Proceedings of the Special Senate Committee on the
Pearson Airport Agreements
Evidence
[English]
Ottawa, Tuesday, August 1, 1995
The Special Senate Committee on the Pearson Airport Agreements met this day at 3:00 p.m. to continue 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: Good afternoon, colleagues, witnesses, ladies and gentlemen. We now enter the third week of our examination on the Pearson airport agreements. In our first week, we heard witnesses dealing in the broad area of policy and procedures. And then in the second week, we dealt with more specific issues relating to the Pearson airport. We heard from gentlemen from the Greater Toronto Regional Airport Authority and their efforts to be recognized as a local airport authority. We also heard from transport officials who were involved in the development of the criteria and the drafting of requests for proposals. We took the testimony of the chair and members of the evaluation committee of those proposals, the procedure they followed in their final report. We received the testimony of an independent review, requested by the Honourable Michael Wilson, dealing with the financial competence of the bidders to perform on the long term obligations being contemplated. We recalled one witness to clarify certain matters respecting the formation of a local airport authority for the greater Toronto area. Finally, we heard the testimony from the author of "The Audit Report", describing to us the monitoring and the audit process that he carried out during the evaluation process.
In a moment, the counsel to the committee, Mr. Nelligan, will introduce our first witness in what promises to be a very informative and a very interesting week as we enter now the negotiation stage of our examination.
I wish to commend my colleagues not only for the amount of time and work that they're giving to this task but also to the quality of their questioning, reflecting the growing understanding of the complicated issues we're ploughing through.
With regard to cabinet confidence, no member of our committee has asked any witness any question which would breach this convention. Similarly, I thank the witnesses for being so forthcoming in their replies to the questions of committee members.
Now, before I ask Mr. Nelligan to introduce our first witness, are there any comments, colleagues? Mr. Nelligan.
Mr. John Nelligan Q.C., Counsel to the Committee: Senators, first, I have a request from the reporters. They have some difficulty some times in identifying documents which have been referred to in the course of the testimony. While I understand they have no complaints about the senators themselves, it is a reminder that when you refer to a document it is of assistance to the reporters to have it identified in a way that they can check the actual text afterwards and I would ask witnesses who wish to refer to documents give it sufficient description that the reporter can actually check out the text of the document at a later time.
This afternoon we are honoured to have with us Dr. Huguette Labelle, who is presently president of the Canadian International Development Agency but more importantly, from our point of view, was the deputy Minister of Transport Canada from 1990 to 1993. And in that particular role I feel she'll have a great deal of interest to us.
Dr. Labelle, do you have an opening statement or do you wish to stay anything, please?
(Ms Huguette Labelle, sworn:)
The Chairman: You have an opening statement, Dr. Labelle?
Ms Huguette Labelle, President, Canadian International Development Agency, former Deputy Minister, Transport Canada: Mr. Chairman and senators, good afternoon. With your permission, I would like to make a very few introductory comments that might assist senators in setting some of the background to the Terminal 1-Terminal 2 redevelopment during the time that I was Deputy Minister of Transport.
As counsel indicated, I was a deputy minister in transport between October 1990 until June 1993. I have been a federal public servant for the past 22 years and for the last 15 have been a deputy minister in different federal departments.
During that period that I was in Transport Canada, we were working on several very important files dealing with the air administration. A number of those impacted directly on the redevelopment of Terminal 1 and 2. Of course, the redevelopment itself, when I arrived in transport in October 1990, the government had just decided to privatize Terminal 1 and 2. And, of course, in the course of the afternoon we will have an opportunity to discuss that whole period. By the time I left in June '90, we were in final stages of negotiating an agreement with the Pearson Development Corporation for the full privatization of that facility.
But first, let me just briefly highlight some of the other key files that were very important at that time to Terminal 1 and 2. And some of these have been raised, I'm sure, by several of my predecessors at this table as witnesses.
But perhaps of all the files, the runway development, or the addition of runways, was the one that was most important in order to ensure that we would eventually be able to optimize Pearson as a major hub and, of course, as a major gateway to the country. So that the addition of runways, which had been contentious and a difficult question right from the seventies, if not before, was an ongoing issue and during the time that I was in transport the environmental assessment was conducted, a report issued, and the government decided to go ahead and build the additional runways - announced that - and also indicated its intention to issue an RFP for the construction of the north-south runway, which was one that was important not only for the expansion but for the good functioning of that airport.
Access to Pearson was another important file. We had been working with the adjacent municipalities to see how we could improve access by road to Pearson. We were also at that time conducting a feasibility study with the governments of Ontario and Quebec on high speed rail in the corridor between Quebec City and Windsor, and we were looking at how we might best improve the intermodal aspect of Pearson by seeing, of course, how it could connect with the rail system in the country for the convenience of passengers.
As others have indicated before me, some of the other files that impacted directly on Pearson were the southern Ontario strategy; the Pearson master plan; improvement of air service or air control services, which I don't think had been mentioned before but this was quite important to the proper functioning of Pearson; the development of the Hamilton infrastructure and services; negotiations of a new bilateral air treaty with the United States; and, finally, a big issue which was before us during all of that period was the financial state of the airline industry.
As senators remember, this was a period where airlines around the world undergoing restructuring were in great difficulties; many declared bankruptcy. Canada was not immune to that and we had some of our airlines, smaller and medium-sized airlines, who declared bankruptcy. And our two major airlines certainly had seen a reduction in traffic and Canadian Airline in particular was quite fragile financially during that period. So these are only some of the key files that were important at that time to the health of the industry, but especially to Pearson as a major hub.
As Nick Mulder indicated to you on the first day of his testimony, all of these were interrelated, interacted with each other, and all of them had to be pursued simultaneously during that period.
So, Mr. Chairman, I would be pleased to answer questions and hope to assist in adding to the information of this inquiry. Thank you.
The Chairman: Thank you very much, Dr. Labelle. I have two senators who have asked to be recognized. First, Senator LeBreton and then Senator Hérvieux-Payette. Senator LeBreton.
Senator LeBreton: Thank you Mr. Chairman. And welcome, Madam Labelle. Thank you for appearing before us today.
I certainly am well aware of your career in the public service and I take some pride in my little, limited role in assisting the former Prime Minister in advancing women at all levels of government and you, of course, are testimony to that.
I have some basic questions to begin with and then I have some other questions relating to policy.
But, when did you learn of your appointment as the Deputy Minister of Transport and from whom did you get this information when you were first informed?
Ms Labelle: By the then clerk of the privy counsel, Paul Tellier, and I learned - At that time I was in the public service commission in a tenured position and still had five years to complete a ten-year mandate and at that time transport, to me, was one of the most interesting departments in the Canadian government. And when I was approached and asked if I wished to accept the Prime Minister's invitation, I was pleased to do so. So it was a few weeks before I started in October.
Senator LeBreton: Thank you. In your long career as a public servant, was this your first experience with subjects involving transport matters, or had you ever worked in transport matters before?
Ms Labelle: When I was in the Department of Indian Affairs and Northern Development, we had dealt quite extensively with transportation in the north and on reserves as well, but especially the whole northern half of the country. This was my most important involvement with transportation.
Senator LeBreton: Okay. And just for the record - just to set the tone - you were actually Deputy Minister of Transport from October 9, 1990, until June 24, 1993?
Ms Labelle: Yes.
Senator LeBreton: Okay. Can you just, you know - without getting into a long answer but - can you, in your own words, describe what you see as the mandate and responsibility of a deputy minister?
Ms Labelle: There are perhaps three different aspects to the role of the deputy minister: One is to advise the minister on policy, on program matters; a second role is to manage the department; and a third role is to be a member of the corporate team, which is called the Canadian government, and to participate in a variety of ways - which I have, whether they are special task forces, committees - to look at the management of the government as well as the future policies.
Senator LeBreton: Would you add a fourth one to that: Implementing government policy?
Ms Labelle: Absolutely.
Senator LeBreton: Okay. How many ADMs - this was a large department. How many ADMs did you have responsible to you?
Ms Labelle: In the Department of Transport?
Senator LeBreton: Yes.
Ms Labelle: There were three line ADMs: One for the coast guard - I'm sorry, there were four line ADMs: One for the coast guard, one for the surface transportation, one for the airports, and a fourth one which was for civil aviation in terms of air navigation and safety of the air system.
Senator LeBreton: That is a big department; a lot of line responsibilities.
Was there only one ADM involved in the airports file, the ADM airports, or did this file - "this file" meaning airports and specifically Pearson - spill over into other areas?
Ms Labelle: There were a number of other assistant deputy ministers involved, especially in functional areas. At particular times the assistant deputy minister of personnel, the assistant deputy minister of finance and administration, the assistant deputy minister of audit and evaluation, and also the assistant deputy minister of corporate policy, were all in different ways involved in different aspects of the airport system as well as in other parts, other aspects of the department.
Senator LeBreton: So when you assumed your responsibilities as deputy minister in October 1990, would you agree that the person in your department who was most familiar with airport matters was, of course, your assistant deputy minister of airports?
Ms Labelle: Yes. And the whole team behind the assistant deputy minister of airports because, you know, you had general managers in charge of each airport; you also had economists, financial people, people who were engineers, systems people that have been working in the airport system for many years.
Senator LeBreton: And that individual was Mr. Victor Barbeau?
Ms Labelle: Yes.
Senator LeBreton: Was Mr. Victor Barbeau your ADM airports for your entire tenure as Deputy Minister Transport?
Ms Labelle: Yes, he was.
Senator LeBreton: On Tuesday, July 11, 1995, in answer to questions from Mr. Jessiman about public servants being reassigned or transferred because of the belief that there was a slow process, Mr. Barbeau responded on page 1600-7:
Not in the sense of being transferred to another department, because essentially -
Whatever that means:
...I am still there. I was, however, requested to leave the department for a period of time.
On further question as to who made this request, Mr. Barbeau responded:
Her name was Huguette Labelle. That is really all I can say.
