timely manner, leveraging these purchases to create jobs and growth and streamline procurement processes.
[Translation]
In the area of accommodation and real property services, PWGSC acts as steward for various public works such as buildings, bridges and dams, and national treasures such as the Parliamentary Precinct and other heritage assets across Canada. PWGSC also provides other federal departments, agencies and the Parliament of Canada with responsive and cost-effective real property services. These are just some of the ways PWGSC continues to foster innovation, achieve cost savings, reduce red tape and improve services. Thank you for your attention. My colleagues and I would be pleased to answer your questions.
[English]
Marie-France Pelletier, Chief Administrator, Administrative Tribunals Support Service of Canada: Thank you for the opportunity to appear before this committee. With me, as you know, is Luc Robitaille, Director General of Corporate Services at the Administrative Tribunals Support Service of Canada. He also acts as our CFO.
As you are aware, the Administrative Tribunals Support Service of Canada, or ATSSC, was established on November 1, 2014, with the coming into force of the ATSSC Act. The creation of the ATSSC is consistent with the government's commitment to improve the effectiveness and efficiency of its administration and operations.
[Translation]
The ATSSC is mandated to provide comprehensive support services and facilities to 11 administrative tribunals. This organization will strengthen capacity and modernize operations, while enabling us to better serve the needs of the administrative tribunals, thereby improving access to justice for Canadians.
[English]
With six months behind us, we can proudly look back and say that the ATSSC managed the commencement of its operations well and with minimal disruptions to our clients and to Canadians.
During those first six months, we have fully integrated and co-located corporate services teams.
[Translation]
In doing so, we have also been able to consolidate a number of legacy financial and human resources systems, and have replaced them with common platforms that will better enable our capacity to manage in these areas. We have also maintained secretariats dedicated to providing specialized core mandate services to each administrative tribunal we serve.
[English]
We have developed and begun to implement our governance structure, which allows for full participation of senior executives, in both corporate and secretariat services, in decisions regarding the overall management of the ATSSC.
Our governance structure also provides for the engagement of chairpersons at key stages on matters that may have an impact for their administrative tribunal.
[Translation]
We have conducted a rigorous budget allocation exercise through extensive consultation with secretariat executive directors and tribunal chairpersons. This budget planning process was very well received, as it demonstrated our commitment to meeting the needs of the tribunals we serve, while ensuring stewardship and probity in the expenditure of public funds.
[English]
We have also undertaken an operational planning exercise for the upcoming year of operations and will also undertake a strategic planning exercise to plan for the years ahead.
In this first year of operations and beyond, we are committed to monitoring ATSSC and tribunal requirements very closely so as to be able and prepared to respond to emerging needs responsibly.
Though we have made great strides since our creation, our work is by no means done. As the ATSSC continues to evolve into a fully functional, service-oriented organization, we remain committed to working with the administrative tribunals to support them in meeting their statutory obligations while respecting their independence.
[Translation]
Our continued success in meeting our mandate, while fostering an organizational culture based on service delivery excellence and engagement, requires sound management of our resources. As you may recall, the legislation that created the ATSSC included a provision for the resources of the tribunals to be managed through deemed appropriations following the ATSSC's coming into force on November 1. The creation of the ATSSC did not result in increases in funding; rather it was created within the existing budgetary envelopes for each of the tribunals.
[English]
Therefore, this represents our first Main Estimates for your consideration.
ATSSC's planned expenditures for fiscal year 2015-16 is $78.6 million. This includes $60.9 million requested as appropriations through these Main Estimates and $17.7 million in re-spendable recoveries through a vote-netted authority.
These planned expenditures and associated appropriations are consistent with amounts previously appropriated to the tribunals through estimates in 2014-15 and prior years.
[Translation]
Of these funds, 88.7 per cent is allocated to support operating expenditures, such as salaries, professional services and transportation, with the remainder to statutory expenditures, such as employee benefit plans. This spending will support the wide-ranging and important services that the ATSSC provides to all the tribunals it serves.
Mr. Chair, approximately $63.7 million is dedicated to programs directly supporting the mandate of tribunals.
[English]
These activities include the provision of expert core mandate services, such as research and analysis, legal support and registry services.
Approximately $14.9 million is allotted to internal services operations, which includes key support services such as IT, translation, procurement, finance, human resources and communications, among others.
As I've indicated previously, we will continue to monitor the budget and implement strategies to direct funds where they are needed the most in order to continue to be responsive and flexible to the needs of the tribunals, as well as to ensure that public funds are spent responsibly.
[Translation]
The ATSSC has taken strides toward putting in place a service-oriented organization that contains many promising opportunities. The organization is fortunate to count on dedicated employees who are fully intent on maintaining the administrative tribunals' outstanding reputation and the quality of the work they perform.
[English]
The ATSSC is committed to a vision of setting the standard for service excellence, efficient and effective operations, and support for improved access to justice for Canadians.
Mr. Chair, this concludes my remarks.
The Chair: Thank you. I'm sure there will be some questions, but congratulations on your first appropriation request. We're pleased that you're here.
I believe Mr. Meredith is next.
[Translation]
Greg Meredith, Assistant Deputy Minister, Strategic Policy Branch, Agriculture and Agri-Food Canada: I would like to take this opportunity to open the discussion on the 2015-16 Main Estimates for Agriculture and Agri-Food Canada.
As you mentioned, I am joined by my superb colleagues, Kristina Namiesniowski and Pierre Corriveau. We have other colleagues with us today who will also be able to answer your questions, if necessary.
I noticed that you have met with a wide range of departments and agencies here this evening. My remarks will be a little different. We are here to discuss the department's financial situation. But first let me provide you with some context.
The agriculture and agri-food sectors are important economic drivers for Canada. We are talking about sectors that represent over $50 billion in exports for Canada, namely, half of our primary agriculture, $100 billion for gross domestic product, close to 7 per cent of the country's entire economic activities, and about $14 billion in trade surplus.
[English]
Agricultural exports are at a record high level currently. Producer incomes and balance sheets are expected to remain very healthy for the foreseeable future. This year farm incomes are projected to be $13 billion, and the farm net worth on average exceeds $2 million. Meanwhile, global demand for food is increasing and expected to be 60 per cent higher by 2050, so there is going to be a tremendous demand for Canada's ability to feed the world.
To help the sector do that, federal, provincial and territorial governments have developed a policy framework to guide agricultural activities across the country, called Growing Forward 2 or GF2 in our parlance. GF2 has sharpened the focus from its predecessor framework on strategy investments that improve innovation, drive competitiveness and ensure market development for producers.
The estimates that you have before you reflect $2.3 billion in federal funding this year, and that funding includes monies that we would spend ourselves at the federal level but also our contributions to provinces and territories. That's an amount 50 per cent higher than our previous framework, so the government has worked very hard to ensure that there is considerable funding for provincial activities across the country.
GF2 is designed to help producers across Canada capture the new markets we expect to develop as demand for food grows, harness innovation, strengthen sustainability and boost competitiveness against aggressive competitors internationally.
GF2 does include a federal-provincial investment of $320 million over five years to help farmers sustainably produce their products. Sustainable agriculture contributes to profitability by safeguarding the productive capacity of the land. It enhances our extremely positive image as an economic steward internationally, and that helps maintain market access and open new markets as they develop.
Trade, as you can imagine, as you've already seen, is a key pillar of Growing Forward 2 and is in line with the government's very active overall trade agenda. Canadian farmers, depending on the sector they've involved in, export as much as 85 per cent of their production. We simply don't have the population to absorb what our farmers can produce, so exporting is extremely important.
Under GF2 we're investing $341 million in our AgriMarketing Program, which helps producers and processors market their products abroad.
[Translation]
The budget tabled last month indicates that the federal government has increased funding for this program by $12 million, while investing over $18 million to broaden the activities of our Market Access Secretariat. These activities include the services of new trade commissioners abroad and a more active and larger role in establishing international technical and scientific standards.
[English]
Today Canada has trade agreements that comprise nearly half the world's agriculture and agri-food markets. The agreements most recently entered into include one with Korea and one with the European Union, so opening important new markets on two separate continents.
The Canada-Korea Free Trade Agreement came into force at the beginning of this year and will level the playing field for exporters in our canola, beef, pork, and grain sectors by eliminating all tariffs, which are currently quite significant.
