THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Thursday, November 22, 2018
The Standing Senate Committee on National Finance met this day at 1:45 p.m. to examine the Supplementary Estimates (A) laid before Parliament for the fiscal year ending Sunday, March 31, 2019.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: My name is Percy Mockler, senator from New Brunswick and chair of the committee. I wish to welcome all of those who are with us in the room and viewers across our country who may be watching on television or online.
As a reminder to those watching, the committee hearings are open to the public and available online at sencanada.ca.
[Translation]
I would ask senators to kindly introduce themselves, beginning on my left.
Senator Forest: Éric Forest, Gulf Region, Quebec.
Senator Pratte: André Pratte, from Quebec.
[English]
Senator Boehm: Peter Boehm, Ontario.
Senator M. Deacon: Marty Deacon, Ontario.
Senator Eaton: Nicky Eaton, Ontario.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
The Chair: I would like to recognize the clerk, Joëlle Nadeau, and our two analysts, Alex Smith and Shaowei Pu, who team up to support the work of the Standing Senate Committee on National Finance.
[Translation]
Honourable senators and members of the viewing public, the mandate of this committee is to examine matters relating to federal estimates generally, as well as Canadian government finances.
[English]
Today, the committee continues its consideration of the expenditures set out in Supplementary Estimates (A) for the fiscal year ending March 31, 2019, which were referred directly to this committee by the Senate of Canada on October 30, 2018.
Honourable senators and the viewing public, during the first part of the meeting today the Treasury Board of Canada Secretariat will give us an overview of the entire Supplementary Estimates (A) as well as their funding requests.
We welcome Karen Cahill, Assistant Secretary and Chief Financial Officer; Brian Pagan, Assistant Secretary, Expenditure Management Sector; Glenn Purves, Assistant Secretary Designate, Expenditure Management Sector; and Marcia Santiago, Executive Director, Expenditure Management Sector.
Also appearing before us to give us an overview of their funding requests in Supplementary Estimates (A) from Infrastructure and Communities, we have Nathalie Bertrand, Assistant Deputy Minister and Chief Financial Officer, Corporate Services; and Marc Fortin, Assistant Deputy Minister, Program Operations.
Thank you, witnesses, for accepting our invitation and for sharing with us why we should recommend your votes in the budget.
That said, I have been informed by the clerk that Mr. Pagan will be the first to makes comments, to be followed by Ms. Bertrand.
Mr. Pagan, you have the floor.
[Translation]
Brian Pagan, Assistant Secretary, Expenditure Management Sector, Treasury Board of Canada Secretariat: Thank you, Mr. Chair. I am pleased to be here today to present details on supplementary estimates (A) for fiscal 2018-2019.
I have a brief three-part presentation. First, I will explain where we are in the government’s budgetary cycle. Afterwards, I will present an overview of supplementary estimates (A) and give you an update on our progress on budget reform.
[English]
As we see on slide 3 of the presentation, we present the parliamentary supply cycle for fiscal year 2018-2019.
Since the beginning of the fiscal year, April 1, we have tabled the 2018-2019 Main Estimates in Parliament, and Parliament provided a full supply for these Main Estimates in an appropriation act that was passed in June 2018.
Thus far in the supply period ending December 10, 2018, we have tabled an annual financial report of the Government of Canada for the fiscal year 2017-2018. We have also tabled the supporting public accounts to close out fiscal year 2017-2018.
We have seen from the Minister of Finance a fall economic statement that provides an update of the forecasts and priorities for the government, and we have before us the 2018-2019 Supplementary Estimates (A) for which the appropriation act will be introduced in Parliament before December 10.
Looking ahead to the period from January to the end of the fiscal year, we expect to table Supplementary Estimates (B) toward the end of January or early February 2019. We expect to introduce an interim supply bill to begin the next fiscal year, and we would expect a budget from the Minister of Finance.
On slide 4 is a reminder about the organization of supplementary estimates. We are here today to discuss the document tabled in Parliament that included an introduction and summary of the amounts involved. It provided details on horizontal initiatives that encompass the involvement and activity of more than one department for which we have 22 discrete horizontal items.
We provided details by each of the organizations. There are 76 departments and agencies requesting funding from Parliament through these supplementary estimates, so they are broken out in detail by each organization.
Finally, the tabled document includes a proposed schedule to the appropriation bill that will be introduced by the government before December 10.
In addition to tabled material, I remind the committee and all observers about the significant amount of information also available online. These include updated forecasts of statutory expenditures; a breakdown of spending or estimates by departmental program or purpose; and all allocations from Treasury Board central votes, including the new budget implementation vote introduced in the 2018-2019 Main Estimates.
We also have listings of transfers between organizations and the InfoBase we presented to this committee that provides additional detail by department and by program on spending, on the distribution of employees across the country, on the planned results for departments, and on the achievements as a result of the public accounts information and the actuals that have now been recorded.
[Translation]
On page 5, you can see that supplementary estimates (A) total $7.5 billion for the 76 organizations submitting requests for parliamentary authorities. That amount represents an increase of 6.6 % over 2018-2019 authorities to date.
In addition, the supplementary estimates include a $600-million increase for statutory items.
[English]
Slide 6 presents the forecasted spending for 2018-2019 in a historical context. For instance, in terms of voted spending we will see an increase from $103.2 billion in 2016-2017 to a total of $121.1 billion as a result of Supplementary Estimates (A).
On slide 7, we see some details on the largest items in the supplementary estimates. There are 11 items summarized on side 7, each of which is over $200 million. They include $827 million for icebreakers for the Canadian Coast Guard; infrastructure and First Nations water projects for Indigenous communities; the new Champlain Bridge to which my colleagues from Infrastructure will speak, and a number of other items.
[Translation]
On page 8, if you consider supplementary estimates from the departmental perspective, you see that eight organizations take up 86 % of the total $7.5 billion. For instance, for $1,686 billion, you see that the Department of Indian Affairs and Northern Development represents 22 % of these supplementary estimates.
[English]
Turning quickly before concluding to the impact of estimates reform on supplementary estimates, as we see on slide 9 these supplementary estimates are the first to be presented to Parliament since the start of a two-year estimates reform pilot project designed to table the Main Estimates after the budget.
The pilot project resulted in two significant changes to the supplementary estimates. First was a reduction in the number of supplementary estimates from three, one in each of the supply periods, to two supplementary estimates for the fiscal year. Second was a significant reduction in budget funding in the supplementary estimates. The bulk of the funding for Budget 2018 initiatives will be allocated directly from the centrally managed budget implementation vote introduced in the 2018-2019 Main Estimates.
On slide 10, we have an update on allocations to date. Budget 2018 announced $7 billion in new spending. Some 43 per cent is now available to departments. By our next update we expect the total number of budget initiatives funded will be over 60 per cent.
The $2.9 billion allocated through the budget implementation vote was established in the Main Estimates. Some $104 million will be paid through other authorities for employee benefits, office accommodations and information technology services. The $137 million to be approved by Parliament through Supplementary Estimates (A) includes items such as $70 million for Canada’s commitments under the Food Assistance Convention and $25 million to address issues in pay administration.
We’re using the supplementary estimates for these budget initiatives as precise allocation or distribution of departments was not known at the time of tabling of the Main Estimates and, therefore, not included in the budget implementation vote.
[Translation]
In conclusion, the next step for these supplementary estimates will be the presentation of a supply bill to the House of Commons by September 10. We expect the president to table supplementary estimates (B) by the beginning of February, and afterwards, a supply bill for supplementary estimates (B), and finally, the main estimates for 2019-2020 will be tabled by April 16. Thank you.
The Chair: Thank you, Mr. Pagan.
Nathalie Bertrand, Assistant Deputy Minister and Chief Financial Officer, Corporate Services, Infrastructure and Communities: Good afternoon. Thank you for inviting Infrastructure Canada to speak with you today.
My name is Nathalie Bertrand, and I am the Chief Financial Officer and Assistant Deputy Minister of Corporate Services for the department. I am joined today by my colleague, Marc Fortin, the Assistant Deputy Minister of Program Operations.
[English]
I am here today to speak to you about our department’s Supplementary Estimates (A) tabled in the House of Commons on October 24, 2018.
Infrastructure Canada is seeking an additional $548 million to support departmental programs. The funding requested is to support delivery of the Infrastructure Canada Investing in Canada plan.