And then, pressed further, he stated:
...I think the facts as I understand them was that there was a perception on the part of some people that I was obstructing somehow the file. I would say that that was a perception not the fact, but that was the reason given to me.
Did you remove Mr. Barbeau, and why?
Ms Labelle: Yes. Let me, before answering the question directly, give you just a little bit of background. When we were preparing to enter into negotiations, Mr. Barbeau himself recommended to me that we appoint a senior person as a full-time negotiator to undertake the negotiations because these would be time consuming, would require senior expertise, senior capacity, and he felt that in managing the airport system of Canada, as well as the many other key files that were being worked on at that time, that this would not provide the right time for him to do this. I concurred with him. I had also had discussions with my minister of the day, who had had representations by different people indicating that they perceived Mr. Barbeau as slowing down the process.
My own view is that Victor Barbeau is a highly professional public servant who was working extremely hard at that time to carry all the responsibilities that he had and, therefore, I did not share that view. But we had all agreed, including himself, that a special negotiator would be the right way to go.
When we arrived closer to the month of May, as the negotiations were becoming very intense - and, you know, everyone wanted to see this file advance and advance as quickly as possible - it became evident to me that he was becoming increasingly the target of those who felt that the process was not moving fast enough; that he was being seen as someone impeding the progress. And, in order to protect the department and in order to protect Mr. Barbeau himself professionally, I felt that it would be wise to ask him to step aside for a period of four to five weeks - with full intention of reintegrating his position - during that very acute stage so that he would not unduly be blamed for whatever was happening at that time, whether it was the speed, whether it was, you know, an issue that was just not being resolved.
Senator LeBreton: So, he himself started the process by suggesting it but because - and you outlined the chronology. So the decision, then, just to repeat the question, was yours, then, alone?
Ms Labelle: Yes.
Senator LeBreton: Not someone elses?
Ms Labelle: My decision to ask him to step aside for a period of four to five weeks was mine.
Senator LeBreton: Yours and yours alone?
The Chairman: Senator LeBreton, would you permit a supplementary from Senator Kirby?
Senator Kirby: Just for clarification. Madam Labelle, you used the words "to prevent Mr. Barbeau from becoming," and what I wrote down here was "a target". Can you just tell us who was he being targeted by? That is to say, if he's a target, presumably he's a target of somebody. Can you just tell us who they are?
Ms Labelle: Sure.
Senator Kirby: Thank you.
Ms Labelle: Well, I think that the people who were negotiating with us on the other side of the table felt that he in some way or other - they perceived that he was impeding the process because he was still managing the airport system and the people who were providing information, documentation, advice, and so on. As I mentioned, this was not my personal view at all.
Senator LeBreton: So, therefore, obviously these people who were on the other side of the table, were they following along - We can perhaps ask them the same question. Okay. Thank you.
What were the exact dates, then, of Mr. Barbeau's temporary removal from his responsibilities as ADM airport?
Ms Labelle: I think it was around the 27th of May and it was to be until early July.
Senator LeBreton: Just early July. To what duties did you reassign him?
Ms Labelle: During that period of time there were - you know, I asked him to take management leave. He was taking some holidays at the same time. So that they were - part of his time that was holiday; part of his time that was management leave.
Senator LeBreton: So you did not assign him to other duties?
Ms Labelle: I would have done so if the period had been longer; it was not meant to be longer.
Senator LeBreton: So is it fair to say, then, he was completely removed from the Pearson airport file and from all other airport business?
Ms Labelle: Yes.
Senator LeBreton: So that did you appoint anybody to replace him on a temporary basis?
Ms Labelle: Michael Farquhar, who was one of the directors general who met with this inquiry last week, I think, was the person who acted on behalf of Mr. Barbeau on the weeks that he was away.
Senator LeBreton: And since you had left as of the 24th of June, you can't specifically, I'm sure, say exactly on what date he returned.
Ms Labelle: But I think it was in early July.
Senator LeBreton: Early July. You obviously initiated his return, according to your previous testimony. So is it fair to say you initiated his return to his initial position and the position that he - original position and, of course, the position that he still retains to this day?
Ms Labelle: When I asked him to step aside, it was with the understanding that he would return to his position within a number of weeks. However, I was no longer in transport when he was brought back to his position. This was my successor, Jocelyne Bourgon who was there and who perhaps will be better able to answer.
Senator LeBreton: That's right. That's fair. So, you know, it was a very, very short period of time from the end of May to the beginning of July and you've asked him to step aside. But what changed in those few short weeks? Did the perception about Mr. Barbeau all of a sudden disappear or did you just think that by removing him for five weeks it would? Could you explain why? There was this perception. A very short period of time passed by and he's back. Was the perception still there as far as you know?
Ms Labelle: I have no idea because after I left the department, I did not stay involved at all in that file. So, again, my sense is that perhaps my successor would be better able to answer that question. I think what I was hoping to achieve was to reduce the pressure that to me was unduly there.
Senator LeBreton: Madam Labelle, you took over at Transport Canada from Glen Shortliffe. And in his testimony on Thursday, July 13, he stated that by the time he took over the whole question of Pearson International Airport was top of the mind. And to quote him:
- Pearson was a mess. It was a disgrace. And worst of all, it was not working...the terminals at Pearson were a big part of the problem as well. Terminal 1, by 1988-89, I can best characterize as a slum.
That was his words but, of course, many of us use those words, including myself, after that. That was the end of the quote.
He went on to describe the conditions of the parking garage, the outdated technology at Terminal 1, and the fact that Terminal 2 at that stage was suffering from - in his words, "an inadequacy of gates".
When you were named deputy minister in the fall of 1990, what was the situation at Pearson? Was it much the same as your predecessor described?
Ms Labelle: Terminal 1 was still very chaotic. The number of passengers was way beyond the capacity of the terminal at that time. The number of air controllers had not been reestablished to the level required in order for Pearson to function smoothly in terms of air movements. So these were two very important aspects. Then, of course, I arrived in October '90 and by February '91, Terminal 3 was opened. Of course, there was an adjustment period while airlines were transferred from one airport or one terminal to the other, but - So there was just a few months when I was in transport where that chaotic situation remained.
Senator LeBreton: So it's safe to say that when you arrived the situation was much the same as Mr. Shortliffe described?
Ms Labelle: Yes.
Senator LeBreton: During your term as Deputy Minister of Transport - and you alluded to this earlier - could you estimate how much of your own personal time was spent on hands on direction of airport matters; how much time was spent on hands on direction regarding Pearson; and how much time on other transport-related matters? I guess I just want to know how much this whole file was dominating.
Ms Labelle: Well, Mr. Chairman, if I can hazard a guess - and I hope people will not hold me to the exact number - I was spending well over, I think, a third of my time on airport matters at that time. And certainly of this, Pearson was predominant. I think the two major files on the airport side were Pearson and the transfer of the five major airports to the four local airport authorities. These were two files that I stayed very close to during that whole period. So it was a disproportionate amount of time that I spent on airports, especially on Pearson.
Senator LeBreton: Which is really what your predecessors have said and also the then minister, Mr. Lewis. He had much the same answer.
I would like you now to address the role that Treasury Board played in this process. Senator Kirby indicated in a earlier life he'd like to stay as far away from Treasury Board as possible; I can't say that I disagree with him. Could you describe for me the role that Treasury Board played? At what stages did you have to approach Treasury Board and what happened throughout the whole process? Can you just kind of - and I guess I'm looking for, you know, I just want some direction and, you know, kind of help me a little bit here on how the process works, who makes the submission, how are they dealt with, are they secret? If they're made, do they become public at some time? And if they're made public prematurely, what happens? Do you make some effort - I guess I'm getting into the security and the - kind of the secrecy of the whole process and the fairness of the process.
Ms Labelle: Normally on a big Crown project like this, you would go to the Treasury Board before issuing an RFP, assuming that you already have the approval of the government, through cabinet, to undertake the project if it is of a size and nature that requires that. But you would go to the Treasury Board to seek approval to issue an RFP and a lot of the content of that RFP would already be there for the Treasury Board to rule on. Also, if there were funds to be expended, and so on, they would approve that. Then after that, normally at the end before you enter into an agreement, you have to seek authority from the Treasury Board to enter into an agreement with the party to either buy the service, the equipment or, in this case it was to transfer the terminals to Pearson Development Corporation. Along the way, depending on projects, there might be times when the Treasury Board will say, "And we want you to return at particular points." But on this size of a project we would keep the Treasury Board informed at various points. I had an intradepartmental committee to oversee this file in transport and in many instances other interested departments would be invited - primarily Treasury Board, finance and PCO. So, in that way, Treasury Board would be kept informed. Mr. Barbeau would be keeping his counterpart regularly debriefed on what was happening and people at other levels would do the same thing. So, it's a question of keeping Treasury Board informed so that there are no surprises; seeking their advice at times, but also getting the authorities at the beginning and at the end.
Senator LeBreton: So would you say that there was a lot of back and forth, a lot of consultation and work done with Treasury Board on this file?
Ms Labelle: Yes.
Senator LeBreton: Would it be normal, more than normal, less than normal?
Ms Labelle: On a project of this nature, which was different and substantial, I think that I would consider it to be relatively normal to have kept the Treasury Board in the picture as much as we did.
Senator LeBreton: And just perhaps because it's such a lengthy question, the security of the process and the documents that are going back and forth because, you know, there was some press reports that Treasury Board documents in the hands of the reporters when in fact people involved in the process had never seen them. So, is there a very strict security measure - are there very strict security measures in place, or how many copies were made? You know, what do you do as a deputy minister and what does Treasury Board officials and your officials do to kind of secure the process of documents?
Ms Labelle: We have systems in place to ensure that anything which is protected, especially of a secret nature, is transmitted in a way to ensure that it is from hand to hand, that it is doubly secure, and that copies are made only of numbers required by the agency where you are sending the document. When it comes to the Privy Council, they make their own copies and circulate it themselves. In the case of Treasury Board, what we do most of the time is provide them with the copies they require so that they can then be distributed more readily.