When the Canada-EU agreement is completed, Canada will be one of the only developed countries in the world to have preferential access to two of the richest economies in the world — the European Union and the United States. That's a considerable advantage over our competitors. Our industries have estimated that our agreement with the European Union will generate $1.5 billion a year in new sales to the EU.
As you know, the government is also actively involved in the Trans-Pacific Partnership negotiations. The TPP is extremely important to the government and extremely important to our department because it comprises 12 key countries around the Pacific Rim that represent 40 per cent of the world's GDP and a market of 800 million people.
To keep our products moving, last year the government passed the Fair Rail for Grain Farmers Act. That bill put into law clear and achievable solutions to ensure that Canada could continue to move our grain to market in a predictable, timely and efficient way. As a result of that effort, shipments from port this year are up 31 per cent over last year at this time and up over 25 per cent over the five-year average.
Innovation is a key part of our ability to continue to compete and a key aspect of Growing Forward 2. We increased our investments in innovation and science in GF2 by 40 per cent over the previous framework in recognition of the importance to the health of the sector.
Investments in the science cluster model have nearly doubled under GF2 to put greater emphasis on collaborative research and to leverage the resources and skills of others. Those investments of $127 million have leveraged an additional $60 million from industry in sectors from livestock through grain and bioproducts.
An important measure that we brought into force this year to support investment by the private sector is the Agricultural Growth Act, which brought in better intellectual property rights for plant breeders, which means that we'll now see greater investment in developing new varieties for Canadian conditions across the country.
Mr. Chair, this is good news for Canada's agriculture and food sector and for Canada's economy overall.
Thank you and the senators for the time. It's much appreciated, and we would be happy to respond to any questions you might have.
The Chair: Thank you. That was a very positive statement in regard to agriculture and agri-foods.
[Translation]
We are going to start with a senator from Quebec, Senator Rivard.
Senator Rivard: I have a question or two for Agriculture and Agri-Food Canada. I will then have some questions for Public Works and Government Services Canada.
In your presentation, you mentioned the transition costs for the Canadian Wheat Board. That program came to an end during the 2014-2015 financial year, correct?
Pierre Corriveau, Assistant Deputy Minister, Corporate Management, Agriculture and Agri-Food Canada: I would like to make a little correction. In 2012-2013, the government announced a transition program worth $349 million. The expectation was that the costs would gradually decrease after the transition period. The transition period is not over but the major part of the expenditure has already been committed. About $205 million have been spent. In the estimates before you, you will see that a sum remains for the Canadian Wheat Board.
Senator Rivard: It looks like a reduction of $6 million if you compare it with the other financial year.
Mr. Corriveau: In the Main Estimates, yes, but, last year, we added funds in the Supplementary Estimates (B).
Senator Rivard: What impact did the abolition of the single desk marketing approach for wheat have on Canadian producers as a whole?
[English]
Mr. Meredith: Just by way of background, the government announced in 2011 that it was going to remove what we call the "single desk." What the senator was referring to is essentially the Wheat Board's monopoly on the sale of wheat and barley. Up until that point, farmers would have to deliver their crops to the CWB if they were wheat and barley, and CWB would market them.
In removing the single desk, we've seen a great deal of investment in the sector. In fact, we just announced an investment of $250 million in acquiring the CWB just last month.
We've seen a 20 per cent increase in the number of licensed grain agents through the Canadian Grain Commission, and we saw greater investment in the wheat crop and cereal crop development in Canada last summer. Bayer CropScience Canada, for example, announced a $10 million investment in cereals development.
A great deal of entrepreneurial activity has been unleashed. The Wheat Board itself is building new infrastructure, new elevators where farmers can now bring their grain and sell it. So there is a new buyer on the market, greater competition for producers out West and their grain, closer opportunities to deliver grain and basically just a much more vibrant and competitive market as a result of removing the single desk.
[Translation]
Senator Rivard: I now have a question for Public Works and Government Services Canada. Do you have an idea of the percentage of vacant space that the Government of Canada owns?
Pierre-Marc Mongeau, Assistant Deputy Minister, Real Property Branch, Public Works and Government Services Canada: I could calculate it but I cannot give you an exact figure. But I will give you one percentage. There are two kinds of vacant space in buildings. There are buildings under construction; they are not considered vacant in our calculations. Our objective with buildings or with space that is ready to be occupied is under 4 per cent or 5 per cent. The latest figures are in that region. The rate is still under 4 per cent. It is between 2.5 per cent and 4 per cent on an annual basis. The way we operate is that, each time we receive a request from a department wanting to occupy some space, we look at our inventory of buildings that the government owns. We try to fill those buildings first. If the space is not available, we go into the market to look for the leases we need. We are a good deal lower than the private sector average in that respect.
Senator Rivard: When you last appeared, I asked you about the status of the conversion of the former Nortel building. The work was on the way to being finished. I think the Department of National Defence is going to be taking over that building. Is the work finished, or almost finished?
Mr. Mongeau: That is the Carling Campus. By 2019, 8,500 people from the Department of National Defence will be located there. There are three buildings that are not linked to each other. So it is a series of buildings, meaning that we can start work in one without having to wait for the first one to be completed. Unfortunately, we have recently done some more extensive testing and found that a part of the curtain wall is in poor condition. When we first looked, we saw that the panels were in poor condition, but we felt that they were good for another ten or fifteen years. We knew that we would have to replace them but we have just seen that some parts of the curtain walls in four buildings are in worse condition than we thought. So, instead of doing the repairs later, in a few years, when the buildings are occupied, we have decided to do them right away. That has an impact on our timeline and our budget. Phase 1 may go over a little, but, overall, we will still be able to meet the 2019 completion date.
Senator Hervieux-Payette: I have a question for Public Works and Government Services Canada, another for the Administrative Tribunals Support Service of Canada and another for Agriculture and Agri-Food Canada.
For Public Works and Government Services Canada, are we at the point of being able to find an administrative way to make sure that all subcontractors are paid within a reasonable time? Just this year, we were visited by a trade group, according to whom the major contractors working on government sites are paid in accordance with our standards. But they asked us for legislation. We did not need legislation in the past; they were paid on time. Administratively, would it be possible to make small deductions from the general contractors? They are not paying their subcontractors, the small- and medium-sized businesses in various trades. They use a huge amount of materials and, once they have reached their credit limit, the banks no longer loan them money. Are you dealing with this problem or am I going to have to ask you again next year? Are we going to have to pass legislation? I find that having legislation is not the smart solution. We have to figure out how to administer the payments and make sure that our small- and medium-sized businesses all across the country can be paid within 30 days of completing the work.
Mr. Mongeau: That subject is indeed on our radar; we have talked about it recently. I can say, Mr. Chair, that our contracts are with the general contractors, not with the subcontractors, unfortunately. Normally, we ask for a payment framework. As soon as we receive a request for payment from a general contractor, we take the time to check it, and if everything is in order, we make the payment within 30 days. At that point, the general contractor can pay his subcontractors as soon as he has received the money, so you have to allow 30 to 60 days.
In some cases, we have been able to reduce the timeframe to 45 days. With major contracts with some management companies, it is possible for the timeframe to be reduced. It is still a difficult problem to solve, even when we do a lot of follow-up. Each year, I meet with representatives of the Canadian Construction Association, but the fact remains that our contracts are not with the subcontractors. So we continue to put pressure on the general contractors.
Senator Hervieux-Payette: Mr. Mongeau, do not tell me that, given the interest rates available from the banks these days, the factor that is blocking the small businesses is just that they no longer have a line of credit. The interest rates for borrowing money to buy materials have never been so low. You could hold back 10 per cent of the payment if they do not pay their subcontractors. If you need advice, I will come and meet with you to show you how to make sure that people are paid within 30 days.
My second question goes to Ms. Pelletier. How many tribunals are you in charge of? How many staff members? On page 5, you list benefits. Are the famous sick days calculated under the current method or under the method that reduces them?
Ms. Pelletier: We provide support services for 11 federal administrative tribunals. They include the Canada Agricultural Review Tribunal, the Canadian Industrial Relations Board, the Canadian Cultural Property Export Review Board and the Canadian Human Rights Tribunal.