[Translation]
The first phase, which focused on the repair and rehabilitation of existing public transit, water, wastewater and social housing infrastructure, is well underway across the country. For the second phase, all 36 programs have been launched. At Infrastructure Canada, all provinces and territories have officially signed their bilateral agreements, and projects are already being approved.
[English]
To date, more than $18.5 billion in funding has been committed through the Investing in Canada plan. Thousands of projects are under way from coast to coast to coast.
To support the Infrastructure Canada program delivery, including legacy programs and those under the Investing in Canada plan, the department is requesting an increase of $548 million through supplementary estimates, bringing total authorities to $6.7 billion.
Included in this request is $57 million in funding for the New Champlain Bridge Corridor project, which was moved forward from last year’s budget to this year’s, was the $235 million paid for a settlement agreement between the Government of Canada and the Signature on the Saint Lawrence group. This supports the additional measures taken by the private partner to help mitigate construction delays caused by the transportation of oversized parts to the work site.
The department is requesting $210 million to assume the P3 Canada Fund commitments previously held by PPP Canada and $43 million in funding for the Disaster Mitigation and Adaptation Fund.
The department is committed to regularly updating Canadians on the results of our investments. We do this through several means.
Our online geomap provides information on projects announced across the federal government under the Investing in Canada plan.
Our new data table shows the funds reimbursed to our project partners to date.
The Open Data portal provides information on the progress of the projects INFC has supported through our programs.
We have posted the signed bilateral agreements and the minister’s mandate letter on our website.
Our funding decisions are announced through local events and social media.
Signs are posted at federally funded project sites to show Canadians where we are investing in their communities.
[Translation]
The department will continue to report back on the results of our investments as we deliver the programming and funding that are key to the future of Canada.
On that topic, I would like to speak briefly about the flow of federal funding to our partners. Infrastructure Canada has been working closely with our partners to explore how we can improve the timeliness of the flow of funds, to ensure payments are made as construction work takes place, otherwise known as “progress billing”.
[English]
Progress billing means that we will make payments to provinces and territories based on the construction work progress information provided to the department. It will result in payments that better align the flow of funds to construction activities.
By changing to a progress billing funding model, the initial payment will be made sooner. Over time, progress billing is expected to provide better alignment of federal investments and accounting to economic activities taking place in real time.
[Translation]
Thank you for inviting us to speak with you today about the important work Infrastructure Canada is doing on behalf of Canadians. We would be happy to answer any questions you have.
The Chair: Thank you very much, Ms. Bertrand.
[English]
I would ask Senator Neufeld to introduce himself.
Senator Neufeld: Richard Neufeld, British Columbia.
Senator Marshall: My first question is for Mr. Pagan who mentioned vote 40 in his opening remarks.
I know the information is on the Treasury Board website because I’ve been looking at it. There are projects for six departments. When the funding was approved in vote 40 it received parliamentary approval, but it also shows up in the Supplementary Estimates (A). It is back for parliamentary approval again.
Could you explain why that is happening.
Mr. Pagan: In the 2018-2019 Main Estimates, we included for the first time in 10 years a central vote, a budget implementation vote, intended to provide the funding for the initiatives announced in the budget.
We have an annex in the budget that itemizes by department the initiative and the amount the government expects to allocate. We took that information and replicated it in the estimates.
If you refer to that table there is a listing by department. For Veterans Affairs there are two initiatives. One is for better services for veterans and one for cemetery and grave maintenance. There are specific amounts identified for each. We do that for all other departments receiving money.
At the bottom of the annex there is something called “allocation to be determined.” That was intended to reflect the fact that certain initiatives were not yet known. We now see in the supplementary estimates the actual disposition: which departments and the amounts of money they are receiving. We couldn’t with precision in the Main Estimates identify where the money was going, so we did not allocate that money to departments.
We are using Supplementary Estimates (A) now that the initiatives are known. We are bringing these initiatives to Parliament for approval. An example is $25 million in funding to departments to support pay administration.
Senator Marshall: Yes, I know that one.
Mr. Pagan: This is in response to challenges with the Phoenix pay system. There was a process designed post-budget to develop a formula to allocate money directly to departments so that they could in turn hire temporary staff to help with the backlog and work with PSPC to work through the Phoenix challenges.
Senator Marshall: The intent of vote 40 was to try to get these Budget 2018 initiatives out to the departments so the departments could implement them.
In his report on Supplementary Estimates (A), the Parliamentary Budget Officer is comparing the progress with moving the vote 40 money out to the departments for action. He is comparing it to what happened in the previous year. He is actually questioning whether the changes to the implementation of vote 40 achieved the desired result of expediting the government’s implementation of the budget initiatives. Could you address that?
Mr. Pagan: I welcome the opportunity to clarify what were the intentions around vote 40. In no way was vote 40 intended to be a shortcut in terms of the development and approval of submissions.
In that budget implementation vote we were aspiring toward complete consistency between the budget and what the government says it would spend in the budget, and the Main Estimates and what appropriations Parliament would support.
In this way the Department of Finance indicated a total of $7 billion available in the budget to support a range of programs and services, most of which were specified with some precision.
Senator Marshall: Yes.
Mr. Pagan: Therefore, the appropriations to support government programs through the Main Estimates sought funding for those amounts.
The wording of the vote prevented us from allocating any money to any department that was not specifically named in the budget. This is why we’re seeing the money for Phoenix now.
In terms of progress, at the time of tabling the Supplementary Estimates (A) 43 per cent of the money was allocated. Now 45 per cent of the money has been allocated, and we will have an update in a couple of weeks. We’ve had seven updates that have showed good and steady progress in allocating the money.
We will have another way of looking at the number of initiatives funded in our next update. Because there are instances where the amounts indicated in the table and the actual amounts of money departments require will vary, it can create an anomaly or a misconception in terms of whether or not departments are moving forward with the agenda.
By the next update over 60 per cent of the budget initiatives will have been funded through this budget implementation vote.
Senator Marshall: If a budget initiative has $5 million attached to it but now it’s determined they would like to have $6 million, does that mean you can actually move out $6 million as opposed to the $5 million?
Mr. Pagan: No, the vote wording was very precise. It restricts us from allocating any money to anyone not named in the annex or to amounts in that annex. We cannot exceed the amounts listed in the budget implementation vote.
What does it mean? If an initiative for which the Department of Finance had set aside $10 million and the department, in standing up the program and in working with its partners, civil society or other levels of government, et cetera, determined that this year it would only need to access a portion of the money for one reason or another — let’s say $2 million — we would only allocate the portion needed. The remaining funds would stay in the vote, and like any other vote in an appropriation act the money would lapse at year end.
Senator Marshall: That was to be my next question. I don’t expect you to move all the money out. There will be some residual there, whatever the amount, but that will not be transferred out to be used on something else. That money will actually lapse.
Mr. Pagan: It will. We are expressly prohibited by the vote wording to use that money for any purpose other than what is listed in the acts.
Senator Marshall: One of the transactions that I am interested in is the purchase of the Trans Mountain Pipeline. I think the cost to government was $4.3 billion, and then it went through the Canada Development Investment Corporation.
Why does that not show up in our supplementary estimates?
Mr. Pagan: Let me see how I approach this one. To this point, the initial purchase of Trans Mountain has been done through a Crown corporation. It is being recorded in the accounts of the Government of Canada as a non-budgetary transaction. We have purchased an asset.
Senator Marshall: Is it in Supplementary Estimates (A)?
Mr. Pagan: No, because we don’t require appropriations to be able to do this.
Senator Marshall: Is it not considered non-budgetary?
Mr. Pagan: It is considered non-budgetary.
Senator Marshall: But it doesn’t show up in any of the non-budgetary allocations.
Mr. Pagan: Marcia Santiago is updating me here. Export Development Corporation is using existing statutory authorities to be able to make loans.
Senator Marshall: Did Export Development lend the money to Canada Investment Development?
Mr. Pagan: That’s right.
Marcia Santiago, Executive Director, Expenditure Management Sector, Treasury Board of Canada Secretariat: The authority belongs to the Export Development Corporation. I believe the Canada Account belongs to EDC. It is an authority of EDC. The overall authority is actually EDC.
Senator Marshall: From where is the Export Development Corporation getting the funding? Are they borrowing it?
Ms. Santiago: I don’t actually know where the exact cash comes from, but the authority for the non-budgetary transaction is within their existing statutory authority for non-budgetary transactions. Because EDC only has statutory authorities, we haven’t listed them in estimates in a very long time.