Senator LeBreton: You know, not that you - What would happen if a public servant leaked their Treasury Board document? What would the government do to such an individual? Would they be fired? Would they be reassigned? What would happen?
Ms Labelle: I think there's a whole range of possibility, depending on the gravity of the situation, the circumstances around which this happened. But it can be from a reprimand for something where the individual may not have done so deliberately, to firing if this was a deliberate - a decision on the part of the individual and that could be causing harm.
In this case, there was a lot of commercial information. So, one has to be careful with the information we have.
The Chairman: Madam Labelle, could I ask you if any of the important Treasury Board documents have been released to the public domain? Do you know of any?
Ms Labelle: I'm not sure, Mr. Chairman. I think that it would probably be better to ask that question to the Treasury Board so that I don't lead you into error. I think there is, you know, a time limit like all other secret documents for those documents. Anything that is labelled "secret" would be under the same rules as apply to secret documents whether they're Treasury Board submissions or others.
My sense is that at this time if something was leaked, it was not part of what was supposed to happen.
The Chairman: I didn't mean leaked, I meant made available.
Ms Labelle: Made available?
The Chairman: Yes. Sorry, Senator LeBreton.
Senator Tkachuk: Just a supplementary on this question. Is that part of their oath of office of a senior public servant?
Ms Labelle: Yes.
Senator Tkachuk: So it would be that the releasing of a Treasury Board document would be of the same consequence as a member of the senior public service standing in front of here and talking about information which, we have had public servants.
Ms Labelle: It would be a breach.
Senator Tkachuk: It would be a breach of their-
Ms Labelle: That is my understanding.
Senator Tkachuk: Okay. That's fine, thanks.
Ms Labelle: But I would hope that the institutions that are in charge of these, Mr. Chairman, could be asked the same questions so that they could correct my comment if I'm not right.
Senator Kirby: I just want to be clear because Senator Tkachuk used the word "oath of office". I think we just ought to, for the record, be clear. The only people that effectively take an other of office are deputy ministers.
Ms Labelle: Are deputy ministers.
Senator Kirby: That other public servants don't.
Ms Labelle: Yes.
Senator Kirby: I mean, I just thought we ought to clarify that.
Ms Labelle: Yes.
Senator Tkachuk: So one who works for you would not be under the same - If you prepare a Treasury Board document and some person below you has a copy of it, would you hold that person just as responsible as if you would have been holding it yourself?
Ms Labelle: Yes I would.
Senator Tkachuk: Thank you.
Senator LeBreton: Going back to the issue of Pearson specifically, we have heard that because of the recession of the early nineties - which, of course, I always try to put things into the proper context - when we got into the whole situation of Pearson and the gloomy economy in the late eighties and the pressure that was put on the ministers and the government to fix Pearson, we've heard that because of the recession of the early 1990s, the number of people passing through Pearson declined. So that the concerns of the late eighties of reaching capacity were somewhat eased. We've also heard time and time again that Pearson - and certainly Terminal 1 was falling apart; the parking garage was closed more often than it was open, et cetera, et cetera. We don't need to bore the committee with horror stories about Terminal 1. On the other hand, some have been trying to continually put the question of a kind of "put it in the fridge" argument that if the number of passengers goes down, there's no need to do any work at Pearson. What's the problem? Which, to my mind, is typical - having observed government of over three decades - of why we face problems in so many areas. The heat is off. Forget about the problem. Panic when a do nothing policy brings the whole matter to a head again.
I would like to have your opinion as to the method of planning for airport renewal. Does it make sense to derail a policy if there's a down turn in the economy? And for the point of clarification, what exactly were in the contracts? Because Mr. Power, one of your officials - or your former official - made it clear that the major focus of the request for proposal was modernization of the terminals not increased capacity. As a matter of fact, he talked about increasing capacity. He said that was the bi-product.
So I just, I would like you to deal with the question of long-term policy and on the whole question of derailing the policy simply because of a down turn in the economy and also what exactly was in the request for the proposals.
Ms Labelle: Prior to my arrival in Transport Canada there had been a number of studies to look at southern Ontario and its airport system, and its capacity, the efficiency of the system, and so on. Because, as members will remember, senators will remember, Pickering is still sitting there. And that was one of the questions: Does one develop Pearson to its full optimization, or does one start all over again and develop a new airport at Pickering? Or, does one do what the city of London, England, has done and have one airport for wide-bodied aircrafts and another airport for more local traffic? I think all of that work pointed to the conclusion that, in order to have an airport which would best serve passengers and that would also make it more efficient for airlines to run their business - because when you have to land, you know, in different airports it's a question of number of aircrafts, and so on - Pearson would be optimized. The optimization required a number of things. It required additional runways if it was going to work. It also required a modernization of its facilities. So that decision had been made and, hence, the issue was one of modernizing and it was one of also planning for future explanation in traffic.
There is no question that the request for proposal did not necessarily put more importance on one than on the other, but as stated in the RFP, we were looking for proposals that would take care of future expansion because that was vital to see just how much we could optimize the airport. So the two were important.
You referred to Terminal 1. If the decision had been to just improve Terminal 1 and continue to remodel Terminal 2, we were looking at about 10 to 20 million dollars to do an uplift and repair the parking for Terminal 1 - which is quite a large parking, an important one - and to deal with some of the services that required to be upgraded at that time.
Senator LeBreton: Just to go back to my question, do you think it makes sense to derail a long-range policy or a policy of any type for a project of this size simply because there's a downturn in the economy?
Ms Labelle: No. I think that it was important to move forward on all aspects, you know, as the government decided that this is what they wanted to do. I think in our case, our role was to ensure that we would be trying to do this in the best way possible, most economic way possible for all those concerned, and there were many involved.
Senator LeBreton: As a followup to that last question, tell us about the runway contracts and where they stood when you left. Regardless of the runway situation, would you not agree that terminal modernization was needed, still is needed even if the runway situation is not solved given the testimony thus far and particularly from your official, Mr. Power, who indicated that the RFP was for modernization of the terminals? The runways of course was another issue, but it does not take away from the fact that the terminals needed upgrading and modernization.
Ms Labelle: At the time that I left, Ministers Corbeil and Hockins had announced that the federal government would be proceeding with additional runways at Pearson, that the federal government would spend approximately $30 million to start the process quickly for the north-south runway - that is, preparing the apron space and so on. This would be done simultaneously to the issuing of the RFP so that construction could take place during the summer of '93 or start in the summer of 1993. That was where we were on runways when I left Transport.
I think, as I mentioned earlier, facilities such as airports need to be upgraded constantly. Otherwise they rapidly, you know, not only lose their appeal, but there are many services that need to constantly be upgraded in an airport. So there's no question that Terminal 1, at a particular point in time, needed -
Senator LeBreton: Still does.
Ms Labelle: - to be modernized if it was going to remain as a terminal.
Senator LeBreton: Madam Labelle, going back to Mr. Barbeau's testimony about the perception - and I had already asked you was this perception a reality because I alluded to reports in the media. Of course you are aware of Minister Lewis' testimony. You, earlier on today, made a specific reference to someone on the other side of the table, so I had to draw the conclusion that you were talking about someone in the consortium objecting to Mr. Barbeau and Mr. Barbeau's position during the negotiations. Who were you referring to?
Ms Labelle: Basically what was happening at that time was that, you know, I was getting from different sources that the people that we were working with felt or perceived Mr. Barbeau to be impeding the progress. My minister and I had discussions. He had had representations. The then Clerk of the Privy Council and I also had discussions about this because he equally had had representations.
Senator Kirby: Who was the clerk?
Ms Labelle: Glen Shortliffe.
Senator Kirby: People keep referring to clerks and ministers, and we ought to know for the record who it is.
Senator LeBreton: I tried to say the clerk or the minister. I noticed that today when I was writing my questions.
So you cannot name a specific individual representing the other side that specifically and directly objected to Mr. Barbeau?
Ms Labelle: No. This was, you know, coming to me from a variety of sources, and the acuteness of these comments were such that I felt that it would be in everyone's best interests, especially the department and himself, to ask him to step aside for a period of time.
Senator LeBreton: Well, this is a large department that you were in charge of. We'll have to get to future witnesses on this particular question about Mr. Barbeau, but obviously there were conflicts in the department. The testimony thus far has spoken about this. There were many public servants who worked tirelessly to see this process through, and others, it is believed, resisted. In fact, we have testimony on the record from Mr. Bandeen of the yet to be organized local airport authority who named Mr. Chern Heed as an employee of the federal government, and I will quote Mr. Bandeen:
...who was extremely upset by the negotiations and what was going on.
To summarize my question, then, the government set the policy, some in the bureaucracy set about to implement the policy, but others obviously had another agenda. I refer to a story in the Globe and Mail which I have with me.
As deputy minister, did this concern you, and as deputy minister, other than what you did with Mr. Barbeau, what did you do about it and about other people in the bureaucracy?
Ms Labelle: I think in any organization when, you know, you have just really any file, you want to have a healthy debate. You want to have a good review of all the information that is there. Better to have this before than after.
Of course in Transport Canada, as in any other department that I have been, there has been, and I have encouraged, good debate so that all points of views are put forward so that at the end, as a deputy minister or as a management team in terms of the advice which is tendered to ministers, we have had the benefit of this.
I always make it very clear to officers working in the departments where I am - I remind myself regularly - that my role is to ensure that the minister and the government of the day needs to have the best information possible to allow them to make decisions in the light of all the information.
After the government has decided, then I think it is our role to ensure that we implement the policy decision in a way, in this case for example, which would be in the best interests of the travelling public, of the government, of the taxpayers, and of the airline industry.