There is also the Competition Tribunal, the Public Servants Disclosure Protection Tribunal, the Public Service Labour Relations Board, the Specific Claims Tribunal, the Social Security Tribunal and the Transportation Appeal Tribunal of Canada.
In all, we have about 400 employees and we make payments for the salaries of about 190 tribunal members. That is the extent of our workforce.
As for the question about sick leave, honestly, I would have to check. Perhaps Mr. Robitaille knows the answer.
[English]
Luc Robitaille, Acting Director General and Chief Financial Officer, Corporate Services, Administrative Tribunals Support Service of Canada: The payments in terms of sick days are administered in line with the terms and conditions of employment set by the employment. So the collective agreements that are currently in place are what we respect and what we apply.
[Translation]
Senator Hervieux-Payette: My question now goes to Agriculture and Agri-Food Canada. I have been reading a little and I see that, with the Green Law, it has been necessary to legislate to force transportation companies to ship wheat. I have to say that is ridiculous.
On page II-46, in the French section of your estimates, we see that your operating expenses for 2013-14 were $703 million. If we look at 2014-15 or 2015-16, we see a difference of $150 million. How many people have you laid off? How did you make up for $150 million? That is a lot of money.
Mr. Corriveau: Yes, there was indeed a reduction in our operating budget. That was the last year of the impact of the deficit reduction action plan. To meet that objective, our department had to lay off about 600 employees. Much of the savings come from those layoffs.
We also had a reduction in our voted appropriation because of two exercises that are mentioned here. Some of the funds were transferred to the administrative tribunal that supports our department and, with our colleagues at Public Works, we are in the process of transferring the administration of our payroll to Miramichi. So, although it shows as a reduction in the department's budget, there is an increase for both departments, plus the creation of Shared Services Canada, to which we have transferred resources.
Senator Hervieux-Payette: But the biggest part of the budget is still the 600 employees who were let go.
Mr. Corriveau: Approximately, yes.
Senator Hervieux-Payette: I suppose that the famous food inspectors were among the 600 employees who were let go. Will the final report on the investigation of the beef out west that was contaminated because of self-inspection be applied to all packing plants, including pork and chicken? Apparently, there is also a big problem with complying with the standards recommended by veterinarians.
Can you tell me what controls you have over this self-regulation?
Mr. Corriveau: In financial terms, food inspection is the responsibility of the Canadian Food Inspection Agency, whose budgets are not part of Agriculture Canada's. So I could not give you any information about that. The simple answer is that none of our reductions affects the number of inspectors, given that —
Senator Hervieux-Payette: — you have no inspectors.
Mr. Corriveau: Right.
[English]
Senator Wallace: Mr. Lakroni, being from New Brunswick, I'd like to get a little more detail on the pay modernization project. The location of the new facility in Miramichi is obviously significant.
In your presentation, you said that this new system replacing what has existed will save taxpayers $78 million a year. I'm wondering: How do you measure that? What's that based on?
Mr. Lakroni: The simple answer to your question is twofold. Number one is that when you centralize, you reduce the operating cost of the Government of Canada. So duplication of managing the pay in 57 departments is going to be in one department. That's going to be PWGSC. I can give you examples of the efficiencies there, but just in the consolidation alone, there are savings there.
The other thing is leveraging the technology, so using a system that is more effective in responding to the users' needs. Basically, the users could get their own services for the simple HR transactions, which leaves basically a couple of transactions done by the employees. So there would be some automation, some self-serve, et cetera,
Senator Wallace: I'm sure it is more efficient, but I'm just trying to tie that back to the dollar amount you that have here. Improved efficiencies are one thing, but how do you equate that improved customer service to dollar savings? Is $78 million a number just pulled out of the air, or is there a spreadsheet that shows what comprises the $78 million in savings?
Mr. Lakroni: This $78 million is $78.1 million a year and distributed as follows. It's two components. I am going to give you the precise numbers. It's $10.8 million for the pay consolidation, for consolidating the workforce in one centre. The $67.3 million is based on the new pay system, which is the automation of certain processes, self-use, that type of thing. So these are the numbers. How we arrived at these numbers was through several iterations of calculations. These numbers were shared with Treasury Board Secretariat. They passed due diligence, several layers of it, and we are confident that these numbers are going to materialize starting in 2016-17, where both the consolidation and the system will be operating on a full-capacity basis.
Senator Wallace: You've indicated that when it's fully operational, it will employ 550 people in Miramichi. How would that compare to the number of employees that would exist today?
Mr. Lakroni: You mean government-wide or —
Senator Wallace: No. Is the 550 a reduction in —
Mr. Lakroni: The 550 is net new for Miramichi.
Senator Wallace: I realize that. They aren't in Miramichi now. I understand that. But with 550 jobs being created as part of this new, off-the-shelf solution pay administration system, how many have been employed in performing that function to date? Is it a reduction in total employee numbers, and if so, how much?
Mr. Lakroni: That number is difficult to basically give you a precise answer on because the hiring of employees comes from various sources. We offer, on a first-come, first-served basis, to employees from government departments who want to relocate to Miramichi. Those are priority basis. How many of those count in the 550? I don't have that precise number because we have an open competition. Preference is given to employees of the Government of Canada. When that is exercised, then we can consider employees who are interested in taking the job in Miramichi.
Senator Wallace: One more, if I could, chair. Another question I'll go to second round on.
I'm just trying to get a sense. Will the implementation of this new pay administration system result in a reduction in the number of employees? You don't have to give me the number, but will it result in a reduction in the number of employees that have been employed to this point to provide service under the existing system?
Mr. Lakroni: It is conceivable. The whole idea of consolidation and generating the savings is that there will be a lesser workforce, government-wide, doing the transactions of pay.
Senator Wallace: It's conceivable. It should be more than conceivable. I realize I'm not going to get a number from you, but is it fair to say that there has been or will be a reduction? Or do you not know?
Mr. Lakroni: The reason why I don't want to give you a number is because I don't have a number and because there are so many variables to determine that number. You have people who retire, you have attrition, you have so many variables. Instead of giving you an absolute number, I will say it's conceivable, and for the amount, I don't have it.
Senator Wallace: That's fine. Well, I'm not sure if it's fine, but I hear what you're saying. I'm trying to tie it back to the number you presented, that there is going to be an overall saving of $78 million. I'm trying to get a sense that's based on X number of employees no longer being employed, less square footage of office space occupied, greater efficiency in your system. That's it; I'm trying to get confirmation of that.
Mr. Lakroni: The answer is yes, and there is $10.8 million attributed to what you just said.
The Chair: No savings in salaries included in that $78 million?
Mr. Lakroni: There would be savings in salaries in that $78 million. That's the conceivable portion. The question of precisely how much, I can't tell you.
The Chair: That's as good an answer as we're going to get.
Senator Wallace: Yes.
Senator L. Smith: Mr. Lakroni, I have an easy question then maybe a tougher one. On page 3 it says that furthermore, PWGSC is committed to delivering $178 million in annual savings starting in 2018-19. These savings will be generated by offering best-value services through key initiatives such as modern government accommodations solutions and standards. That sounds like the type of answer Mr. Mongeau would be giving me.
The Chair: Do you want equal time?
Senator L. Smith: I'm sorry; I didn't realize it was you who asked that.
Mr. Mongeau: The innovation, Mr. Chair, is again twofold.
[Translation]
The first aspect is about restructuring. We have implemented what is called Workplace 2.0 and reduced office space. Formerly, per-employee space could go up to 21 m2. Today, with more contemporary designs, that space can be reduced to 18 m2 or even 16 m2 per employee.
Offices are more compact, meaning that it is possible to reduce space a lot, including wireless technology that is adapted to the new workplace. The first consideration is to design the offices with a view to optimizing the space.
Senator L. Smith: Does that include open spaces? Are there other types of space that can accommodate your staff?
Mr. Mongeau: Yes, exactly. The offices are smaller, but there is also common workspace in the rooms that are more easily configured or where the space can be separated into two.
In those spaces, we see people solving problems in the office by walking together in the morning, for example. We have decided to keep creating that kind of open space so that our employees and those from other departments can have access to different spaces inside the organization. The spaces are more modern.