Senator Marshall: Why do the transactions relating to Trans Mountain that I am aware of show up through two different corporations?
Trying to trace the transactions and the amount is a challenge. Why is the guarantee through the Export Development Corporation, yet the purchase of the pipeline is through the Canada Development Corporation? It looks like different transactions are occurring in different places so that you can’t put the picture together.
Mr. Pagan: It’s a very complicated transaction that has been led by the Department of Finance. We would have to get back to you with a bit more detail in terms of the structure of the deal, but grosso modo Export Development Corporation exists to provide loans and backstop. They’ve used that authority as the initial vehicle, and Canada Development Corporation will actually have the day-to-day management.
Senator Marshall: Could you provide that to the committee? I know $4.3 billion paid because I got that from Kinder Morgan. Also there was a $1 billion loan guarantee through Export Development Corporation. Then I saw $1 billion in financing for something else, which might have been done through the Export Development Corporation.
Could you provide us with all the transactions associated with Trans Mountain, the acquisition of that pipeline, and the work that has been carried out?
Mr. Pagan: We’ll certainly follow up with our colleagues in Finance and provide an explanation of the structuring of the deal.
The Chair: Mr. Pagan, for purposes of clarity, would you please look at the question precisely to see whether other areas of government are implicated in this transaction so that we can have more accuracy on it?
Mr. Pagan: Certainly.
The Chair: Thank you.
[Translation]
Senator Pratte: My first questions will be about the Champlain Bridge file, administered by Infrastructure Canada. I understand why a request is being made through supplementary estimates (A). Recently, there were developments in the Champlain Bridge file, and I would like to know whether you have some idea of the financial impact of those changes, that is to say that the bridge, according to what we have been told, will not be ready on December 21, 2018, but rather in June 2019. There is also a new concept, because we were told that the bridge would be substantially complete on January 28, 2019. I don’t know exactly what “substantially complete” means, but never mind. Could you enlighten us about the potential negative or positive financial impacts these recent changes may have on the government?
Marc Fortin, Assistant Deputy Minister, Program Operations, Infrastructure and Communities: Thank you for your question. With regard to the Champlain Bridge and the figures presented to you today, you have to go back to 2016 and 2017, when several events took place in the context of this important project. You have to understand that the Champlain Bridge project was brought forward by three years. We had to accelerate things when we began the infrastructure construction process.
Certain events occurred during 2016-2017. There were two specific objectives for the amount of $235 million presented today. The first was related to the issues and disagreements about transportation and access to Quebec highways at the time. We had to include mechanisms in the SSL consortium contract to offset these disagreements and claims. Afterwards, in 2017, there were a series of strikes on the different sites. There was a negotiation period with the consortium to solve all of these issues.
The purpose of the second step, among others, was to devise acceleration measures to increase the number of workers and establish accelerated work shifts on the site. At certain peak points, there were more than 1,600 people working on the site. This led to additional costs.
Those are the figures you see before you today. We are talking about figures and activities that took place in 2016 and 2017, and were resolved during negotiations in the spring of 2018.
Senator Pratte: I understand very well, and I am not necessarily complaining about the delays. I monitor this project very closely, because I often drive through there, but I still have questions on the potential financial impact of these changes, since the project was supposed to end December 21, and for all kinds of reasons, it will now end in June. Is that going to cost the government more money? Will fines be imposed, or do you not know that at this time?
Mr. Fortin: A contract is in effect at this time. That contract includes penalties if necessary, but obviously, when these last events occurred, the figure I gave you earlier referred to events that took place in 2016 and 2017. Other things happened after 2017. These events—I think this was the point of your question regarding impacts—are being discussed at this time by the consortium and Infrastructure Canada. Whenever we have held such discussions with the consortium, the department and the various partners very transparently addressed the media and the figures were put on the table.
The work being done now subsequent to these last events will follow the same process, and we will be able to release the nature of the discussions at a certain point.
Senator Pratte: Can you lighten me about the substantial completion of the bridge concept?
Mr. Fortin: I can try, yes. When we talk about substantial completion, there are two concepts at play which you may have seen in the media: being able to cross the bridge in one’s car, and the closure of the structure as such. Approximately 91% of all of the slabs are in place on the bridge. The bridge should be closed at the end of December, which means that we can then invite you to walk on the bridge, but it will still be closed from a structural point of view. Those are the two concepts you are referring to.
Senator Pratte: So, once it has been substantially completed, you will still need to pave the road.
Mr. Fortin: Unfortunately in Canada, winter is a factor. Everything that involves the watertightness of the asphalt poses certain challenges because of temperature fluctuations which prevent us from going further, as we would like to at this time.
[English]
Senator Eaton: It is nice to see you again, Mr. Pagan and Ms. Santiago.
Will the $128 million put aside for the Purge class lawsuit cover all the costs? I think, to begin with, you thought the costs would be between $50 million and $110 million and obviously something changed.
Mr. Pagan: At this point, yes, our understanding is that as a result of a final settlement there is greater certainty now in terms of the costs for this program.
Senator Eaton: How many plaintiffs signed on? Do you have that?
Mr. Pagan: In fact, there is a process under way now to confirm the final number of settlements.
Senator Eaton: Is it closed now, and nobody else can come forward? That’s it.
Ms. Santiago: No, it’s not closed yet. I don’t believe it is.
We would have to confirm the specific closing dates, but I think the date just passed was the date by which a number of people withdrawing from the claim were to make a decision.
I think people can still join the class at this point. Some of that $128 million is to validate claims and place people into the class.
Senator Eaton: We will see, perhaps by the end of this year, what happens.
Ms. Santiago: Perhaps.
Senator Eaton: There is something I don’t understand but I am sure you do, obviously. There is $210 million in funding to assume P3 Canada Fund commitments of PPP Canada. What is that?
Ms. Bertrand: PPP Canada was dissolved in March 2018.
Senator Eaton: What is it?
Ms. Bertrand: They are P3 projects that had been assumed by PPP Canada.
Senator Eaton: I don’t understand what a P3 project is and I don’t understand what PPP is. Perhaps you could just explain what a P3 project is.
I don’t think anybody here knows except you guys. It’s office language that is not known to us. What is a P3 project? Is it public, private and government?
Ms. Bertrand: It’s a public-private partnership. That’s what PPP stands for. PPP Canada was a Crown corporation established to promote the use of P3 projects and was dissolved in March 2018.
Infrastructure Canada took over the responsibilities for these projects, including the legal obligations or the financial commitments that had previously been made by the federal government to these projects.
Senator Eaton: Do you have a list of those projects?
Ms. Bertrand: I do have a list of those projects.
Senator Eaton: Could you give them to the clerk?
Ms. Bertrand: I can do that, yes.
Senator Eaton: Thank you very much.
[Translation]
Senator Forest: Thank you for being here with us. In the Champlain Bridge construction contract, I had read that penalties of $100,000 were planned for every day of delay; after a certain period, the penalties would go to $400,000 a day of delay. I find these amounts rather astronomical. Since the deadlines were not respected, are we going to cash in on these financial penalties imposed on the consortium?
Mr. Fortin: The figures you quote are in the current contract. That contract is still in effect. As I mentioned earlier in response to Senator Pratte’s question, there are discussions ongoing at this time with the consortium.
Senator Forest: About the penalties?
Mr. Fortin: About the penalties included in the contract.
Senator Forest: What would justify changing the current contract?
Mr. Fortin: It’s not a matter of amending or altering the contract. I mentioned events beyond the control of the consortium that is building the bridge, and I spoke of conflict resolution mechanisms earlier. There may be delays when the causes are beyond the consortium’s control, and that is in the contract. It is the PPP principle, which involves risk sharing. Certain risks were recognized as being beyond the control of the consortium and were not caused by bad management on its part. In such cases, measures are in place to temper some of the provisions.
Senator Forest: To moderate the provisions somewhat.
Mr. Fortin: Yes.
Senator Forest: Concerning the Investing in Canada Plan, you say that $18.5 billion were invested in projects. Do I understand correctly that that amount is disbursed in partnership with the provinces, territories and municipalities? In that case, the total would be $55.5 billion for projects in Canada.
Mr. Fortin: There are a variety of projects. Are you talking about the total amount for projects, or the number of projects? There are two different things.
Most of our programs are allocation-based. These allocations are earmarked for the territories and provinces. The amounts are approved on the basis of projects submitted by the partners, according to their priorities.
