Proceedings of the Special Senate Committee on the
Pearson Airport Agreements
Evidence
[English]
Ottawa, Wednesday, July 26, 1995.
The Special Senate Committee on the Pearson Airport Agreements met this day at 9:30 a.m. to examine and report upon all matters concerning the policies and negotiations leading up to, and including, the agreements respecting the redevelopment and operation of Terminals 1 and 2 at Lester B. Pearson International Airport and the circumstances relating to the cancellation thereof.
Senator Finlay MacDonald (Chairman) in the Chair.
The Chairman: This is day two of week two, gentlemen. Thank you for appearing.
I think Mr. Nelligan, the counsel, will introduce our witnesses this morning.
Mr. John P. Nelligan, Q.C., Counsel to the Committee: Senators, this morning we have two witnesses from the Department of Transport. Mr. Gerry Berigan is presently Regional Director for Airports, Atlantic Region, but he was, at the appropriate times, a senior executive in charge of this project stationed in Ottawa. Mr. Wayne Power was and I believe still is Director of Transition, Pearson International Airport and was directly responsible for the actual drafting of the RFP.
I understand that both of these gentlemen are prepared to make a short opening statement setting out their connection with the matter, and then they will be available for questioning.
The Chairman: Before we swear the witnesses, these gentlemen were responsible for the development of the criteria that would lead, then, to the evaluation which we will be discussing this afternoon. Is that more or less correct?
Mr. Gerry Berigan, Regional Director for Airports, Atlantic Region: That's correct.
The Chairman: Would the witnesses be sworn, please.
(Gerry Berigan, sworn:)
(Wayne Power, sworn:)
The Chairman: Gentlemen, do you wish to make some opening remarks?
Mr. Berigan: If you don't mind, Mr. Chairman, thank you.
Good morning, senators. My name is Gerry Berigan. I'm the Regional Director General of the Airports Group for Atlantic Canada.
During the period that you are interested in, I was located in Ottawa from June of 1988 until July of 1990. I was the Director General of Commercial Development for the Airports Group. Then in July of 1990 until I left to take up the position in Moncton, I was the Director General of Special Projects and Corporate Planning in the Airports Group.
My involvement in this issue began in December of 1988 when the deputy minister asked my boss at the time, Dave McAree, who was the executive director or the precursor to the ADM of airports, if I would take on the additional responsibilities of coordinating all the initiatives which were in the planning stages for trying to quote, unquote, "fix" the Pearson problem.
You'll recollect that in December of 1988, the minister announced a cap on the number of movements in and out of Pearson Airport for the Christmas period, but ultimately that was extended. There were another bunch of issues which were announced as short-term and medium-term initiatives to try to deal with the congestion at Pearson.
In addition to the cap or the reservation system of the number of aircraft that would land and take off per hour at the airport, there was a commitment to develop some infrastructure and try to move some flights away from Pearson to Hamilton Airport. There was a commitment that the terminals at Pearson would be, if not redeveloped, at least spruced up so that they could react to the criticism that was being received on the condition of the terminals, particularly Terminal 1.
During the course of the following years, there were a number of other initiatives, essentially which were taking place in and around Toronto, which I was asked to try to coordinate from an Ottawa perspective to make sure that people weren't bumping into each other and that there were some semblance of organization to all the initiatives that were taking place. There was a noise management process introduced at the airport. There was an increase in the dollar value of the fines that would be levied for violations of the noise management procedures. There were issues relating to international garbage and where and how that would be incinerated.
Of course, the major decision related to the government's announcement of its intention to develop Pearson as the hub of the southern Ontario network, and that entailed the decision to go in front of an environmental review process to construct additional runways at Pearson.
Once that decision was made, there was the necessity to look at various ways of funding the runways. Part of the commitment to the environmental panel was that there would be a master plan done for Pearson Airport and a strategy developed for all the airports in southern Ontario. So that work was under way, looking at all the surrounding airports at Pearson and how they would fit in ultimately to the southern Ontario strategy.
Part way through the process, of course, Terminal 3 opened. There were initiatives to determine which airlines would be assigned to Terminal 3, which ones would remain behind in Terminals 1 and 2, and ultimately there was the announcement that the government would issue competitive requests for proposals for the redevelopment of Terminals 1 and 2.
That process started. It was run, essentially, at the Toronto Airport, in the Toronto office, but there were a number of issues that had to be relayed from the headquarters perspective, and I was the focus for getting those decisions relayed to the project office at the airport, which Mr. Power essentially was running, trying to develop the RFP.
So my involvement up until August of 1992 essentially was the coordination of all the activities that were happening with respect to trying to fix the Pearson problem.
I got the opportunity at the end of August in 1992 to take the job in Moncton. I accepted that. It was an opportune time. The proposals had been out. They were in the process of being evaluated. We were waiting for the response from the environmental panel on the runway situation, so it was an opportune time for me to move to Moncton and I did so.
So during the period of time from 1988 to October or August of 1992, I would be pleased to try to answer any questions relating to what happened then. Thank you.
The Chairman: Would Mr. Power like to follow, or would you rather wait?
Mr. Wayne Power, Director of Transition, Pearson International Airport: Maybe I should follow to help set the context.
I'm Wayne Power. I am a Transport Canada employee, currently located at Pearson International Airport and now having responsibility for managing those activities associated with the transition of Pearson Airport from a government operation to an airport authority.
I will explain my role in respect of the RFP phase of the T1T2 project.
At the time that Minister Lewis announced the government's decision to proceed with a request for proposals, to seek competitive proposals for the private sector development of the terminals at Pearson, I was working on the Terminal 3 project team.
In the early part of March 1991, almost immediately after the opening of Terminal 3, I was assigned to the T1T2 project. In that capacity, I was reporting to the general manager of major Crown projects at Pearson, who in turn reported to the airport general manager.
My responsibility was for the preparation of the RFP documents, for managing the RFP process, and during the proposal evaluation phase, for providing the interface between the evaluation committee and the proponents when the evaluation committee needed clarification of any of the aspects of the proposals. I did not myself participate directly in the evaluation of the proposals.
As Mr. Berigan said, I would be pleased to try to answer any questions you may have.
The Chairman: I wanted to just remind the committee that some year and a half ago, a Senate committee was sitting on matters relating to the International Monetary Fund. The witnesses were from the Department of Finance. The first questioner was the Honourable Alan J. MacEachen who, of course as you know, had been both Minister of Finance, Minister for External Affairs, and a person very much interested in Third World development and so on. He started the questioning at ten o'clock in the morning, and he would stop every once in a while and ask if anybody else wanted to -- he said, "I don't want to monopolize the time," and everybody else said, "Go ahead" because we knew what a knowledgeable questioner he was. He was on a roll.
At 10 to 1 he stopped and the meeting adjourned. He had been the only questioner. That's an example of a person who is on a roll and so on.
I want to make it clear that if any witness feels, as I indicated yesterday, that the 30-minute rule is too restrictive, at my discretion, I will allow for time for --
Mr. Nelligan: Any senator.
The Chairman: What did I say?
Mr. Nelligan: Witness.
The Chairman: I'm sorry. If any senator wishes to take more time than 30 minutes, just be advised that I will caution you after a certain length of time so somebody else will have a crack at it.
So, Senator Bryden, I think you are the first.
Senator Bryden: Thank you, Mr. Chairman.
I don't pretend to be anywhere close to Senator MacEachen, but there was a little implication that I really wasn't on a roll yesterday.
Mr. Power and Mr. Berigan, I think most of my questions will be directed to both or either of you, which ever one or both of you that had information you could be helpful with because I don't know and I don't think it's very helpful for me to try and distinguish which area, so would you please -- and if one answers and the other has something to add, this is a pretty informal process, and we simply want to get at the facts.
On October the 17th, 1990, Mr. Lewis announced that private sector participation would be sought for the modernization of terminals at Pearson. I would first like to know what other options were available or are available to the government or to the Department of Transportation to have fixed the Pearson problem, so-called, other than the option that was chosen, and that is the privatization?
Mr. Berigan: I guess, senator, in general terms there is always the option of the Crown doing the construction itself. I think, as Mr. Mulder indicated in his opening remarks, at that point in time there was no money available for that type of work that was envisaged as being required.
The other option that of course has come to light through your discussions yesterday was that there was an option perhaps to let an LAA do the work and the third option of getting the private sector involved. I guess, you know, my understanding of the situation at the time was that the other two options, other than the private sector, were not forthcoming.
Senator Bryden: There would be a third option, wouldn't there, and that is to have maintained the situation, the status quo and perform maintenance to bring -- I don't know whether you said -- to bring the terminals up to a better standard?
Mr. Berigan: Yes, there would have been -- I guess if that was called a fourth option -- a temporary fix, if you will.
In fairness, I think that was the essence of the announcement that Mr. Lewis did in fact make because he was saying that there was a lot of work yet to be done and that the runway environmental process was going to commence and that whatever had to be done to fix Pearson would be done.
Senator Bryden: The option that was pursued was a private one.
Mr. Berigan: That's correct, to issue an RFP, yes.
Senator Bryden: But within the private option, are there not a number of ways to proceed? It was decided to proceed with an RFP with a one-stage process. Is there not another process which is a two-stage process where there is a call for expressions of interest and then followed by requests for proposals?
Mr. Berigan: That's correct. That was the process that was used in the Terminal 3 initiative.
Senator Bryden: Do you know the time frames on Terminal 3? I think it was Mr. Power said you were involved in Terminal 3. What was the time period for the expression of interest on the Terminal 3 contract?
Mr. Power: I wasn't involved precisely at that phase, but I do recall that the expression of interest was issued in September of 1986. The response to that expression of interest I believe was about mid-November of '86, and then the request for proposals was issued in December of '86.
Senator Bryden: And what was the time for reply to the expression -- I'm sorry, the request for proposals?
Mr. Power: The request for proposals was issued, as I said, in December of '86 with the responses due on May 1st, 1987.
Senator Bryden: I have asked others this. Is there a procedure that is contract definition, a procedure whereby a developer is selected through a process, and then the contract -- or the proposal is actually defined in discussion between the department and the developer?
Mr. Berigan: Yes. That is a process that, to my knowledge, is used frequently in the major procurement activity of the government. This was a different process involving a lease rather than a procurement.
Senator Bryden: I just want to cover the field here.
There's also sole sourcing. Is that an option?
Mr. Berigan: Yes.
Senator Bryden: Really what that is is just an award to a particular supplier or, in this instance, a developer.
Mr. Berigan: Yes.
Senator Bryden: Was there, at this time, an option available to have Air Canada own Terminal 2?
Mr. Berigan: Yes. At that point in time, there was still the option of having the airlines more involved in the actual management and perhaps ownership of terminal buildings. That was one of the issues upon which the department sought direction during the preparation of the RFP.
Senator Bryden: And who did you seek the direction from?
Mr. Berigan: From the minister.
Senator Bryden: From the minister.
Why in this instance was it decided not to request expressions of interest as was done in the Terminal 3 situation?
Mr. Berigan: Well, senator, I know that in statements that the minister made upon the release of the RFP, he indicated that, from his perspective, the initiative to issue an RFP had been available, had been public knowledge since Mr. Lewis' announcement, and that those who would have been interested and capable were already working on it. In any event, were there serious proponents to come forward, they could participate in the RFP process because he would entertain delays or extensions to the 95-day period. So I know his remarks indicated that he didn't think it was necessary.
Senator Bryden: So it was the minister's decision?
Mr. Berigan: Yes, it was.
Senator Bryden: And in substitution for that -- and I'm just picking up from what you said -- the fact that he had indicated his intention, when was it to go to the private sector? 1990?
Mr. Berigan: Mr. Lewis made that announcement, I believe, in October of 1990.
Senator Bryden: Of his intention to go to the private sector?
Mr. Berigan: That's correct.
Senator Bryden: And the RFP was issued in March of --
Mr. Berigan: 1992.
Senator Bryden: -- 1992.
In your experience -- and it's been quite long, I think, in the public service -- have you ever known a minister to change his intention over a period of 18 months?
In fairness, what I am asking is the fact that a minister expresses in 1990 that he intends to go to the private sector, does that then prevent him from changing his mind 15 months later to do something else?
Mr. Berigan: Not that I am aware of, senator.
Senator Bryden: The persons who were -- in order to reply to an RFP, is it fair to say that a great deal of effort has to go in and a considerable amount of money spent in order to do that?
Mr. Berigan: In an RFP for the project of the size and complexity of Terminals 1 and 2, yes.
Senator Bryden: And until such time as either a formal request for expressions of interest or an RFP is issued in relation to this case, anyone preparing and spending that money on a complex situation like this would be dependent on the minister not changing his mind. There had been no formal call.
Mr. Berigan: They would be undertaking that work at their own risk.
Senator Bryden: On spec?
Mr. Berigan: Yes.
Senator Bryden: As the three unsolicited -- the developers who provided the three unsolicited proposals beginning in 1989?
Mr. Berigan: That's correct.
Senator Bryden: What is the purpose of a call for an expression of interest? What is contained in an expression of interest?
Mr. Power: If we use the example of Terminal 3, because we had not really pursued this approach for providing major terminal facilities in Canada, the primary purpose of the expression of interest in Terminal 3 was to seek to do just as the title implies, to determine if there are proponents interested in pursuing this type of project. We were not absolutely sure of the extent of response we would get from the private sector to this type of project, so the expression of interest called upon interested parties to identify their interest and to put forward their qualifications for participating in this type of a process and to suggest to the government what terms and conditions they might be interested in pursuing such a project, under what terms and conditions.
Again, because we didn't know at that time what the scope of response or interest might be, we used the expression of interest phase to short list, if you wish, the number of interested parties to a manageable group who actually would have the qualifications to meet the government's requirements for the project.
Senator Bryden: Do you recall how many people responded to the call for expression of interest on Terminal 3?
Mr. Power: There were eight responses.
Senator Bryden: And how many ended up on the short list?
Mr. Power: Five.
Senator Bryden: Five out of the eight?
Mr. Power: Yes.
Senator Bryden: Do you recall how many people responded to the request for proposals on T1T2?
Mr. Power: There were two, if you wish, qualified responses in terms of two responses which met the mandatory criteria for a proposal. There were three proposals received, one of which had not met the minimum mandatory requirement for consideration, and that proposal was not evaluated.
Senator Bryden: The two that responded to the RFP on T1T2, were these basically the same organizations that had provided unsolicited proposals?
Mr. Power: Essentially, yes.
Senator Bryden: And one was Paxport?
Mr. Power: Paxport Inc., and the other was Airport Terminals Development Group, for which the lead member that have consortium was Claridge Properties, who was involved in the Terminal 3 project.
Senator Bryden: In the expression of interest process, do you also assess the financial viability of the people who are expressing interest, their ability to carry out the project?
Mr. Power: In the expression -- I'm sorry, senator. Did you say the expression of --
Senator Bryden: Yes, in your assessment of the people who replied to the expression of interest.
Mr. Power: Not to any great extent. There's very little detail. My memory fails me on the exact criteria.
Certainly the proponents are expected to demonstrate that they would have ability to carry out the project, but at that stage there's a very minimal assessment at that sort of thing, at the expression of interest stage. That normally would be done in response to the RFP.
Senator Bryden: From the time you received the replies, to the call for expressions of interest on T3, until you called for the RFP, what was the time lapse?
Mr. Power: Roughly six weeks.
Senator Bryden: Six weeks.
Mr. Power: Four to six weeks.
Senator Bryden: And during that period, you would have assessed and short listed?
Mr. Power: That's correct.
Senator Bryden: In Mr. Lewis' -- well, let me ask you this first.
You have been involved in both the Terminal 3 project and the Terminals 1 and 2 project. Which of the RFPs was the more complex?
Mr. Power: In terms of technical complexity and the overall number of issues to be addressed, the T1T2 project would have to be considered as the more complex because it covered a broader range of issues.
I think as a previous witness explained to you, the Terminal 3 site that was made available to the proponents was a green field site -- basically a vacant piece of land. In the case of Terminals 1 and 2, we were transferring by lease two existing, operating terminals with employees and, therefore, a wider range of factors had to be considered.
Senator Bryden: Well, there would be sublessees and --
Mr. Power: There would be a significant number of leases and contracts that would have to be signed. There were approximately 165 Transport Canada employees that would have to be transferred to a private sector operator. Existing facilities were in relatively poor shape at that time, for which there had to be a plan for modernization and upgrading.
Senator Bryden: Indeed, and I can refer to it here in speaking notes of Mr. Lewis, and I quote, "This is one of the most complicated proposals I have ever seen in my years in government." If anyone wants to know, I'm referring to a document called a Berigan document, dated October 18th, 1990, number 00713.
In light of the fact that the minister's statement and your statement that the T1T2 was a more complex RFP than to reply to than Terminal 3, the length of time that proponents were given to reply on the Terminal 3 RFP was considerably longer, was it not?
Mr. Power: In terms of the response period to the RFP, it was slightly over four months on Terminal 3 and 95 days on Terminals 1 and 2.
I'm just about finished with my EOI thing.
Were you aware that an expression of interest process prior to a request for proposals was also used in the big contract for the bridge to Prince Edward Island?
Mr. Power: I'm not familiar with that project.
Mr. Berigan: I was not aware of that, no.
Senator Bryden: Once again, I'm referring -- if you want to make sure that I'm not misquoting, it's a document dated April 19th, 1991, 001114, a Berigan document.
There was a meeting on April the 15th between Transport Canada and the three developers that occurred, and I believe one of you were present at that meeting.
Mr. Berigan: Yes, I was present. There were three meetings on successive days with the three parties who had submitted unsolicited proposals. That's correct.
Senator Bryden: Was there discussion of whether the EOI process would be used during those meetings?
Mr. Berigan: Yes. With all three developers, yes.
Senator Bryden: And am I correct in saying that Paxport did not want or did not feel that an EOI process was necessary, that Airport Corporation didn't mention it really and that Canada Airports wanted a two-stage process, an EOI and an RFP?
Mr. Berigan: I believe that's correct, yes.
Senator Bryden: On May the 27th, 1991, was a draft call for expression of interest prepared?
Mr. Power: I don't know as to the dates, senator, but for the T1T2 project, there was a draft expression of interest prepared. We were preparing the documentation to be ready for whatever direction we were given by the minister.
Senator Bryden: And once again, the document is Berigan document OO1035. In that draft, and I quote, "Proponents must submit an expression of interest which contains a detailed statement of the qualifications to undertake the project." That would have been in that draft document. What would normally be included in that detailed statement?
Please take your time because you are not limited by time. I am. You can take as much time as you wish.
Mr. Power: To a great extent -- quickly, off the top of my head, the main qualifications would be the experience of the developer, the proponent, in terms of experience on similar projects; the breadth or the scope of the consortia that he was prepared to assemble to undertake the project; whether they would have experience and qualifications in various aspects; operation in the case of Terminals 1 and 2 would be design and development, project management, operations.
Senator Bryden: Also whether the proponents had done projects of that size or complexity before?
Mr. Power: That would be a factor that would be assessed.
Senator Bryden: Part of their track record, I guess?
Mr. Power: Yes, very much so. Prior experience is usually a very standard component to assess.
Senator Bryden: Why was that call for expression of interest not used?
Mr. Power: Again, as Mr. Berigan explained, the direction we received was to follow a one-stage process.
Senator Bryden: And that would have been received from the minister?
Mr. Power: Yes.
Senator Bryden: During this time there was also consideration being given to the development of the runways or additional runways at Pearson.
Mr. Berigan: That's correct.
Senator Bryden: Is this the same time frame -- please help me. I'm not exactly sure whether they run starting from about the same time or whether one preceded the other.