When you look at what is being done in other countries, in Europe, for example, the trend is to about 21 m2. But in England, the space has been reduced to 10 m2 per person. So trends differ. Here, we consider that 16 m2 or 18 m2 makes for a reasonable space, as long as there are common open spaces around the offices where people can get together and have discussions. It creates a much more dynamic space.
That is why we use the wording you see in the text of the report, because we think that it is a major innovation and it is what allows us to make most of our savings over a number of years.
Senator L. Smith: Have you studied the impact of that approach on your employees' morale? I imagine you conducted a study to find out their opinions before coming to that conclusion. Can you tell us what the impact was on morale?
Mr. Mongeau: Thank you for your question, Senator. When you announce to someone that their space is going to go from 21 m2 to 18 m2, he does not accept it easily. However, when we know that a department wants to implement Workplace 2.0, we set up complete spaces in a building that employees can go and see so that they can better understand how they will be able to function in that environment.
There are all kinds of solutions. As I explained earlier, with the common areas, with the spaces where people can eat, the interest grows. We reduce the size of panels to let in more natural light from outside.
As for closed offices, a lot of people think that they will finally be getting one. Well, no, that will not be the case, because we are still going to be providing open offices, even for managers. This represents a change in our organization.
The people who are most often on the road will be located in the centre of the building and those who work more in their offices will be located around the outside. We are basing ourselves a lot on what is being done in other countries, but we also have our own team right here with the ability to respond to the requirements of different departments.
Will everyone like it? Probably not, but I have to say that I only hear from satisfied people.
Senator L. Smith: My question is still for Public Works and Government Services Canada. We have received a report from the Department of National Defence.
[English]
It says that the Defence Procurement Secretariat will supply timely, coordinated decision making and will work with key partners to streamline defence procurement processes.
[Translation]
As you know, there has been a lot in the news lately about Canadian Forces ships, aircraft and equipment. What kind of vessel are you going to build and what will your role be with the Department of National Defence?
For example, about four months ago, we found out on the news that it was impossible for one of our ships in the Pacific to carry food.
[English]
It was one of our supply ships. It was falling apart, and it was grounded and couldn't supply the ships. Now we don't have a supply ship because both supply ships appear to be in peril. The question is, as an example, how do we streamline so it's not going to take 10 years to get another supply ship to be able to supply our other ships? What impact do you guys have on the procurement process to streamline it so that we can cut down the lead time, make sure we get the right manufacturers, make sure the pricing and the people are not taking advantage of us from a manufacturing perspective?
Lisa Campbell, Assistant Deputy Minister, Acquisitions Branch, Public Works and Government Services Canada: Those are excellent questions, and I'm glad to address them both. First I will speak to the Defence Procurement Strategy and the specific example that was offered.
The Defence Procurement Strategy was announced last year, in February 2014, and the goal is to deliver the right equipment to the Canadian Armed Forces in a timely manner, leveraging these purchases to create jobs and growth in Canada and also streamline procurement processes.
The strategy is the result of a strong collaboration between industry and government, and by government I mean the Department of National Defence, Public Works, Industry Canada, Foreign Affairs. It represents a fundamental change in defence procurement. We have made a lot of progress since implementing the strategy. We established a secretariat that is responsible for coordinating all this work and doing some of the policy coordination. Value propositions for ensuring that there is jobs growth in Canada are starting to be applied to procurements. I will give you two examples. One is medium lift helicopters for the Coast Guard and the other is headquarters shelter systems projects, and it will continue to be applied in a systematic basis going forward.
Work is also under way to streamline procurement processes. We have a new governance structure in place at my level, at the assistant deputy minister level, at the deputy minister level and also at the ministerial level. We are also making final arrangements to increase the Department of National Defence's delegated contracting authority. They will have contracting authority for the lower level procurements up to $5 million so they can handle these themselves. These are more routine, and there is a fair volume of transactions at the zero to $1 million level, and they will do those themselves, with our support, of course.
I have a couple of key facts. In June 2014, the Department of National Defence put out the Defence Acquisition Guide to tell industry about the potential procurements that we foresee over the next 20 years. Industry feedback was very positive. They said this helps them plan their business case and prepare for these things, and a new iteration of the guide will be released this year. So every year the Department of National Defence will put one of those out.
Also, in December 2014, Industry Canada released something called a Value Proposition Guide, explaining to industry, "Here is how we expect you to conduct yourselves when we're trying to promote jobs and growth in Canada," and also to ensure a broad awareness in industry of a new approach of leveraging these major procurements to benefit Canadians.
Our priorities for this fiscal year are to focus on a whole-of-government, streamlined approach to managing procurements, and we also have a couple of major developments: One, the Department of National Defence now has in place an independent, third-party challenge function for high-level mandatory requirements. What I mean by that is that when they put in requirements that bidders have to meet, there will be a challenge function questioning those, making sure that, where possible, we buy off the shelf, that we aren't spiralling into years of R&D design something that doesn't exist. So, where possible, Canada will be buying off the shelf, and then sometimes tailoring these things for Canada-specific needs.
We are also establishing a defence procurement industry advisory group. We want to engage with industry early on. That will help tell us what capacity is available in Canada, what we need to go elsewhere for, what needs to be developed. Then we're also going to measure other performance, in other words, look at these procurements and make sure that the outcomes are what we're trying to achieve.
To the point you raised about Joint Support Ships, these are the ships that actually help and supply other ships that are in operation, both for combat and not in combat. The navy identified a couple of years ago that they need two support ships, with an option to build a third to replace the ones that were mentioned. They're called auxiliary oiler replenishment ships. These two ships will be built in Vancouver Shipyards as part of a non-combat package that they were awarded. Those are only going to be operational in probably 2020; the first ship will be built.
But the navy is also considering options to address the gap between the retirement of the existing ships, which is happening a little sooner than expected, and the delivery of Joint Support Ships. We can get help from allies. There is also the possibility of other ships that could be refitted to fulfill this function. They're looking at that right now. The budget for these Joint Support Ships, the two that will be built, is currently $2.3 billion.
I'm happy to answer any other questions.
Senator L. Smith: First of all, it seems like you have a lot of players when you have Defence, Public Works — who else? You have three or four players.
Ms. Campbell: Industry Canada.
Senator L. Smith: You have so many players involved in this process now. It would appear, then, that this took place because there are some weaknesses or holes in the procurement policy that existed before, and somebody needs help.
With the number of players you have involved, who makes the decisions? Is everything like a joint panel decision? You have so many players. It would appear that one of the challenges you face is who will make the decisions and what type of competition and leveraging will exist between the various departments.
Ms. Campbell: I'm happy to break it down in the function and roles of each. Public Works is responsible for acquisitions, for the actual procurement. The largest public spend in Canada is National Defence. They are the ones who set the requirements. Meanwhile, we also have Industry Canada, who is trying hard to help Canadian businesses — to help them innovate, to help them become part of the global supply chain. They do a lot of work in that area and they know Canadian industry well.
We also have the Department of Foreign Affairs and International Trade, which is trying to help Canadian companies be part of the global supply chain. So they do have a role, and the goal of all of this is to make sure we have a coordinated Government of Canada approach.
Earlier there was some discussion about small- and medium-sized enterprises. Public Works actually does a lot of work with small- and medium-sized enterprises. They get 40 per cent of the public procurements that we spend, close to $6 billion. We have six offices across Canada that help them. We want those companies to be able to avail themselves of opportunities in defence procurement — not only because it helps for jobs and growth in Canada, but also it helps give them a leg up in exports.
How decisions are made: There is project governance at the director level — so specific project governance to make sure it's on time and within or under budget, and also troubleshooting when issues arise. There is governance at my level. My counterparts in those other departments that I mentioned, we look at all of the procurements now, so basically the ones that were started some years ago and the new ones. I mentioned a couple where we're actually applying value proposition, in other words, how we are structuring this to ensure that, as much as possible, keeping open, transparent and competitive processes, we are providing opportunities for Canadian companies.
Then there's also a deputy minister's committee that looks at these, and then, as appropriate, ministerial working groups on some of the complex, high-profile projects. I can give you a couple of examples: The Maritime Helicopter Project has a ministerial working group. The Canadian Surface Combatant Project is another big one. That's 15 ships that will be built out of Halifax. It's a really important initiative. It's Canada's biggest public procurement.