So, you know, I certainly worked very closely with Mr. Heed, since you mentioned his name. As general manager of Pearson Airport, Mr. Heed was left with many very important tasks. One was to make sure that Pearson remained or continued to work properly, while a lot of people were very worried in that airport - airlines, tenants, employees - not knowing quite what would happen.
Secondly, he was very involved in assisting on the runway environmental process, met nearly every night with local groups who wanted to find out more about, you know, how this would be done, what would be the impact on the communities, and of course played a very central role in providing information at the time of the RFP, was involved in the request for proposal, as well as during the negotiations in providing a lot of very important information. So where I was, Chern Heed worked well beyond the call of duty in ensuring that all those files were moving smoothly and as fast as we could. So, you know, Chern Heed knew very well, I think, how public servants - what the role of a public servant is in the national government.
The Chairman: Madam Labelle, does there come a point where healthy debate, as you put it, has to be reconciled, has to come to an end?
Ms Labelle: Absolutely, Mr. Chairman. I think as a deputy minister or as any manager at different levels, I think it is part of our role to try to arrive at consensus. If consensus is not achievable, then of course it is your responsibility to close the discussion at a time when it's important to do so.
Certainly during the time that I was in Transport Canada, I was very well served by the senior officers of Transport Canada in all parts of it and certainly in the airport area. They worked extremely hard and were under tremendous pressure to deal with all of these files that needed to be pursued simultaneously. A lot of this you couldn't get anybody else to do because they were the ones that had the experience, the knowledge firsthand, and therefore they had to be stretched. For months, many of them did not take any days off in the summer of 1992, 1991, and this was an example.
The Chairman: Well, could you indicate whether any of your officials, at whatever level, were adamant throughout the piece in advocating a local airport authority as opposed to the commercial privatization of the airport? How long did this go on? How long can you put up with what I call "adamancy" or advocating a local airport authority as opposed to the process which you were already in?
Ms Labelle: Well in terms of Pearson, we did not have, until very close to the end, a final proposal from the local airport authority to be able to respond to. So that in a way, the team that was involved in negotiating transfers of our airports to local airport authorities were working very hard not only in transferring the five airports to the four authorities, but there were well over a dozen other airports - Winnipeg and Ottawa were two examples, Thunder Bay and Moncton - where the team, which was quite small, was already working in responding to their questions, in assisting them with their work because they would be the next tier that we would address after the first group of airports was transferred. So that in terms of Pearson, there had been different, of course, representations, as you have heard Mr. Farquhar and others, during certainly the time that I was there. At the end, their great difficulty was in getting a consensus between the various municipalities. They achieved that over time, but during most of the time that I was there, they had not achieved that consensus. Therefore, we were not in a position to compare their proposal to the course of action that the government had decided to take at that time.
Senator LeBreton: Thank you, Mr. Chairman. I'll continue.
Just to make the point again that the issue here is not the privatization of Pearson International Airport, it's the leasing of two terminals.
You did a very good chronology of Mr. Chern Heed's service to the government. You know, I go back and point out Mr. Bandeen's quote when he described "...who was extremely upset by the negotiations and what was going on." Well, it's very interesting that this same Mr. Chern Heed was part of the evaluation team and was one of the signatories on the document in August 1992 that recommended that the best proposal was from Paxport. You might have just overlooked that, but I think that's very telling, then, for him to kind of sign off and then, as you stated, to go on and be involved in the negotiations, and then in the summer of 1993 be dealing with the then yet and still - you know, we've got a local airport authority that still hasn't got a general manager. For him to then, at that stage of the process, try and interfere with it - but that's something we'll have to obviously -
Ms Labelle: Mr. Chairman, I cannot speak in terms of discussions that might have taken place between two other individuals.
Senator LeBreton: That's right.
Ms Labelle: Certainly in the role that I played in Transport Canada, Chern Heed was someone who was indispensable on all of these files and who worked very hard on all of them.
Senator LeBreton: By his own admission, he was one of the ones that was resisting. I'm almost finished, Mr. Chairman.
Madam Labelle, you were Deputy Minister of Transport from October 9th, 1990 until June 24th, 1993, two years, seven-and-a-half months, to be precise. It probably felt a lot longer than that for you.
Why did this process take so long? On August 18, 1989, over a year before you took over at Transport, the Government of Canada announced a southern Ontario airport strategy, including runways and restoration work for Terminals 1 and 2.
On October 17, 1990, one week after you assumed your position as deputy minister, the government announced that it would be seeking private sector participation in Terminals 1 and 2 through a competitive Request for Proposal or RFP - I hate acronyms - process.
Seventeen months later, on March 11th, 1992, the government released a formal RFP inviting the private sector to finance the upgrading of T1T2, and 90 days was given for the respondents to submit to the RFP.
At a meeting of interested parties, almost within the same time frame, in a House of Commons Transport Committee meeting, the minister, Mr. Corbeil, publicly expressed a willingness to extend the time and in fact did so. The 90 days for the proposals to be in, which would have been up in June 1992, in fact was extended until July 17th, 1992. So it's 127 days in total. I think if you go back and check the records of your department, that's above average for the amount of time for an RFP to be announced and in.
Mr. Lane and his evaluation team took over and, as he testified, worked throughout the summer of 1992 under a fixed, self- imposed time period. They evaluated the bids and declared Paxport's the best overall proposal. Now, we're still in the summer of 1992.
On December 7th, the government makes the announcement, based on the evaluation committee report, that Paxport had submitted the best overall proposal and, subject to certain conditions, negotiations would proceed.
On February 1st, Paxport and ATDC, or the Air Terminal Development Corporation, merged and on and on and on the negotiations go, ending up in Treasury Board approval on August 27th and the announcement on August 30, 1993.
Since the government's initial announcement specifically regarding T1T2 in October 1990, we have now covered a period of time of two years and ten months. You were the deputy minister through this whole period of time, except for the period from June 24th to August 30, 1993.
My question is very basic. Why did this take so long?
Ms Labelle: The government, when it decided to privatize Terminals 1 and 2 through a long-term lease, also decided that they would like to have the environmental assessment for the runways done prior to issuing the RFP. Now that was supposed to come soon after October 1990. It was supposed to come, you know, in the winter-spring of 1991, the environmental assessment itself. This was a movable feast in that the dates were changed a number of times, which really brought us to the fall of 1991 quite rapidly. So this is where, in the summer of 1991, the then Minister of Transport, Mr. Corbeil, decided that we should move ahead and go to cabinet to seek approval to issue an RFP before the end of the environmental assessment process. This is when, at that time, we just went to work with that in mind.
Basically, there were many steps. This was one which deferred, probably by close to one year, the issuance of the RFP so that, you know, you are now at a much later period of time. You are no longer in October 1990. You are really in the fall of 1990, and it was by the time the government looked at what it wanted to do - of course as you know, the government decided in the winter of 1991 - of, I'm sorry, '92, to issue the RFP, and it was issued very soon after that decision in March.
Senator LeBreton: So it was a year wait.
Ms Labelle: Yes.
Senator LeBreton: In total, 17 months.
Ms Labelle: Yes.
Senator LeBreton: You know, this is rather kind of a curious, long, time frame. We are talking about the leasing of two terminals when, you know, I look at the present government's timetable for the privatization of CN, which is more than just two buildings and an airport. You know, they tabled the legislation in early May with a cooperative Opposition and a cooperative Senate. We have passed it through the Senate. You know, this whole thing is all in and closing by late October, according their timetable. So it seems to me that this was a very long, drawn out process on two terminals as opposed to the so-called "national dream", Canadian National, but that's just a comment of mine.
Ms Labelle: I would just like to comment on the CN file, Mr. Chairman because before I left government, we had started to work on that one.
Senator LeBreton: That's another policy of the federal government following along on our policies.
Senator Kirby: I just thought it was a tribute to good government that it got done so quickly.
Senator LeBreton: I have said that I cannot help but find myself thinking that had all of this not got bogged down in this process, whether in fact if it had been kind of an incomplete process, whether in fact the government would have just taken it, put on their stamp of approval, and we wouldn't have gone through all of this and the terminals would be fixed and everyone would be happy. I often find myself wondering if that would have been another NAFTA, free trade, GST, et cetera.
Finally, my last question, Madam Labelle. During the long period of time - it must have felt long to you and I'm sure it did - that you were deputy minister, did you do everything that was necessary to ensure that government procedures were followed to the best of your ability?
Ms Labelle: Yes, I certainly did that.
Senator LeBreton: Thank you very much. That's the end of my questioning, Mr. Chairman.
The Chairman: Senator Hervieux-Payette, please.
[Translation]
Senator Hervieux-Payette: Welcome to the President of CIDA, with whom I was proud to work when I was a member of the government and she was a deputy minister. I have to say that in those days I never found that a lot of time was spent on resolving cases and preparing the files. We arrived for International Youth Year at the same time as everybody else. So I just want to say that it was a pleasure to work with you, Ms Labelle, and today's proceedings are not, in my opinion, meant to be an opportunity for scoring partisan points, as some journalists are claiming, but rather an opportunity for us to carry out the mandate that was entrusted to us as a Senate committee. I have to admit that the summer would be more fun spent somewhere else than in this committee, where we're slowly being buried alive in paper.
You'll have to forgive me, sometimes it will take me a little while to formulate my questions because all the documents are in English. I agreed to work in English because our working documents come from the committee secretary. But I have to say that sometimes I only have the English terminology, and I'm not a simultaneous interpreter, so if there are hurdles I would prefer to address you in French rather than English, because it's easier, and perhaps throw in the occasional technical question in English because I don't know the French equivalent.
At the start, I think, there's one thing we really should try to clear up and that's this question of 90 days, after which everything was supposed to be settled. In 90 days the whole issue is supposed to have been resolved, and yet Price Waterhouse gave us a report that said, that recommended, that six months were required before going ahead with a request for proposals.
Was it on your recommendation that the RFP was made for a period of 90 days? Where did that 90 days come from?