Mr. Berigan: The runway work or preparation for the environmental panel and the environmental impact statement began, gee, mid-'89. I would guess about mid-'89.
The development of the RFP work -- and that continued up until there was a report from the environmental panel in late '92 and the subsequent government response to the environmental panel's recommendations.
The RFP work began in mid to late 1990 and continued on a dual track, if you will.
Senator Bryden: Yes. So they were somewhat the same time frame.
Mr. Berigan: Yes.
Mr. Power: Yes.
Senator Bryden: Initially, did you have a work plan in your runup to the RSP -- I keep saying RSP. If my RSP was doing better, maybe I wouldn't stumble. The RFP. Do you have a work plan?
Mr. Power: Yes, we had.
Mr. Berigan: Yes, we did. It wasn't just for the RFP. It was for all the initiatives that were under way in trying to address the Toronto problem.
Senator Bryden: Did the work plan contemplate having the results of the Environmental Assessment Review Panel before issuing the RFP?
Mr. Berigan: Yes, the initial work plan did have that.
Senator Bryden: It did. The RFP would await the results of the EARP?
Mr. Berigan: Yes, that's correct.
Senator Bryden: When was that panel appointed? To help you, let's see if this is right. November the 22nd, 1989. Does that sound about right?
Mr. Berigan: That's when FEARO, the federal environmental assessment office, announced that it was forming a panel. That's correct. There were changes in chairmanship subsequent to that, but the panel was announced about that time. That's correct.
Senator Bryden: Referring to a document referred to as a Berigan document dated 1990, 000713, once again, speaking notes from Mr. Lewis, "We will not presume upon the results of the environmental panel. Therefore, we may have to wait until the panel has reported before finalizing the RFP."
So your work plan at that stage really coincided with Mr. Lewis' position.
Mr. Berigan: That's correct.
Senator Bryden: Also in that regard, there is a letter from Mr. Lewis to Claude Taylor. It's a Lewis document this time dated February 7th, 1990, 000262. And I quote: "Offering the terminals for lease in advance of certainty about Pearson's runway capacity is therefore not a viable business decision for government or for the developer."
So up to February 1991, whether the RFP went out depended, first, on the results of the environmental assessment, and, second, on the decision whether the runways would expand.
Mr. Berigan: That's what that indicates. That's correct.
Senator Bryden: That's correct. Thanks.
Are you referring once again to a document that -- I do it so I can move quickly. April 18th, 1991 is a Berigan document, 001161. Mr. Hession wrote to Mr. Lewis expressing his dismay that the RFP could be delayed until after the environmental assessment. Were you aware of that letter?
Mr. Berigan: I was aware of that letter, yes.
Senator Bryden: Now, either one of you, would you tell me what the initials F-E-A-R-O stand for?
Mr. Berigan: That's the Federal Environmental Assessment and Review Office, which was a component of the Department of the Environment but reported, I understand, directly to the Minister of the Environment.
Senator Bryden: Is that a government agency, then?
Mr. Berigan: Yes, it is.
Senator Bryden: Is it under that agency that the Environmental Assessment Review Panel is established?
Mr. Berigan: That's correct.
Senator Bryden: And is that established using government personnel or other personnel? Do you know?
Mr. Berigan: Depending on the type of assessment that's required, I believe the intention is to try to get experts from the appropriate fields to sit on the panel.
Senator Bryden: So they are really the government agency responsible for seeing that these things get done, I take it?
Mr. Berigan: That's correct.
Senator Bryden: Mr. Power, do you recall putting a memo in your file -- and I am referring to document 001114 -- in which you tell yourself, "The minister has announced the intention to proceed with RFP after the FEARO panel has issued its recommendation on the runway proposal"?
Mr. Power: I don't recall the memo directly, senator, but it's quite probable. As was discussed early in the process, that was the intent.
Senator Jessiman: What is the date, please?
Senator Bryden: April the 19th, 1991.
Senator Bryden: In a document dated May 27th, 1991, Senator Jessiman, 001035, in the draft call for expressions of interest, the document stated, and I quote, "It is intended to release the RFP following the federal Environmental Assessment Review Panel's recommendations."
It would have been contained in the call for expressions of interest.
Just one more of these. This is a Berigan document dated May 16th, 1991, 001161, an internal memo which was from Chern Heed. Who is Chern Heed?
Mr. Power: He was the airport general manager.
Senator Bryden: At that time?
Mr. Power: At that time.
Senator Bryden: And it was to a Mr. Mitteregger, M-I-T-T-E-R-E-G-G-E-R. Do you know who he is?
Mr. Berigan: I believe that was an administrative person in the headquarters office who was involved in responses to ministerial correspondence. So if there had been a response to a letter received by the minister that was being prepared at the airport, it would have been sent in to her for transmittal into the headquarters process.
Senator Jessiman: Sorry, could you give me that date again?
Senator Bryden: May 16, 1991.
Senator Jessiman: Thank you.
Senator Bryden: In that memo, Mr. Heed said, "Clear commitments have been made to the public that no steps to expand the capacity of Pearson airport will be taken until after the results of the environmental assessment review is known."
The RFP was issued on March 16th, 1992; correct?
Mr. Power: Right.
Senator Bryden: Had the recommendations of the environmental review panels been issued at that date?
Mr. Berigan: No.
Senator Bryden: I'm sorry?
Mr. Berigan: No.
Senator Bryden: What had changed the government's position, which up until now has been so clearly stated that no RFP would go until environmental assessment had -- if you don't know, that's fine. I don't expect you to speculate.
Mr. Berigan: I don't know.
Senator Bryden: I think you mentioned the statement. I didn't write it down. When was the Environmental Assessment Review Panel's report released? I think it was November the 30th, 1992.
Mr. Berigan: That's correct.
Senator Bryden: So that would have been, I don't know, about five months after. Did you look at that report?
Mr. Berigan: The runway report?
Senator Bryden: By the EARP?
Mr. Berigan: No, I did not. I was in Moncton by that time.
Senator Bryden: Mr. Power?
Mr. Power: I have read the report, yes.
Senator Bryden: In the report of that panel -- I'm sorry to have to go through this. I tried to be better organized, as usual.
Can you tell me what the recommendations vis-à-vis more runways for Pearson was in that report?
Mr. Power: I know generally the theme of the report, senator, but I do not remember the specifics.
Senator Bryden: I was doing what you do when you lose your place. I was filling in time.
I have the results, and I would ask if you disagree that this is a correct statement.
The interim report -- and this is the report of November the 30th, 1992, the Environmental Assessment Panel, which is a public document. These are the findings and page 84: "(a) There is now no likelihood that passenger aircraft movement demand will reach the levels projected in the environmental impact statement for 1996 before the year 2001 and maybe even later; (b) There is no serious and continuing problem of traffic congestion at Pearson at the present. The problems with congestion virtually disappeared due to an improvement in the use of runways and a decline in demand caused by the recession; (c) A decision on runway expansion can be deferred for two to three years without significant risk."
Mr. Power: I recollect that those are the statements of the report, yes.
Senator Jessiman: What was the date?
Senator Bryden: The report is November the 30th, 1992, and I quoted from page 84.
Was there concern expressed to you at any time about the shortness of the period to respond to the RFP?
Mr. Power: There were concerns expressed that the response period is shorter than normal and that that would be -- it was a factor for consideration, yes.
Senator Bryden: There was a review at headquarters between February 24th and 26th in 1992 of the RFP before it was issued. Was the issue of the reasonableness of the 90 days discussed at that time?
Mr. Power: It was discussed at several times, but a particular discussion at that date I can't recall specifically. It could very well have been because it was a subject of discussion.
Senator Bryden: You have already indicated that the response time on T3 to the RFP was four-and-a-half months.
Mr. Power: Yes, senator.
Mr. Bryden: And it was a less complex proposal than T1T2, and the response time there was 90 days.
Mr. Power: Yes.
Senator LeBreton: Four months. Ninety plus, and then it was extended to 120. So it was four months.
Senator Bryden: No, the RFP didn't have 120 days.
Senator Jessiman: It was extended.
Senator Bryden: Of course it was extended because the people who were already in the ballgame wanted another few months to get their act together, but anyone who was replying to that RFP was under a 90-day limit. If you couldn't get your act together in 90 days, you couldn't play.
Mr. Berigan: I don't believe that's correct. Immediately after the RFP was released, Mr. Corbeil, I believe, went in front of the standing committee and indicated that had there been a proponent come forward who requested a longer period of time, that would be certainly considered.
Senator Bryden: Which standing committee?
Mr. Berigan: The standing committee of transport.
Senator Bryden: In the department?
Mr. Berigan: In the house.
Senator Bryden: Was that after the RFP had --
Mr. Berigan: I believe it was the day after either he had made his announcement of releasing the RFP or the day after the RFP was released.
Mr. Power: I believe it was the day after his announcement. It was March 12th, I believe.
Senator Bryden: So that when the Greater Toronto Airport Authority requested a delay, if they had requested a six-month period to reply, the minister was open for that?
Mr. Power: The minister had indicated his willingness to entertain a request for extension. However, no proponent came forward with that request. The only request we received for an extension was the request from one of the proponents, and that request was granted.
Senator Bryden: Did the minister make a press release saying, "If anyone wants more time to reply, please let me know"?
Mr. Berigan: Not that I'm aware of.
Mr. Power: Not that I'm aware of. However, we were aware of the minister's decision on this. The question was asked at the interested parties' conference that was held immediately after release of the RFP. One of the parties in attendance asked if an extension would be considered. The response was that there was an indication of the minister's willingness to entertain such a request, and that such a request, if required, should be put through, in effect, my office, the project office.
Senator Bryden: How many people attended the meeting of interested parties?
Mr. Power: In the order of 150 to 200 people.
Senator Bryden: How many of those were potential developers?
Mr. Power: How many of those people who would have been interested in participating as a developer? I really cannot say. I would speculate that probably at least half the people were consultants and agents who would be interested in participating with a developer in providing their services to a developer as opposed to proceeding with an RFP.
Senator Bryden: Themselves.
Mr. Power: Individually, yes.
Senator Bryden: Subcontractors.
Mr. Power: Yes.
The Chairman: Concessionaires.
Mr. Power: Primarily architectural engineering consultants, airport planners, and less likely would be concessionaires.
Senator Bryden: So that British Airways, I think, or British airport services -- somewhere in the documents there is reference to them at least at one point having an interest. If they had someone mail the RFP to them and it said 90 days to reply -- I'm using them as an example -- and they did not attend this interested parties' meeting, would they have known of the minister's willingness to entertain the possibility of lengthening the period?
Mr. Power: It's possible they may not have had first-hand knowledge of that intention. However, it would not be unusual for a party if they felt that the response time was inadequate to ask the project office, "Is there a potential for an extension of time?" Whether they would have had first-hand knowledge of the minister's intention in this situation, I have no way of knowing.
Senator Bryden: You would have no way of knowing how many others like that who might have been potential responders did not respond because of the shortness of time?
Mr. Power: That's correct, I have no way of knowing.
The Chairman: Is the intent of your question, Senator Bryden, to indicate that the methods used by the minister to indicate his willingness to extend it was not sufficiently advertised?
Senator Bryden: No. My point is that the official position of the Department of Transportation under the minister was, "Here is a request for proposals; you have 90 days in which to reply." Is that correct?
Mr. Power: That is correct.
Senator Bryden: And there was no official position came out of the department, the minister, by press release or except by meetings with people who were already interested that indicated that in fact that period, not could be, but had been extended; correct?
Mr. Power: That's correct.
Senator Bryden: Thank you.
Mr. Chairman, I'm almost finished. And you took some of the time at the beginning.
The Chairman: I know. I have accounted for that. You are at the 50-minute mark.
Senator Bryden: I'm at 50?
Senator Tkachuk: Time flys when you are having fun, Senator Bryden.
Senator Bryden: I thought it was 15.
I'm almost finished, and I appreciate your patience. I'm always bothering his patience, so that doesn't trouble me a great deal.
Not just in relation to the 90 days and all of that, but at the time of the issuance of the request for proposal, there was outright opposition by some parties to a call for proposals at all at that time; is that not correct?
Mr. Berigan: I was aware of some, yes, through press reports essentially.
Senator Bryden: Was Air Canada one of them?
Mr. Berigan: Air Canada, their position during this period was fluctuating quite a bit. They, and I think Wayne will confirm, were consulted and essentially participated in the development of the RFP as it related to their treatment by the proponents. There were representations being made at different levels of the organization by different levels from within Air Canada about whether or not they should be held ransom to a private sector developer and whether or not it was appropriate to proceed at this time. So in general terms, I guess I would say there was a sense that Air Canada wasn't fully on board. On the other hand, they were participating in the development of the RFP.
Senator Bryden: In testimony before the House of Commons committee, Air Canada -- the person who represented Air Canada at that -- indicated that they wished a delay of two years. Now, I don't want to editorialize here, but just a little bit. If it's going to go ahead anyway and you're going to be having to deal with it, doesn't it make business sense to participate if you can in this development whether you like it or not?
Mr. Berigan: Yes, that is correct.
Mr. Power: That's correct, and that's the basis on which the people with whom I worked was participating in the RFP.
Senator Bryden: The Air Transportation Association of Canada opposed the issuance of an RFP at that time as well; isn't that correct?
Mr. Berigan: I have no knowledge of that, but --
Senator Bryden: There's no reason why you should know everything, but I will refer the committee to a document dated March the 5th, 1992, 000301. The air transport association in that document opposed the issuance of the RFP for T1T2 because it was not supported by the industry in Canada. The needs for terminal development capacity could not be addressed until a decision was made on new runway construction, and for that reason they opposed it.
The Airport Development Corporation, were they part of -- were they respondents to the RFP?
Mr. Power: No, they were not.
Senator Bryden: Did they not also oppose the issuance at that time?
I refer the committee to another document, September 26th, 1991 -- and I wouldn't do the three zeros, but the docket number is 649.
Mr. Power: The time frame may have played some part there, but I don't know the exact date that Airport Development Corporation was no longer involved as a partner in Terminal 3. At one point, ADC and Claridge were partners in Terminal 3. By the time of the T1T2 proposal call, ADC was no longer a partner in Terminal 3. Claridge at that time, who had procured ADC's interest in Terminal 3, Claridge of course was a lead figure in one of the proponents, but ADC was no longer a player in Terminal 3 or at the airport at that time.
Senator Bryden: Yes. We, at some point in these proceedings, are going to have to explore that situation as well. Basically the basis of their opposition in 1991 was that the demands of traffic was down significantly and there was no requirement for major development in a rush at that time.
Let me just ask you because you see the people going through the airports and so on. At the time that the RFP was issued, other than the fact that repairs or maintenance or something had to be done at the airport, you had lots of capacity in 1992.
Mr. Power: In 1992 there was surplus capacity, yes.
Senator Bryden: And you had surplus capacity on runways, and Terminals 2 and 3 in 1992 were operating at about -- combined were operating at about 50 per cent of the number of passengers they could handle.
Mr. Power: No, it was considerably higher than that. There was -- the combined capacity of Terminal 2 would be in the order of -- "capacity" is a very flexible figure, but in the order of 18 million passengers a year for Terminals 1 and 2, and at that point in time they were handling in the order of 11 to 12 million.
Senator Bryden: And what is the capacity of 3?
Mr. Power: In the order of 10 million.
Senator Bryden: We had evidence given yesterday that the capacity is to handle approximately 30 million today. Maybe it's gone down since 1992, but today there's about 20 million?
Mr. Power: In terms of today's traffic levels, it's in the order of 20 to 21 million.
Capacity of the terminals -- as I say, capacity is very much a subjective thing. We have estimated that you will continue to provide a reasonably good level of service in terms of capacity of the terminals, a good level of service up to 28 million, but you should expect to see a noticeable deterioration in the level of service at that level.
Senator Bryden: If you get close to maximum, it's bound to start to -- if you are right up to your top, but you're a long way from your top now.
Mr. Power: That's correct.
Senator Bryden: And you were in 1992.
Mr. Power: That's correct.
Senator Bryden: Just two more people who had requests that the RFP not go ahead at that time. The province of Ontario --
Mr. Berigan: I was aware of that, yes.
Senator Bryden: -- did not want you to proceed at that time.
Mr. Berigan: That's correct.
Senator Bryden: And the Greater Toronto Airport Authority had asked for a delay.
Mr. Berigan: I wasn't aware of that personally.
Senator Bryden: Well, we had evidence yesterday from the people from the authority that they had asked for time so that they could make a proposal. They didn't have time within the 90 days, although some of them tried.
Mr. Power: They did not make that request to the project office, no.
Senator Bryden: Not to you.
Mr. Power: No.
Senator Bryden: That, Mr. Chairman, does me for the first round. I appreciate, not only the patience of the witness, but the forbearance of the chairman. I just wanted to make one comment to Mr. Berigan. I can't believe his forbearance in waiting until 1992 to move to Moncton.
The Chairman: Well, that was exactly one hour.
Senator Bryden: I appreciate that. It let me get finished, and I probably won't even have a second round.
The Chairman: I think that's quite likely.
Senator Tkachuk.
Senator Tkachuk: Thank you, witnesses, for coming.
These documents came to us yesterday, and I would like to thank the people who put them all together. They are very thorough, but I'm not as quick a reader as Senator Bryden. I just got to look at a few of them. So I may ask some detail in the process, which I think is very important and that we have to discuss here today.
I would like to point out that I like the way these things are put out. I would just prefer that the people who are putting them together in the Department of Transport -- and I know they are trying to do a good job -- would get them to us a little bit earlier so a slow reader like me can catch up and maybe have more relevance to my questions, but I will do my best.
We have a number of issues that have been discussed at some length over the last week and a half. Let's go to Terminal 3.
When was the public made aware that the construction of Terminal 3 was going to take place?
Mr. Power: The need for Terminal 3 was an often-discussed subject, you know, through from the late seventies, through to the late eighties. It was somewhat of an on-again off-again project as traffic levels, traffic growth increased and then traffic may have declined.
It was the spring of 1986 I believe, if my memory serves me right, that the minister of the day announced the intention to proceed with the development of Terminal 3 using the private sector.
Senator Tkachuk: In '86?
Mr. Power: I believe it was the spring of '86.
Senator Tkachuk: Spring of '86.
Mr. Power: Do you have any better dates?
Mr. Berigan: No.
Senator Tkachuk: Is that about right?
Mr. Berigan: Yes.
Senator Tkachuk: We're going to use the private sector. This is the spring of '86. Then the expression of interest took place, we heard, later on that fall.
Mr. Power: Issued in September of '86.
Senator Tkachuk: In September, and then the call for proposal shortly thereafter. A lot has been made about the expression of interest. Expression of interest is not unusual and not having an expression of interest is not unusual. Is that not --
Mr. Power: I think that's a fair statement.
Mr. Berigan: That's a fair statement.
Senator Tkachuk: That would be a fair statement for government contracts. The reason this expression of interest was done was because this was a new thing. This hadn't been done before.
Mr. Berigan: That's correct.
Senator Tkachuk: So it's sort of -- like if I went to a dance and three women asked me to dance, I wouldn't need an expression of interest, right? I mean, I wouldn't have to walk around and ask people to dance. So I think that's what the government was trying to do here, right? They were trying to find out who wanted to come to the dance.
Mr. Berigan: I think there was a general uncertainty as to whether or not the private sector was prepared to get involved with terminal buildings on airports, and the intention was to see if there would be any interest in it.
Senator Tkachuk: Right. So this was announced to the Canadian public in the spring of '86, and the expression of interest was later on that fall, and then the call for proposals shortly thereafter in December, right?
Mr. Berigan: That's correct.