We announced on May 1 that a request for qualification for firms is going to be put out. That has been posted now on Buyandsell, and it's essentially to invite firms to come in and identify themselves as combat systems integrators and warship designers. That process is already under way, and that will feature value proposition.
Senator L. Smith: Will Canadian industry be able to move fast enough to supply you the equipment before the equipment becomes obsolete?
Ms. Campbell: That's an excellent question. That's why we do so much industry engagement. For example, on that project, this big one, Canadian Surface Combatant, we have had 15 industry engagement sessions. I have been at some of them myself. We engage with them regularly, making sure they have capacity and making sure they're ready not only to do it by themselves but also, as appropriate, to partner with other companies and leverage their capacity.
Senator L. Smith: Thank you, chair. I'll give everyone else a chance. It's a fascinating topic. There are lots more questions we can ask. Thank you very much.
The Chair: I was wondering: The expertise that you're developing with respect to procurement for DND, are you using it for other government procurement projects?
Ms. Campbell: That's an excellent question. As I think my colleagues were saying, what Canada is doing is not unique. There are all sorts of international best practices, international contracting organizations. We actually are tapping into that expertise. What we're learning on the defence side, we're trying to apply on the non-defence side, because what the acquisition program procures is really quite varied. It's things to test vaccines; it's clothing for our men and women in the military. It's really very vast. So yes, we are applying those lessons.
I should mention, because you've raised it, that we are in the middle of a pretty big transformation process. We will be procuring a solution that will provide better information and services to our clients, suppliers and Canadians, and we're going to be using web-based access. Really, this is responding to businesses' needs. That's how businesses work now, and we need to react in the same way.
It's a $16-billion spend, overseen by our department. This transformation will support what we call the smart procurement approach: early engagement of clients and suppliers, effective governance, independent advice, and benefits for Canadians. It's also going to do something else that I think is particularly important. It's going to give us better data: What are the trends? How fast are we paying people? How fast are the procurements coming in? It will give us much more accurate analytics to allow us to adjust as we go forward.
Senator Eaton: Ms. Campbell, you are so articulate, but if we were going to war tomorrow, it seems to me we would be right back on our heels. I hope you don't mistake this; this is not an attack, but I'm stunned by the process. The process is year after year, we have the defence department. We went through this wonderful thing about the ships being built in Halifax, and other ships being built out West. It seems to me we never quite catch up. It would be so nice if, for once, when we had the generals here and the head of the navy, or you guys, you would say, "Yes, they are actually being built; yes, they are coming off the line in June."
The F-35s, we don't even hear about them anymore. I hear now we're fixing up the CF-18s to last to 2020. Does it never worry you guys what we would do if we went into a major war? How would we get ourselves up and going? Why does everything take so long?
Ms. Campbell: Thank you for the question. Some of what I described earlier is, quite frankly, government's efforts to do better at this. We recognized that some of these procurements take too long; sometimes they're over budget. It creates a trust and confidence issue, and we need better information earlier. Some of what was raised in the question is more appropriately answered by my colleagues at the Department of National Defence, but for the part that is Public Works —
Senator Eaton: Well, they turn to us and say, "Ah, but you know our colleagues at procurement, Public Works, they'll tell you everything."
Ms. Campbell: If I may, I'm glad to share some of the early successes that we have seen through the National Shipbuilding Procurement Strategy, which is a bit of a precursor to the Defence Procurement Strategy, which covers everything.
The National Shipbuilding Strategy was created a couple of years ago, and it's estimated to provide $2 billion in annual economic benefits to Canada and 15,000 jobs.
Senator Eaton: Believe me, but we have been through that and know how good it is. I'm just hoping that by the time the first ship is coming off that we keep on procuring, so we never find ourselves in a position where we have no supply ships, where we're taking CF-18s — which are how old now, 20 years old — and we're fixing them up to last until 2025. It's like building subways in Toronto — if only we'd start, but instead we keep on talking about it.
Ms. Campbell: That's an excellent question. One of the benefits of these strategies is that they are long-term. The NSPS is a 30-year strategy. Through a competitive process we awarded a combat package of work to Irving Shipyards, so it is a long program of work that can be planned to avoid the boom and bust problems, to ensure efficiencies over time and to allow us to see issues far into the future. So it allows a very detailed level of planning. There is the same thing with Vancouver where a non-combat package of work was awarded. Very detailed planning goes on years ahead and buying equipment in advance. It's called long-lead items, ensuring that you buy things like engines that you know you will need enough in advance that you can ensure continuity of work.
Senator Eaton: May I ask agriculture a question? Regarding the TPP, is the United States going to try to block our participation, or is our participation in the TPP assured? I don't see anything in the estimates here allowing for costs, or was that also apportioned last year?
Mr. Meredith: For the Trans-Pacific Partnership, no, there are no costs built into our estimates because the negotiating teams are part of our complement, but also the Department of Foreign Affairs and International Trade has a negotiations unit, and that's basically the expenditure for now.
I would never say that anything is assured. We are in a negotiation with 12 other countries. But you know that the government has made it a priority. We are at the table.
Senator Eaton: I know that, but I've also heard that it could be conditional, if President Obama doesn't fast track it in the Congress. Or if he decides he doesn't want us as part of the TPP, then can he keep us out?
Mr. Meredith: So far they have been very anxious to have us in. With respect to Congress, you're talking about Trade Promotion Authority, which allows for Congress to have an up or down vote on the acceptance of an eventual deal — it's not the deal itself at this stage. That got additional support in the Senate today with a package that the house leader put together with the democratic senators. We'll see if TPA comes forward, but we think it will eventually.
Right now, I would say that the President and maybe some of his colleagues in Congress have expressed a certain amount of concern about the pace of our negotiations with the U.S. I hesitate to suggest that that's putting us on the path of being outside of the agreement. I think there is quite a bit of domestic politics at work.
Senator Eaton: Why are we negotiating with the U.S.? Is it over our dairy products?
Mr. Meredith: No, it's the mode of engagement. There's a lot of bilateral negotiation that goes on. It's not all what the trade people would call pluri-lateral negotiations. But those negotiations en groupe do happen. For example, towards the end of the month, ministers will be getting together from all of the TPP nations to negotiate at once. We're working out, bilaterally, a number of aspects of the agreement.
Senator Eaton: It depends how we well we do with the U.S., whether we can go on to New Zealand and — ?
Mr. Meredith: No, it's not sequential like that.
Senator Eaton: Oh, it's not sequential.
Mr. Meredith: No.
The Chair: I haven't figured out how this is working either. Maybe just for the record, you might explain this. We were a little late coming in and expressing an interest in the Trans-Pacific Partnership. The United States was in there from the beginning with a number of countries. My understanding was that Canada would have to accept whatever those initial countries negotiated. All we're doing is trying to convince some of the initial countries about our position.
Mr. Meredith: Senator, those are pertinent points, but I would rather not go too deeply into them. I think they really lie with the Department of Foreign Affairs and International Trade and our own chief negotiator.
The Chair: It's from the agricultural point of view that we're interested in knowing, and in supply management. That's what we're dancing around here. We'd like to know what's on the table.
Mr. Meredith: Everything is on the table. Everything is being negotiated. As our minister has said many times, every country has sensitivities in these negotiations. I would hesitate to characterize the current negotiations as us trying to get into the TPP. There were a certain number of dimensions of an eventual deal that we've already agreed to, but there is a great deal that remains on the table for negotiation. I wouldn't quite characterize it as Canada trying to accede to a fully developed agreement.
The Chair: We will take your suggestion and bring in some other witnesses to help us.
Mr. Meredith: That will make me very popular, I'm sure.
Senator Eaton: I'm so popular tonight that perhaps I should cede my place to Senator Chaput.
[Translation]
Senator Chaput: My first question goes to the officials from the Administrative Tribunals Support Service of Canada. Ms. Pelletier and Mr. Robitaille, first, I must congratulate you. We have often wondered about this project in the past. But it saw the light of day in November 2014.
In your presentation, you said that you had established secretariats for each of these 11 tribunals. Did we not have them beforehand? If so, what is the difference?