We are talking about two things, to be clear, and we can provide the list if you want more details.
Are you talking about the total amount for projects, or about the total number of projects?
Senator Forest: I am trying to understand, given the economic impact of the program. I’ll give you the example of a project going on in the wonderful city of Rimouski, to the tune of $40 million. The contributions are one third, one third, one third; one third comes from the federal government, one third from the provincial government, and the last third is contributed by the municipalities. Out of $40 million, for instance, $12 million comes from the federal, $12 million from the provincial, and the rest is paid by the municipality. So, it is not a $12-million project; it is a $40-million project.
I’d like to know if the amount of $18.5 billion represents only the share of the federal government, or if we must take into account the shares provided by provincial and municipal partners.
Mr. Fortin: I understand your question. You want to know if we are talking about the third or the total amount.
Senator Forest: That is correct.
Mr. Fortin: We could send you the specific details through the clerk. The three-thirds arrangements you refer to would fall strictly under the Small Communities Fund. There are other programs, and I want to make sure I am answering your question correctly according to which programs are involved, or whether we are talking about all of them.
Senator Forest: Indeed, there is the Small Communities Fund, the Large Urban Centres component, and the Major Infrastructure component. All of these funds involve partners, and other partners also invest and provide capital. What is the overall economic impact of the federal investment?
Mr. Fortin: The amount of $18.5 billion represents the federal government share in a case like that one.
Senator Forest: Given that that is one of the main government strategies to stimulate the economy, it would be interesting to get a sense of the overall impact. We are talking about direct effects without considering indirect spinoffs.
Mr. Fortin: We will do a follow-up on that point. Thank you for your question.
[English]
Senator Neufeld: Thanks to everyone for being here.
Could you explain the specific Treaty 8 Agricultural Benefits Claim of $239.4 million to me, please?
Mr. Pagan: It relates to the settlement of a specific claim. I believe it is with Williams.
Senator Neufeld: I want to ask you about Williams too. Treaty 8 and Williams are two different things.
Mr. Pagan: Right. In 1994, the Little Red River Cree Nation filed a claim to request agricultural benefits for their nation. Since that time, the department has been working with the band to negotiate a settlement.
In 2016 cabinet approved a financial mandate. In April 2017 a settlement offer was accepted by the Little Red River Cree Nation, which was ratified on August 25.
According to the settlement a compensation methodology has been developed to access 21 cases for a total of $1.2 billion. Eighteen have been fully settled and three are in late stages of this process.
Senator Neufeld: When was the claim started?
Mr. Pagan: The initial claim was filed by the Little Red River Cree Nation in 1994. There have been active negotiations since 2005 and a cabinet mandate from December 20, 2016.
Senator Neufeld: It took from 1994 to 2016 to get that claim settled. That’s interesting.
How about the special claims under the Williams Treaties?
Mr. Pagan: This one dates back to 1923 when Canada and seven First Nations entered into the Williams Treaties, resulting in the surrender of lands around the shores of Lake Ontario and north of Lake Simcoe.
In 1992, the First Nations sued Canada in Federal Court, seeking $5 billion in damages. There has been a series of judicial rulings and negotiations since then.
In 2016, cabinet approved a negotiation mandate and a final settlement was reached in March 2018 for this purpose. As a result of the settlement, it is expected to secure funds to achieve full settlement of all outstanding litigation with the seven Williams Treaties First Nations.
Senator Neufeld: Is that inclusive of all legal claims?
Mr. Pagan: That is my understanding, yes. This deals with all outstanding issues.
Senator Neufeld: On both of them.
Mr. Pagan: Yes, on the Williams Treaties.
Senator Neufeld: Canada paid for all the legal claims: what it cost Canada and what it cost the First Nations. Is that correct?
Mr. Pagan: I have no insight in terms of the cost of the First Nations themselves. There are programs that assist First Nations in addressing their claims, so I would imagine over the years there may have been some support through that. I don’t have details on that.
Senator Neufeld: It is over the years, my goodness, from 1923.
Mr. Pagan: Just to be clear, the initial treaty was from 1923. The claim, the legal proceedings against that treaty, began in 1992.
Senator Neufeld: That is a little better.
Senator M. Deacon: I have a contextual question. Earlier today we met with FCM, the Federation of Canadian Municipalities, the national voice for approximately 2,000 municipalities representing more than 9 per cent of our Canadian population. We talked about infrastructure, communities, and the economic, environmental and social challenges facing Canadians, including the Investing in Canada plan
From listening to the FCM, the money and the value are there but the money is not getting to them. Could you comment on why this might be their perception?
Mr. Fortin: As a matter of fact we are working very closely with the FCM. The point you raise is about capacity in small communities and smaller cities.
For that reason, we have put in place a small program with FCM because they have the network to reach out to municipalities that are sometimes facing difficulty with the application and especially with asset management overall.
In five years, $50 million has been put into infrastructure, in partnership with FCM. They have been reaching out to municipalities with less capacity from a resource point of view for them to work better and have access to expertise. They have reached out to over 440 municipalities so far, and 60 per cent of those municipalities participating in that management program represent fewer than 5,000 people. Everything is not perfect yet, but we have at least created some momentum with our partners so that we provide that capacity.
Senator M. Deacon: We are learning and moving forward. Is there anything significant that you need to change or think about to ensure that they see and feel the money is getting to source? Perhaps it is a matter of time in some capacity?
Mr. Fortin: There is an aspect of capacity. There is also an aspect of knowledge of the program and accessibility to the program. The department has put geomapping information on our website to reach out and have more engagement with them.
There is capacity, but there is also an information flow that needs to take place. We are working very hard with our partners like the provinces and territories. The agreements, the amount and the allocation are all on our website as well.
Senator Boehm: I want to press you a bit on the back office transformation initiative. As we know, this is designed to replace or consolidate, to put it better, all the HR systems and some of the financial and information management systems that exist throughout government.
A number of Treasury Board witnesses came forward in February to this committee. I wasn’t here yet, so I am catching up. It was said that $110.6 million had been spent on the initiative over the past few years, but there was no real information on the overall budget or the planned future expenditures.
We’ve seen an iceberg coming at us before with the consolidated pay system. I guess my question is: Where is this going? Is there an overall budget for the back office transformation initiative? How much has been spent to date? What does the future look like in terms of expenditure?
Karen Cahill, Assistant Secretary and Chief Financial Officer, Treasury Board of Canada Secretariat: In terms of a planned budget, we’re still working with the program responsible for the back office transformation to determine future budget. I also want to mention that some of the budget for the back office transformation are contributions from participating departments.
In our estimates, we have $18 million for back office transformation. Of this $18 million, $10 million comes from contributions from other government departments that want to move on to the consolidated system that the back office transformation will implement.
In terms of what has been spent to date, at this time we have spent $130 million. The initiative started in 2014-15, and it definitely includes our $18 million for fiscal year 2018-2019.
This committee will have the information in the future year’s budget because this will need to be approved by Parliament as we determine how much we will be planning for the upcoming years. This has not yet been determined.
Senator Boehm: Would these voluntary transfers include voluntary transfers to Shared Services Canada, for example?
Ms. Cahill: No, that’s strictly voluntary transfers from other government departments to the back office transformation.
Senator Boehm: To the initiative itself.
Ms. Cahill: Which is in TBS, yes.
The Chair: Thank you. Before we move to the second round, I have a question, if you permit me, senators.
The Treasury Board Secretariat received $15.4 million in the Main Estimates to stabilize and transform the government’s pay administration. Now it is also requesting $5 million in these supplementary estimates for the same purpose.
Could you provide the committee with clarity on how much have you spent this year to date on replacing the Phoenix pay system and what have you accomplished?
Ms. Cahill: I will have to follow up on how much we have spent to date.
The $5 million we’re requesting is a reprofile to stabilize the current Phoenix pay system. This is not for the new system that will replace Phoenix. The $5 million is to hire employees that will work on looking at the current process, cleaning the information on the current Phoenix pay system, and working to have a stable system for when we transfer to another system.
I will definitely have to follow up with this committee in terms of expenditures to date with respect to this question.
Mr. Pagan: I would also add that this past spring the Comptroller General conducted an extensive costing of the Phoenix program, both historically and for the current year, and then painted a picture of future-year requirements.
I unfortunately don’t have that costing with me, but we will provide that to the committee. It is, to my knowledge, the most up to date and most complete costing of the Phoenix system.