Ms Labelle: Mr. Corbeil, who was the minister at the time, decided that it should be 90 days, and he also decided that we should indicate that we were ready to grant an extension if one of the companies or firms requested it. So it was a decision by the minister.
Senator Hervieux-Payette: The process was even speeded up further by skipping the stage that was followed in the case of Terminal ... of Terminal 3, where it says in the English there was an "expression of interest" stage - I don't know the French terms for that, I imagine the interpreter is in a better position than I am to know it - and what was the advantage, or what was the recommendation thanks to which that stage was skipped and the decision was made not to go into it in greater depth? I believe that in the case of Terminal 3 there were six or eight groups and really major consortiums of five, six, seven partners that took the time to sign letters of agreement and that formed groups. Since that process was used in the case of Terminal 3, by what rules or just how, in the end, was the decision made to skip it?
Ms Labelle: Going with two stages or one doesn't depend on in-house regulations, it depends very much on the type of project. Very often expressions of interest are called for when it looks as though there are quite a large number of firms that will be bidding and a certain number of them - will probably be well below the threshold for being considered seriously and so it becomes quite an expense for those firms. And then too it's an expense because a lot of time has to be devoted to assessing the larger number of proposals.
In this case, Mr. Corbeil decided to go direct to a call for full proposals, backed up by numbers, right from the start.
Senator Hervieux-Payette: My previous experience with the SNC Group was that that stage (because we went through similar ones in the past with that firm) made it possible to do a sort of pre-feasibility study that cost a lot less and to see if, ultimately, the project was feasible from both the technical and the financial standpoints and whether we wanted to go ahead. So both for the bidders and for the government it was a [useful] stage in big projects, the major projects that cost hundreds of millions for the firms that bid on them. You say that Mr. Corbeil at that time thought that the market - ultimately there must be a reason why only three proposals were received including one that was rejected. Compared with Terminal 3, was there a feeling of unease that resulted in people who might have been interested abstaining from bidding on that phase?
Ms Labelle: It's hard to know whether certain firms that had displayed interest in previous years, why they didn't bid at that time. We really don't know. But among others there was BAA - British Airport Authorities - which with a Canadian consortium was interested right up to about six months before the call for tenders went out. Then they literally decided to close their doors here. And they had employees here and everything. So they decided not to bid. There weren't a huge number like that, because the project did after all require quite specialized firms, or at least quite specialized consortiums. I think Mr. Corbeil could probably answer that question. I think his view was that there probably wouldn't be that many bids. But I think he would be able to explain to you himself.
Senator Hervieux-Payette: All right. We spoke earlier about the environmental impact assessment process, about modernizing the two terminals and about constructing runways. In your opinion, what could have caused delays?
You said you took some time before having the impact assessment done - was that because the terms of reference for it, the assessment team has to know what project they're going to be working on, on the one hand, and on the other, obviously there is the environmental impact of new construction and additional traffic as well.
Going by what we saw in the documentation, the local authorities in Mississauga weren't very keen on more traffic, because of course when planes fly right overhead they're a little less delightful that when you're several miles away. So the impact study was after all pretty important. How did it happen that there ended up being two positions on it? One, if I remember correctly a letter from Mr. Lewis when he was minister saying that it was understood that the government was not going ahead, was that the project would not begin until an environmental assessment had been completed. I presume he was thinking of the interests of the residents in the region. And the other position was that a little later it was decided that the RFP would be launched anyway, for a project worth hundreds of millions of dollars, without having the results of the environmental assessment.
So where did the directives come from saying go ahead immediately? And what was the reasoning?
Ms Labelle: That environmental assessment was on a huge scale. It was important. The subject was a thorny one for the region, as you remarked, and the panel that was appointed asked on a number of occasions for additional information, because when they held preliminary hearings to see what sort of information they should be asking us for, to see if we had what they needed, they twice decided that they wanted additional information. So at that point we moved heaven and earth to arrange for that additional information quickly.
But then, when summer arrived, the panel decided there was no point holding hearings in the summer, so that delayed things, and then there were municipal elections and that delayed things further. So one thing led to another. And when Mr. Corbeil took over at Transport, and studied the situation, it was he who came to the conclusion that he wanted to go ahead. He wanted to send a memo to Cabinet, to his colleagues, to study the situation and reach a decision as to whether - the government wanted a decision as to whether it should continue to wait until the panel had completed its assessment or whether it should go ahead. The government decided to go ahead, and that was why the RFP included the two options, in an effort to protect the government if the panel should come up with a negative finding.
Senator Hervieux-Payette: So that means that the preliminary plans for the new runways were already drawn, that the Department had submitted its blueprints so that the impact assessment could be done, and the assumption was - Who was financing the new runways at that point?
Ms Labelle: We had been talking with the Department of Finance for quite some time already by then, to find the best solution for financing the new runways, because there again there were different options. The government could decide to make it a government project and fund it out of the Consolidated Revenue Fund, or it could call upon the airlines and their passengers to pay special fees, specifically for the new construction, or, third, it could ask the private sector to take on the project, to do the building and even manage the facilities for a while, and then eventually, probably, return them to the government.
So during that period financing was the subject of real discussion, ongoing discussion, in an effort to reach the best possible solution for all concerned.
Senator Hervieux-Payette: As I understood it, there were what amounted to two projects: the modernization, on the one hand, putting the terminals back into shape, and on the other hand the possible construction of new runways, which might take place at virtually the same time, without its having been decided who would do it or who would pay for it, but knowing that sooner or later it would be the users who paid in any case.
But the thing I'm wondering is, was there - which of the two contracts, in the end, was the more urgent, since we've been told there was some urgency and you said just now that you arrived in October and the new airport, Terminal 3, started operations in February, so I imagine that the following spring there was still the same urgency about congestion? How would you define the urgency of the need to go ahead, since it seems to me that there's some confusion about just what was urgent? What was happening that anyone could have accused you of dragging your heels?
Ms Labelle: The thing was that at that time, with the recession, opening Terminal 3 gave us more space than was necessary. It would always have been difficult to estimate what the possible traffic would be. So it is definitely important, at a certain point, to ensure that we wouldn't find ourselves once again in the impasse that we'd been in during the 1980s, the late 1980s.
Let's say that it was probably ... that the priority was repairing Terminal 1, which was really obsolete, especially the parking facilities. There were certain aspects - the doors, the electrical system - that had to be updated, and so on. So in terms of immediate urgency, it was Terminal 1 that needed to be patched up, at least parts of it.
The runways were important from the standpoint of having, keeping and increasing Pearson's capacity overall, of optimizing, as was said earlier, the role it could play in southern Ontario and ensuring that Canada wasn't relegated to the sidelines especially as regards traffic that might go via the United States and depart from Canada for other countries. It was important to ensure that Pearson could operate smoothly.
So the immediate urgency was really Terminal 1, at least from a basics point of view. Then came the runways, to ensure a long life for Pearson, and also, obviously, overall modernization of Terminals 1 and 2 and making sure all three terminals were working as components of a whole, well interconnected and so forth.
Senator Hervieux-Payette: With respect to - I understand the definition of the [relative] urgency of the problems, but Terminal 2 - the question of Terminal 2 was settled, in the end, with agreements with Air Canada. I understand that Air Canada was satisfied with the agreement that was reached with the Department and that the formula of working with the Department and investing jointly worked out very well as far as the modernization of Terminal 2 was concerned. So that matter was resolved to the satisfaction of Terminal 2's principal and just about only client. So it remained to find a solution for Terminal 1. But what remained of the Department's official policy of Local Airport Authorities if the day after saying they were going ahead, they transferred T1 and T2 to the private sector? What was left to be managed if the runways were built, the terminals up and running and almost all the revenue was generated by the three terminals - what was there left for a Local Airport Authority to manage?
Ms Labelle: Let's say that what was left to manage was the assignment of different airlines to the various terminals, access to transport, sector 4, which was a sector that was not transferred, and the grounds. And depending on what happened with the runways, if they were privatized before a local authority took control of Pearson, if that happened, there would have been the runways as well. But let's say that the three terminals would already have been in the hands of three or two private companies, or one, which is what happened in the end.
Senator Hervieux-Payette: To your knowledge, did the Local Airport Authority play a part? Did they have any input? Did they... Ultimately there were two versions. Some people said they weren't capable of getting together, of all singing the same tune, or could they have been part of the process, said their say and ensured that you had a local consensus on airport development? The perception in Montreal was always that Toronto was the ideal municipality where everybody got along, so we found it a bit bizarre - I found it a bit bizarre - to hear that Toronto couldn't agree and so a call for tenders went out just to settle the war among the municipalities, whereas in my opinion, the testimony that I heard from those people was to the effect that they were prepared and if they didn't get the LAA they would have liked to have a voice in the tendering process. So to my knowledge, and I'm asking you, did the local municipalities participate at some point in preparing the RFP process? Were their concerns, their worries, taken into consideration in designing the process?
Ms Labelle: They didn't participate in the RFP process at any point, as far as I know. So no, they weren't there.
[English]
The Chairman: And why was that, Madam Labelle?
Ms Labelle: In our case, we were still at that time waiting for them to be a body that the government could recognize as a duly formed body. So, you know, this was the issue at that time.
The Chairman: Yes, they didn't participate because they weren't recognized.
Ms Labelle: They were not recognized.
The Chairman: Right. And there was good reason why they were not recognized?
Ms Labelle: They were not recognized then because they had not demonstrated to the satisfaction of the minister that they had met all the basic principles. I think the one major one was the fact that there was still one conditional approval by Mississauga at least close to the end. Before that, there were a number of other issues, but which they succeeded in dealing with. This remained, by the month of May, the one issue that was still outstanding.
The Chairman: And you were in total agreement with the minister's direction that you had to have resolutions from the major players which were unconditional and which met the requirements of the department, your department?