Ms. Pelletier: Beforehand, the tribunal employees reported to the tribunals. Now, with the establishment of the Administrative Tribunals Support Service, all the employees who used to report to the tribunals actually report to us. We wanted to make sure that there would always be expert employees to serve the tribunals exclusively in their areas of expertise. When we say secretariat, we mean that employees who fulfill the mandate of the tribunals in those specific areas of expertise are always assigned to them. It is an organizational structure, an organizational arrangement that we have put in place so that, although all the employees have been brought together under one roof, it is clear that the tribunals keep the expertise of their staff and can call on them to help fulfill their mandate.
Senator Chaput: So we are probably talking about the same employees.
Ms. Pelletier: Yes.
Senator Chaput: The difference is in the structure?
Ms. Pelletier: Exactly.
Senator Chaput: In your presentation, you also said that you allow the chairs to participate in major decisions. In your 2015-16 Main Estimates, you list expenses of $17.1 million in payments to the chairs and to the tribunal members.
How many chairs are there? Is there one chair for each tribunal, meaning 11 in total? And what kinds of payments are involved?
Ms. Pelletier: I will check the figures to make sure that I give you the right answer. The amount of $17.05 million is to pay the salaries of the chairs and the members of the tribunals. So these are the salaries of the tribunal members.
Also, you asked me the number of chairs. There is one chair per tribunal, for a total of 11.
Senator Chaput: My next questions are for the officials from Public Works and Government Services Canada. They will be along the same lines as the questions Senator Wallace asked about payroll systems.
You say that the new payroll system will allow the Government of Canada to replace the outdated system by a modern solution. However, you state that there is already a reduction of $10 million due to the activities involved in this. How can there be a reduction in the appropriation with the system not yet in place?
Mr. Lakroni: Thank you for the question. I would like to specify that the savings I referred to are identified for 2016-17.
Senator Chaput: On page 3 of the French text, there is a mention of a reduction of $10.3 million.
Mr. Lakroni: The $10.3 million shows that we are spending less this year than we did last year. This year, we are spending $10.3 million, and last year, we spent $44.5 million. In 2015-16, we plan to spend only $34.2 million.
Senator Chaput: How is the amount allocated?
Mr. Lakroni: It is the cash flow from the project, because it is not linear. When we are putting a system in place, the planning stage if you will, we spend less. During the design phase, we spend less. The years when we spend more are in the implementation stage. I can give you the total cost of the project if you are interested.
Senator Chaput: The project is scheduled to be fully implemented in 2016.
Mr. Lakroni: Exactly.
Senator Chaput: The savings of $78 million will not start before 2016.
Mr. Lakroni: In 2016-17.
Senator Chaput: Very well. Thank you. I have another question for Agriculture and Agri-Food Canada regarding the AgriRisk initiatives. In your 2015-16 budget, you are seeking an increase of $5 million in the Main Estimates for those initiatives. What do these initiatives entail? What are the criteria you use to approve a project?
Mr. Corriveau: Last year, a little like what Mr. Lakroni explained in reverse, not a lot of funding was allocated. This year, given that this is the second year of the initiative, we expect to spend more money. My colleague in charge of implementing the program will explain the precise mechanics.
Kristina Namiesniowski, Assistant Deputy Minister, Programs Branch, Agriculture and Agri-Food Canada: Thank you, Mr. Chair. I will answer in English so that my explanations are clear and precise.
[English]
We have an AgriRisk program, and it is a program that, in the context of the GF2 framework, was a new initiative that government felt should be an important part of our framework. This program supports two streams of activity. One stream we refer to as research and development. What do I mean by that? We support research and development by providing federal-only, time-limited financial assistance to project proponents to undertake research and development activities related to the development of new risk management tools. We also have a stream of activity that we refer to as the administrative capacity-building stream, and that stream is cost-shared with provinces and territories. It supports pilot administration during early years of delivering new risk management tools.
One of the initiatives that our minister certainly refers to on a regular basis as one of the pilots that we're supporting through the risk management, the AgriRisk Initiatives program, is the Western Livestock Price Insurance Pilot Program. This is a new initiative that was developed between the federal government and the Western provinces where we've put in place a new risk management tool that supports the livestock industry in terms of offering price insurance. Through this program, we were able to provide support to that initiative, which is a pilot. As I've indicated, we're working with the provinces and the industry in assessing the impact that that tool is having on producers. To date, it's been a very positive initiative that has been welcomed by producers and has provided support to the development of an insurance tool that hadn't existed up to that point.
[Translation]
Senator Chaput: In terms of the pilot project, how many applications have you received? How many initiatives have you supported in Canada?
[English]
Ms. Namiesniowski: To date, under the stream of research and development, we have nine projects that we've approved to date. Under the administrative capacity-building stream, we have had one project that has been approved. This is a new initiative, as I indicated, that was developed and announced as part of our new framework. We're in the process of working with industry, and we're increasingly getting new demands that are seeking support through the program to fund different initiatives.
My colleague made reference to the fact that the funding profile for this program is ramping up, and there is a reason it's ramping up. When we first started it, we knew we would have to work with the industry to develop demand, and we're now seeing that demand increase. So we fully expect to be in a position to support additional projects between now and the end of the framework.
[Translation]
Senator Chaput: Have you turned down any applications so far?
Ms. Namiesniowski: I'm not sure whether we have turned down any applications, but I know that sometimes there are proposals —
[English]
I know there are proposals where we need to work a little bit with the industry to make sure it fits the requirements of the program.
[Translation]
Senator Chaput: I understand. Is there a limit in terms of the funding for your pilot project or other initiatives? And have you set a time-frame?
[English]
Ms. Namiesniowski: Again, from the point of view of the two streams of activities, on the research and development side, the parameters of the program allow us to provide up to $500,000 worth of support per fiscal year for a project. But that's an up-to amount, so it very much depends on the nature of the proposal and what is being requested and whether everything requested falls within the terms and conditions of our program.
[Translation]
Senator Chaput: Is that the maximum?
Ms. Namiesniowski: That's the maximum.
[English]
That's the maximum on the R&D side. On the administrative capacity-building side, we can make available up to $8 million per year in total, but we cost-share that with provinces and territories.
[Translation]
Senator Chaput: Does the private sector provide assistance?
[English]
Ms. Namiesniowski: In terms of the eligible applicants that come to us, they are not-for-profit, industry organizations and co-operative mutual insurance companies. They can be academic institutions. As I've said, on the administrative capacity-building stream, we cost-share that with the provincial governments, so they're often a partner. Our expectation is that the proponent is putting some of their money on the table, so we leverage. Typically, it's a 33-66 per cent cost-share.
[Translation]
Senator Bellemare: I will continue with a question for Agriculture and Agri-Food Canada. You gave us some good news about the opening up of markets and the increase in demand in the agricultural sector. You must surely have a strategic vision of the industry. Do you think that this momentum in the Canadian economy will promote intensive agriculture at the expense of local products? Or on the contrary, do you think that it could also give a meaningful boost to smaller producers who provide more specific products? Is your thinking neutral in terms of those two types of agriculture or do you have preferences in your programs?
[English]
Mr. Meredith: Thank you very much. I really appreciate the interest in agriculture. It is a very diverse sector in two senses. The size of farms varies quite dramatically, and the nature of the products that they're growing or producing varies quite dramatically; they vary across the country and within provinces.
There a couple of interesting trends which I'm sure you're familiar with. There does seem to be, in Canada and in most developed economies, a much greater interest in very specialized foods. So niche markets are growing either for organics or for new kinds of crops that weren't very popular a few years ago; suddenly they have become popular.
There is a great deal of interest amongst consumers in local food, and there's a great deal of interest in the provenance of food, how it is produced and processed, where it comes from and how it has been treated. In this framework, we've deliberately increased the flexibility for provinces to be able to target those kinds of industry, and they treat smaller farms differently than very large farms, just like we would do as a government with very small firms versus large firms.
There is a desire to connect the producer more directly with the consumer because that's what the consumer wants. We try to work on programs that give visibility through the supply chain, so producers understand where consumer tastes are evolving. We give provinces the ability to respond to things like local markets or the creation of niche markets and a variety of other small, tailored programs that respond to what consumers are looking for but don't know how to find.
[Translation]
Senator Bellemare: I am pleased with your answer since our province has a lot of those regional initiatives. My understanding is that you also support that type of agriculture, not just large-scale farming.