The Chair: Therefore, my second question would be: As we look at the new Phoenix pay system, could you provide the committee with additional clarity on where you are and what is happening to?
When we look at the new one, what is it to be called, because there is some likelihood they won’t call it Phoenix?
Mr. Pagan: Right. With respect to where we’re going for Phoenix replacement, you’re quite right, senator. In the Main Estimates, Treasury Board drew down some money to support a new plan going forward. This funding establishes a temporary team in the Treasury Board Secretariat of 25 personnel that are undertaking the planning.
We have recently done some procurement testing and invited vendors to bid on a replacement project. It’s my understanding that there’s actually ongoing testing of those possible solutions. There will be a decision and an announcement once the testing is complete about the next steps in that process.
Senator Marshall: Yes, I had intended to ask a question of Infrastructure Canada, but Senator Boehm brought up the back office transformation and I can’t let it go.
You talk about it like it’s a project that we’re just moving along, but you must have a road map as to the date it will be completed and what will be the final cost.
I would like to know what is the date of completion and what will be the final price.
Ms. Cahill: With respect to the back office transformation, a bit of a reset was done. Currently, we are focusing on the financial system where we need to be on board by April 1, 2020. There are 18 departments currently operating on Fre Balance, which is their financial system. We need to be on board with those government departments as FreeBalance will be obsolete. These are the first departments that we will be on board with.
In parallel, we’re still working at developing the broader scope where other government departments will be on board.
As I mentioned, there was a reset. Our main focus at the moment is to look after those 18 departments and to move the financial application to a stable infrastructure, which is a Cloud Infrastructure that will link to the Government of Canada system.
Senator Marshall: What is the estimated final price of this system? What are you estimating the cost to be as of today?
Ms. Cahill: At the moment, we’re still in the planning phase of the next steps.
Senator Marshall: But the project has been ongoing for a number of years.
Ms. Cahill: Yes, I understand.
Senator Marshall: Last night the Auditor General’s officials testified. They made reference to the risk associated with new systems, especially financial systems.
My understanding is that the back office transformation system also includes a financial system. Am I correct or not?
Ms. Cahill: Yes, you are right. It includes a financial system that is already in operation in some departments of the Government of Canada.
Senator Marshall: This is a major system. We’ve talked before about this system in previous meetings. It seems like the government work along on the system. Hopefully at some point in time it will be completed, and hopefully at some time in the future we will know what the price would be.
I would think you would have a road map as to when different departments will come on stream, when it will be finalized and when there will be a final price. Do you not have that information?
Ms. Cahill: We do not. With respect to the back office transformation and the implementation of the financial system, as I said, we have done the reset. Initially, we had the big plan to bring on board many government departments.
We have reset to focus only on the 18 government departments, and that work is being done.
We are doing preparatory work to continue on with the project, and I will reiterate the fact that when we have the road map completed, we would go to the appropriate cabinet committees. We will be presenting our request for funding to Parliament, just like we do for any other funding request initiative that we have.
Senator Marshall: Have you ever had a road map, because the project has been ongoing for a number of years, that estimates the cost as well as the completion date? Was that ever established at any point in time?
Ms. Cahill: I would need to follow up on this. I am sorry; I am not responsible for the project. Since I am new to TBS — that’s not necessarily the reason — but I will have to follow up and I would be happy to follow up.
Senator Marshall: Yes, could you?
Ms. Cahill: Yes.
Senator Marshall: You are the Treasury Board Secretariat and I would expect you to have it.
Ms. Cahill: The project is under the Treasury Board Secretariat, but under another assistant secretary.
The Chair: Thank you. Madam Cahill, you could provide information to the clerk.
Thank you very much to the witnesses for your comments and putting clarity to the questions.
Honourable senators, we are continuing our study of the Supplementary Estimates (A) with our next panel of witnesses.
[Translation]
We now have before us representatives from two other departments.
[English]
From Innovation, Science and Economic Development Canada, we have Mr. Philippe Thompson, Assistant Deputy Minister and Chief Financial Officer, Corporate Management Sector; Lisa Setlakwe, Senior Assistant Deputy Minister, Strategy and Innovation Policy Sector; and Mitch Davies, Senior Assistant Deputy Minister.
From Fisheries and Oceans Canada, we have before us Ms. Jen O’Donoughue, Chief Financial Officer; Andy Smith, Deputy Commissioner, Strategy and Shipbuilding, Canadian Coast Guard; and Mr. Luc Boucher, Director, Harbour Development, Policy and Planning.
We welcome the witnesses and thank you for accepting our invitation to share with the National Finance Committee from the Senate your comments, your views and to bring clarity.
I have been informed that Mr. Thompson will be the first to give his opening statement, and he will be followed by Ms. O’Donoughue. Please go ahead, Mr. Thompson.
[Translation]
Philippe Thompson, Assistant Deputy Minister and Chief Financial Officer, Corporate Management Sector, Innovation, Science and Economic Development Canada: Good afternoon, Honourable senators. We are pleased to be here this afternoon to provide an overview of supplementary estimates (A) from Innovation, Science and Economic Development Canada for 2018-2019.
[English]
The department is requesting $159.3 million in the supplementary estimates. The largest item, approximately 80 per cent of the ask, being requested through these estimates is $125 million for steel and aluminum producers. Canada’s steel and aluminum industries are key contributors to the Canada economy, providing well-paying jobs and key inputs for other major industries, including energy, advanced manufacturing, construction and automotive.
On June 1, 2018, the United States imposed tariffs applying to imports of Canada steel and aluminum. As a result, the Canadian government announced countermeasures to the tariffs and made available $250 million in funding over two years of $125 million per year to Canadian steel and aluminum firms to help bolster the competitiveness of Canadian producers and to better integrate the Canadian supply chain of steel and aluminum.
[Translation]
This funding will provide affected firms the flexibility to sustain investments in new equipment and technologies, maintain their specialized workforce, and allow them to better serve Canadian metal users by strengthening Canadian capabilities. Work is already under way in order to determine the eligibility of organizations under this program, and we continue to strive to deliver the announced funding to affected organizations in a timely fashion.
[English]
The department is also requesting a total of $29.7 million in unused funds from 2017-18 be brought forward to the current fiscal year. These unused funds originate from four different programs: the Strategic Innovation Fund, Connecting Canadians Program, Cancode and the Connecting Families Initiative. During 2017-18, there were minor modifications to the specific cash flow requirements of projects, which required the small reprofile of funds to match expenditures. This resulted in the need to shift the funds to this fiscal year to deliver agreements that were put in place with recipient organizations.
[Translation]
Moving on, there are also two other new funding initiatives for which the department is requesting funding through the supplementary estimates. The first is a request of $2.4 million for the Advertising Initiatives. This funding was awarded through the Privy Council Central Advertising Fund, which allocates $35 million of funding to various organizations for advertising initiatives which are aligned with Budget 2018 priorities. At ISED, the funds will be used in order to promote Innovation Canada, Women Entrepreneurs, and Women in Science, Technology, Engineering and Mathematics. The campaign will drive traffic through the single-window platform at Innovation Canada and into the programs and services best suited to support and grow Canadian businesses.
[English]
The second is a request of $525,000 in order to help with the stabilization of pay administration.
This funding will be used to alleviate the financial pressure and increased workload in the department created by the implementation of the new pay system. It will specifically help provide better support and services to employees that have been affected by Phoenix by allowing new in-house compensation advisers to address the backlog of unprocessed pay transactions.
Furthermore, ISED will be offering in-house advice and guidance on life events, such as maternity and retirement, in order to prevent overpayment or underpayment situations. We remain committed to supporting employees affected by pay transformation and will reallocate internal resources as required to address any issues which may arise.
[Translation]
Mr. Chair, it is also very important to note that the department has made significant progress on the implementation of the Innovation and Skills Plan through funding announced in Budget 2017 and Budget 2018. Examples include: the Strategic Innovation Fund, which is a fund that encourages research and development to accelerate the transfer and commercialization of Canadian innovations. It makes it easier for Canadian businesses to grow and expand and helps attract and retain investment.
Since the boundaries between industries are no longer well defined, all industries have access to them. To date, a total of 30 projects have been announced under this program, totalling planned assistance of $775 million across five different sectors, which are spanning across the country.