Senator Tkachuk: That's only a period of a few months. That's rather quick.
Mr. Berigan: Yes.
Senator Tkachuk: In 1990, when the minister announced that he was going to and the government had decided that they would look at private sector development, that is, outside of the Ministry of Transport for developing Terminals 1 and 2, were there people who were interested?
Mr. Berigan: Yes.
Senator Tkachuk: People were coming to the dance?
Mr. Berigan: That's correct.
Senator Tkachuk: A few of them? One, two, three?
Mr. Berigan: Actually, the unsolicited proposals had been received before the minister's announcement of the government's intention to go to a competitive RFP process.
Senator Tkachuk: So the government was fully aware that there were people who were interested in the process and even a project of this size?
Mr. Berigan: Yes.
Mr. Power: That's correct.
Senator Tkachuk: Let's talk about capacity for a minute because that's another -- you know, outside of God, can anybody predict the capacity or the future use of an airport?
Mr. Berigan: Traffic forecasting is an art rather than a science, I would suggest, yes.
Senator Tkachuk: For example, is the Edmonton airport at capacity, the Edmonton International Airport, the one just south of town?
Mr. Berigan: I don't believe it is.
Senator Tkachuk: No, it isn't. Calgary airport?
Mr. Berigan: No.
Senator Tkachuk: Long ways yet. Mirabel?
Mr. Berigan: Certainly not at capacity.
Senator Tkachuk: I'm sure at the time when they built Mirabel, even though we have heard from even one witness who says that Mirabel was probably a wonderful anything, and you know, in 2035 or something like that, we'll all thank the politicians who made the decision. The point is that I don't think when it was built that it would be 2035 when they thought it would be full; is that not correct?
Mr. Berigan: I believe that's true, yes.
Senator Tkachuk: I believe they expected things would get a little better. So the question of capacity -- there was political pressure at the time. We have heard from Mr. Lewis that there was some pressure on the government and the deterioration of the airport, and they wished to proceed. I mean that was sort of the fundamental reason for their decision.
Mr. Berigan: That's correct.
Senator Tkachuk: Mr. Berigan, you were in charge of putting together the sort of pre-expression of interest. What does all this mean? Like how did this start?
Mr. Berigan: In terms of the documentation, senator?
Senator Tkachuk: Yeah.
Mr. Berigan: Well when officials undertook to prepare for a competitive RFP process, I believe the first plan of action was that Mr. Barbeau convened a small working group to try to glean what could be gleaned from the Terminal 3 experience and to try to lay out a work plan for the development of an RFP process. That subsequently was taken over by the project office in Toronto.
During that period of time, there were a number of policy issues which arose, in which it was deemed necessary to get direction on. There was extensive work over the period of time to try to resolve some of those issues that would be ultimately reflected in the request for proposal document.
Senator Tkachuk: And this started at about what time?
Mr. Berigan: It started at about the time of Minister Lewis' announcement that an RFP would be issued. That was in '90?
Mr. Power: Yeah, fall of '90.
Senator Tkachuk: Fall of '90.
So let's get this right. You started off by organizing the material and what you had learned from the Terminal 3 process.
Mr. Berigan: That's correct.
Senator Tkachuk: And you began work. So after you completed this, what happened?
Mr. Berigan: That was a continuing process. I guess the resolution of some of the policy issues was in fact guiding how quickly we could proceed. There were of course a lot of technical studies and documentation that would need to be put together for the eventual proponents, and I believe that started being collected early on.
Mr. Power: Very early in 1991 as well.
In reference to the preparation of the documents, we were aware that the one stage versus the two stage was a policy issue from which we would be getting direction from the minister. However, in order to be able to respond quickly to whatever the decision was in that respect, we prepared the documentation for both approaches, whether it be a one stage or a two so that we would be in position to respond quickly.
Senator Tkachuk: What did you prepare for the expression of interest?
Mr. Power: We prepared much like a request for proposals, if you wish, except it's a call for expression of interest. As I outlined earlier, we're asking more for an expression of qualifications and capabilities and interest of parties to participate in a project of this nature. We would outline the scope of the work to be carried out and then ask the proponents to indicate their interest and qualifications.
Senator Tkachuk: We started this shortly thereafter. Now, through this whole time, you're meeting with people that may be interested. Is there people like knocking on your doors and saying, like, "What do you expect?" or "What do you want me to do?" Explain this to me because I have some experience with the CRTC, which is sort of, like -- you know, they say there are so many channels available. People who want to participate in a specialty channel, go visit the CRTC, and the bureaucrats get an idea of what is happening and what they expect. Then sometime down the road they call for an application. Then you don't visit them any more, so to speak. Tell me how this works.
Mr. Berigan: There were letters put to the minister suggesting ideas of what should be done, how it should be done, and when it should be done. When people were aware that I was a focus for different activities, I was getting phone calls and being asked to meet with people to explain where the process was. There were representations made which essentially raised some of the policy issues that ultimately needed to get resolved. In general, we were trying to satisfy the requirements and the schedule of the minister of the day.
Mr. Power: In addition to that, at the site office level, we would frequently get inquiries from mostly consultants who would be interested in participating with a major developer or selling their services to a major developer. These consultants would make contact, trying to keep on top of when an RFP issue might be expected simply so that they would be in a position to be prepared to approach interested developers. So we frequently would get inquiries in that regard to which we could only respond that, you know, we're waiting for a ministerial decision on the issue, and we might give an indication that it would be not less than four months or in that order. Again, we would not be in a position to give any concrete date until the minister made a decision in that respect.
Senator Tkachuk: So there was a long period of time between -- I mean, I hate to editorialize, but it seems to me that for Terminals 1 and 2, between the time the minister announced his intentions to the time the RFP was called, we got a serious period of time for those who wanted to be players, to be players. We have 17 months.
Mr. Berigan: A period of 16 or even 17 months.
Senator Tkachuk: That's a long time even for a government, right? That's a long time. So there was no attempt by the bureaucracy to limit the time. Was there any attempt by you to limit the time? "Let's do this tomorrow."
Mr. Power: No. We were preparing to issue the RFP as quickly as possible once there was ministerial direction to do so, but not in terms of trying to influence the minister's time line on this.
Senator Tkachuk: So you received direction from the minister to issue the RFP?
Mr. Power: That's correct.
Senator Tkachuk: So if he would have phoned you after four months and said, "Move this thing, I want it done in a month," you probably would have done it?
Mr. Power: After four months. We might have been hard pressed within a month. As time went on, the amount of time line between when the minister would say go with it and we could actually get it on the street was diminishing. As we matured the documents, if the minister had said presumably, let's say, June of '91, we probably would have needed two or three months to get it out. When the minister finally -- when the direction to implement was given in February or March of '92, we had a very short time frame. The documents were well advanced, and we could issue very quickly at that point.
Senator Tkachuk: Right, but he basically waited until sort of the homework was complete.
Mr. Berigan: Essentially until the policy issues were resolved from my perspective, yes.
Senator Tkachuk: And it was his decision before to call the RFP?
Mr. Berigan: Yes.
Senator Tkachuk: So it could have been called a little bit earlier. It could have been called a little bit later. He just decided to do it at this time, 17 months after the public had already known. It must have been fairly well known because I know one of the partners was from a company even as far away as Saskatoon. Agra Industries was involved in one of them. If you hear about it in Saskatoon, you even hear about it in Moncton. So it wasn't a secret in Canada amongst people who wanted to be players.
Mr. Berigan: That's correct.
Mr. Power: That's correct.
Senator Tkachuk: You mentioned a number of times policy issues that had to be revolved. What would they have been?
Mr. Berigan: These were issues that the department felt necessary or in fact received direction from the minister in order to finalize certain parts of the request for proposal document. They ranged, for example, from the issue of whether it be a one- or two-stage process, to the amount of time that would be permitted for proponents to react to the RFP.
There were issues such as what would be included in the scope of the RFP, whether it would be T1, whether it would be T2, whether it would be T1 and T2 combined and whether or not any of the centre core property would be included in the property that was being included in the request for proposals.
There was decisions about what exactly the private sector developer would be asked to do and how far would he get involved in the operation of the airport, such as would it include operations or include safety and security and those types of issues.
Again, there was the question of how to deal with what type of runway capacity and therefore what type of investment and facility would eventually be required by the developer in his response to the RFP.
There were issues about who would be eligible to submit proposals, whether the Terminal 3 developer was eligible, whether airlines could participate, and the extent of foreign ownership that would be permitted.
There was the issue of how to deal with existing employees at the terminal buildings.
There was the issue of timing with respect to the environmental process that was ongoing for the runways.
There was the issue of evaluation criteria. What would be the factors used in order to assess the proposals once they were received?
Those were the types of issues for which we sought ministerial direction.
Senator Tkachuk: So this was not a quick and dirty process. This was, it seems to me, complicated, complex, well documented, very organized. Am I out of line here?
Mr. Power: No.
Senator Tkachuk: You've heard all the controversy obviously. That's why we're here.
Mr. Berigan, you're a fairly major player.
Mr. Berigan: I was in the middle of a lot, yes.
Senator Tkachuk: Normal activity?
Mr. Berigan: To the best of my knowledge, yes.
Senator Tkachuk: Did you feel undue pressure from the minister to organize the RFP in a way that would favour one over the other?
Mr. Berigan: No.
Senator Tkachuk: Did he have chit chat with you or did you ever see him?
Mr. Berigan: Yes. There were frequent meetings essentially on those policy issues.
Senator Tkachuk: Basically on what to do with Terminal 1 and 2?
Mr. Berigan: Yes.
Senator Tkachuk: In Toronto, you are a fairly big player at the airport. It must have been quite interesting. You had the Toronto Airport Authority and you had local politicians, you had the developers, all these people come and visit you?
Mr. Power: No. Maybe we were lucky at Pearson being farther away from where the action is in Ottawa. We had very little direct contact with the major players, the people you referred to. As I say, there were people who would inquire, what is the status? Is there anything we can tell them in terms of when we anticipate a release? That was primarily the extent of contact from the interested parties, certainly at my level, at the project level.
Senator Tkachuk: Who put you in charge of this, Mr. Berigan?
Mr. Berigan: Glen Shortliffe, the deputy minister, in December of 1988, with the concurrence of my boss.
Senator Tkachuk: And your boss was?
Mr. Berigan: At that point and time it was Dave McAree and subsequently Victor Barbeau.
Senator Tkachuk: You reported to them? How did the reporting structure go?
Mr. Berigan: Yes, I reported to Victor Barbeau who in turn reported to the deputy minister. For a lot of these issues it was a question of keeping Mr. Barbeau informed because things were happening quickly, and there were times when I would get calls from the deputy minister's office to do something and it was incumbent upon me to keep them informed. That was the way we operated.
Senator Tkachuk: Mr. Power, who did you report to?
Mr. Power: At this period of time my direct reporting relationship was to Mr. McComb who was the manager of major Crown projects at Pearson who in turn reported to Mr. Heed, the Airport General Manager.
Senator Tkachuk: If there had been something going on that you considered unethical, you know, whether a guy was bringing a suit case of money or whatever it was -- unethical, would you have reported it?
Mr. Power: Yes, definitely.
Mr. Berigan: I would have.
Senator Tkachuk: You would have reported it?
Mr. Berigan: Yes.
Senator Tkachuk: Did you have reason to?
Mr. Power: No, not at any time.
Mr. Berigan: No.
Senator Tkachuk: So during this whole period of time, you were there from '88 to '92?
Mr. Berigan: That is correct.
Senator Tkachuk: You organized the RFP, you had no reason to report something that you considered that would jeopardize the process?
Mr. Berigan: That's correct.
Senator Tkachuk: Mr. Power?
Mr. Power: That's correct.
Senator Tkachuk: I may have more questions later, but I am done right now.
The Chairman: Gentlemen, you laid the ground work. You prepared the criteria that was to be followed by the evaluation committee. Is that a straight forward statement?
Mr. Power: Not really in terms of developing the criteria. I was responsible for incorporating the evaluation criteria in the RFP documents. Mr. Lane, who you will be dealing with later today, Mr. Lane had been appointed as the chairman of the evaluation committee and it was he who developed the criteria. To a great extent, we consulted because the criteria was to evaluate the requirements as set out in the request for proposals, so therefore they had to mesh.
But the final statement of the evaluation criteria was provided to me by Mr. Lane.
The Chairman: I see. Did anyone criticize the work that you or Mr. Berigan did or add to it or subtract from it or have any quarrel with it?
Mr. Power: Not that I am aware of. Nobody spoke to me directly and I am not aware of any quarrel with the quality of the documentation.
Mr. Berigan: Either here.
The Chairman: Senator Kirby had asked for time. He is not here, but Senator LeBreton asked so I will recognize you after Senator LeBreton.
Senator LeBreton: Thank you, Mr. Chairman. Thank you very much for appearing today. I actually now had several of my questions already asked by Senator Tkachuk. I just had one question, because I was going to ask the very same questions. I appreciate your answers.
I have one question going back to putting this in the proper perspective. We are talking about Pearson, the late 80s, the pressure that was obviously on the government and the minister as he testified from the business and travelling public and people that had to go through Pearson to fix Pearson.
On the question of the inexact science of trying to forecast capacity -- and Farquhar last night said forecasting capacity had a plus or minus 20 per cent. We sometimes wish political polling was that inexact.
What were the projected forecasts in the late 80s?
We could not anticipate what would happen in the early 90s. What were the forecast in the time frame when we were trying to deal with this Pearson problem for this period of time that we are now in? What were they projected for Pearson?
Mr. Power: Without attempting to give specific figures, they were projecting that the traffic would reach the level of capacity at the terminals, in terms of passenger traffic, by the late 1990s. That the forecast -- it was said we would have a capacity problem by the late 1990s. That was the forecast at that point and time.
Senator LeBreton: It would be fair to say then that given the pressures in the late 80s that there was reason to believe that action had to be taken rather immediately, knowing how long it takes for proposals and things to be put together, to start to act on doing something about Pearson International Airport?
Mr. Power: Taking into consideration the length of time it would take to implement a project or work of this nature. The feeling was that the work should proceed in order to have as much as possible of that work completed before we developed the capacity problems.
Senator LeBreton: Then I just have a clarification question. I think you answered this. I am sure you did. A number of comments have been made about the supposedly short time for the response to the RFP or the rush as Senator Bryden characterizes it. Others expressed the view that time was sufficient, believing that Transport Canada had learned a great deal. And as you have already testified, you have with the T3 experience, although they are quite different.
Could you just again describe to me what occurred during the 17 month period between the time that the minister announced in October 1990 and the time that he gave instructions for the RFPs in March of 1992 what was going on in your shop at that time? I think you talked about developing policy, but obviously this 17 months did give you some time to fine tune, and so I just wanted to clarify what actually happened in that 17 months?
Mr. Power: In addition to actually preparing the RFP documents themselves, which took a fairly extensive period to prepare a complete package of documents -- as in fact one of the first steps that we did in February of 1991 was to engage Price Waterhouse to provide us with expertise services as an overview consultant who advises throughout the RFP preparation process, and in fact the initial drafts of the documents were in fact prepared by Price Waterhouse.
At the same time that that package of work was occurring, there was also considerable amount of work which had to be done on sight gathering the technical information and assembling it in a manner that could be used by proponents for when they prepared their requests for proposals; engineering drawings, engineering reports, complete catalogue of leases and contracts that would have to be signed, definition of which organizational components for employees which would be potentially transferred to the developer. This was occurring in parallel with the actual preparation of the RFP documents. Again, this was information that would have to be available to interested parties in order to prepare the response.
As well, in addition Mr. Berigan outlined many of the more critical or higher level issues for which we would be seeking ministerial direction. At the same time, there is always a number of operational issues that have to be resolved, and our intentions or requirements reflected in the RFP documents, and these were issues that were not of magnitude or scope that would be referred to the minister, but they would be issues that would be addressed by the airport manager.
So again we had to look at options for resolving issues, look at alternatives and then make some decisions that would be incorporated in the RFP.
In a project of this nature, there is usually a large number of such issues, and it was our desire certainly to have our position on such issues clearly reflected in the RFP. Those issues were being resolved and incorporated into the document as decisions were made at the airport.
Senator LeBreton: So in other words then, the 17 months was time well spent, and to have that period of time then was a much better situation for you than if the minister would have come say in March of 1991, a year before, and called a request for proposals. This gave you more time to develop the policy and request for proposals?
Mr. Power: It gave us more time, but I think I indicated had the minister come in June of '91 and made his decision, we would have needed some time to bring the documents together, but we could have issued say by early fall of '91 or whatever. Certainly as we had more time, we were able to be more thorough in the material we were able to gather and polish the documents up a little better.
Senator LeBreton: You could have done it earlier, but you did appreciate this obviously?
Mr. Power: We took advantage of the time.
Senator LeBreton: Thanks very much.
The Chairman: Senator Kirby.
Senator Kirby: Thank you, Mr. Chairman.
I really just want to make sure I understood a couple things you said. I want to go into an area that no one else has discussed.
First, with respect to the decision to not proceed with a two phase approach, and specifically to not proceed with an expression of interest, that decision was made by the minister, is that correct?
Mr. Berigan: That's correct.
Senator Kirby: And the minister was Mr. Corbeil at the time?
Mr. Berigan: Yes.
Senator Kirby: We switch minister's going through here. I just want to make sure I had the right minister.
Secondly, the decision to proceed without waiting for the environmental review panel to report was also a decision made by Mr. Corbeil?
Mr. Berigan: Yes.
Senator Kirby: In spite of the fact that I think in Senator Bryden's questions to you you confirmed that Mr. Lewis had written a letter to Air Canada and that in fact he had speech notes which indicated when he was a minister that the contract would not be awarded, privatization would not proceed until the process was finished. Nevertheless, his successor changed that and proceeded in any event without waiting for the EARP process?
Mr. Berigan: Yes, the approach was changed, yes.
Senator Kirby: Can I ask a bit about the actual process then by which the RFP itself was developed. Mr. Power I believe a moment ago you mentioned that Price Waterhouse -- I think what you said was did the initial draft of the RFP, is that what you said?
Mr. Power: Yes, that is correct. They were under contract to my office to assist us in preparing the documentation, and they did an initial cut of the document.
Senator Kirby: They were working under instructions from you?
Mr. Power: That's correct.
Senator Kirby: Did that initial draft contain the 90 day time limit?
Mr. Power: I am sorry, my memory just does not recollect. I do not know about the initial draft, but certainly one of the more mature drafts, the draft that Price Waterhouse tabled, I believe it did contain that time frame.
Senator Kirby: Who would have told them what the time frame was?
Mr. Power: We would have told them that there was different issues under discussion and we would have told them to -- for various of the policy issues that we will draft the documents with a particular time frame in mind subject to confirmation from the minister. If they were given direction on that, I would have directed them.
Senator Kirby: So the 90 days was not their idea?
Mr. Power: No.
Senator Kirby: Did they have a view on the 90 days?
Mr. Power: Yes, they expressed concern that the 90 days was a relatively short time frame.
Senator Kirby: Did they express that concern -- so there he was, although they were your outside consultants who had been hired to draft the RFP. Their view was that it was too short a time frame. Why did they think it was too short a time frame?
Mr. Power: It was just their -- I do not know if they gave me any long or lengthy dissertation of why they would arrive at that. It was based on their experience in this field, that they felt in their view it was a relatively short time frame.
Senator Kirby: Just let me read you a comment here from a document. If it helps any it is number 639. October 29, '91 document from Chern Heed to Mr. Barbeau. I will just extract one sentence from it because it contains the essence of the document. "Price Waterhouse has commented that notwithstanding that the department may consider requests to extend the response time, publication in the RFP of a 90 day response time for proposals would convey the message that the government is not committed to a fully open and competitive process."