Mr. Meredith: No.
Senator Bellemare: I have another question for Public Works and Government Services Canada about the changes in operating expenditures. In the estimates, we see that the operating expenditures, which were $2.085 billion in 2013-14, declined significantly in 2014-15, and you are maintaining this downward trend in 2015-16 with $1.651 billion. At the same time, you are consolidating services. How do you pull off this feat of providing more services with a lower operating budget?
Mr. Lakroni: Thank you for the question. It is quite a technical question, but I will make it interesting, since the objective is the same. Two years ago, the Auditor General pointed out that the departments had to review the definition of capital, if capital expenditures were planned for in the operational budget. Capital was redefined, but not by the departments; the rules were established by the Treasury Board. The departments had two years to clean things up and transfer the operating funds to capital. The Department of Public Works has a lot of assets, just like the Department of National Defence, among others. So we were able to transfer about $250 million from operations to capital.
The second aspect is that some leases considered to be capital in nature were transferred to the same capital budget, because a lease can be either operational or capital. It all depends on the department's exposure. The good news is that, if you remember, a few years ago, we were often going back asking for funding through the supplementary estimates. At the same time, we used the opportunity to renew our formula for the funding for real property. We are now funded mainly according to realistic needs, meaning that the needs of the departments are assessed in a realistic way, rather than being based on forecasts. That has enabled us to request the funding as part of the current Main Estimates. There are about $90 million from the funding that we would have otherwise requested under the supplementary estimates. It is a mix of things.
Senator Bellemare: In the summary table listed in the Main Estimates, on page II-290, where we see $2 billion for 2013-14, the base for 2013-14 does not have the same definition as 2015-16?
Mr. Lakroni: In 2014-15, the base is the same.
Senator Bellemare: But in 2015-16, is the base different?
Mr. Lakroni: No. The base for 2014-15 is the same as for 2015-16.
Senator Bellemare: It's 2013.
Mr. Lakroni: Exactly, it's in 2013.
Senator Bellemare: How many employees did you have in 2013-14 and how many do you have now?
Mr. Lakroni: In the budget, I can tell you that we have almost 12,000 employees now; about 11,900, if I'm not mistaken. We had just over 12,000 employees before.
Senator Bellemare: Thank you for your answers.
[English]
The Chair: I have on my list for second round Senators Rivard, Wallace and Chaput, just following up on points that hadn't been cleared up previously. If at any time a question requires you to do some research or to send us back a letter, that's fine as well, too, especially if we're asking for tables and that kind of thing.
[Translation]
Senator Rivard: I would like to go back to Senator Hervieux-Payette's question for Ms. Pelletier. I want to make sure I understood your answer. The question was whether, in your budget requests, you factored in the policy changes regarding the compensation for banked sick leave. I think I heard you say that you were not sure, and you added that when you prepare the budget requests for the salaries of unionized workers, you rely on the existing collective agreement; in the case of non-unionized workers, you follow the wage policies established. What I am trying to understand is that you could not have accounted for the policy changes regarding the compensation of sick leave, because it is proposed in Bill C-59, which is at second reading in the House and whose pre-study we will start next week.
Am I to understand that you cannot ignore it because the bill has not passed yet? So it's not a matter of not knowing but rather that it cannot be taken into account? The question applies to all the departments. You follow the existing collective agreements, and if the decision is to change them unilaterally through a piece of legislation, we will find out when Bill C-59 is passed.
Ms. Pelletier: Absolutely. I will let our director of corporate services clarify that.
Mr. Robitaille: That's exactly it. The collective agreements in place today are the ones governing the application of sick leave, those that we follow and that we have considered in our budget request today.
Senator Rivard: I just wanted to clarify that, because the measure is proposed in Bill C-59. Thank you.
[English]
Senator Wallace: Mr. Meredith, a couple of questions for Agriculture Canada. I was interested in your comments about your Growing Forward 2 program — I guess you call it GF2 — and that is a sizable program indeed, as you're well aware, $3 billion over five years. You are now in your third year, and you're seeking an increase of $5.7 million in the current year. As you've described it, GF2 is available to promote competitiveness, market development and innovation in the agriculture field. Again, I understand it's a joint program between federal, provincial and territorial governments.
Are all of the provinces involved in that program? Are they all contributing to it?
Mr. Meredith: Yes; they are.
Senator Wallace: Obviously all the provinces are receiving some benefit from the program.
Is the federal government funding that would be part of the program allocated to the provinces on a fixed formula basis so that the provinces know when they put their money in what they will receive from the federal government?
Mr. Meredith: Yes. The formula is basically the percentage of the national farm-gate cash receipts that exist in a given province. That formula was negotiated with the provinces some time ago, and it still applies today.
Senator Wallace: Approximately what would be the percentage of federal contribution to the GF2 program versus the provinces and territories?
Mr. Meredith: It is 60-40, with 60 being the federal.
Senator Wallace: My sense of it from your comments is that you're pleased with the program. It has success and is assisting in the Canadian agriculture trade, but how do you measure the success of that program? Do you have a quantifiable methodology that you've used? I guess that's it. How do you measure the success of that program?
Mr. Meredith: Luckily, I just do the negotiations. My colleague will answer.
Ms. Namiesniowski: Thank you very much, Mr. Chair, for the question.
To clarify in the context of the Growing Forward 2 framework, we have a number of different types of programs. There are some that we refer to as federal-only programs that are not cost-shared with the provinces, and then there are those programs that are cost-shared with the provinces and delivered by the provinces, but delivered in the context of the framework agreement that's been negotiated with them.
In the context of this current agreement, a lot of work was done and continues to be done with the provinces on the question of measurement and how do we collectively ensure that we're getting the kind of outcomes that we believe are the right ones in the context of that significant level of investment.
Concerning what has been done, we've worked with the provinces and territories to develop what we refer to as a performance measurement framework. In the context of that framework, we have ensured there is linkage directly to the department's performance activity, architecture and our strategic outcomes. We measure at the outcome level, at the program level and at the individual project level. Through all of that, collectively, we're able to make a determination through the collection of data that is specific to different projects and at a program level whether we're making an impact.
This is a different model than what had been in place under the last framework, where there seemed to be more ability for provinces and territories to pick and choose what they were going to measure. This time we recognized there was real benefit in coming up with a standardized approach and the picking of specific types of indicators that we're tracking. We asked for feedback from the provinces on an annual basis. We have annual discussions with them where we actually talk specifically about performance. We also have some formal measurement tools that we deploy. In fact, in the context of the cost-shared programming, we are about to have a formal survey where we're going out and surveying recipients of program dollars to be able to get a sense of how the investments that have been made have had an impact on them in terms of making a difference.
We have something that's more robust than what we had in the previous framework. At the end of the five-year period, we'll have a much better sense of the kind of impact we've made.
Senator Wallace: It will be important throughout. At the end of five years, there may well be a desire to continue the program onward. Having that data to measure the success will be obviously helpful for politicians to make the decision.
Ms. Namiesniowski: Right.
Senator Wallace: Mr. Meredith, in your presentation you said that farm incomes are roughly $13 billion in Canada. If we were to look at those incomes over the last three to five years, what is the trend?
Mr. Meredith: The trend is definitely increasing. Forgive me for not knowing the exact growth over the last two frameworks, but the last three years have been record years for farm incomes. The trend is definitely positive.
A lot of that has been driven by a couple of important changes in the markets. Grains and oilseeds have come back in terms of prices. They're off their record highs of last year but still fairly robust. In the pork and beef sectors, we've seen a real turnaround. Pork producers were struggling in the past, say, 2008-11 period; likewise beef producers around the same period. A large part of that struggle has been the COOL legislation, the mandatory country-of-origin labelling in the United States. That shaves about a billion dollars a year off the sector. It has diminished our trade with the United States about 50 per cent and 36 per cent for cattle and hogs respectively.
That program has been running in the United States since 2008, and we were hoping very much to have a resolution of that very soon.
Senator Wallace: Have we seen a change in the export of Canadian organically grown products?
Mr. Meredith: Percentage increase, yes, but it's still a very small export market.