[English]
Another example is the $950 million innovation supercluster initiative, which is a collaborative effort between industry, academia and government, to build up existing areas of industrial strength and grow globally competitive companies. Through a small number of high-value strategic investments, this initiative is co-investing with industry in bold and ambitious proposals to strengthen Canada’s most promising clusters and build superclusters at scale. A total of five superclusters have been selected: digital technology; protein industries; the next generation manufacturing; the AI-powered supply chains; and the ocean supercluster. Together they represent more than 450 businesses, 60 post-secondary institutions and 180 other participants in sectors covering 78 per cent of Canada’s economy.
These superclusters offer ongoing opportunities for collaboration to individuals, businesses and post-secondary institutions across the country.
[Translation]
These are just two examples of progress which has been made regarding the Innovation and Skills Plan, but there are more.
[English]
In closing, I want to reaffirm our commitment to the stewardship of public resources. The resources being sought through the 2018-2019 Supplementary Estimates (A) represent the necessary funding in order to deliver programs which are beneficial for the Canadian economy.
I want to thank you, Mr. Chair, for this opportunity, and the committee members for your time. My colleagues and I would be pleased to answer any questions you may have at this time. Thank you very much.
[Translation]
The Chair: Thank you.
[English]
Jen O’Donoughue, Chief Financial Officer, Fisheries and Oceans Canada: Good afternoon, Mr. Chair and committee members.
[Translation]
We have the pleasure of being here this afternoon to give you a rapid overview of supplementary estimates (A) for 2018-2019.
[English]
We do have a presentation, which I believe has been circulated, so I will refer to different slides.
I will begin on slide 3. Supplementary Estimates (A) is the first of two supplementary estimates exercises planned for the 2018-2019 fiscal year. They present the department’s revised spending plans which were either not sufficiently developed in time for inclusion in Main Estimates or have been subsequently refined.
The items presented today include all Treasury Board approvals since Main Estimates and exclude Budget 2018 items. I will provide committee members with an update on our Budget 2018 items later in the presentation.
As with all supply bills, they were referred to committee where the contents are studied before voting actually takes place. Our department is seeking Parliament’s approval for $980 million through these estimates. On slide 4, we will quickly present a summary similar to the information on page 2-37 of the publication.
[Translation]
Or page 2-82 of the French version.
[English]
This table allows you to see the breakdown of our authorities according to vote 1; vote 5, capital; and vote 10, grants and contributions.
We are also presenting, for information purposes, an increase of $3.2 million in our statutory forecasts specifically related to updated employee benefit plan requirements. The total estimates that are presented to you today are $983.2 million.
Slide 5 highlights some of the key items in our estimates. These items can also be found on page 2-37 and 2-38 in the Explanation of Requirements section.
[Translation]
Or pages 2-82 and 2-83 of the French version.
[English]
The majority of the funding sought today, $827.3 million, is related to the procurement of three icebreakers for the Canadian Coast Guard. The vessels will help to ensure that the Coast Guard maintains icebreaking capacity in the northern and southern icebreaking zones. An additional $57.8 million also relates to the Coast Guard and is to complete the engineering phase of the Canadian Coast Guard’s Offshore Science Vessel, as well as purchasing of material to advance the construction of the vessel. This vessel will replace the CCGS Hudson on the East Coast and continue Canada’s proud history of ocean science.
Funding in the amount of $33.9 million is being sought to support negotiations and reconciliations for Indigenous people, and we are seeing $21.5 million in funding to implement and amend the Fisheries Act, which will enhance, modernize the improve the Fish and Fish Habitat Protection Program.
Slide 6 outlines a list of remaining items. The total of these items is $24.5 million. They are for other initiatives, some technical reinvestments, and transfers to and from other government departments.
On slide 7, we present an update on DFO’s five Budget 2018 measures. At this point, DFO has accessed funding for four of these five measures. Approximately $120 million in authorities have been granted to the department for renewing Canada’s network with small craft harbours, $87.2 million; protecting Canada’s nature, parks and wild spaces and species at risk, for $16.4 million; the Sustainable Aquaculture Program, $9.5 million; and protecting marine life, including specifically whales, at $6.6 million.
[Translation]
Thank you for having given me the opportunity to speak with you about supplementary estimates (A) 2018-2019. My colleagues and I are now ready to answer your questions.
The Chair: Thank you, Ms. O’Donoughue.
[English]
Senator Marshall: My first question is for Fisheries and Oceans. Could you give us some information on the three icebreakers? Have you taken possession of them?
Andy Smith, Deputy Commissioner, Strategy and Shipbuilding, Canadian Coast Guard, Fisheries and Oceans Canada: We have taken possession of the three icebreakers. That happened in late August. The three icebreakers at this time are in Chantier Davie in Lauzon à Lévis.
One of them will be entering service before the end of December of this year. It has gone through some regulatory compliance work, including a paint job to make it red and white.
The other two vessels will remain in Chantier Davie undergoing a conversion package. They will enter service in 2019 and 2020 respectively, at which time the first ship, which will have not undergone the conversion, will come back and undergo its conversion package.
Senator Marshall: Could you give us some financial information? What is in supplementary estimates is the $825 million, but $811 million were already given during Main Estimates.
Is the $825 million the total cost of the three vessels?
Mr. Smith: The $827 million is the money that the Coast Guard requires in fiscal year 2018-2019. The contract that was announced on August 10 in Quebec City represents the purchase price and the regulatory work for the first vessel. That was $610 million, leaving a total of $217 million to be spent this fiscal year.
Over half of it is represented in the import tariffs that effectively go out of one pocket of government and back into the other pocket.
The other remaining funds associated with that $217 million are for acceptance surveys, some personnel costs, operating costs, surveys and inspections.
Senator Marshall: So none of the capital funding that was approved under Main Estimates is being used for these three icebreakers.
Mr. Smith: That’s correct.
Senator Marshall: What about the Canadian Coast Guard offshore oceanographic science vessel project? What is that?
Mr. Smith: My colleague Jen O’Donoughue to my right referred to the Canadian Coast Guard ship Hudson stationed out of Bedford Institute of Oceanography in Halifax. It is currently 55 years old and is a venerable, safe and reliable platform, from which DFO does oceanographic research at sea.
The ship is undeniably 55 years old and we have seen increased maintenance bills on the Hudson. Some years ago a replacement project was launched, and the offshore oceanographic science vessel will replace the Hudson on completion of construction.
Senator Marshall: The project is the replacement of the vessel.
Mr. Smith: Yes, it is.
Senator Marshall: The Department of National Defence has a 20-year strategy that they released last year. It outlines what their capital acquisitions will be over the next 20 years.
Would the Department of Fisheries or Coast Guard have a similar document?
Mr. Smith: We do not have a similar policy document as Strong, Secure, Engaged which came with a funding profile. The Coast Guard and DFO continue to seek funding on an as-required basis.
Senator Pratte: Just to follow up briefly on the oceanographic science vessel, in Main Estimates, if I am not mistaken, there was a decrease in the expenses for this project, and now we see that you’re requesting $57.8 million.
Could you explain this, or am I mistaken?
Mr. Smith: I don’t have a line of sight on to the Main Estimates. I can certainly come back to the committee on that figure.
We launched the design in earnest for this vessel about this time last year. Actually, it was in early January of last year. As we progressed in the work to facilitate the design and get the critical vendor-furnished information required to integrate all the systems in the ship, the advance purchase of material and the long lead items were required. That’s what this money was meant to facilitate so that we can expedite the design to the extent possible.
Senator Pratte: What is the total cost of this program for both vessels or one vessel? Is it one vessel or two?
Mr. Smith: It’s one vessel.
In 2009, when the project was envisioned, it had at the time an estimate of $144 million for the vessel. As you may have seen in the recently released National Shipbuilding Strategy annual report, that budget has now been raised to $331 million, and that’s under review as we go into the construction phase sometime in 2019.
Senator Pratte: We should have possibly a new estimate for the costs sometime next year.
Mr. Smith: Yes, we will.
[Translation]
Senator Pratte: Mr. Thompson, I’d like a brief explanation, please. When you talked about the sum of $29.7 million to be carried over from 2017-2018 to this year for four programs, you spoke of small funding carry-overs to align with expenditures. Could you explain that further?
Mr. Thompson: Thank you for the question. We have budgets over periods of more than a year to fund major programs. These are programs that require negotiations to develop contribution agreements. They are conducted in partnership with private enterprises or non-profit organizations.