So, I will read the next sentence so you do not think I am taking it out of context. "The number and complexity of the issues to which proponents must respond with mature and firm proposals require a response time of not less than six months." So that was the view of your outside consultants who you had hired to draft the report.
The question then I have is --
Senator LeBreton: Was that the view of outside consultants or Chern Heed?
Senator Kirby: This was the view of Price Waterhouse.
Senator Jessiman: What is the document please?
Senator Kirby: 000639.
Senator LeBreton: Is that in this group of documents?
Senator Jessiman: Date please?
Senator Kirby: October 29th, '91.
Senator Jessiman: What is it called?
Senator Kirby: It is called the Power Document, which I assume refers to Mr. Power and not to some other form of power.
I wonder if I could -- can you tell me who decided 90 days? How was it decided?
Mr. Power: We received direction from the minister that the response period would be 90 days.
Senator Kirby: I am sorry, this is just so we know, this is Minister Corbeil?
Mr. Power: That's correct.
Senator Kirby: I thought Mr. Lewis was gone by then. With respect to -- just sort of one kind of peripheral question. Was the Department of Supply and Services involved in anyway in developing the RFP? My experience as a deputy in town always was that they did not like any RFP's going out that they were not involved in, so I am curious to know if they played a role.
Mr. Power: They did not play a direct role.
Senator Kirby: Was that unusual?
Mr. Berigan: It was not. During all the interdepartmental consultations that were taking place, the requirement to speak to them never came up.
Senator Kirby: Just as a matter of interest, is that generally true of MOT? Does MOT operate on its own that way?
Mr. Berigan: Again senator, I guess it depends on the type of procurement we are looking at, getting back to a major equipment procurement or system procurement, obviously DSS is involved, but from a lease pointed of view --
Senator Kirby: They are not. Can I ask you a couple of questions about the evaluation criteria? Who set them?
Mr. Berigan: There was a --
Senator Kirby: What I am referring to is the section in section 7 of the RFP itself. It has a headline Evaluation Criteria, just so you know what I am talking about.
Mr. Berigan: The generation of those was an iterative process where the experience in Terminal 3 was used to take a first cut at the least general headings of the criteria to be used. Those were run through interdepartmental consultations or checked with the consultant.
Senator Kirby: Price Waterhouse?
Mr. Berigan: Price Waterhouse consultant. And then again before the document was put together they were vetted and in fact expanded upon by Mr. Lane, who was going to be the chairman of the evaluation committee, and the general essence of the evaluation process was sanctioned by the central agency.
Senator Kirby: I am curious about -- I will tell you why. There is nothing surreptitious about this. You have a section which you call 7.7, best overall acceptable proposal and you list two criteria. Page 48 of your RFP. You list two primary considerations and then you go on to have some other minor ones.
The actual development of those criteria was done by you people. I mean, as I understand, as usual in Ottawa everyone was consulted about everything. Whose ideas does that document reflect? Who were the group of officials who did that or whoever?
Mr. Power: The final documentation is endorsed by the chairman of the evaluation committee. And in fact, some parts of it were drafted. The final drafting was a product of the chairman of the evaluation committee, and I think Mr. Lane would be in a position to discuss that with you later today.
Senator Kirby: Okay. I am not asking about the evaluation. I understand that the evaluation committee -- what they did in the evaluation. I am trying to understand the criteria. Who decided and what was the process by which the criteria was decided that they would measure or do the evaluation on? The evaluation is only as good as the criteria against which it is being measured.
Mr. Power: Notwithstanding the consultations I would have had with Mr. Lane, as I explained, but the actual final chapter that went into this book was provided to me by Mr. Lane.
Senator Kirby: Am I correct in inferring from that therefore that you had no input or no views on whether or not the criteria were correct or whether other criteria should have been considered? Were you consulted on that question?
Mr. Power: I had consultations with Mr. Lane during the period that he was preparing this chapter.
Senator Kirby: You had a lot of familiarity with Pearson itself at the time right?
Mr. Power: Yes.
Senator Kirby: The thing that struck me on reading it, isn't it amazing that nobody in those criteria talk about the impact of changes either on the airlines who use the airport or indeed on the cost to passengers? People are very worried about how much the government gets or how much the developer will get, but nobody seems to care much at all -- frankly it is not mentioned -- about what the potential impact would be either on the airlines through increased fees or on passengers because increased fees are going to try to pass it on to passengers. Is that not sort of strange?
If you look at the top two criteria, very concerned about the financial return to the Crown and you are concerned about the developer. No mention of either airlines or passengers.
My question is simply, I guess to Mr. Power, was whether or not that issue was ever discussed, or if not, why not?
Mr. Power: I think it is a matter of assessment of how the impact on the passengers is assessed.
If you look at the various criteria on the development plan and under the management of operations, it basically does provide for an assessment of the extent to which the facility that is going to be provided meets the needs of both the travellers and the users.
Senator Kirby: That talks about the facility. Does not talk about who pays. Let me tell you what bothers me. Be very easy to jack up the return to the Crown by simply offering to pay the Crown whatever you felt was required to get the RFP, provided you believe you could simply pass those costs on first to airlines and then to passengers. If you believe that you can indirectly tax passengers -- and the criteria do not talk about that. I find that odd.
I realize we will be able to talk about it in some depth this afternoon. Since, Mr. Berigan, you were involved in developing the RFP, you don't recall that being an issue at any stage in the game?
Mr. Berigan, I saw you stick your finger up. I thought you were going to say something.
Mr. Berigan: I do. I recollect there being discussions about the treatment that would be given to the carriers as being a consideration in the evaluation of the proposals, and specifically with reference to Air Canada, where there is a complete section on how charging and pricing and infrastructure development would be dealt with on the Air Canada issue. I can't put my finger on where it says that in the document itself.
Senator Kirby: I take that.
Mr. Berigan: I know that was certainly discussions with the central agencies and the interdepartmental committees.
Senator Kirby: It ultimately gets lost when we come to evaluating the best overall proposal.
Mr. Power: It gets picked up in places such as the first item on top of page 47 under the business plan. One of the factors that would be evaluated is the associated pricing strategies. Now, if you go back earlier in the document where it talks about pricing strategies, it indicated that we were interested in seeing the developer's strategies, pricing of services to users. And that, therefore, this would be a factor that would be evaluated as part of the plan.
Senator Kirby: Knowing how sensitive governments are in general to tax increases, direct or indirect, I guess I am surprised that the impact on the ultimate consumer in dollar terms, or indeed the airlines, because they would be the people who would force it on the consumer, gets buried. I take Mr. Berigan's point. It is there somewhere. It is buried. Anyone simply looking at the evaluation criteria has to say, isn't that kind of strange?
Can I just ask one last question? Given the fact that this was a process going out over time, the other thing that struck me as odd in terms of reading the RFP was there was no -- it does not seem to reflect the fact that over time the actual circumstances at the airport may change.
We have been told that back in '87, '88 there was demand, and then suddenly we got to '92 and by the end of '92, there is lots of capacity for quite sometime.
Do you want to comment on why the RFP itself and indeed the evaluation criteria does not contain any reflection of the fact that perhaps by the time we go to the proposals, we ought to also assess whether or not the economic circumstances have changed from where they were 17 months before where you started out?
Mr. Power: The reason that was not considered to be a major fact in this particular request for proposals is that the primary or major focus of the RFP was to provide for the modernization of the existing two terminals and to do it in a manner which made best use of the land area that was available for these terminals and best provided for expansion in the future.
Additional capacity was not a primary focus of this RFP. It was somewhat of a secondary issue in that we wanted to make sure that best use was made of land. However, it was the modernization -- because of the condition of the existing terminals, it was the modernization that was one of the main focuses. Knowing that that modernization was going to be somewhat disruptive to the operation of the terminals while that was taking place, the traffic levels were important because of the view to try to have this work done in advance of a significant traffic growth. The longer the modernization of the terminals was postponed, the greater the potential for this work having to be carried out during periods when the terminals are starting to become congested.
Senator Kirby: You said 3 responses to the RFP came in and one was dropped. Obviously we know a lot about the two that were accepted. Just to complete the record, what was the one that was dropped and why was it dropped?
Mr. Power: The requirements for a valid proposal was that any party that was interested had to register as a proponent and with the proposal had to put a security deposit. I think it was a million dollars. Those two criteria were not met.
Senator Kirby: By some third --
Mr. Power: By the third party. Therefore, on review by the contract office that this essential criteria was not met, and therefore the proposal was returned to the proponent and not turned over to the evaluation committee.
Senator Kirby: So they never got into the evaluation committee?
Mr. Power: That's correct.
Senator Kirby: You had three unsolicited proposals that you talked about on and off this morning. I guess I am not familiar with bids where you have a number of unsolicited proposals on the table. My instinct is that a combination of unsolicited proposals and a short response time -- i.e. 90 days in this case -- creates an unlevel playing field for any new players who want to enter the game because the other players are already into it and they have a short time to respond. Am I right or wrong in that sort of conclusion?
Mr. Power: I am not sure the unsolicited proposals had a significant affect on that situation because there was a significant difference between the unsolicited proposals, and in fact the proposals that were eventually submitted by the proponents to a great extent because our request for proposals had criteria much broader range, more well-defined set of criteria which the proponents had to respond to. In fact, as I say, there was a radical difference between the unsolicited proposals and the final proposal that was submitted.
So whether or not the fact that parties would have prepared unsolicited proposals back in the pre-1990 and the 1989 period, to what extent that might have assisted them, I really can't comment on that.
Senator Kirby: Bigger constraint would have been the 90 day time limit, at least according to Price Waterhouse?
Mr. Power: Yes.
Senator Kirby: Mr. Chairman, that is all I have.
The Chairman: I have two senators, I have Senator Hervieux-Payette and I have Senator Jessiman. I want to ask you if you can allow -- it is half past 11:00. We will adjourn for lunch at 12:00. I wonder if you two senators could cooperate with me so we could give Mr. Nelligan the last 10 minutes to wind up? Senator Hervieux-Payette please?
Senator Herviex-Payette: Did you participate in putting together the RFP for Terminal 3? Were both of you involved in that process?
Mr. Berigan: I was involved peripherally in the RFP process for Terminal 3, yes.
Senator Herviex-Payette: Did you follow the same process which means that you had to hire outside consultants to put it together in both cases?
Mr. Berigan: That was the case yes.
Senator Herviex-Payette: Was it the same consultant in both cases?
Mr. Power: No, it was not.
Senator Herviex-Payette: To your recollection, did you go to Mr. Barbeau, Mr. Shortliffe and then to the ministers saying that you needed outside consultants to put together the RFP since you had previous expertise at putting the RFP?
Mr. Berigan: Yes, that was a -- we obtained the necessary approvals for that process, that's correct.
Senator Herviex-Payette: And, you made the final selection or were you given a list of consultants that would be available to assist you? How did you decide to take another firm?
Mr. Berigan: Generally, the process was two-fold. The normal process is that there is a list of consulting firms who would be considered by the officials to be capable of doing the work, and there would be a request sent to the minister's office to get approval to seek invitations from this group of consultants.
Additionally in this case, there was an indication that some of the firms who might otherwise have been qualified to do the work, there was an indication that they might have been involved with one of the parties that had submitted the unsolicited proposals, and where that was the case we made note of that. And when the approved list of consultants to be solicited came back down, then we asked for proposals and selected the best.
Mr. Power: I was not involved at the time the request for proposals went out, but I assisted in the evaluation of the proposals. From the file I am aware that four firms requested to submit proposals. Two of them declined to submit. I know one I remember directly because of an interest in participating with a potential developer, but there were two responses to the request for consulting services.
Senator Herviex-Payette: Okay. Who gave them the scope of their mandate? Did you prepare for instance documents that would ask a consultant to make a proposal for the request for proposal?
Mr. Berigan: Yes. The scope of the work would have been attached to the request for permission to retain a consultant, and the general terms of reference to which the consultants would have had to respond were prepared as part of that package.
Senator Herviex-Payette: Maybe after my colleague's question, just to clarify that for my own -- I was under the impression that the expertise to put together RFP was lying or at least is within the Supply and Services Department. Why did you decline to ask them to come and seek outside consulting? Because most of the construction of the Government of Canada that was conducted for many, many years are being administered by this department, so they have engineers and they have people who can appraise costs and so on.
As far as a technical aspect for the airport operation, my impression is that you had the expertise more than anyone else in this country because you were the only one in the business of running airports so that you would give the parameters that are to be considered when it comes to the evaluation criteria, that you would supply this to the consultant and the consultant would be there more or less to make sure that all the angles were covered and probably in terms of construction and financial viability.
Of course the consultant was asked to -- so what was the respective roles between you and the consultant and why didn't you have the internal people within government to conduct that? Because I suppose that there was a fee attached to that consulting firm and that this was a cost in the administration of the process.
Mr. Berigan: If I might try to answer the second question first, our experience had been that in this type of project, it might have been Public Works --
Senator Herviex-Payette: Today they are together, okay. Fine.
Mr. Berigan: -- to do that work on our behalf. And, of course, they were on a cost recovery type basis and had to our knowledge not that much experience, particularly in the groups that were attached to the Department of Transport.
The other issue, I guess, was that one of our concerns was that the documentation had a business perspective on it and we wanted to make sure that the consultants brought that type of outside business developer approach to the preparation of the document. Obviously we did provide a lot of input in terms of the technical requirements from an airport operations point of view.
Mr. Power: That was the general reason in going to a firm like Price Waterhouse. The other factor was just simply the resources, the volume of people. This was a project team that was being set up to deal with the T1, T2 project. It was difficult to accumulate enough resources in house to in fact do all the work.
One of the areas where Public Works Government Services Canada does have a considerable expertise is in respect to engineering and architectural aspects of a project of this nature, and in fact they did provide that support. I had a Public Works Government Services Canada unit attached to me to provide the engineering and architectural support. We did not go outside for any of that.
Senator Herviex-Payette: What was, for instance, the team that was putting that together, how many people on your side compared to the outside people? Would you say that you were two and they were seven? What was the ratio?
Mr. Power: No, it was in the reverse. Price Waterhouse -- generally the people we dealt with were two or three people assisting us on the request for proposal in setting up the overall process.
My group varied depending on the time, but it would vary between six and eight people to provide -- dealing with the technical matters which I agree with you fully, within government we held the expertise even more so than Price Waterhouse, dealing with the operational issues, dealing with the business issues of the airport, leases and contracts, and dealing with the engineering and architectural. Price Waterhouse assisted us in pulling the pieces together into a cohesive package.
Senator Herviex-Payette: Were they mainly, in terms of expertise, mainly people on the financial side would you say because you are referring to the business aspect?
Mr. Power: Primarily financial and management consultants, process consultants, in the process of managing an RFP process.
Senator Herviex-Payette: In putting together for instance the score point to analyze further on the request for proposal, who was putting the score points in terms of the evaluation so that when the evaluation team would come afterwards, putting points for the design or putting points for the financial capacity or all the score points, who has developed that?
Mr. Power: That was developed by the evaluation committee, Mr. Lane and his group.
Senator Herviex-Payette: You had nothing to do with that?
Mr. Power: No.
Senator Herviex-Payette: Thank you.
The Chairman: Senator Jessiman?
Senator Jessiman: There has been a lot said about this one step proposal rather than the two steps. I would just like to review and you confirm -- tell me if I am wrong. Going back to the spring of '86, the government said they are going to use the private sector to develop Terminal 3. Then they asked for expressions of interest in September of '86.
The next step that happens is 1987, there is a new policy concerning a future management framework for airports in Canada which included -- private sector leasing would be considered.
Then on October 17th, 1990 there is the announcement that they are going to have the private sector involved in T1 and T2, and 17 months later they asked for request for proposals. That is a period of six years that we are talking about. The people out there knew that this government was interested in the private sector.
Now, when you got the first responses for requests for proposals, you said that there were eight. Were they eight consortiums or eight companies? I am going to read some off because you said there was five on the short list. Actually according to the announcement, only four made a bid. There was Bramalea/Wardair. Are they by themselves or do they have another number of companies with them?
Mr. Power: They have supporting firms with them on a contract basis. I cannot recall exactly who was a member or a partner of the consortium as opposed to who may be affiliated with them to provide airport planning service or design services.
Senator Jessiman: The groups though, it is not just one company that makes a bid.
These as a rule are ordinarily consortiums. No one company is going to spend $700,000 on its own. Even on the last one, the Bronfman's had Lockheed with them. Bramalea/Wardair, were there more people than just that or was that the two companies?
Mr. Power: I cannot recall whether there was anyone in partnership?
Senator Jessiman: What about Cadillac Fairview? Could you give us the information later? Falconstar I know is a consortium because it included Paxport. Airport Development Corporation, was it on its own?
Mr. Power: Haung and Dansky was Airport Development Corporation, although they indicated in their proposal that if there is a successful proponent, they would be partnering with Lockheed.
Senator Jessiman: Okay. And they were the successful bidders?
Mr. Power: That's correct.
Senator Jessiman: Who were the other four? You said there were eight? If you cannot give me now, tell me later, and if they were consortiums as well.
Mr. Berigan: In terms of the way that those people submitted their expressions of interest, the partnership so much was not the issue as to whom it was that went along with them to help and assist in bringing expertise to the process. So whether they were financial partnerships or business relationships is --
Senator Jessiman: I guess my point is that it is not just one corporation that makes these bids. They have to have other people to help them.
Mr. Berigan: Yes.
Senator Jessiman: I want you to also tell me -- you told me who Airport Development Corporation is and you are going to give me a list. They made an unsolicited bid. So did Canadian Airports Limited. Who is that?
Mr. Power: One of the major players in that group was the British Airports Authority. I do not know the names of who else is involved.
Senator Jessiman: They made an unsolicited bid as well?
Mr. Berigan: For Terminal 1 and 2.
Senator Jessiman: Right.
Mr. Berigan: Yes.
Senator Jessiman: As did Paxport. Everyone on that side of the table has only been talking about Paxport, but there are actually three.
Now, when we get to the bidding or the people that responded to your requests for proposals, we had three parties. You had Canadian airports and it is made up of seven parties. There is Toronto Dominion Bank. There is only six parties. Then Cogan Corporation, Ellis-Don Ltd., J.J. Barnicke, Public Service Pension Board, British Airports Authority. Then the second was the Airport Terminals Development Group, and that is Bronfman, and LAH Ltd. which is Lockheed. And then the third is Paxport which has Matthews Group Ltd., Allders International, CIBC Wood Gundy Capital Inc., Ellis-Don Inc., Bracknell Corporation, AGRA Industries Ltd., NORR Partnership Ltd., Sunquest Vacations Ltd. So my point is that there were a lot of people that did get involved in this.
I want to go back a little bit before they made these bids. After you set out your request for proposals, the minister the following day made an announcement that he would entertain extensions if someone wanted one, and he also had a meeting I understand with 150 to 200 people.
Mr. Power: He did not have the meeting. I chaired -- it was a bidder's conference or interested parties conference if you wish.
Senator Jessiman: How long after the request for proposals did that take?
Mr. Power: Two or three weeks.
Senator Jessiman: There were 150 people and you explained what the situation was?
Mr. Power: We reviewed -- at a bidder's conference of this nature, we normally review the primary points of the request for proposals and the submission process.
One of the people attending the conference asked the question of whether or not extensions would be entertained, and it was response to the question put forward by that person that I indicated that the minister had indicated his intention or willingness to entertain requests for extensions.
Senator Jessiman: I have one other question. Have there been cases when you would have a request for proposals over 120 days?
Mr. Power: I can't answer that directly, senator. There was probably situations, but I can't answer directly. I can't give any examples.