Senator L. Smith: Mr. Meredith, I sat and I listened, for example, to $50 billion export, 7 per cent of GNP farming, $13 billion, 60 per cent higher demand by 2050 going forward to strategy plan capturing new markets, innovation, competitiveness trade, 85 per cent of our capacity.
So Canada-EU you said $1.5 billion of agri-products potential. How do we gear up, and what role do you folks play in helping our country gear up to be able to supply the demand that is going to be out there and maintain our product quality?
I saw under your name that you are the assistant deputy minister for strategy policy. I'm not trying to pick on you.
Mr. Meredith: It's impressive, isn't it? Every day I wake up, I can't tell you.
Senator L. Smith: It is. I'm jealous; I'm just a senator.
Mr. Meredith: No. The sector is doing well — $56 billion in exports last year. I think the question you're asking is fairly strategic because we do worry about that exact type of thing — that is, negotiating a trade agreement, and then my colleague running a market access secretariat that deals with accessing those markets is not enough. The sector has to respond.
These are sophisticated operators. Producers are very well organized into commodity groups and associations that are preoccupied with issues like getting their particular commodity group ready for export markets. Our job, I think, is three or fourfold.
One is to negotiate the access and maintain it; one is to do some marketing on behalf of the industry. The minister has been all over the world on behalf of producers to ensure that the markets are developed and that there are opportunities there for producers. A lot of those missions are with producer groups and industry representatives. Some door opening has to go on.
Then we work closely with the associations. In the agriculture sector, there are a large number of commodity groups that are active globally. I will give you a small example. When you go to ministerial trade negotiation meetings in the WTO or elsewhere, the overwhelming number of stakeholders who attend are agriculture; out of 100, 90 will be from agriculture. They're very active and sophisticated.
We have a mechanism, again, through my colleague's responsibilities. We call them value-chain round tables. They bring everybody involved in a supply chain together to develop strategies. We act as a facilitator for them. So you will have input supplier, farmers, initial primary processors and final processors at the table. A lot of what they're doing is developing strategies for global trade.
Ms. Namiesniowski: I can also add in terms of what we do specifically on the programming side. We have programming that supports — Canada is doing very well, but we're very conscious that we can't rest on our laurels. There are other competitors out there that are also doing well and are nipping at our heels.
In the context of our programming, through the framework, there is a real focus on helping the industry to remain innovative. We have federal-only programming, as well as programming offered at the provincial level, that is focused on innovation and trying to drive our industry to continue to be more innovative going forward.
We also have specific programming in support of the industry's market-development efforts. The government's opening the door will bring the industry so far, but it's really important — the industry is the best place to actually get out there and sell their product. So we have programming that supports the industry directly to do that.
We feel that together with the government and the industry, that's two sides of the same coin, and you can't be successful without each of them. Through our programming, we provide support to the industry to be doing market development in the different markets around the world to help them support their product sales.
Senator L. Smith: Are you folks, and Ms. Campbell — you're coordinating with industry, groups, associations, et cetera. What about infrastructure? I guess industry plays a part in developing more infrastructure, but if you're suddenly going to increase your capacity by a major level — it appears that once the Canada-EU deal kicks in, you will have a big bump. With Korea, you will have a big bump. Are we going to be equipped, or are we going to "Growing Forward 3" and "Growing Forward 4" quickly, including our infrastructure requirements?
From the federal and provincial perspectives, there will be requirements for cash to make sure that not only industry will put their money in but also government will, through its various vehicles, have to put its money in.
I'm wondering where that thought process is at. Are we ready for it? You don't want the big wave to come and suddenly we get whacked. You want to make sure you're proactive. You know better than I do. Where are you?
Mr. Meredith: It's an excellent question because, last winter — not the winter just passed but a year ago — we ran into some major infrastructure bottlenecks — to the point where grain shipments were behind by 78,000 cars. A car carries nearly 100 tonnes of grain. That had to do with weather and capacity on both of the major railroads.
I have to say that we're very preoccupied by the infrastructure. So is the industry. We have a foresight group that sits down and regularly looks over the horizon to see where the pressure is coming from for more capacity.
The capacity that we're looking at is primarily rail. An average bushel of grain has to travel 1,500 kilometres to get to tidewater. We're looking at railroads, the inland infrastructure, the terminal infrastructure and increasingly port infrastructure. The sector has been investing a great deal of money in building port terminal capacity. All the major companies are expanding there. There are opportunities for railroads, ports and others to access the Building Canada Fund to develop P3s, and that's going on as well.
You've hit on a very important point. We have basically three — maybe four — but three major outlets for all of these products. One is south, of course; one is east, either through the Great Lakes, the Port of Halifax or the Port of Quebec; and one is west through Vancouver and Prince Rupert.
The overwhelming pressure right now is toward Asia because of the growth of incomes, populations and urbanization in Asia.
But you're right: We're talking about shipping a billion or a billion and a half dollars more to Europe. That preoccupies people who are concerned with the functioning and efficiency of the whole value chain.
The Chair: Ms. Pelletier, I'm going to give you the last word. In your presentation, you talked about a vote-netted authority. Could you explain for the record what you meant by "vote-netted authority"?
[Translation]
Or is this Mr. Robitaille's area?
[English]
Ms. Pelletier: In our case, the $17.7 million of vote-netted authority stems from the Social Security Tribunal. The Social Security Tribunal is largely funded by the Canada Pension Plan and the Employment Insurance program. The net vote provides the ATSSC with the authority to make recoverable expenditures up to $17.7 million on behalf of those two accounts.
Essentially, this means that the Social Security Tribunal operations are funded out of these accounts as opposed to funded out of the Main Estimates.
This is the arrangement that was made for the operations of this tribunal.
The Chair: You have $17-plus million at page II-2 of the estimate request here. Do you get other funds in addition to that which come from these two sponsoring agencies? Is that what you're saying? Am I understanding you correctly?
Ms. Pelletier: I want to make sure I understand you correctly. Just one moment.
The Chair: You talked about $17.7 million in re-spendable recoveries. That's $17.7 million you've received from these other funding departments that you have mentioned.
Ms. Pelletier: Exactly.
The Chair: Is that in addition to what you're claiming of $60 million total?
Ms. Pelletier: Yes.
The Chair: That's in addition to that?
Ms. Pelletier: Yes. So voted through the Main Estimates are $60.9 million.
The Chair: Yes.
Ms. Pelletier: And the authority to spend $17.7 million additionally as vote-netted revenue. This amount is exclusively directed to funding the operation of the Social Security Tribunal.
The Chair: But do you need to get that authority through —
Ms. Pelletier: Not through the Main Estimates, no. Let me just double-check with my CFO here.
Mr. Robitaille: For the Social Security Tribunal, the overall spending is estimated to be $18.1 million. There is $400,000 that we are asking for through these Main Estimates to be appropriated directly to us.
The $17.7 million is funded through the statutory votes for CPP and EI. We've asked Treasury Board and have received the authority to seek those resources through — once we have expensed for those resources, we would then seek a claim for reimbursement from the holders of those statutory votes.
The authority here being requested is not for that net vote component itself; it's simply for the share that is being appropriated to us directly.
The Chair: And because it's statutory, we don't need to see a transfer in here?
Mr. Robitaille: In the online tables associated with the Main Estimates, there is a table that depicts clearly that there are two amounts that are credited to our appropriations, totalling the $17.7 million, whereby those would be sought through the net vote sources.
The Chair: Is that the same wording that I see in the schedule attached to the Main Estimates, A-2, "Administrative Tribunal Support Services of Canada — Program expenditures and authority to make recoverable expenditures on behalf of . . ."
Mr. Robitaille: That's for CPP and EI operating accounts. Those are the $17.7 million, which we have.
The Chair: We normally like to be able to trace the money and know where it's going. That's part of our job here.
Mr. Robitaille: Absolutely.
The Chair: However, since the time is done, and my team is anxious to get home and watch a hockey game, I will call it an evening. Thank you.
On behalf of the Standing Senate Committee on National Finance, we thank you very much for being here. We have seen some of you before. At our next meeting we will be dealing with Supplementary Estimates (A). If you are in the Supplementary Estimates (A), we may well see you again. We will start in the afternoon on the budget implementation bill two weeks from Tuesday past.
Thank you very much. This meeting is now concluded.
(The committee adjourned.)