When there are delays in negotiating contribution agreements, to enable flexibility, we have to carry over the funds to a subsequent fiscal year in order to implement the program. These are amounts of money we did not have time to commit during the fiscal year because we wanted to complete the contribution agreements properly. We hope to sign these contribution agreements over the next year and spend these amounts.
Senator Pratte: Talk to me about the Connecting Canadians program; let’s use it as an example. You negotiate with private suppliers in the context of that project.
Lisa Setlakwe, Senior Assistant Deputy Minister, Strategy and Innovation Policy Sector, Innovation, Science and Economic Development Canada: Yes, we are negotiating with private suppliers. Sometimes, that has to do with negotiating agreements, but sometimes, recipients’ projects also don’t advance at the anticipated rate. They have plans and expect projects to be completed over a specific period of time and spending to occur at a certain rate. But sometimes the reality does not match up. In that case, we adjust our budgets as needed to reflect the reality of projects.
Senator Pratte: The demand for those programs must be considerable and probably much larger than what the available funds can cover. What criteria are used to select one project over another?
Ms. Setlakwe: That depends on the program. For the Connecting Canadians program, we had specific objectives. I don’t have all the details, but we can definitely send you the criteria; they are available on our website and are provided to stakeholders.
For example, with the latest program, we tried to place emphasis in part on rural communities for which there are gaps. That was one of the criteria, but we also looked at the value to be obtained based on the money provided.
[English]
How much is that investment going to buy us? How many people or households will we be able to connect, and does it help competition?
[Translation]
We have certain objectives according to our policies. Different criteria are considered, and we would be happy to get back to you with that information.
Mitch Davies, Senior Assistant Deputy Minister, Innovation Canada, Innovation, Science and Economic Development Canada: I would like to add something.
[English]
In the case of the Connect to Innovate program, we achieved an objective to have 900 communities connected that had no fibre connection to Internet whatsoever. That was triple the original plan for the program, so it was actually quite positive in terms of the leverage that was possible with the funding we provided.
It includes 190 Indigenous communities that prior to that had no fibre access whatsoever. These are folks at the edge of the network that are getting a fibre byte that unlocks the kind of speed you and I enjoy in cities.
[Translation]
Senator Forest: Thank you for joining us to share this information.
Mr. Thompson, for the Strategic Innovation Fund, we are talking about $775 million and 30 projects. Is the money you’re requesting already allocated to projects?
Mr. Thompson: The deferred credits were already part of Innovation, Science and Economic Development Canada’s budgets, but we are asking for them to be carried over to next year to fund the projects that are currently being negotiated.
Senator Forest: So, it is something like a budget transfer.
Mr. Thompson: Exactly.
Senator Forest: You are talking about five sectors that cover all of Canada. What are those sectors?
Mr. Thompson: Are you talking about industrial clusters?
Senator Forest: No. You say that the Strategic Innovation Fund involves planned assistance of $775 million for five different sectors that cover the entire country. That seems to be different from superclusters.
[English]
Mr. Davies: The sectors referenced were established in Budget 2017: advanced manufacturing, digital industries, health and biosciences, clean technology and clean resources. Those five sector are the areas for investment under the Strategic Innovation Fund.
[Translation]
Senator Forest: Are those funds provided only to industries or businesses? Could applied research centres also have access to that type of an innovation fund?
[English]
Mr. Davies: The agreements that we reached on the Strategic Innovation Fund in large measure are with private sector enterprises.
There can be cases where they’re working in partnership with industrial research establishment applied researchers, but he program is dedicated to provide capital to various projects that companies would bring forward.
I contrast that with the case of the Innovation Superclusters Initiative. This is a bringing together of all the players in the ecosystem. Many of the organizations you have referenced will play a role in building the ecosystem as part of the governance and as part of the projects financed by those superclusters in years ahead.
[Translation]
Senator Forest: Were the funds used mainly for mobilization in terms of more productive equipment or were they intended for research and development or marketing?
[English]
Mr. Davies: In the case of the Strategic Innovation Fund we can fund research and development, capital equipment enhancements and protective equipment, or a combination of both of those, and, obviously, all the personnel-related costs of training development and development of the staff.
Yes, a wide range of activities can be covered under the program.
[Translation]
Senator Forest: It is very flexible as a program. As for the Small Craft Harbours Program, you have $87.2 million in funding. Is that part of a program for upgrading small craft harbours or for the Small Craft Harbours Program?
[English]
Ms. O’Donoughue: This relates to the funding received in Budget 2018, the $250 million. This is the amount we are spending this year on the list of projects that have been approved.
[Translation]
Senator Forest: It does not concern the Small Craft Harbours Program.
Luc Boucher, Director, Harbour Development, Policy and Planning, Fisheries and Oceans Canada: That initiative, which was announced in Budget 2018, must, on the one hand, help the program renew and repair the existing port network, but on the other hand, it must also focus on the divestiture of ports that are not essential to the commercial fishing industry. So there are 330 of them that are part of the Small Craft Harbours Program portfolio. Focus is placed on that aspect under that specific initiative.
Senator Forest: If I remember correctly, the divestiture program was capitalized for $1 million in 2016, which is quite negligible for Canada. What is currently that program’s capitalization?
Mr. Boucher: More specifically, the Budget 2018 initiative, as we call it, is a $250-million program over two years for the current fiscal year and the following one. That program focuses on divestiture. However, for clarification, before that initiative was announced, all the divestiture activities of the Small Craft Harbours Program had to be funded through the program’s regular budget. However, that budget makes it very difficult for us to manage the life cycle of assets, which are fishing harbours essential to the commercial fishing industry. That is why only highly reduced amounts were intended for divestiture activities. In general, we are talking about roughly $1.5 million to $3 million per year.
Senator Forest: That was really a modest budget. Thank you.
[English]
Senator Neufeld: I thank everyone for being here. When will The Coast Guard offshore oceanographic science vessel be finished? When will it be in the water and operational?
Mr. Smith: The project design effort is meant to be completed in 2019. We’re looking to cut steel on that sometime in the summer-fall of 2019. It would be a bit speculative at this point to put a delivery date on the table.
Three years after we start to cut steel we will be looking at proceeding with harbour trials and sea trials leading up to delivery.
Senator Neufeld: Somewhere around 2022, I guess.
Mr. Smith: Yes, 2022-23 would be a reasonable estimate.
Senator Neufeld: I am not asking you to be exact. I understand that.
What happens to the Hudson, then? What happens to the ship that you have now?
Mr. Smith: The Hudson, on delivery of the offshore oceanographic science vessel, will be decommissioned.
Senator Neufeld: It can’t be sold, then, I guess.
Mr. Smith: We will retire it from service. Then, as part of the decommissioning process, it will either be sold to a buyer or scrapped.
Senator Neufeld: This is for the East Coast, right?
Mr. Smith: Yes, it is.
Senator Neufeld: What happens on the West Coast?
Mr. Smith: We have a vessel comparable to the Hudson currently on the West Coast. It is somewhat younger than the Hudson and is not at this time envisioned for near-term replacement.
Senator Neufeld: I could use that somewhat younger, I guess, but what is somewhat younger?
Mr. Smith: I don’t have the exact date, but we won’t be looking to replace the Tully for 20 years.
Senator Neufeld: It’s significantly younger, or will you run it a lot longer?
Mr. Smith: It is younger, and we will operate it for another 20 years or so.
Senator Neufeld: Is that ship constantly doing science on the West Coast?
I ask that because we are going through issues that deal with tanker bans on the West Coast. I live in British Columbia, by the way.
Could you tell me a bit about what it does, what it is supposed to do and what information it brings?
Mr. Smith: Certainly. In the Coast Guard we’re often fond of saying that we take science to sea. We take our DFO science colleagues to sea.
I should mention we have an oceanographic science vessel and an offshore fisheries science vessel the West Coast, both with DFO scientists on board.
The scientists, certainly on the oceanographic side, do any sort of ecosystem analysis, ocean science, deep ocean science, benthic science, which is the layer before the ocean floor, and hydrographic charting to enable and assist NRCan in some of the work they’re doing. They spend over 200 days a year at sea. These ships are real workhorses; they spend a lot of time at sea.
Senator Neufeld: Is any of the money that has been set aside for cleanup of oil spills on the West Coast coming through the Coast Guard? Is something happening at the Coast Guard? Can we see something starting to take place?
Mr. Smith: The Oceans Protection Plan is a key government initiative.