Ms Labelle: Yeah, the major players were important. Mississauga was very important because most of the airport, except a small parcel, is in that municipality. Therefore, it was important for Mississauga to be fully on side. So the minister at that time felt that it was important not to recognize them until all the, you know, major municipalities and regions had unconditional resolutions.
The Chairman: Yes. Mississauga, of course, continued to insist that the Island Airport be included with Pearson in development.
Ms Labelle: Yes.
The Chairman: And your officials testified last week that this was impossible.
Ms Labelle: Yes, because we were not the only owner of the Island Airport. In the case of Montreal and Mirabel we were owners of both, and it of course made it, you know, easier to put the two airports together.
Senator LeBreton: Just a supplementary, Mr. Chairman, if I may.
The Chairman: Yes.
Senator LeBreton: Did not the minister, Minister Corbeil at the time, write to the mayor of Mississauga, Mrs. McCallion, asking her to drop that requirement, and if she did so, he would then recognize the LAA?
Ms Labelle: I think so, Mr. Chairman, but I would like to double check our correspondence. I have got a lot of correspondence during that period.
Senator LeBreton: I think you will find that that was there.
The Chairman: Senator Hervieux-Payette.
[Translation]
Senator Hervieux-Payette: For the benefit of those who may be listening to us, Toronto Island Airport isn't in the municipality of Mississauga, not on that municipality's territory at all. It's the local airport in Lake Ontario where small planes land and then you have to take a little boat to reach the mainland. So, to make sure we're clear on this, even if Mississauga made it a condition, it wasn't an airport that was on its territory. It was an airport with air traffic, of course, but not one that belonged to the federal government but to the City of Toronto, isn't that correct?
Ms Labelle: We have some involvement but the City of Toronto is the big player, yes.
Senator Hervieux-Payette: It's important to be clear that Mississauga's objection arose from the expansion, so were they consulted about the issuing of a call for proposals, to meet their requirements?
Ms Labelle: No.
Senator Hervieux-Payette: So -
Ms Labelle: They were very involved, however, in the whole question of the environmental assessment of the runways. They were involved in the drawing up of the Pearson plans, in developing the southern Ontario strategy. Like all the other municipalities, they were very involved in all those elements.
Senator Hervieux-Payette: I'm going to jump one small stage to something that has been discussed at great length and that's Paxport. Its financial viability was discussed and finally the conclusion was reached that Paxport needed reinforcement. Who decided that? Did you make that recommendation to the government or - Where did the idea come from that Paxport couldn't cope with a financial operation on that scale?
And how did it happen that the second bidder was invited, the only one that was on the list, to join Paxport?
Ms Labelle: I'd just like perhaps to start with some background information on that question, if I may, and then get down to the question proper.
As you know, the firm of Richardson Greenshields was retained to advise the team assessing the proposals. They looked into the whole question of the financial clout of the two groups and of course of Paxport in particular. And their recommendation in the end was that, with the information they had, and there was no more available at that time because there are after all limits to the information that is accessible to us, especially when dealing with private companies as almost all the bidders were, including Claridge, but we had all the information you usually get. And they recommended to us, or they determined, their conclusion was, that those two companies, those two consortiums, were capable of handling the project.
Senator Hervieux-Payette: They were the ones who recommended the merger?
Ms Labelle: No. No, I beg your pardon, [they gave it as their opinion] that each of the groups that had submitted a proposal was financially capable of undertaking the project. As you know, when at the end - at the beginning of December when the government announced that Paxport was the group with the best overall proposal, the government also specified that it wanted the proposal's financial viability to be demonstrated in greater detail than had been possible during the RFP process, and at that point we retained the firm of Deloitte & Touche. And it was in January 1993 that the two companies came back and told me that they were holding discussions and then we had a number of meetings with them and naturally dealings with them right up to the time they wrote me to say they were now just a single entity and that they would be working on the basis of the Paxport proposal and would in effect be a single group.
So it was during that period, end of December-beginning of January, that the two firms got back to us, got back to me. I had not had anything to do with merging them. I didn't suggest that they work together.
Senator Hervieux-Payette: To your knowledge, at the Department there was no contact who said to them, "Listen, there's just the one project"?
Ms Labelle: Certainly not. The officials at Transport Canada never to my knowledge suggested they should get together on this.
Senator Hervieux-Payette: Thank you. One small question, Mr. Chairman. Who prepared the famous booklets, the 35 evaluation booklets? At the first stage I asked people a number of times, people who used the booklets, in particular I asked the RCMP Group last week, and I never found out who prepared them and who drew up the score sheet. Since the people who used them and the people who were questioned haven't been able to tell me, I'll take advantage of your being here to put the question to you.
Ms Labelle: The evaluation committee, which was set up under Ron Lane, whom you met, and which had as its co-chair Chern Heed, prepared the criteria and added the scare sheet at that time. There was not just the evaluation committee but also a number of subcommittees, as you know, and it was those teams who did the work.
Senator Hervieux-Payette: They prepared those little booklets?
Ms Labelle: That's right.
Senator Hervieux-Payette: Which were submitted to you for approval, I imagine, and which went to just what level in the bureaucracy? Did they go as high as the minister?
Ms Labelle: My role was to ensure that we had a team in which we had confidence, that the process, the approach, was firmly established and was one that would lead us to choosing, we hoped, the best proposal in an objective and impartial manner, and that the whole thing would enable us to arrive at valid conclusions.
When this work was finished, I asked just for an overview of the whole thing, to be satisfied that it all hung together, and I told Mr. Corbeil, and I gave him a briefing on the approach, not in detail but to let him know that he too could rest assured that we had put in place what was needed. So in general that was the approach that was taken.
Senator Hervieux-Payette: Who recommended that Richardson Greenshields and RCMP be selected for the process? Where did those recommendations come from?
Ms Labelle: Richardson Greenshields was suggested by the evaluation team while RCMP, Raymond Chabot, was a decision of the minister's.
Senator Hervieux-Payette: So the booklets were a kind of small caveat. We've discussed the question of financial viability, and Paxport, and the merger. Paxport's bid and the final contract with the new company, Newco, do they cover the same things? Are they identical or virtually, or are there important variations and if so what?
Ms Labelle: I should explain that I was no longer at Transport Canada when the final contract was drafted. On the other hand, I was there when the negotiations were going all out. With negotiations like those, there would obviously often be extras in the final contract, things that differed from the original proposal.
The original proposals are what really enables us to chose the best overall proposal, while in the contract you very often find changes, which can be quite major. That's where there's a difference, as you know, between a services contract and an equipment purchasing contract. When you purchase equipment, it's much easier to make the decision, while a services contract like the one we're discussing has a number of elements and requires negotiations that can result in changes. And that was undoubtedly the case in this situation.
Senator Hervieux-Payette: As far I can figure it out, there were in fact considerable differences between the call for proposals, the terms of reference, and the Paxport proposal and ultimately the combined proposal. I don't think we're really talking about the same contract and the same terms of reference. I suppose that the approval process has to go through the same channels inside the government - the financial proposal has to retrace the same route to get approval. But we'll put that question to the next witness.
Ms Labelle: May I just add, Mr. Chairman, that when I was at Transport, the negotiations were about the Paxport proposal and not a combined version of the Claridge and Paxport proposals. And that was important for us, because of the very point you've just made.
Senator Hervieux-Payette: But if we look back a little, there is after all the case of the Huang and Danckzkay proposal on Terminal 3, which started with a $300 million contract and, in the correspondence I was reading from Mr. Hession, he warned you that the deal ended up costing $520 million and it generally costs the users a little more when there is a discrepancy in costs.
I think that in the present case there were players who jumped ship around the time of Newco and that certain investors simply dropped out and didn't invest, didn't pursue the deal. As I said, I'm not going to ask you questions about the final deal because you weren't there at that time. But it's important to raise the issue, nonetheless.
One small question.
[English]
- and to make sure that my friends across understand - and they are very good at these questions, usually. Did you have any political staff attempt to become part of the contract negotiation team? Did you have any intervention from ministers' offices, this minister or other ministers, to have people join the negotiating team?
Ms Labelle: I did not have representations from our minister's office to be part of the negotiating team. We ensured that the chief of staff of the minister was informed of what was happening. Michèle LeMay at that time was the chief of staff.
We had, at that particular point, a situation where what we thought was still the chief of staff of Mr. Jelinek had wanted to be part of the negotiations. We denied that, although by that time we found out that he was no longer the chief of staff. He had just left a few weeks before and I think was with one of the Matthews Groups but looking more at the runway situation than the airport situation.
Senator Hervieux-Payette: During the course of negotiations, did you have a regular meeting with some of your colleagues at the higher level or PCO so that they would be informed and follow the development of the agreement with the new company?
Ms Labelle: Yes. We had some regular meetings with the Privy Council Office to make sure that they were aware of how we were proceeding, what was generally the progress on this file. Usually, at that time, we would take advantage of such a meeting to include the Treasury Board and sometimes the Department of Finance, depending, so that they could also remain informed of the progress of the file.
Senator Hervieux-Payette: In many documents, we see that there was some pressure regarding timing, emergency. It seems that, you know, in March '93, there was a lot of pressure to finalize a transaction. Who, where was the pressure coming from? I mean the RFP had been issued. I mean, we were close to the contract being awarded. It was being negotiated. So at the conclusion, I mean, who was putting pressure to finalize this transaction? Would you say that there was some people, members of the staff or the Prime Minister at the time, Mr. Mulroney, made some interventions?
Ms Labelle: Our minister from the beginning wanted to see this file move with dispatch, along with a number of other files. I think ministers like to see decisions being implemented swiftly. So there was no question that, you know, the transfers to the local airport authorities and this particular file were important and big, big issues. So the deadlines that we kept giving ourselves were always difficult to meet because we were not the only party at the table. Many lawyers and accountants were there trying to advise on the best course of action to follow.
I did not receive any pressure personally from the Prime Minister of the day.