Senator Jessiman: In Transport Canada. You don't know?
Mr. Power: No.
Senator Tkachuk: No comment.
Mr. Berigan: In essence, the 2 RFP's that I am aware of are the T1 and T2.
Senator Jessiman: T3 was brand new. Transport Canada was going to engage the private sector to be involved.
Mr. Berigan: Yes.
Senator Jessiman: Thanks very much.
Mr. Nelligan: Gentlemen, we have heard some suggestion that one of the problems involved in the subsequent negotiations on T1 and T2 is that the RFP itself failed to indicate that there had been a change in the leasing arrangement with Air Canada whereby in a letter in 1988 there had been an extension of its rights for a longer period of time.
I wondered if you can explain to us how it was that this important variation in the Air Canada lease failed to get into the RFP?
Mr. Berigan: I guess, Mr. Nelligan, the agreement that had been reached with Air Canada shortly after the southern Ontario initiatives was announced was an agreement by which Transport Canada and Air Canada agreed on how to make improvements to Terminal 2.
One of those principles was to respect the investment that Air Canada was making, they would be given an extension to their existing lease in order to be able to recoup the investment that they were making.
Subsequent to that initiative, again during the period before the RFP was released, there were many mixed signals being transmitted by Air Canada. One of them specifically was that they supported the Paxport proposal and was recommending that the government accept the Paxport proposal.
When that was received, there was discussion and understanding within the department that those guiding principle that had been reached with Air Canada were no longer on the table now, that they were supporting one or another of the developers.
Ultimately, of course, Air Canada withdrew and indicated that they would want to work a deal with whomever the successful developer were. In fact, the request for proposals makes a specific reference for a requirement for the proponents to recognize the investments that Air Canada had made in the terminal building and to explain how they would either compensate or recognize that with Air Canada so that their investments and security would be protected. Is there anything else?
Mr. Power: I do not think there is much to be added. The process for informing the proponents of which contracts were in place at the department and which they would have to assume responsibility for was through a data room or a collection of all leases and contracts that I had available for consultants to review.
In view of the point that Mr. Berigan has made that the decision was made internally that this statement of principles was no longer viewed as a binding agreement between the parties, that document was not included with the package of Air Canada binding agreements, and it was on that basis that that document was not included.
Mr. Berigan: If I might, two other points. It was recognized that the agreement that had been reached prior, this guiding principles, had not been turned into a natural lease document and therefore there was no legal document to make available.
What was recognized was that in any event Air Canada had a lease that extended at least until 1997, and if the developer had wanted to undertake any work before the expiration of that lease, they would have had to come to some agreement with Air Canada in terms of the modifications or amendments that might have been required to that existing lease.
Mr. Nelligan: I have some problems. The letter of support of Paxport I take it related to the original unsolicited proposal?
Mr. Berigan: Yes, that was before the RFP was issued.
Mr. Nelligan: And that was in the year 1989?
Mr. Berigan: I believe the letter from Air Canada was later than that.
Mr. Power: I believe the letter from Air Canada was in respect of the minister having announced in 1990 of his intention to proceed with an RFP, Air Canada's letter was in reference to the expectation that a request for proposals and a subsequent proposal by Paxport that that is what Air Canada would be participating in. It was not in respect of the unsolicited proposal. It was in respect of the proposal which would presumably be called for at some later date.
Mr. Nelligan: In August of 1991, Mr. DesRochers, and this is document 801935 in the litigation process, wrote to Mrs. Labelle reminding her of correspondence between Air Canada and Transport Canada in 1989 where an agreement was reached between Mr. Shortliffe and Mr. Groom of Air Canada on guiding principles for Air Canada's long term lease negotiations.
One of those guiding principles, number 10 is, "It is understood and agreed that should Transport Canada sell and or assign Terminal 2, terms and conditions of the long term lease will apply in its entirety for the duration of the term, plus renewal options" which I understand extended for 40 years.
Now, were you aware when you prepared the RFP and put the documents in the document room that Air Canada, in August of '91, had reiterated its adherence to that extension of lease?
Mr. Berigan: Yes.
Mr. Power: Yes. But as Mr. Berigan has said that we were getting mixed signals from Air Canada. That was one piece of the puzzle, if you wish. In general, in looking at the overall situation, it was still the view that that was not a binding obligation. I was having consultations in drafting the request for proposals with Air Canada people. People who had been assigned to work with me on drafting the proposals. They were aware of what was going into the request for proposals in respect of Air Canada, and at no time was I asked to make reference to the guiding principles. They never raised the guiding principles as a contractual obligation with me.
Mr. Nelligan: Were you around when they finally did raise them during the course of the negotiations with the successful proposer?
Mr. Power: Yes, I was still involved in the project at that time.
Mr. Nelligan: How did they explain their failure to notify you at the earlier stage and then insist on their rights at the later stage?
Mr. Power: I didn't have any direct discussions with Air Canada on that matter.
I was involved with the project, but I didn't have any direct discussions with Air Canada on that matter.
Mr. Nelligan: We will hear from Air Canada later on.
Mr. Power: Perhaps I might point out, in the request for proposal documents, the supporting documents we had indicated -- I am just looking for the reference now, we had indicated to proponents again reminding them of Air Canada's role and again providing them with a contact at Air Canada. Yes, in fact we -- maybe I will read as noted in the section 3.9 of the request for proposals, "Air Canada has prepared a master plan which represents Air Canada's view of how Terminal 2 should be developed." A copy of the master plan is developed and then suggested that the following Air Canada officials may be contacted with respect to the project, and we actually gave them the names of the contacts within Air Canada with whom I had consulted.
Mr. Nelligan: But, that is the only reference, plus the reference that they had a lease until 1997?
Mr. Power: That's correct, in the reference that is in the main RFP itself.
Mr. Nelligan: Whereas in fact they subsequently alleged they had one that went on for 40 years after that. That caused some of the difficulties.
Mr. Power: Yes.
Mr. Nelligan: Now gentlemen, were either of you interviewed by Mr. Nixon?
Mr. Berigan: No, I was not contacted by Mr. Nixon.
Mr. Nelligan: Were you, Mr. Power?
Mr. Power: I do not know if interview was the right word. I had contact with Mr. Nixon. The initial contact was I attended at a meeting at Mr. Nixon's office at the time we turned over much of the documentation relevant to the proposal, to the deal, to the agreement.
I subsequently provided Mr. Nixon with the airport general manager a familiarization tour of the airport facilities which were the subject of the project. And I did have a telephone inquiry from his staff seeking information. One request asked me to comment I guess on an observation that had been made to them that the request for proposals document that had been prepared and the subsequent submission by Paxport was virtually identical to what was reflected in the unsolicited proposal.
My comment to the individual who called me was that there was no real similarity in either respect, either in terms of the request for proposals or the subsequent submission by Paxport.
I may have been contacted. I do not have a precise recollection. Time to time I may have been called for data at the airports.
Mr. Nelligan: Is there anything he asked you that you have not been asked by this committee today that you feel is relevant to this inquiry?
Mr. Power: No, I think the points I raised with you were the only contacts with Mr. Nixon.
Mr. Nelligan: Thank you very much.
The Chairman: We will adjourn now for lunch. I hate to end this session on a rather sad note, but I want to inform my colleagues that Senator Desmarais died this morning after a mercifully short illness. He was terminally ill. We will adjourn now until 1:30. Thank you very much for your excellent forthcoming evidence. Thank you so much for your assistance.
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Ottawa, Wednesday, July 26, 1995
The Special Senate Committee on the Pearson Airport Agreements met this day, at 1:30 p.m., to examine and report upon all matters concerning the policies and negotiations leading up to, and including, the agreements respecting the redevelopment and operation of Terminals 1 and 2 at Lester B. Pearson International Airport and the circumstances relating to the cancellation thereof.
Senator Finlay MacDonald (Chairman) in the Chair.
The Chairman: Come to order please. Welcome gentlemen. Mr. Nelligan will introduce the witnesses.
Mr. Nelligan: Senators, we have with us this afternoon Mr. Ron Lane, who was referred to this morning as the chairman of the evaluation committee. As you know, he was also largely responsible for the drafting of the standards which were included in the RFP. With him, on his left, is Mr. D. G. Dickson who was then director general financial policy and operations, and Mr. John Cloutier who was the senior financial advisor, airport transfers, and they assisted Mr. Lane in his endeavours.
I understand that Mr. Lane will outline in general terms the work which his committee performed after he has been sworn.
(D.G. Dickson, sworn:)
(Ron Lane, sworn:)
(John Cloutier, sworn:)
The Chairman: We have only been doing this gentlemen since the O. J. Simpson trial began. Yes Mr. Lane, go ahead please.
Mr. Ron Lane (retired), Member of the Evaluation Committee, Transport Canada: My name is Ron Lane. I am the former regional director general for the airports group in the Atlantic region. And in January of '92 I assumed the function of chairman of the evaluation process for the proposals on T1, T2.
My function was to establish the methodology, to establish an evaluation team, to develop the criteria that was to be used, to prepare the documentation, and after proposals were received, to manage the evaluation process and deliver the evaluation report.
Mr. Nelligan has asked me to speak briefly on the process of how we did it. We took a conventional decision-making process in that we had the RFP, which established a lot of conditions, background, requirements and that sort of thing.
From that, we would derive specific criteria that would relate to the development plan, the air side, the commercial plan, the financial plan, the transfer plan. We would develop criteria derived from the RFP and the alternatives would be presented to us in the proposals. Taking those alternatives, we would compare them to the criteria we had preset to see how well they had met the criteria we had set and we would comparatively rank one proposal against the other.
We would do this in accordance with the general frame work of the RFP in terms of a subplan, a plan, and a best overall proposal concept.
I do have some handouts I think that are in front of you now, which lays out the evaluation team structure and also lays out the report structure of how we would proceed.
So I think that was my function. That terminated about December '92 I completed my last major assignment with the evaluation process.
The Chairman: How long did it take you, Mr. Lane, from beginning to end?
Mr. Lane: I started, as I said, in January, and we had some input to the RFP to describe to the proponents how the evaluation would be done. We then assembled a team, and our phase one, as we called it, was preparation which was to get that team together, get the criteria set, developed, make sure we all understood the methodology and get that documented in work books. The whole process would be documented in work books in which the individual evaluators would work and it would contain his instruction, and using that, in his own hand, he would evaluate his part of the proposal, were he an expert in airport security, traffic engineer, finance person or whichever part of one of the teams he was working on, he would work in that book.
And having completed his work, he would deliver that book to the co-chairman of that plan. We had the five plans; proponent qualifications, development plan, maintenance and operation plan, transfer plan and business plan.
These co-chairmen of the plan level would assemble all the information from their evaluators and assemble a plan evaluation. How did they score the proponents on the development plan? One team, how did they score on the transfer plan in another case or the finance plan in another case?
And then when we had the five plans assembled, we would sit down only as a committee of 10, the evaluation committee, and we would meld those plans into the best acceptable proposal. Obviously some proponents may win one plan and may lose another. There was obviously weighting on these plans. Some were definitely more important than others. It was the function of the 10 people to put those plans together and to come up with the best overall acceptable proposal.
That took us, like I say, from January. Our evaluation was actually completed August 28th, I believe. From then on it was the process of presentations and going to brief the losers and those things. That really wrapped up in about December '92.
The Chairman: Now, I should have looked this up, but I seem to remember, but I can be corrected, the testimony of Mr. Barbeau who said that he played very little or no participation in the evaluation plan. As a matter of fact, he said he dropped in once in a while to keep your morale up, giving the impression that you guys were all on the verge of a nervous breakdown doing this evaluation. This is my hyperbole, I admit.
Mr. Lane: Victor did visit us, and I'm always glad to see the boss. We had assembled a very cohesive team and very productive team, and they were running very hard. The pressure, I guess, was probably pressure we generated to meet the target we had set. I was certainly aware people were getting tired. We were running 7:00 in the morning till 10:00 or 11:00 at night and people were engaged in the activity, certainly immersed in it. That was a concern. I do not think anybody was coming apart at the seams or anything over this or because of pressure. I think it was just a very engaging exercise we were into.
The Chairman: It was not something that you had not experienced before or something that was very unusual, or was it?
Mr. Lane: Yes, it was unusual I think to work in a hotel environment, close document control, work space, in close proximity with eight different people working that intensely for that period of time. It certainly was not a routine workday.
The Chairman: You were working out of Toronto?
Mr. Lane: Yes, we moved to Toronto. We did the preparation stage here in Ottawa through March, April, May and June basically. We moved to Toronto -- actually the day the proposals were due we moved the team to Toronto.
The Chairman: I do not remember why you did that. Was there a reason?
Mr. Lane: I had requested that because many of the people I had in our group were people who had jobs here in Ottawa, and I would like to get them somewhere where I could keep them focused, away from their normal functions, being called back, that sort of thing. I wanted complete command of their time.
I wanted to keep the proposal documentation confined to Toronto in our area and not outside and not have people requesting to see parts of it or all of it or have three or four evaluations running simultaneously in various places in government. To achieve those objectives, I thought it was desirable that we do it in a somewhat secluded environment in Toronto, plus the Toronto project team was there and we could rely on them for some secretariat support. And our deputy minister concurred with that approach.
The Chairman: Senator Tkachuk.
Senator Tkachuk: Welcome witnesses.
Mr. Lane: John did you want to make a statement?
Mr. John Cloutier, Senior Financial Advisor, Airport Transfers, Transport Canada: Sorry, Mr. Chairman. What we had in mind was that maybe it might help the committee if we described briefly our role in this particular process. Let you know roughly what the timing was of the different participation, I guess, and Mr. Dickson had planned to do likewise.
The Chairman: Please go ahead.
Mr. Cloutier: As Mr. Lane mentioned, I was a member of the evaluation panel during the period March to August, 1992 and subsequently, during the period June to September 1993 I directed the audit of the chattels and consumable stock amount which was part of the sale and part of the transfer of T1, T2. My permanent responsibilities are that of senior financial advisor for airport transfers.
As financial advisor for airport transfers, I worked on developing the financial approach for the transfer of the first four airports to LAA's to developing the financial parameters that formed part of the July, 1994 national airports policy, and I participated in the financial negotiations for the first four transfers, 1989 to 1992.
As an evaluation panel member, my focus related to the transfer plan -- and you will see that is part of the diagram that Mr. Lane handed out -- and also related to establishing the evaluation rating criteria for the transfer plan and to actually evaluating the proposals.
The transfer plan component of the proposals dealt with the sale of movable assets or chattels that were to form part of the T1, T2 transaction, the sale of consumable stock items, like bulk oil, fuel, parts, inventories and so on, with the arrangements for the transfer of a number of Transport Canada employees that were part of the T1, T2 operations. There were 160 to 170 employees involved, and they were to transfer to the new operator of T1, T2.
And with the assignment of existing Transport Canada revenue and expense contracts that were part of the operations of T1, T2 and we are thinking like contract for concession leases and service contracts and so on.
Carrying on with Mr. Lane's description of the process, the evaluation of the transfer plan involved organizing the subcommittee of specialists to assist with that particular evaluation, and our subcommittee comprised an official from the material management branch of Transport Canada, because of his knowledge of departmental asset records and so on; someone from Transport Canada's personal branch for their knowledge to assist with the personal aspects; someone from Justice Canada with an extensive knowledge of contracts and agreements and so on; and finally someone from the National Transportation Agency who had previously been involved with airport transfers.
As an evaluation committee member, I reported to Mr. Lane. He was very effective at encouraging us to do our best. He did not come around and wake us up in the morning, but close to it.
The transfer plan evaluation subcommittee consisted of myself as a co-chair and Mr. Chern Heed, who was then the airport general manager at Pearson, and the four members that I mentioned earlier.
From approximately March to June, 1992, the transfer plan subcommittee developed the rating criteria and the plan according to the global approach that Mr. Lane referred to, and this was done by examining the RFP transfer plan requirements and identifying detailed elements that we would use or that were relevant in measuring or evaluating the proposals in a rating scheme with numbers to work with.
Subsequent to that, during the period May to September, 1993, I engaged and directed the work of independent auditors who carried out an inventory and an audit of the chattels and the movable assets and consumable stock, and they essentially determined the amount that would be sold, or the sale price for those items to the new operator.
From a personal point of view, I have been a public servant for about 20 years. I had brief absences in there from the Canadian government to work with the World Bank for a stint in Tunisia, and another absence to work in the UN on a famine relief program in Ethiopia.
I have worked as Acting Director of Financial Administration for Transport Canada as a policy advisor on grain transport, as director of accounting and audits over at the Canadian Transport Commission, and even as an income tax auditor for Revenue Canada.
I work for Michael Farquhar, who was here as a witness last night, and since late summer of 1994, I have been the project director for the transfer of Pearson Airport to an airport authority.
Mr. D.G. Dickson, Former Director General, Financial Policy and Operations, Transport Canada: Perhaps if I can just briefly summarize for you my background and experience and my role in the T1, T2 project. My professional training is as an engineer, and I have a Masters of Business Administration. I have been with the public service about 24 years, 14 of those years with Transport Canada. Most of my experience is in financial analysis and financial planning. That has involved the review and recommendation on a number of proposals and allocation of funds and so on.
My particular involvement in this project began in April of '92, as Ron explained, in terms of developing the evaluation process and methodology. I was asked to participate in the business plan part of the evaluation and to co-chair the business plan section. And, as John has described, what we did in that phase was establish the criteria, the weightings and so on, the methodology we would use. We also engaged in outside consulting firm, Richardson Greenshields to provide us with professional accounting and financial advice, and they worked with us through the whole evaluation process.
We assembled a team of people that again helped in terms of developing the criteria and the methodology, and then worked through the review of the proposals and development of our conclusions and final ratings.
So that was basically my role and involvement in the evaluation process, which I understand is the main thing we want to talk about today.
I have also had other involvements later on in terms of the negotiations, and I guess if there are issues to come up there, I would be able to provide information in that area as well. So that is just a brief summary of my background and involvement in this phase of the project.
The Chairman: Anything you want to add, Mr. Lane, before we --
Mr. Lane: One final thought I guess I should say. After we finished phase one, that is our preparation, the documentation, the booklets, we had all the committee co-chairmen, including John and Don sign-off on that documentation, saying, "This is the way we are going to do it and we will not deviate from that."
That was also presented to our minister. I cannot imagine that he read it all, but he was assured that we were ready and that is how we would do the process and it would not be changed.
The Chairman: All right.
Senator Tkachuk: Welcome witnesses. I will not be too long. I just want to sort of go through the process. I have been doing that since the start because I think it is important that the process is understood by the public, about how diligent you do your work and how professional it seems to be.
Mr. Barbeau, your immediate superior, has said that he had engaged you to head up this process. Could you tell me when you found out about it?
Mr. Lane: I guess Victor called me maybe December '91, somewhere in there, and asked me would I do this job. I was not particularly enthused at the time and suggested well, I am quite happy here and looking at retirement within a year's time and he said, "Fine, I will find someone else."
Early January I guess Victor came back and asked me again, and he was having difficulty and would I do it, and I said yes, I would.
Senator Tkachuk: Did he say why he wanted you?
Mr. Lane: I think it was because he wanted someone that had not been involved with any of the controversies that had maybe surrounded Pearson and the issuance of this RFP or been involved with proponents or unsolicited submissions or any of that sort of thing. I think that was one of the prime reasons.
I hope he thought I had some management coordination skills that I could bring to this thing as well. I think primarily he was looking for someone that had knowledgeable perhaps in the airports world and some knowledge of Pearson, but mostly that gained from discussions at national meetings and things like that. Very much arm's length rather than someone that had been involved.