We have any number of initiatives, I should say, including on the West Coast where we recently put a contract in place for a towing service. Two towing vessels will be stationed on the West Coast, one in the northern Prince Rupert area and one down in the southern Vancouver Island area. As additional belts and braces to be on station at sea, they can tow tankers to safety in the event that they are in trouble.
As an example, that is a direct realization of the Oceans Protection Plan that has been put in place.
Senator Neufeld: Perhaps you can provide us, through the clerk, with more information about what is happening with the Oceans Protection Plan and everything that has to do with the Coast Guard.
I would appreciate if you could do that, please.
Mr. Smith: Yes, we would be happy to provide that to the clerk.
Senator Neufeld: That would be great because it would help us in our deliberations about what is happening.
Mr. Smith: Very well.
Senator Neufeld: My next question is for Mr. Davies. As far as fibre optics go, would you be the person to ask?
Mr. Davies: The three of us will take it, sir, so you will certainly get your answer.
Senator Neufeld: I live in one of those fringe areas around a community of 20,000 people that just received fibre optics.
I am not an expert on this stuff. I don’t know anything about it, other than when I turn on my BlackBerry I should see those lines.
Could you tell me whether the service I get with TELUS would be the same as someone in Vancouver would get? By “service” I mean not somebody coming to fix something, I mean the service with my iPad or iPhone.
Mr. Thompson: For the question, senator. Before we answer that question, I’d like to rectify something that I’ve said.
[Translation]
I do not want to mislead the committee. Concerning the question on the report, we are talking about $15 million this year, which brings the programs’s total budget to $442.3 million. So the deferred money, which is the existing money, is $15 million. The new request for funding in the supplementary estimates (A) is $125 million for steel and aluminum.
[English]
Ms. Setlakwe: I, too, am not an expert on the technologies, but I think it depends on what technology has been deployed to your community.
There are greater capabilities in certain places than others. I couldn’t say, even within a city, whether the same technological capabilities exist in every neighbourhood of a city.
Senator Neufeld: When you partner with someone, do you just leave it all up to them as to whatever they will put in? Is that correct?
Is there not some kind of process that has to happen, or is it just that’s the minimum and that’s good enough?
Mr. Davies: I’ll come back to what you asked. I can help a bit at a general level.
It’s a different question when you talk about cellular service. If you’re talking about comparing a cellular service in different locations, then you’re talking about the infrastructure of the cell towers and so on.
Senator Neufeld: I am not talking about that.
Mr. Davies: You talked about TELUS. The program at the department is aimed at getting the fibre established in a building, a home, a hospital and so on, so that they have adequate service to be able to use the Internet properly to look at live video and high-quality video, which is the most intensive application through the Internet.
Depending on where you live, your point is well taken. You may or may not have the same speed or quality in that service. If you’re in an urban centre, 85 per cent of Canadians have what we would consider high-speed Internet available to them. With that 85 per cent level, over time as technologies change, the private sector builds to that because the economics are there in terms of the numbers, the capital cost and what return they can get on it.
After 85 per cent, you’re looking at ways to incent the private sector to build that out. With the Connect to Innovate program, I spoke earlier about the 900 communities that got lit up that were not lit. That is what that programming is meant to do.
That is a general answer. I couldn’t answer about your neighbourhood. On our Internet site we have a fairly interesting mapping where you can see the Internet coverage, where it is good and where there are spots. We can get down to the neighbourhood and tell you whether you are covered and so on.
We use that mapping when looking at proposals so that we can make good choices and get the money to go as far as possible to cover the objectives of the program, which is to connect as many people as we can. We’re also trying to address those who are the farthest out as well.
A lot of choices are being made with scarce dollars about where you invest and making a balance about where you put it.
Ms. Setlakwe: A couple of weeks ago you may have heard that our Minister Bains, met with his federal/provincial/territorial colleagues. They committed to developing a long-term strategy to deploy to a minimum speed of what we call 50/10. It is 50 download/10 upload megabits per second. That is enough for most of us around this room to do everything we need to do on the Internet. It is very high speed.
You can get higher for supercomputing and things like that, but for citizens to conduct their daily business, to stream Netflix, for children to do their homework on the Internet, and all of that, that kind of speed gets them what they need.
They’ve agreed as a group to work toward a long-term strategy to get the full country to that level. It will take some money and some time, but it is the first time that there is a real pan-Canadian commitment to working toward that.
Senator Boehm: I would like to ask about U.S. tariffs on steel and aluminum and the support that is being given to Canadian producers and manufacturers. I have met with executives of at least two aluminum companies recently, and I know they have been having meetings.
Regarding the use of the Strategic Innovation Fund for this, you’re asking for $125 million of these supplementary estimates. I realize there is a lot of uncertainty because we don’t know when these tariffs will come off or when the U.S. will decide we’re not subject to section 232 as a national security threat to them.
By the same token, however, there are people who might be losing their jobs. Do you have any indication on jobs lost or how many manufacturers have really been impacted? If they’re coming to you for support, do you have program criteria that you’ve established? Do you have at least a potential sunsetting approach to this? Is there a deadline for the receipt of applications, for example? I am just wondering how you manage this.
Mr. Thompson: The $125 million is the first round. It’s through CIF and is for big companies. My colleagues in the organization are also looking at potential interventions for small and medium enterprises that will be impacted.
Mr. Davies: The demand we have in the door exceeds $1 billion in terms of total projects opportunities. Certainly the $250 million the government announced will definitely be spoken for.
This is the first tranche. There will be a second one. We will be doing it over two fiscal years. We were able to move from announcement to having that demand in the door within a number of months, working closely with industry. Firms must have 200 employees or more, so we’re talking about large-scale producers. I acknowledge there are pressure points in other parts of the sector affected by our own tariffs and so on.
We’re seeing projects that allow us to support workforce development. That goes to your point about people being concerned about the status of their jobs. With the one project announced to date with ArcelorMittal for $49 million, we secured 600 jobs. As part of the arrangements we’re actually securing those employment figures going forward. In fact, they had a job fair the next day for their location. We’re maintaining their capital plan. In the uncertainty they’re experiencing, they’re actually investing in their future.
We will expend the funds. In terms of your point on grandfathering, these dollars will be deployed. Obviously, we’ll see how the situation unfolds. They’re investing in diversification of their product lines and looking for new markets and opportunities, which in some cases require them to reconfigure their capital plant and invest in new equipment.
At one level it’s sending a message of optimistic investment in the future. There are also the changes that came through in the fall economic statement in terms of capital cost writeoffs for productive equipment which has moved to immediate writeoffs. There is a tripling of the overall capital costs.
All these measures tend to lean in and have investment made future market opportunity and diversification. In each deal we will do, and we will announce others, the effect on the workforce and commitments in respect of the workforce will be integral to every one of those agreements.
The Chair: Before we adjourn, I have a question in respect of your vote. I read about protecting Canada’s nature parks, wild spaces and species at risk, and your vote is $16.4 million.
Being a senator from Atlantic Canada, there is no doubt that you probably saw me coming. I want to talk about what is happening with Atlantic salmon, and I know you cannot provide me with information on the scientific side.
I will take the Miramichi River as an example. When we talk about Atlantic salmon, it includes Quebec, right up to Newfoundland and Labrador. It is said that New Brunswick’s famous Miramichi was once the largest salmon-producing river in North America. It created a lot of jobs for locals and people in the surrounding areas of the great Miramichi River.
The numbers of salmon are dropping at alarming rates. There are also other rivers in Atlantic Canada which are now a fraction of what they used to be in the 1980s and 1990s.
With your vote you’re asking the Finance Committee to consider protecting Canada’s nature and species at risk. How much funding have you received to protect the Atlantic salmon population, which is a species at risk, as we have heard from scientists and looked at the population of this threatened species?
Ms. O’Donoughue: I don’t know that we have the answer today. We’ll have to come back to you on that number.
Senator Marshall: I have one last question on steel and aluminum producers. Is any of that money being disbursed now, or has it started to flow?
Mr. Davies: The first agreement was reached and announced. That is the first one with ArcelorMittal. A number of the agreements are imminent. We’re well advanced in negotiations and discussions with each company. Further announcements will be made in the near future.
The Chair: To the witnesses, thank you very much for your professionalism and for providing clarity to our questions.
I remind honourable senators that the next meeting of the committee will take place Tuesday morning in our regular room, where we will start pre-budget consideration of Budget Implementation Act No. 2, Bill C-86.
(The committee adjourned.)