Senator Hervieux-Payette: Would you consider that you had some kind of a deadline at that time, I mean, to finalize a transaction?
Ms Labelle: We had given ourselves a number of deadlines, and the government had also identified a number of deadlines over the course of this project. When the RFP - when the decision was made to inform Paxport that they had the best overall proposal, it was felt at that time that within a number of months, by the spring, sort of late spring of 1993, that the agreement would be completed.
Of course with the two firms coming together, and they had to do their own due diligence in doing this and also because there were a number of issues that needed to be clarified, including how it would be financed, really by the time we started to clear those off the table, have the certainty that the two firms were one, we really were quite in the advanced spring by that time. You know, it was March by then. Indeed, the time was passing and because of all this, we were not - you know, we didn't have a finalized agreement. You know, the pressure was on to complete this major undertaking, but somehow, there were a number of things that happened during the course of its delivery that impeded progress.
Senator Hervieux-Payette: How was the question of competition law resolved? In fact, I see a lot of letters of Air Canada being certainly very uneasy about having only one company operating the three terminals and leaving them with no possibility to negotiate and, of course, being more or less a prisoner of this unique ownership of the three terminals. I mean, how was this question addressed at the time?
Ms Labelle: Yes.
We had informed the Competition Bureau at the time of the issuing of the RFP so that they knew that they would eventually need to review whatever the results would be of this RFP. Then on I think it was February 1st, when we were informed by the two firms that they were in the process of coming together and in an advanced stage, we informed the Competition Bureau that this was happening. We also informed Paxport and Claridge at the time and the new Mergeco that they would have to meet very early with the Competition Bureau, which they did, in order to ensure that what they were doing was in conformity with the law. They did that over the course of the spring, had several meetings with the Competition Bureau.
Senator Hervieux-Payette: But at the same time, one of the requirements of the new owners of Terminals 1, 2, and 3 was not to build an airport in a certain radius, of course, certainly limiting the competition. This is the way I understood it. At the same time, making sure if - and the projection of future clientele was certainly not easy to make as you mentioned before.
Ms Labelle: The Competition Bureau, when we approached them early on, indicated to us that what they wanted was to see the final proposal for the agreement before being able to rule on it. They didn't feel that they should be ruling that early, that it was only much later, so there must have been - you know, there would have been two periods where the Competition Bureau was involved, one at the time that the two firms were coming together, and I presume after I left, when there was an agreement to present to them before it was signed.
Senator Hervieux-Payette: You left in July, as was mentioned by you -
Senator Jessiman: June 24th.
Senator Hervieux-Payette: June 1993.
Ms Labelle: Yeah.
Senator Hervieux-Payette: In your civil servant jargon, I was told or informed that you had one of the highest deputy minister rankings, which is DM3. You were moved to president of CIDA. It is either a DM2 or DM1. Is it considered to be a promotion? Why did this happen in the middle of a transaction? I mean was it part of your plan or your career that you had to move somewhere and all of a sudden it comes from heaven? I know that you are doing a very fine job, but how did this move just close to finishing one of the major transactions - I mean, of course, we know that Mr. Barbeau was removed and so on. So the perception certainly is that it was not certainly the most appropriate time. If I was the president of a company, I would not move a vice-president, you know, just finalizing a transaction. I would wait until the transaction is over. Can you explain that to us?
Ms Labelle: As senators know, deputy ministers are appointed at pleasure by the Prime Minister. We are moved to other departments in the same way. I think that senators would have to ask the Prime Minister of the time and the special advisor to the Prime Minister, who was the Clerk of the Privy Council, Glen Shortliffe, at that time. I was not given any reason. There were a number of deputy ministers who were moved on that day.
Senator Hervieux-Payette: Okay. Well, we were close to an election, so I suppose very often it's time for people sometimes to move around.
When Mr. Barbeau was moved, and that's why I put the two together in trying to understand and having heard your comments that it was to protect him from - I have some, in my books, certain letters from Paxport mentioning that they were worrying about the speed and their own - and I have the same thing from the notes that were sent to us for the appearance of Mr. Broadbent. I took the time to read it at lunch time, and he too mentions that there was a perception that people were not too much - well, "I had to complain about the lack of responsiveness or obstructionism from the airport group." You mentioned that you were very pleased, very satisfied with your team. So, I mean, Mr. Broadbent was directly involved, was your chief negotiator, and he said that he had some obstruction, and you are telling us that the group did an excellent job, everybody was working hard. So which version - how do I reconcile that?
Ms Labelle: Let me deal with the Paxport situation first and then comment on Mr. Broadbent's comments.
In terms of Paxport, you have to remember that this company had put a bid for Terminal 3 way back and were not the successful candidate. That was back in the mid-eighties. So they have been - you know, to them, they have been interested in participating in the redevelopment of terminals at Pearson for a long time.
As Senator LeBreton mentioned earlier, even after the decision was made, for a variety of reasons, the process was protracted. First, it was environmental assessment. Then, you know, we were talking about the merging of the two companies as two points, as examples. I think that, indeed, Paxport were hoping for a much more rapid progress than was the case. I was not surprised to see their correspondence to us.
In terms of Mr. Broadbent, that particular - I saw - like you, I was given a copy of his presentation to this inquiry. That particular section, I would just like to give you a bit of context.
The Chairman: Madam Labelle, it was Mr. Broadbent who gave you a copy of his testimony, nobody else?
Ms Labelle: Yes. It was Mr. Broadbent, as a courtesy, who sent me a copy of his comments. Indeed, he did that yesterday.
The Chairman: Proceed.
Ms Labelle: Okay.
So in terms of his views, when he came, we had hoped that over a period of three months or so that we would have seen the completion of the negotiations with hopefully an agreement that was satisfactory to all parties.
He of course was looking for a team and for instant assistance. One would in his position.
At one stage Mr. Broadbent asked me if I could provide him the services of Chern Heed full time in Ottawa. I had to deny that. I think I understood after the fact, but I had to deny that because I needed Pearson to work.
We also needed the environmental process to really work as well and be successful, hopefully for once, and therefore - and he was also needed because the proponents needed to go and get the information on site where he was. Of course he was the most senior officer. So it is an example of something that I personally had to deny.
There were a number of times when Mr. Broadbent came to me feeling that he was not provided with information that he requested, analysis that he requested fast enough, and at that time I would investigate it each time. There were times that I said, "Well, sorry, we can't." I mean everybody is doing everything they can. There's only 24 hours or so in a day, and people were working late, sometimes all night.
Other times I worked with our staff and found alternative ways to be able to assist him with what he required for his work to proceed. So I can understand, you know, his impatience. However, I'm still of the view in a very definitive way that the team that was there worked very hard at that time to be helpful.
Senator Hervieux-Payette: My last subject, we have a copy of a letter of the Air Transport Association of Canada. To say the least, I mean - to quote from their letter, they say:
...we can no longer afford the luxury of high cost terminals.
I suppose he was referring to Terminal 3. They were recommending to take no action on Terminal 2 until Air Canada is satisfied because they have done modifications and things seem to be going in the right direction.
Do nothing more than the necessary maintenance and ordinary improvements to Terminal 1 until 1993.
And they said:
This phased approach coupled with public ownership of Terminal 1 will provide a more reasoned approach to terminal capacity and development.
Mr. Nelligan: Can you give the document number, senator?
Senator Hervieux-Payette: It's 00036.
At the bottom of the second page of the letter, they say:
We also are not in agreement that development and operation of terminals by private developers is in our interest nor the interests of the consumers who ultimately have to pay for whatever is put in place.
At the end he's concluding to the minister:
Mr. Minister, we believe that the initiative of the private developers is neither timely nor appropriate. It does not have our support because the volume of passengers does not warrant such projects.
My question is this: What kind of weight does this association have? I mean is it representing a small number, a large number? Does it represent the whole industry? Who do they represent because their letter is pretty strong and they were sending copies of their letter to Mr. Mazankowski, Mr. Beatty, Mr. Wilson, Mr. Jelinek, Barbara McDougall, Mr. Hockin, Mr. Lewis, Mr. McDermid and Mr. Martin. I guess everybody was informed of their opinions. All these people were sitting in cabinet. So I feel they are the authority with you on these matters, and that's what they were recommending to the government. So do you say that this group was totally ignored?
Ms Labelle: ATAC - and this letter was signed, I think, by Gordon Sinclair, their executive director--
Senator Hervieux-Payette: Yes.
Ms Labelle: - at that time was very concerned about the financial state of the industry. And they were also concerned about no action being taken that could impede the success of the environmental review that was taking place on the runways. But I think their prime concern was the health of the industry. You know, they were seeing some of their own having to declare bankruptcy, others in the verge of bankruptcy, and I think that they were worried that additional investments would be passed on eventually to the airlines.
Senator Hervieux-Payette: Do they represent the airline company?
Ms Labelle: They do.
Senator Hervieux-Payette: And was it at the time, or the year 1993 - not necessarily the letter, but the year - that we saw Canadians having some major difficulty and the government having to come to some decision and put in some money to guarantee their existence? Terminal 3 was built almost for them and they were almost close to bankruptcy. So, I guess their opinion that there was - a close scrutiny was really important in terms of these financial matters, was very important, and I guess this kind of letter should have had some weight in the decision to go ahead or not to go ahead. Would you say that they were an association that were not taken seriously at the time?
Ms Labelle: No, ATAC was taken seriously. They did represent the airlines. They represented - the major airlines played quite an active role also on ATAC. ATAC was involved in many aspects of representing the industry. It was on regulations, it was on pricing that they were negotiating for the industry some of the umbrella-type of pricing agreements.
I think their letter was sent to a very large group of ministers and I think ministers, I'm sure, had the opportunity - you know, they knew the views of ATAC when they made their decision, yes.
Senator LeBreton: Just a supplementary, Mr. Chairman. Just for the record, Madam Labelle, this same association had also expressed an interest in managing the runways themselves and I think we should just make that clear for the record.