Senator Tkachuk: What instructions did he give you?
Mr. Lane: Well, they were relatively simple. It was to establish the evaluation methodology and establish a committee to carry out the evaluation and complete it. And I was given very much I would say a free hand to do that.
Senator Tkachuk: Which is what he said. He basically gave you the responsibility for doing it.
Mr. Lane: I thought I had that responsibility, yes, to move ahead as quickly as I could.
Senator Tkachuk: So you set up your first task. You organized your life -- what was your first task? What did you think your most important thing to do was to do at the very beginning?
Mr. Lane: I suppose get some help. I did that. We did not have a team established at that time, but I did ask Dan White, one of my regional managers, to join me in this and he did and he was helpful and supportive.
Our first task was really to get the evaluation portion of the RFP ready, chapter 7 of the RFP, and describe to proponents how this evaluation would be done, describe our committee process, indicate to them what the most important factors were and the structure of the evaluation in that plan structure and things like that and to get that done because the RFP was moving forward quite quickly.
So having completed that, we then turned to assembling our team. First thing we did when we assembled the team was how are we going to do this thing? Let us get a methodology down and get a manual working so we all understand where we are going.
From then on, we followed that general process through. We set up the co-chair process of the planned committee, and those people went out and recruited their people. And as Don has said, the same time that was going on, we were engaging a process consultant, engaging Richardson Greenshields and engaging the architectural engineering consultants we needed. We could not tie up -- we had about 50 people I guess running on this process and we just could not tie up anymore people for two to three months on an exercise like this. So we just definitely had to go to get consultant support.
Senator Tkachuk: You had come in actually towards the end of the announcement time, and now they were getting organized to actually issue the RFP. Were you given any opportunity for input into the RFP?
Mr. Lane: We wrote the one chapter that centred on our activity. The RFP was well-advanced, but we could offer input and we did where we were having difficulty dealing with it in evaluation. We suggested perhaps things should be changed or maybe reordered a little bit in there so we could get it in an evaluable format. What we were going to get was something that was consistent from an evaluation point of view as something we could handle, and we did input when we had those concerns.
Senator Tkachuk: When you organized your time frame that you would need to assess the proponents that would be making proposals, you mentioned earlier on, you said your own?
Mr. Lane: Yes, we looked at it and said, the RFP was coming out and the proponents have roughly 90 days, and we should if we are respectable people at all be able to respond in a like time frame. Let us set that target at two months after proposals are received. They had three months to prepare. Let us have a shot at evaluating them in two months. That became sort of our internal target.
We had no external pressures to go fast. As a matter of fact, we were told there was lots of time and take whatever time is required et cetera, but we thought to have credibility, and again to keep control of the process and discharge it quickly, get it done before it became a real issue on where we were and the second guessing started and all that sort of thing.
Senator Tkachuk: And good manners?
Mr. Lane: Yes, I guess so.
The Chairman: The discipline on time and target time and so on was self-imposed?
Mr. Lane: Yes, it was.
Senator Tkachuk: When you put your people together were you given freedom to put your evaluation team together?
Mr. Lane: Yes, I had the -- I put forth the names of the people that I wanted internally and externally, and those, of course, were approved, I think by the minister, the actual committee we had that would do this, and we selected the people for specific reasons and we put those names forward with those reasons and we were supported in the structure and makeup of the committee.
Senator Tkachuk: So you would have picked all of the people involved in the proposal evaluation committees, some of which were from the bureaucracy itself, professionals within the bureaucracy itself.
Mr. Lane: Yes.
Senator Tkachuk: And some were from outside?
Mr. Lane: Yes, we wanted some outside people.
Senator Tkachuk: That was your decision?
Mr. Lane: Yes.
Senator Tkachuk: How did you recruit these people?
Mr. Lane: We went looking for the, say, the development plan, I guess. We were looking for someone that we knew who would have no bias in this situation, that was qualified in the transportation area. We began to look for someone in the academic area. We talked to people in other departments who knew such people, and we came across Dr. Gerry Stewart, I had never met, but who was involved with transportation, head of the transportation research, I think, at the University of Toronto, and he happened to be on sabbatical, I said, "That's my guy." Because we have his services full time and he is in Toronto.
Again, in the case of someone like Clayton Glen, maintenance and operations plan co-chairman, we were looking for someone who had knowledge of the airline industry, and the impact on that industry. And although the industry was not in favour of the project, we put out some feelers through contacts we had and that name was the one that came back to us, and I was certainly very pleased at that one because I had known Clayton Glen and his record of course in Air Canada and in the industry had tremendous respect. So we were very happy that the industry, though not in favour of the project, would endorse a person we had chosen.
The one person who was recommended to us was Mr. Paul Adam. He was recommended to us and he was a lawyer from Toronto. We discussed this with Paul, his background and what he had done and his association with government projects in the past and his interest in this one, and he certainly was helpful to us and very specifically to myself as co-chairman of the proponents qualification panel.
The other people from outside was Austin Douglas. He had retired. Austin was a very senior person in Transport, an engineer and senior manager; and he was probably the most difficult to retain. Being a retired public servant, we had all kinds of difficulty with his contract, getting him on board and that sort of thing, but we were successful in doing that.
As a whole, as I say, the team really came together and committed to the objective of what we were doing. They didn't hesitate to challenge each other. None of these guys are particularly hesitant to challenge, I would say. But it was a productive exercise and I think it went very well. We had the right personnel to do the job.
Senator Tkachuk: The architectural and engineering consultants and your financial consultant, did you make these decisions?
Mr. Lane: No. The co-chairmen of the development plan selected the architectural and engineering consultant; and the co-chairmen of the business plan were responsible for selecting their financial consultants.
Senator Tkachuk: So you actually delegated some responsibility and said, "You're responsible, so you get them." Is that the way it worked?
Mr. Lane: I was rather busy and these were the consultants that were going to support these people in their specific area. They should make their selection from the request for proposals that they had issued to get them.
Senator Tkachuk: So Mr. Joliffe and Mr. Dickson would have chosen the financial consultant?
Mr. Lane: Yes.
Senator Tkachuk: And Douglas and Stewart the architectural and engineering consultant?
Mr. Lane: Yes.
Senator Tkachuk: What about Price Waterhouse?
Mr. Lane: Price Waterhouse was under contract to the project team with Wayne Power and had input into the RFP and the development process of that. That was winding down. There was some room in that contract, so we quickly said, "Well, let's bring him on board as our process consultant in developing the documentation and the things we had to do to provide us all the support that we needed at Pearson in terms of administrative support, document control, lockups and reproducing the RFPs and all those things." We moved them right over as our process consultant very quickly.
Senator Tkachuk: Once you assembled your team together and you had made a decision to go to Toronto to receive the proposals, what happened when the proposal arrived?
Mr. Lane: We looked at the size of them, of course, was the first thing. And we had models and computer disks and architectural drawings and a truckload of material. But the first thing, of course, was to get it down to our process consultant and to get it reproduced and get it in front of our evaluators as quickly as possible.
So we received the proposals on Monday and we had the material in front of the evaluators to start work on Tuesday, various specialty groups, whether they be, like I say, traffic engineers or people involved with inspection services, customs areas or what have you, they had material with which to start work.
Senator Tkachuk: The proposals, once they came in, they were secure?
Mr. Lane: Yes.
Senator Tkachuk: Who looked after the security?
Mr. Lane: That was primarily the task of two groups. One was the contract group at Pearson we were using to accept the proposals. They would take the proposal, take one copy, put it in the vault, and that was the original for all time. We were then delivered a bound copy and a loose copy; and those copies were given to our process consultant and his job to protect the integrity of those proposals, get them reproduced, bring the documents back into the secure area in the hotel and lock them up.
And then each of the evaluators would go in and draw material. They would be working out of audit cases, their own individual audit cases which they could lock. They would take the material from the control area, go to their work area, again in the hotel, and work with their team. When they were finished, bring it back, sign in again, and then they were free.
Senator Tkachuk: Chairman, I have been at this thing for about 40 minutes. I have more questions to ask, but I think I am up to the point where the proposals have arrived so I would like to pass and let others ask any questions so they don't have to listen to me for much longer.
The Chairman: Did you hear that Senator Bryden? Isn't that a nice example?
Senator Bryden: I was quite happy to let him finish.
The Chairman: You were enjoying it. All right.
Senator Hervieux-Payette.
Senator Hervieux-Payette: When I want a person specific to answer a question, I will ask you; otherwise feel free, one of you, who has got the answer.
I was wondering, I mean, if the lockup process was a regular standard practice when Transport Canada in awarding contracts? You have built airports before. You have awarded large contracts -- certainly, not in Montreal recently, but in other parts of the country. I find this very unusual. Was there any specific reason why the process had to appear so above reproach or whatsoever? I just question -- it seems that it was not the standard practice.
Mr. Lane: I think that was my decision. I think it was concurred in by the team members, that we wished to keep control of the submissions until such time as the evaluation was completed; and that the best way to do that was to have our process consultant put some procedures before us that we thought -- we were not working in secret at all. We had no mandate to do anything in the secret sense, but we were certainly running a high level of commercial confidentiality in this process. The proponents had made that quite clear. The material was copyrighted. It was to be treated in confidentiality, et cetera. I think we had a process that assured ourselves we could do that.
Senator Hervieux-Payette: What would be the reason that prompted you to initiate a new way of doing --
Mr. Lane: I did not realize it was new. But I felt it was a requirement to maintain the confidentiality of the proposals, until we had finished the evaluation, at which time the minister and the proponents could do whatever they wished with their information. But when it was in our care and custody and we were working with it, we would treat it and make every effort to protect the confidentiality of their proposals.
Senator Hervieux-Payette: Your selection of Toronto over Ottawa, which is your normal place of business, and the department expertise is there, I mean was it -- was there any particular reason for you for that choice?
Mr. Lane: Yes. I suggested earlier that we did have a lot of people from the department and from other areas of government in Public Works, et cetera, and two thoughts. One was to control the people and their effort, keep them focused on what we were doing; and not to have documentation and information in the headquarters area of -- we had a lot of demands for -- requests, I should say for -- that we should send specific parts of the proposals to Ottawa, to this office, to that office, someone else wanted to see them, wanted to look at them. We said, "No. There will be a time when we are completed and other people will take over. But in the meantime we would like to keep control of this documentation and the evaluation process." And there would be a single evaluation process done, and that would be ours.
Senator Hervieux-Payette: So it was a very tight process and there was no brown envelope sent to anybody at the time, I suppose, with that kind of process?
Mr. Lane: I don't know. I was not aware of any and I --
Senator Hervieux-Payette: There were no leaks?
Mr. Lane: I had complete confidence in the integrity of the people I was working with and their motivation as well as my own to do this, do it quickly and come forth with one report, and then our minister would deal with it and not be upstaged in any way by leaks and statements, half-truths or what have you, be it on the street.
Senator Hervieux-Payette: Okay. So this is about the process.
I was wondering, I mean, in page 106 of your evaluation I have the best overall acceptable proposal plan scores. Who has prepared the weighted average for each part, component of the evaluation? Was it done by your team or when you had to go through the evaluation process the people who had prepared the RFP had already allocated score points to each activity, for example, proponent qualification 5 per cent; business plan 40 per cent. Who did that allocation of points?
Mr. Lane: This was done by our evaluation committee prior to receipt of proposals. That was agreed to and signed off before we went to Toronto and the weightings that would be applied to the various plans.
Senator Hervieux-Payette: Since you were chairing the --
Senator Kirby: Can I just ask one question?
Senator Hervieux-Payette: Yes.
Senator Kirby: I don't want to ask a supplementary, this is just so the witnesses can help us. Like people this morning were referring to "minister" and I was never quite sure who they were referring to. I just wonder like when Mr. Lane says "these things were approved", it helps us a bit I think if we know who is doing the approving. You said, for instance, I think a minute ago in response to the question -- I think the question was who decided what the percentages would be, you said you suggested and they were approved. It doesn't help us much if we don't know who -- who did the approving? Just occasionally if you can stick names in as opposed to "theys" it helps us a bit. That is really what I am saying.
Mr. Lane: The evaluation committee here I know was approved by the minister, and I would believe he read it and understood the mixture of inside-outside people and things like that.
The weighting, if you like, and the complete evaluation documentation, was presented. The minister requested to see it. It was delivered to him.
I would not think here, and I do not want to presume things about the minister, but he would not have read it in that detail.
He was assured himself that it existed and that we were ready. We set those weightings. I am not sure they were approved by anyone. We signed them off as a team. Before we went down, we signed that off.
Senator Kirby: I didn't mean to sidetrack you. You had just said that they were approved and I was curious as to by whom. If they were not, that is okay.
Mr. Lane: I can't say, sir, to what extent the minister reviewed it or how happy he was with it.
Senator Hervieux-Payette: Because you understand that one of my questions, since it is your own committee that you were chairing, that the proponent qualifications were just 5 per cent. One, if the people are not qualified they should not even be tabling a proposal. So for me it is certainly in my own perspective, and coming from the background of having been with SNC, I mean the qualifications are probably, in my own experience, have a lot more weight in accepting, you know, a responsible business entity than the 5 per cent. So I am not questioning because we don't know specifically as recommended the 5 per cent, but I just want to underline that I am very puzzled by the fact that it was 5 per cent when the business plan was 40 per cent, and we know what the business plan is when we are in business. A business plan is as good as the day it is being tabled and when we get to the reality of doing business, I have never seen one realized in reality. So it is just to say that, you know, this is certainly a much more unknown question.
Mr. Lane: Perhaps I can give a rationale for that. We were running a one-stage process. Normally, you would have a proponent's qualification process, you might have five or six and you might qualify four, and then you would deal with their proposal. We had a one-stage process and we might have had four or five proponents. We recognized there was a difference certainly between proposals and proponents and we were sort of dealing with a different kind of scoring here.
We said, "Well, qualification of proponents is a threshold item. It is really a threshold item. He is qualified or he is not." So you would say, "He is qualified, should we give some points?" "Well," we said, "the RFP says we will." So we said, "Fine. We will allow a score there so that the stronger proponent will receive some advantage." What we really want to evaluate here is the proposals, the hard data, the future of Pearson as an international apport, that development plan, how he is going to develop it, the maintenance and operation plan, how he is going to operate it and the financial return, the money and how solid is that.
Those are the issues. Now, once we look at the proponent's qualifications and decided he is above the threshold, do we score points at all? We said, "Yes, we will score, and there will be some advantage. But, again, the issue probably shouldn't turn on that."
Senator Hervieux-Payette: It is because when I look at the formation of each consortium, I could see that in the qualification of the other group that didn't win, ATDG -- you always refer to that with letters -- that this group had, first of all, were operating Terminal 3, or anyway close to operating, I didn't know the date when you were evaluating if the Terminal 3 operation had started, but at the same time that they had an experienced operator as part of the team, like the Lougheed Group that were bringing at least an experience comparable to the one that you have in Transport Canada, while the other group, there was not one single group that really had airport operation.
For me, I think it is one of the crucial elements when you put together qualifications. You have the financial aspect and you have, of course, the capacity. So no matter what the business plan you are putting together, I mean if it is not to be a story but the reality, you need some people who know how to operate. For me, I mean, this is one thing that I still have questions in reading the assessment, is that one -- I know that in your points, you have given 36 points to the Airport Terminal Development Group, and 33 points to the PAXPORT proposals, so there is a three point difference. I suppose that their lack of previous experience in airport operations maybe played a role and you were part of that team. That is why I am referring to you.
But I just have the feeling when it comes to put together the other document, whether you are talking about development plan, business plan or management and operations plan, when people have never been in charge of an airport, it is hard to make an assessment by the other groups if the group at the beginning really had never operated.
Otherwise -- I mean this is just a commentary -- I hope that in the report card here that your department would have had 100 per cent because here, from what I gather, I mean, if I look at the overall evaluation, I mean one proponent -- and I just want -- is it total 100 per cent? Could you refer to page 106 because I think we would be much easier to discuss?
Mr. Lane: Yes, I have it.
Senator Hervieux-Payette: In 106 the 497 would mean, if I transferred that in percentage points, 49.7?
Mr. Lane: The 496 was where, ma'am?
Senator Hervieux-Payette: The total of Airport Terminal Development Group, on 100 per cent the 497 would mean 49.7 per cent?
Mr. Lane: Yes.
Senator Hervieux-Payette: And the PAXPORT would be 57.7?
Mr. Lane: Yes.
Senator Hervieux-Payette: Did you have a threshold, like I have when I am in school that if I have 60 per cent I pass my exam and I graduate to another class and if I don't, I fail and I have to start all over again? So did you have a bench-mark or a threshold that was given to you before to qualify one operator in order to say, "We are going to award the contract to this one because now we are certain that they have enough points to be qualified to operate the terminal"?
Mr. Lane: We didn't have a threshold in that sense. There were reasons in the RFP for disqualifying a candidate, if he wasn't a Canadian or if he was an airline or a level of government was part of his consortium or something like that, and our job was to rate it against the RFP. And, in that sense, yes, it had to meet the majority of conditions of the RFP, and then to do a comparative evaluation of the proposals against each other to see which was the better.
Senator Hervieux-Payette: So then let's say that they would have even 100 per cent less each of them, what was for you in your mind, I mean the evaluation team, the percentage that was needed so that -- because you were awarding a contract to operate two major terminals in the biggest airport in the country and of course you had -- the only competition you had in fact was yourself, I mean the operation by the government; and certainly if you had to do it, you would have -- they would have to do it better than you do.
As far as I am concerned, I mean I think I wonder if all together you were satisfied with the score of being less than 50 per cent for each of the two -- less than 60 per cent for each of the two.
Mr. Dickson: Could I comment on that, Ron?
Mr. Lane: Yes, certainly.
Mr. Dickson: Again, in terms of the scoring system that we set up, and this was built up through the details, basically when we looked at the individual criteria we were looking at three ranges, a zero to three which would not meet requirements, if you like, but it could still be scored in that range; a four to six, which would be meets requirements and, again, there was latitude for judgment within that range; and then seven to ten would be exceeding requirements. So that was the kind of ranges we were working with at the detailed criterion level and then that got rolled up in the final point scores which you see here.
So I suppose if something came back and it scored 300 points or less, we probably would have had to look pretty hard at it.
Senator Hervieux-Payette: Because I would say that if you have over 80 you are A and if you have over 60 you are B and then you are C. Here, I would rate them D; and we are talking about, as I say, a very important contract and very long-term contract and, if I look at the score cards, I mean, I must say that I question myself, I mean, on the awarding of the contract because you made a specific recommendation to award the contract to PAXPORT. Were you obliged to make a recommendation? Could you have just submitted an evaluation without any recommendation saying to the minister, "This is our evaluation. Now it is up to you to make the decision"? Were you asked to make a recommendation?
Mr. Lane: That was my job to evaluate the proposals and select the best proposal. The scoring again, as Don said, you got into the seven to ten range if you exceeded requirements. So not many cases did the proponent exceed requirements. They were excellent proposals from very strong consortiums. But our evaluators were reluctant to go up into the "exceeding requirements" range for some reason, or they just didn't see it in the proposal.
So when you look at the 497 score, you are really looking at that essentially out of 700 because our people didn't go into that 700 up range very often. They did it, certainly at times, when they there was some feature of the proposal that they thought was particularly innovative, a new approach or something like that, they would. I found that very seldom did they go up into the "exceeding requirements" range for either proponent.
The Chairman: Senator, what page were you at?
Senator Hervieux-Payette: Page 106 of the 135 pages of the proposal evaluation report that was prepared by the evaluation team. In a sense, we don't know the process of how the points were awarded.
The Chairman: I just wanted to ask you: Where did you get this? I haven't got it.
Senator Hervieux-Payette: I think you probably have it in the pile that we have received. It is called, "T1T2 Terminal Redevelopment Project Toronto Lester Pearson Proposal Evaluation Report". I would be surprised if you didn't have that. It is one of the books.
Mr. Dickson: I believe it is in binder number four.
The Chairman: You received this yesterday?
Senator Hervieux-Payette: Yes, yesterday.
The Chairman: I see. I have an old one which has got several pages missing.
Senator Hervieux-Payette: I say yesterday. It may have arrived on Friday but, anyway, I read it yesterday.
The Chairman: The Clerk informs me that these arrived --
Mr. O'Brien: Yesterday. They were waiting for a waiver from Claridge. That waiver came and copies were distributed. Earlier documents had been given to the committee, but there had been blanked out because of this --
The Chairman: All right. Thank you.
Senator Tkachuk: What does this mean, chairman?
Senator Hervieux-Payette: Make sure that we all share the same documents.
Senator Tkachuk: I am asking you what this means. This document that you have got, you received, the Clerk?
The Chairman: No. Senator Hervieux-Payette received this yesterday.
Mr. Nelligan: Perhaps I can explain. In your original briefing book --
Senator Kirby: The blue briefing book.
Mr. Nelligan: Yes, there was the original production given by the department which had followed the usual restrictions under the Freedom of Information Act as to private commercial information and so a number of passages were deleted. We were asked by the department to get releases from the bidders in this project so that they could feel they could release it without any difficulty of releasing private information. We did not get those releases until yesterday, at which time we notified the department and they were to send over the uncensored versions to us, which arrived apparently at some point last night or yesterday afternoon.
Senator Tkachuk: So they have been distributed?
Mr. O'Brien: They are available for consultation, pursuant to committee resolution, when they are received by the Clerk, which was yesterday at 2:30.
The Chairman: We haven't been back to our offices obviously since that time.
Senator Hervieux-Payette: I read that around midnight last night.
Senator Tkachuk: Let me finish here. You got it yesterday afternoon, and they have been distributed to all the offices?
Mr. O'Brien: There are eight volumes of documents. I did not. But they were available upon request and researchers from various --
Senator Kirby: One of our staff members got the document, made three copies and gave one to all of us. Like there is a whole pile of volumes. What one of our staff members, when we are notified that a bunch of documents arrive looks through and Xeroxes those that our side wants and then just distributes it to all three of us.
Senator Tkachuk: So you notified their offices?
Senator Kirby: Both sides are notified.
Senator Tkachuk: I understand.
The Chairman: Go ahead, senator, I am sorry.
Senator Hervieux-Payette: Getting back to the evaluation process, each subcommittee had their own, I guess, score card with zero to three and four to seven and so on, and each one were responsible but were not involved in the other committee evaluation process? I mean it was a separate -- the way you have structured that? Mr. Cloutier was doing it on the transfer question with his team?
Mr. Lane: Yes.
Senator Hervieux-Payette: And Mr. Dickson with your team and you were assisted by your consultant? And all of this came together at the end in one point that was under your direction, Mr. Lane?
Mr. Lane: Yes. As the co-chairmen and John and Chern Heed finished their report and Keith Joliffe and Don finished their report, and the idea was to bring into the process the five reports before just the evaluation committee. We would have the pre-set criteria. We would apply it. Out of that should come our winner.
From there, the point you made about making a recommendation, took us considerable time in the final throes of this process, and I think it was John Cloutier who pointed out to me that if we are making a major mistake it is probably going to be made in the last week of this process, so let's just slow down here and think about what is the outcome of this, how it is to be worded and what do we recommend. We must recommend the best proposal, make a selection. What else do we want to say? And that process took three or four days of very interesting discussion within our group.
Senator Hervieux-Payette: Since you were operating on a five subcommittee basis and the five subcommittees prepared these five reports, was committee one, I mean, aware of the report of the four others, and of course reviewed it and in order to sign the report agree with the four other committees?
Mr. Lane: As the co-chairmen finished their report, they would bring it before the whole committee of 10. They would present it. I had all of the co-chairmen give me a commitment during the time they would read the complete proposal. They had knowledge of it and they -- when the other people brought forth their report, whether it was John's Transport plan, he would be prepared to be challenged on what he had done, his findings, why, if the narrative or the explanation wasn't felt adequate, it should be revised. In that sense, the end of the time, I think, the full committee could sign this evaluation report and say -- truthfully say they have knowledge of what is in there and they can concur with it.
Senator Hervieux-Payette: Since you were not in a hurry to produce, did you send back some of the subcommittees to do their own work because some members of the committee were not satisfied, or was it so well done by each subcommittee co-chair that you endorsed each other's report?
Mr. Lane: No, I am afraid some of the boys were sent back. It was the view of the committee that, in some areas, the plan was incomplete and they might have been working but then had dropped something -- basically a good report but it didn't finish and it needed some work. I guess most of them were reworked once or twice until all the challenges had sort of been met.
Mr. Dickson: The other thing that might have been added was more explanation of the scores. In other words, in the first round that we would go through there might have been explanation of how it was rated, and the people who had done the rating would explain what the factors were. They would have certain things documented but they, perhaps, hadn't fully documented why they had come up with the score. And so in order to make that clear, and something that was part of the project report, then that might be expanded.
Senator Hervieux-Payette: Since our chair, I mean, is telling us that we work a bit like the O.J. Simpson inquiry, were you operating like a jury, I mean each one at the same weight with his vote around the table and you had to have unanimity in order to come up to the end result of making a recommendation?
Mr. Lane: We were working on a consensus basis.
Senator Hervieux-Payette: Consensus is not unanimity. Consensus means that you don't agree but you won't oppose. Unanimity means that you endorse each and every thing in the document, which is different.
Mr. Lane: I am comfortable with it. I can't speak for the other members of the committee whether they were completely comfortable in unanimous agreement with everything that is stated in the documentation, I am not sure.
Senator Hervieux-Payette: But it is important for us to know -- if one person had not felt comfortable, if the person could have abstained or say, "I want a minority report." I mean, there was -- because I mean it is difficult, we know that at the political level, to have even in the same team and in the same party, to have unanimity and to have everybody and we work on consensus. So we have people sometimes not agreeing but they vote with us in the house. So this is different.
Mr. Cloutier: Correct me if I am wrong, Ron, but I think we had unanimity with respect to the findings and the recommendations and Ron insisted that we have that and that we couldn't leave to go home until we had that. But with respect to the, I guess, the other plans, I think it was a question of that we had to be, I guess, generally satisfied -- I mean we didn't try to do their jobs and assume their roles. We did review the reports and I think there were some very interesting challenges by the other committee when you tabled your own report, and so that you were generally satisfied. I am not sure that unanimity was something we were looking for or you could have achieved. But you were generally satisfied. With respect to the findings and recommendations, we did all agree with that.
Mr. Dickson: That was certainly my impression of the implication of my signature on the report, that I supported the recommendations and the findings, the overall conclusions.
Senator Hervieux-Payette: Mr. Dickson, since you were on the most points report card, I mean 40 per cent of your evaluation was awarded, I mean, on the business plan, and of course on the business plan you have to think in terms of the financial viability, the cash flow, I mean the capacity of the partnership to conduct and be able to realize the business plan and so on. There were rumours at the time that the major proponent, PAXPORT, was in great financial difficulty. We know even today that that person has -- is going through difficult financial difficulty. So how would you -- I mean if you have a business plan and the people don't have the capacity to realize the business plan and one of the proponents that was, I would say, more or less endorsing or backing PAXPORT was one of the major business entities in the airport, I mean I am talking about the one you mention in your report, the Allders group. I mean that they were 20 per cent ownership, but at the same time they were the one endorsing the Matthews Group, so in fact they represented a lot more. Maybe they had very important financial capability, except that they were going against the rule of having people on the retail side being a major player in the new terminal.
How could you reconcile that in the business plan and say that this is a deep plan and we know it is going to be realized this way knowing that one of the partners, and the major partner, was having financial difficulty, according to what was reported in the media of the time?
Mr. Dickson: Okay, there are a couple of points there. First of all, just on the Allders situation, there was nothing in the RFP itself that restricted the participation of retail tenants at the airport, although that was an issue that we did flag and we did pass on as an observation to be dealt with in the later stage. So, in terms of the evaluation, Allders particular role couldn't be scored one way or another.
On the more important question of the financial strength of the proponents, again, what we had done, we had established certain criteria, we had asked for certain information and so to a large extent we were evaluating the information that was provided.
Now, with respect to what may have been happening in the economy and what you referred to as rumours, obviously, we couldn't evaluate the rumours, but we did engage an external consultant and part of their job was to do a due diligence search on the proponents, to give us their opinion on the financial status of the proponents. They basically gave us a summary on each of the major players in the two consortiums. So that was really our main source of information on the capability of the people or the companies involved to carry out the project.
Senator Hervieux-Payette: Well, it is strange that the due diligence one month was not -- at the end be able to sign the contract after they were awarded the contract because they didn't have the financial capacity. How do I reconcile that that within -- I mean if, who are the consultants? Is it the Richardson Greenshields group that you are referring to?
Mr. Dickson: That is correct.
Senator Hervieux-Payette: And they did the due diligence in both Airport Terminal Development Group and PAXPORT?
Mr. Dickson: Yes, they did.
Senator Hervieux-Payette: And made a report that said both of them have the financial capability of realizing the --
Mr. Dickson: Yes, there is a summary in your package of what they provided to us.
Senator Hervieux-Payette: I haven't read it, but --
Mr. Dickson: That was the essence of it, that in terms of being able to finance the project that they felt there was a reasonable probability that they could do that.
Again, they had certain financial tests that they used in coming to that conclusion, as well as doing research on the companies themselves.
Senator Hervieux-Payette: Okay. Anyway, Mr. Chairman, at a later stage I will have some questions why finally it was the Airport Terminal Development Group who got to the contract, to sign the contract because the other group was not financially capable of executing the contract. But I know that it is a two-stage thing, that you were recommending, then you were sitting at the table negotiating the financial final arrangements in order to make complete the deal and this stage you were not part of the process.
Mr. Lane: I was not. My involvement ended with the completion of the exercise, the delivery of the report.
The Chairman: Senator Kirby?
Senator Kirby: Okay. I thought we were alternating sides. That is fine.
Senator LeBreton: We don't always alternate sides.
The Chairman: We are going by the Bryden rules.
Senator Kirby: That's fine.
I wonder, then, if I can go back just to pick up on a point that you just mentioned. I too haven't seen the Richardson Greenshields evaluation, but you are telling us that, Mr. Lane, as far as the evaluation committee was concerned, you had a report from Richardson Greenshields verifying, I guess is the word, the financial capability of both proponents to carry out the work, to do the project; is that right?
Mr. Lane: That is right.
Mr. Dickson: They did an assessment and provided their opinion to us.
Senator Kirby: Yet you -- and you -- this was in -- this information was roughly the beginning -- late November, beginning of December, right?
Mr. Dickson: No. This would have been back in July or early August.
Senator Kirby: Even though the announcement wasn't made until much later?
Mr. Dickson: That is correct.
Senator Kirby: The announcement wasn't made until December, am I correct on that?
Mr. Dickson: Yes, this is part of the evaluation that was completed the 28th of August.
Senator Kirby: It was done in the summertime.
Mr. Dickson: Yes.
Senator Kirby: Were any of you gentlemen involved in the subsequent decision by the department in early January of 1993, which in other words is a little over a month or so after the report, after the winner had been announced, the department made a decision to ask Deloitte & Touche to investigate the financability of the PAXPORT proposal -- this was after they had been awarded the contract. Were any of you three gentlemen involved in that decision, the decision, first of all, to get outside consultants to once again look at financability issue? Mr. Lane, you were --
Mr. Lane: I was not.
Senator Kirby: You had left?
Mr. Lane: Yes.
Senator Kirby: Mr. Cloutier, were you?
Mr. Cloutier: I was involved in a peripheral way. I was involved as, I guess, another evaluation panel, an RFP that went out to select financial advisors to assist with the negotiation process. And so as part of that evaluation, or part of that looking for a financial consultant to assist with the negotiations, Deloitte & Touche were selected as financial -- independent financial advisors. I am not sure at this point, I wasn't involved in their work and who they worked with. I was under the impression that they had worked with Mr. Dickson and with Mr. Keith Joliffe who --
Senator Kirby: During the evaluation process?
Mr. Cloutier: No, this is after. We are talking January, February 1993. I wasn't involved in the process, but if I remember correctly there was a letter went out to each of the proponents advising them of what had happened as a result of the evaluation process, and I presume a letter went out to PAXPORT telling them that they were successful. I didn't see or wasn't involved in that correspondence, but I am under the impression that the letter to PAXPORT made mention of the ability to prove financability of their -- what they were proposing to do in their proposal.
Senator Kirby: Sorry, you mean proving the financability was a condition of the letter that said you won subject to these conditions? I am paraphrasing it.
Mr. Cloutier: There were conditions in there, but I am not aware of the details of that. I would have to defer to my colleagues that were involved in that specific process.
Mr. Dickson: Just to respond to that question, I was aware of the letter that went out to PAXPORT. I wasn't involved directly in preparing it.
Senator Kirby: Roughly what date, Mr. Dickson, is this letter?
Mr. Dickson: I believe that was sometime in December of 1993.
Senator Kirby: Right after the minister's announcement or at the same time?
Senator LeBreton: 1992.
Mr. Dickson: 1992, thank you.
As far as the involvement of Deloitte & Touche, I wasn't directly involved in engaging them but I was aware that they had been engaged and I was subsequently involved with them in some of the discussions that took place around financability and then eventually into the negotiation phase.
Senator Kirby: But from the point of view of an evaluation group, you were prepared to sign a recommendation recommending a particular firm even though there was obviously some doubt within a matter of weeks of the financability of the winner?
Senator LeBreton: May I interject here, Mr. Chairman? May I refer to a release of the Minister of Transport on December 7th, 1992? I -- there was never -- you seem to leave the impression that the contract was awarded and that later on the financial viability question came in, when clearly in the press release put out by Mr. Corbeil on the 7th of December 1992 announcing the acceptance of PAXPORT as the developer, it says, "Consequently, PAXPORT will have to discuss with stakeholders and be in position to satisfy the Government of Canada as to the financability of the initiative before the federal government enters such negotiations to reach an agreement within the framework of the request for proposal."
So it wasn't a big secret.
Senator Kirby: I thought that is exactly what I said a couple of minutes ago. I asked Mr. Cloutier specifically, wasn't it true --
Senator LeBreton: No. You said a few moments ago, and we will check the records tomorrow, that they seem to have awarded this when there was some question later about the financial viability.
Senator Kirby: If I can put it marginally differently, then, if it makes you happier --
Mr. Nelligan: I think there is a question of language and may I just raise it now while we are talking about it?
Senator Hervieux-Payette: Continue speaking. I like it.
Senator LeBreton: He speaks a different kind of English than I. His is definitely "rouge".
Mr. Nelligan: The word used in the December letter is "financability", which I assume relates to the ability of the proponents to obtain financing for the project. Some of the senators have been using the "financial viability of the proponent", which I understand to mean whether the proponent itself is financially sound. I am just suggesting to you that there may be a distinction in the terms and perhaps you could get clarification from this witness.
Senator Kirby: Well, since you posed the question, I mean I am happy to do that. I think that the words have been used modestly interchangeably only because needless to say it would be hard if you thought the proponent wasn't financially viable it would be pretty hard to conclude that the project was.
Mr. Nelligan: I know, but I would assume that as a --
Senator Kirby: Since you raised it, why don't you pose the question? I am happy to have you do it.
Mr. Nelligan: This was one of the things that concerned me. Mr. Nixon in one of his comments criticized the method used here, that there was no financial prequalification.
Now, to what extent did you as the assessors of the proposals consider financial qualifications vis-à-vis the persons who made proposals?
Mr. Lane: We had a statement, I believe in the RFP, that the proponent was to describe his financing arrangements, and they did that. The RFP also said that before entering into an agreement the proponent must demonstrate that the financing was in place. There was a condition before he would describe his arrangements and when he was to enter into the contract he was to demonstrate that the financing was in place.
So what we were looking at was a description of his financial arrangements. We looked at them, who they were, what they were and decided, yes, that is feasible, logical, and he's qualified. That is where we left it.
Mr. Nelligan: Then what was it that the minister was asking for? After you had accepted that level of qualification, what was the additional factor the minister was looking for in his report in December?
Mr. Lane: I think he wanted that demonstration that the financing was in place. It wasn't just a description of the arrangements but the financing was in place and they were ready to go.
Mr. Dickson: Perhaps I could just elaborate on that a little bit?
The other key consideration was, I guess, the arrangements that could be made with the airlines as the major tenants in order to make this financable, and that was another consideration, if you like, in the financability of the project. So you had the capacity of the proponent to put equity into the package. You also needed to have the airlines participate eventually in terms of signing leases at certain rates in order to generate the cash flow that would sustain the project.
So my understanding is that that was one of the considerations at the time the letter went back to PAXPORT to have them confirm with major tenants the fact if they were heading in this direction that there would be some support for them in terms of entering into leases or working with them to make the project happen.
Mr. Nelligan: I don't know if that helps.
Senator Kirby: That's fine. I have no problem with that at all.
Can I just because you raised the question of the leases for a moment, we had a discussion this morning about the fact that in the evaluation methodology and evaluation criteria, I guess you would call it, and Mr. Lane you said that that had been included in the RFP on your -- you people had written that piece of the RFP. A major focus on the financial side is on the return to the government. Nowhere in the six points that you have got listed in sort of bullet points under "Major Criteria" is there any discussion of the likely impact of the cost on the airlines and thereby presumably ultimately on airport passengers.
I guess my question is, it sort of struck me as odd: Why did you not consider as a factor -- and Mr. Dickson just raised it a minute ago saying, in a sense, the question is: Were the airlines going to be prepared to pay the levels of lease rates that a proponent, and he was referring to the winning proponent, had proposed? Why was that not a criteria and, indeed, the likely impact of that on passengers, a criteria because, presumably, if you increase leases most retailers, which is in a sense what airlines are, try to pass the costs on to their customers? Why was that not mentioned in your evaluation criteria?
Mr. Lane: In our management and operations plan we have pricing strategies.
Senator Kirby: I read that piece.
Mr. Lane: And we had in the transfer plan a commitment by the successful proponent to assume all leases.
At that time, if the Air Canada lease -- the lease we were dealing with and the data we were working with said that lease ran until '97.
Senator Kirby: With options for an extension, correct?
Mr. Lane: We were not involved with any options for extensions. This was a lease that terminated in '97 and until that time the proponent, whoever he was, would have to have Air Canada's approval to enter in that space, make any changes, do anything. After that date, on the other side, the proponent would own the terminal and Air Canada would have to sit down and negotiate with him for the new lease and their new rates.
Senator Kirby: Therefore, I guess this is my question to Mr. Dickson, in looking at the financial data that PAXPORT gave you, did you take into account, did you make the assumption that the Air Canada lease would remain constant through '97 and therefore there would be substantially less revenue coming into PAXPORT than if they had had an opportunity to change the rates? Like what were your assumptions essentially regarding revenue from Air Canada in particular into PAXPORT up to the end of '97?
Mr. Dickson: Okay, as I recall, part of our assumption or some of our assumptions would be that in fact the proponent would have to negotiate with Air Canada, and in fact as part of their proposal they had set aside a certain amount of money to be paid to Air Canada for leaseholds improvements, and that one of our assumptions was that by reimbursing Air Canada for what they, Air Canada, had put into the facility that in fact they would be able to negotiate at some point a new lease.
Senator Kirby: So your assumption was that they would be able to negotiate prior to the expiration of the old lease essentially higher rents from Air Canada?
Mr. Dickson: That is correct.
Senator Kirby: That is sort of a strange assumption to make. It strikes me assuming the tenants are going to pay more when they don't have to always -- is there a logic behind that assumption?
Mr. Lane: The tenant wanted improvements to the building. He wanted improvements to his transporter areas and Air Canada wanted improvements to be made initially early.
Senator Kirby: Did you have any evidence by the way that Air Canada would pay that?
Mr. Lane: No. Wait now --
Senator Kirby: I haven't seen any.
Mr. Lane: We did not discuss the question with Air Canada.
Senator Kirby: That are was my question. That covers that issue.
Can I talk for a second about the issue, as Senator Hervieux-Payette raised when she raised the question of Allders, when you were doing this evaluation did you understand the linkage between Matthews and Allders in the sense that the Matthews equity contribution was coming by way of a loan from Allders or that was not knowledgeable to you at the time?
Mr. Lane: No.
Mr. Dickson: No.
Senator Kirby: From your point of view in terms of evaluating the business plan, Mr. Dickson, would it have made any difference? Suppose you had known in a sense that the Matthews equity portion was a loan from one of the other players on the team, and therefore that player presumably could have ended up with a significant interest, a tenant could end up owning the building, would that have impacted on your evaluation criteria?
Mr. Dickson: I guess in terms of the specific hypothetical question, I am not sure. But in terms of, generally, if there was different information presented in the proposals, then it is possible that we would have assessed it in a different way.
If we had different facts, we would have taken those specific facts into account.
Senator Kirby: I guess I am asking a slightly different question.
If you had known about the linkage between Allders and Matthews, would that have had a negative impact on your evaluation or not is, I guess, what I am asking, or was it simply a non-factor?
Mr. Dickson: Again, it is a matter of how it would have been presented in a different set of facts. I can only hypothetically say that if I had a different set of facts I might have come to some other assessment in terms of scoring.
Senator Kirby: Okay. Let me ask you to move into another area, then. The process I was kind of curious about, the lockup and stuff, I am used to seeing that done with budgets but not much else, was the process in terms of -- I understand wanting to get people out of town, but in terms of a lockup -- a lot of people in Ottawa like to leave town -- in terms of the process and the lockup, was the same procedure used when you evaluated T3, the proposals for T3?
Mr. Lane: I wasn't involved with that. I don't know.
Senator Kirby: I believe none of you were involved in that. But do you know? Does anybody know?
Mr. Lane: I don't know. I know they --
Senator Kirby: When your department evaluated the proposals for the bridge to P.E.I., again did they use the same? Does anybody know?
Mr. Cloutier: I think, and correct me if I am wrong, Ron, as Ron mentioned earlier that a lot of the process, including the lockup, was part of Mr. Lane's decisions, but I think, if you will remember, Ron, that as an evaluation panel when we met earlier during the period prior to the proposals coming in, one of the concerns we had as evaluation committee members was to make sure that the process was secure. We felt that if there was any tainting of the process as a result of a breach of security that it would reflect on all of us as panel members.
It is probably -- certainly, based on my personal experience with other RFPs and other projects not as big as this, this went a little further, but generally speaking on a smaller scale you have secure arrangements and you keep the proposals in all of the documents under security at all times.
Mr. Lane: I would say that looking at the link project it was, of course, longer running and they were using a different approach. But looking at the CBC evaluation on the Broadcast Centre in Toronto, an equivalent development, their process was much tighter than ours in terms of the confidentiality point of view and that sort of thing; much tighter.
Senator Kirby: When you got to the point where you had your evaluation team looking at the reports from each of the individual groups and you had to come to a recommendation, was that pretty easy to do or were there conflicting views?
Mr. Lane: The decision was clear before us who the winner was, that that was there. We knew that. We had all come to that conclusion. But it was just the wording and we had a couple of lawyers in the room and it got extended conversation on what this specific word means or that specific word means.
Senator Kirby: You kind of have to -- look, I understand the problems of negotiating anything with lawyers, and not being one I am very sympathetic to your problem. But I am trying to understand something for a minute. You say it was obvious to everyone who the winner was.
Mr. Lane: Yes, we knew that.
Senator Kirby: Then you tell me you had trouble in some sense figuring out how to say that?
Mr. Lane: It seemed that way.
Senator Kirby: I thought you did a pretty good job in two seconds.
Mr. Lane: The findings and recommendations -- first, we were just going to make a representation and then it came, "Well, we need some findings," and, "Well, we do. Let's word the findings and then let's word our recommendation or not," et cetera. That was the process. In retrospect, I think it was time well spent to take care on how we handled the process.
Senator Kirby: I would infer from what you said, and tell me if I am wrong, that any disagreements among members, and obviously if you were having a debate there was an element of disagreement among members, any disagreement among members was over wording; there was no substantive disagreement among members of any kind?
Mr. Lane: On what phase, sir? This ending here?
Senator Kirby: Because you said to me you all agreed right away on who it was and then you argued for four days over what you would say about it. I guess I am trying to understand what was it you were arguing about. So far your comments have been really general and so it is hard for me to understand whether they were substantive differences or just typical lawyer type differences. But they are paid by the hour so you can understand that.
Mr. Lane: It was the question that was asked earlier. Did we have to make a recommendation? Yes, we did. Well, no, we didn't. We just had to indicate which was the best proposal, don't recommend anything, say, "This is the best proposal."
Senator Kirby: Isn't that a recommendation?
Mr. Lane: That was a point of debate among our group. We said that this is the best proposal.
Senator Kirby: What am I missing here?
Senator LeBreton: You just made our point.
Mr. Lane: And then who are we making the recommendation to, or what are the findings? It was those sorts of questions. Yes, we would make a recommendation. We would publish some simple findings, get the wording down as simple as possible and that seemed to take us quite a bit of time.
It doesn't seem complex, but it wound up that way making statements such as the fact that we found both proposals acceptable. Do we need to say that? Yes, no, and that sort of thing. We said, "Yes, we do. We will state some findings and we will make a recommendation."
Senator Kirby: In your document, in fact, you say that both proposals are acceptable, but you picked B over A -- I am paraphrasing.
Mr. Lane: Yes.
Senator Kirby: Was in fact the option of accepting neither an option for you?
Mr. Lane: Yes, I guess we could have said neither proposal is acceptable.
Senator Kirby: Were the proposals compared, in a sense, against, I don't want to call it the status quo because that isn't what I mean to convey -- were they compared against the notion of, essentially, T1T2 continuing to be owned by the federal government and developed by them?
Mr. Lane: Only in one remote sense. It wasn't an option. Transport Canada standards weren't necessarily to be the proponent standards. He had a very free hand to tell us what he wanted to do.
Senator Kirby: I will tell you why I ask the question. In your evaluation criteria you place a very high evaluation on the issue of return to the government. I guess my instinct says return to the government has to be compared with what -- normally when you are doing that kind of an evaluation you compare return with the government in comparison with some form of the status quo, i.e. the government continuing to own it or et cetera. Did you do that? In which case I don't know how you could do that without evaluating as sort of a base case, or whatever you want to call it, the maintenance of the status quo?
Mr. Lane: It was a competitive process and we had two offers on the table. Nothing said really that these people have to be better at operating airports than Transport Canada before we do that. There was no such criteria that says these must be better than Transport Canada operating it or better than the British Airports Authority or anything like that. There was one bench-mark comparison.
Senator Kirby: That was A against B?
Mr. Lane: That was A and B versus what we called the base case.
Mr. Dickson: It was, I guess, the commercial valuation that was done independently for us by Price Waterhouse. So there was a bench-mark in the sense of another set of figures that had been prepared independently to compare what was being offered. So there was that comparison made.
Senator Kirby: And how were those -- I mean you said they were developed by Price Waterhouse. Was Price Waterhouse working for you as your process consultants?
Mr. Dickson: It was under a separate contract, that is, the process consultant. As part of a separate contract, they were asked to come up with their assessment of the commercial value, if you like, of this offer. So they came up with a range of values of the 57-year lease, that then we could compare to what was put forward by the proponents. And that was seen as a bench-mark, if you like.
Senator Kirby: And you were not -- so you just took their report as it had been developed and didn't get into an issue of debating with them, whether or not you accepted their numbers, is that right? I mean their numbers were sort of given as input data that you didn't go behind.
Mr. Dickson: That is correct, although in terms of the methodology that they used, we did look at the methodology and we did come to some conclusions that it looked like a reasonable approach given, you know, the amount of information they had to work with and so on.
Senator Kirby: Am I just -- we have the Price Waterhouse people coming at some point.
The Chairman: We hadn't planned to call them, but we can. We have their report.
Senator Kirby: I am not asking for that at this point. I just leave that on the table for now.
Okay. Thank you, Mr. Chairman, for you.
The Chairman: Senator Tkachuk.
Senator Tkachuk: Yes, I have just a couple of questions here. When we talk about the experience of the people who were making the proposals, the only other terminal that had been leased out in the country was Terminal 3 at this time, so if you went with experience only you would have to sole source?
Mr. Lane: I think we are looking at these people had participated in a lot of other airport projects all around the world. We weren't just looking at Toronto and vicinity. Some of the people in the T3 project were now over in these consortiums, of course, and had experience and they had wide experience in airport developments in the U.S. and other countries.
Senator Tkachuk: Let's talk about the PAXPORT group because a company that -- I know a company that I am -- I don't really know the people involved in it but I know the company in our province, now headquartered in Calgary, unfortunately. But in PAXPORT could you tell me what companies there were that were involved in this consortium? I know they are all written out here, but you might -- I just want you to -- you were the head evaluator.
Mr. Lane: All the companies involved or the ownership?
Senator Tkachuk: The ownership.
Mr. Lane: Well, we did have Allders and AGRA, and Bracknell, Matthews, Ellis-Don and Sun Tour Company -- Sunquest Tours -- quite a diverse group of owners in the PAXPORT proposal.
Senator Tkachuk: They were there to bring a wide array of experience to this group, I assume. I am making an assumption.
Mr. Lane: Experience can be part of the group as an equity thing or an all-part owner; or you buy it in terms of consultant capability and you can obtain it in either way.
Senator Tkachuk: I am going to sum up here because I don't want to make it seem as if the evaluation group is under some kind of a trial here. You know what I am saying? Like I know why I am here at this inquiry; and I know why the inquiry is here. I think we should let the rubber hit the road.
Was there political interference in your process?
Mr. Lane: No. I felt no political interference in the process.
Senator Tkachuk: You know what I am talking about when I say "political interference"?
Mr. Lane: Specific direction.
Senator Tkachuk: Someone phone you, tell you choose this, choose that?
Mr. Lane: First communication I had with the minister -- I guess the first time I met Minister Corbeil was when I presented my report.
Senator Tkachuk: That was the first time you met him?
Mr. Lane: Yes.
Senator Tkachuk: Did any of the evaluators that you have hired, did they get -- did any of them complain about getting phone calls from political people or lobbyists?
Mr. Lane: No, no.
Senator Tkachuk: To favour one group over the other?
Mr. Lane: No, not to me. If they received any, there was no complaints to myself on it. We had no contact with lobbyists. As we say, we dealt with the proponents through the project team at arm's length and we didn't accept any outside information of any type.
Senator Tkachuk: You have retired from the public service?
Mr. Lane: Yes, I have.
Senator Tkachuk: Did you retire in good standing? When did you retire?
Mr. Lane: Perhaps you gentlemen can decide that.
Senator Tkachuk: When did you retire any way?
Mr. Lane: It was the last project I did in Transport and I retired on completion of this, yes.
Senator Tkachuk: "Whew", right?
Mr. Lane: As my friend said to me, as we got near the end of this, he said that retiring from this is like stepping off a freight train going 90 miles an hour.
Senator Tkachuk: The other two members here are public servants. You are still working in the public service?
Mr. Dickson: That is correct.
Senator Tkachuk: You are still working in the public service?
Mr. Cloutier: That is correct.
Senator Tkachuk: Mr. Barbeau said that if you are still there, people are happy with you; right?
Mr. Cloutier: Presumably we are still there and we will be for some time, hopefully, given the pink slip atmosphere that exists currently with respect to public servants. But, yes, we are still gainfully employed and working long, hard hours.
Senator Tkachuk: You haven't been brought to task by anybody for this process that you developed and put together. Did someone bring you in and chew you out?
Mr. Cloutier: No.
The Chairman: Can I ask a supplementary, senator?
Senator Tkachuk: Sure.
The Chairman: Now, to refresh my memory, even though I have the chart in front of me, how many people were involved in this evaluation process?
Mr. Lane: I am sorry, I don't have that answer. I know at times we had exceeded 50 people on a working day. The total numbers, some of the teams as they got under way wished to retain further consultant services for a short period of two to three days. They wanted a specific traffic engineer to look at some aspect of the routes that -- the road access system to Pearson, the curb operation or parking or something.
The Chairman: All professionals?
Mr. Lane: Yes.
The Chairman: When your job was finished, when you had signed off your report, during and up to that time did you in any way consider your part in the process as flawed?
Mr. Lane: No. I was quite happy with the process and the way it was conducted.
The Chairman: Mr. Dickson?
Mr. Dickson: No.
The Chairman: Mr. Cloutier?
Mr. Cloutier: No, Mr. Chairman.
Senator Tkachuk: I have one little item to ask. I am done, basically.
I understand the difference between the financability of the project and the financial health of the companies. I understand that.
Once the contract was given out, after you finished your evaluation and you made your recommendation, if it had been any other company wouldn't they also have received a letter saying, you know, "Get your finances together". My understanding would be that that is a normal course; they would have gotten a letter if -- who was the competition to PAXPORT? They would have gotten a letter saying, "Get your finances in order. You won," is that not right?
Mr. Lane: That was my assumption.
Senator Kirby: What is the document?
Senator Tkachuk: She just showed it to me.
Senator LeBreton: A letter from Victor Barbeau to PAXPORT on the 7th of December 1992.
Senator Tkachuk: I don't get one envelope from the Department of Transport, senator, not one little one even.
Mr. Cloutier: And you keep hoping.
Senator Kirby: He doesn't want to break the string any way.
Senator Tkachuk: I wouldn't trust them any way.
Are you going to answer that or do you want me to ask someone in the follow-up process to ask that question?
Mr. Dickson: I thought it had been answered. I guess in that kind of a situation if there were conditions that would apply that is not uncommon that there could be a letter going out saying that there is some further conditions we want to discuss or further details we need.
Senator Tkachuk: Okay. I am done. Thank you.
The Chairman: Senator Bryden.
Senator Bryden: Mr. Chairman, I have been so quiet, I have been preparing for this. How much time do we have left?
Senator Jessiman: Seventeen years.
Senator Bryden: Mr. Chairman, I have no questions.
The Chairman: Mr. Nelligan?
Mr. Nelligan: I wonder if you can help us, gentlemen, in the findings and recommendations of the proposal evaluation committee, having found that PAXPORT was best overall and both were acceptable, you then say, "There are conditions and limitations in the proposal which should be addressed in negotiating the required agreements."
First of all, can you assist me as to where you can find those conditions and limitations set out in your report?
Mr. Lane: I can't because -- I think in the transfer plan were there some issues?
Mr. Cloutier: Without -- I think they are written in here. With respect to the transfer plan, in both of the proposals, there were a number of qualifications. And in consultation with Justice Canada they advised that that should be of concern to us because each of the proposals contained qualifications in certain areas.
Now, I can only speak for the transfer plan. I don't know about some of the other plans, but I will give you some examples, and I can't remember which proponent it was or possibly both. One of the proponents, or possibly both, said that all of the existing contracts, leases and agreements that would be assigned from Transport Canada to the new operator when they took over had to be in good standing and none could be in default. Given that there is, if I remember correctly, several hundred, and there is any number of them that are technically in default at any point in time, then that would constitute an impediment to transfer.
Another example was in the case of the sale of the chattels and the consumable stock, the RFP was quite clear that there were going to be specified conditions and it wasn't flexible or negotiable that these were the ground rules and the criteria under which they would be transferred, and that was based on as is, where is, at their net book value, calculated in accordance with Transport Canada accounting and depreciation policies.
I can't remember if it was both, but certainly I think both of the proponents indicated that they wanted the price adjusted depending on the condition of the asset.
They also indicated in the case of one of the proponents that they wanted some additional assets over and above the chattels, and I think they made reference to loading bridges, and I can't remember if the loading bridges were in fact owned by Transport or were already leased or owned by one of the airlines.
With respect to the transfer of employees, and it is a very sensitive area as you will realize, that if you don't have the employees on side and they were concerned about their future with the new employer, it could create or cause at some point in time an impediment to transfer and that the conditions under which the operator would accept the employees, as in guarantee of employment, accept the existing collective agreements, to give them a compensation package comparable or as a minimum to what they had as public servants and so on, and that some of the -- one of the proponents that I remember, but I can't remember which one -- specifically what they had in their proposal did not meet the comparable compensation package; and also indicated the arrangement they were proposing for the transfer of pension benefits would not have been acceptable to the federal government.
So, on that basis, for the transfer plan, and it is written in the evaluation report, we identified those as items that would have to be dealt with in whatever negotiations or discussions that occurred to go from a proposal to a set of agreements and actually hand over the keys.
Mr. Nelligan: So that basically these were matters of a technical compliance that you would have to check rather than matters of substantial defect in either of the proposals?
Mr. Lane: Yes.
Mr. Cloutier: Substantial defect -- I am not sure, depending on your point of view whether they are substantial or not because you can't -- the ground rules for the transfer of employees were very clear and they were minimum requirements that had to be met. The RFP was quite clear. And so they may be easily solvable, assuming both parties were amenable to solving them; but if one party said, "No, I am not interested, my position is what I put in the proposal," then obviously you would have a problem to deal with.
Mr. Nelligan: So that we should be able to ask next week when we talk to the negotiators: Did they address these conditions and limitations and did they feel they were resolved? This would be a matter for them to tell us whether these conditions and limitations were dealt with in the course of the subsequent negotiations?
Mr. Cloutier: That is correct.
Mr. Nelligan: Finally, were any of you gentlemen interviewed by Mr. Nixon?
Mr. Lane: No.
Mr. Cloutier: Not me.
Mr. Dickson: Not directly, but I did meet with the consultants who were preparing information for him.
Mr. Nelligan: What information did they seek from you, sir?
Mr. Dickson: They sought an understanding of the financial plans and the financial information that went into our evaluation.
Mr. Nelligan: All right. Did you give them any information other than the information you have given to us today?
Mr. Dickson: We went through a lot of detail in terms of calculations, how the calculations were done, almost line by line the numbers in the proposals. So there was a lot of detail that was discussed with them which has not been discussed here today.
Mr. Nelligan: Would that have been from a representative of Crosbie and Company?
Mr. Dickson: Yes, it was.
Mr. Nelligan: It went to the method by which you came to your calculations on the acceptability of these two proposals?
Mr. Dickson: That is correct. It was basically to help them understand the financial projections and the details of the proposal.
Mr. Nelligan: All right. So that you were dealing with the financial aspects not of the ultimate contract but of the proposal as dealt with by Mr. Lane's committee?
Mr. Dickson: That is correct. It was specific to the financial aspects.
Mr. Nelligan: Thank you very much.
The Chairman: May I thank the witnesses?
Gentlemen, we are very grateful to you. You have been very helpful to us. We thank you for your assistance. You have been very forthcoming.
We adjourn now until nine o'clock tomorrow morning to hear from representatives from Industry Canada as our first witness.
The committee adjourned.