Ms Labelle: Yes.
Senator LeBreton: You know, they had other proposals other than the letter that Senator Hérvieux-Payette is referring to.
Ms Labelle: I think the senator is right. They had come to Transport Canada and indicated to us that if the Crown could not finance the runways, which they felt was the best approach - but if it was not possible - that they would be ready to see how they could form a consortium of airlines in order to be able to provide financing for the construction of runways.
Senator LeBreton: So they had their own interest as well.
Senator Hervieux-Payette: On the runways.
Senator LeBreton: That is right, but the fact of the matter is that they were in there for their own interest.
Senator Hervieux-Payette: I hope so. We are all for our own interest, I hope.
Senator LeBreton: No, but I just wanted to put it in the proper context that they not only corresponded about the issue you raised but they also had expressed an interest in operating the runways themselves.
Senator Hervieux-Payette: I think I have gone through my list of questions, Mr. President.
The Chairman: We have now recognized there are three senators, Senators Kirby, Tkachuk and Jessiman, with questions and, of course, Mr. Nelligan. And 5:30 is our usual adjournment time. Is it your wish to try to finish by then, or will you go to 6:00 o'clock.
Senator Kirby: I just assumed, Mr. Chairman - I'd never thought about it until you asked the question, but I mean - I presume we will try to finish as quickly as we can but that what we would do is what we did whenever it was last week that we asked a witness to hold over and come back. In this case, it will be the evening session. I guess, was it last Tuesday night we did the same thing? So I assumed we would follow the decision you made last week, which was to adjourn at 5:30 which, I think, is what you did when we had the people from Toronto here, I guess it was the LAA people, and then just resume at 7:00 o'clock as we had before.
The Chairman: Is that agreeable?
Senator Hervieux-Payette: We have good sandwiches.
Senator Kirby: That, Mr. Chairman, thinking about those sandwiches is a tremendous incentive to finish questions.
Senator LeBreton: Or not to finish them!
The Chairman: I have pleasant news for you. It's lasagna night! Senator Kirby.
Senator Kirby: Thank you very much, Mr. Chairman. May I say a belated welcome to one of my former colleagues who I had a lot of dealings with when we were both deputy ministers in the bureaucracy.
I wonder if I can go back, Madam Labelle, just to clarify a couple of the comments - a couple of your answers, and then I want to actually get off into an area that my colleague hasn't raised with you.
When the issue of the decision, your decision to move Victor Barbeau was discussed - or, at least, to send him home for four or five weeks - you pointed out that a number of people through a variety of sources unnamed were putting pressure on him and that he was, I think your term that I wrote down was that "he was being put under undue pressure". You also made the observation that similar comments about him were being made to the PCO. You referred to that. I assume - did you ever in fact discuss the Victor Barbeau issue with Mr. Shortliffe?
Ms Labelle: Yes. Let me first say that the pressures were not put on him directly but there was perception well expressed that he was impeding the process. So that's slightly different.
Yes, I have had discussions. I had had discussions with Mr. Shortliffe on this issue. He had indicated to me that, you know, he had had representations to the extent that Mr. Barbeau was impeding the process as well.
Senator Kirby: Did he comment on whether he - how can I put it - believed those representations, or did he indicate that he didn't think they were right?
Ms Labelle: I think he would have to answer that himself, but the sense I had from our discussion is that he felt that these were perceptions but that they were damaging perceptions.
Senator Kirby: They were perceptions, not reality. Did he ask you to move or temporarily move aside Mr. Barbeau? I realize you made the decision.
Ms Labelle: Yes.
Senator Kirby: Were you asked to do that?
Ms Labelle: I made the decision. He felt that it would probably also be in the best interest of the department and of Mr. Barbeau if he was not in the picture for a while. But I made the decision in the end.
Senator Kirby: But did he ask you to?
Ms Labelle: No, I made the decision.
Senator Kirby: I understand that. Okay. Can I move, then, to talk -
The Chairman: Senator Kirby, may I ask a question?
Senator Kirby: Sure.
The Chairman: This is a direct question, Madam Labelle. You were deputy minister and your senior assistant deputy minister, Mr. Barbeau, was in charge of the airports. Did you ever - with the relationship, professional relationship as close as it was, did you ever get any impression that Mr. Barbeau was not in favour of the privatization of Toronto airport, because we have witnesses now to call.
Ms Labelle: Yes. No, I think Mr. Barbeau should speak for himself on that in terms of -
The Chairman: I know. But I'd like you to be a little bit forthcoming.
Ms Labelle: In terms of, you know, the sense that I had is that a sequence, a different sequence he might have felt would have been probably better, but he was a good public servant. He knew, you know, what his role was and his role was really to implement the decision of the government of the day. And, you know, but I think that he should be asked what his views were.
The Chairman: Yes.
Ms Labelle: Certainly in working with me all the time, every day, he understood very well that, you know, the government had decided to proceed and what we were all looking for was the best way to proceed. So that, as I said before, that the interests of the public, of the government, of the taxpayers, of the airlines, were best served by the approach that would be taken.
The Chairman: Yes, I understand that. And I never quarrel with your professional public servant. That is not the question here. You are saying, though, that if he had his druthers, he would have preferred another course.
Ms Labelle: Well, you know, there were various options that were looked at over the number of years. And the original approach that the government decided on was to have the environmental assessment done, then proceed with the request for proposal. And, of course, they changed their mind for the reasons that, you know, were identified because of the protracted approach that the runway environmental assessment was taking. They at that time, you know, made it a different decision. So at the end I think Victor Barbeau, like all the other federal public servants, understood what his role was. And we were all working so hard in making this happen that there was not much time to speculate about alternatives at that juncture.
The Chairman: Yes. Well, I think the words you used was that "You did this in an objective and impartial manner -
Ms Labelle: Yes.
The Chairman: - to reach valid conclusions", which you then presented to the minister with your recommendation as the deputy minister, as the person who runs the department. And you were satisfied that the process was valid.
Ms Labelle: I think in terms of the process that we followed, once the government had made the decision to issue the RFP, then my role was, as you said, to ensure that the process that we would follow would be one that would lead to an impartial decision.
The Chairman: Yes.
Ms Labelle: Or at least an objective decision.
The Chairman: So the process was not, in your opinion, in any way flawed.
Ms Labelle: The process for the issuing of the RFP is one that I'm satisfied with.
The Chairman: All right. Thank you. Go ahead, Senator Kirby.
Senator Kirby: Thank you, Mr. Chairman. Can I turn to an area you haven't really talked about, which is Mr. Broadbent's role in the sense that he was an outside negotiator.
First, it's relatively unusual for the government to not use an existing public servant to negotiate major contracts. All the ones I can think of have been done by people in-house as it were as opposed to - I was going to say as opposed to "out house", but that may create the wrong impression.
How was the decision made to not use an existing public servant to run the negotiations? Why did that happen?
Ms Labelle: When the decision was made to have a senior negotiator, the person that was the most obvious to me was Ran Quail, who was the Associate Deputy Minister of Transport. He had been supporting me throughout the evolution of this file. He already had quite a lot of information about it and Ran Quail accepted to do so. He was appointed deputy minister a number of weeks later and left the Department of Transport.
So at that time I looked for individuals within the federal government who could do that. I was looking preferably for a deputy minister who was leaving as a final assignment, or one who might already be working in our centre, for example, you know, who would be on a preretirement assignment of some kind, or an associate deputy minister. And this did not turn up positive result. Those that I would have been interested in were not capable or interested in doing this. And it is then that I turned to the outside and we're looking for - I was looking for the same kind of qualifications. It had to be somebody who knew the federal public service fairly well and had recently been in a senior position and who still, you know, knew all the key players and therefore could work with them instantly. And this is how Mr. Broadbent was asked to join and become the second chief negotiator.
Senator LeBreton: Just a supplementary?
Senator Kirby: Sure.
Senator LeBreton: When did he retire as a senior deputy minister in the public service. Do you recall?
Ms Labelle: In the year before.
Senator LeBreton: Just within the year?
Ms Labelle: Yes.
Senator LeBreton: Okay. Thank you.
Senator Kirby: That sounds about right to me but I don't remember.
Senator LeBreton: I don't remember either.
Senator Kirby: Just to finish off on the issue of why you didn't stay within the department since you'd gone to within the department in the first place, why did you not go to Mr. Barbeau?
Ms Labelle: Because, well, number one, he had already identified the fact that it should be someone else. He had already recommended to me prior to the start of the negotiations that we should hire - that we should bring someone who would be a senior officer and who would do, you know, the negotiations on a full-time basis. But secondly, in discussions that I had had with my minister of the day, he, you know, had conveyed the fact that perceptions were out there that Mr. Barbeau would not-
Senator Kirby: Your minister had conveyed that impression?
Ms Labelle: Pardon?
Senator Kirby: Your minister had conveyed that impression?
Ms Labelle: Yes. And therefore felt - His view was that therefore it would probably not be in the best interest if we asked Mr. Barbeau. But, as I said, Mr. Barbeau was the first one to point out that we should go to someone else.
Senator Kirby: So you hired - you made the decision unilaterally to choose Mr. Barbeau, or was it cleared with the PCO?
Ms Labelle: Yes. I consulted with my minister. I consulted with my clerk of the Privy Council at that time, Glen Shortliffe. And I had consulted with many colleagues for assistance in identifying someone. The time was very short. I had not expected Ran Quail to leave at that point, so I had to try to find someone in a matter of a few weeks, preferably days. It took me a few weeks.
Senator Kirby: Who did Mr. Broadbent report to?
Ms Labelle: To me.
Senator Kirby: Directly?
Ms Labelle: Yes.
Senator Kirby: Does that mean he didn't - And I presumed he was reporting to you, but does that mean that he was not simultaneously reporting to the PCO? I mean, that I presumed he was reporting to you and if information went to Langevin Block, either side of the Langevin Block, it went from you, is that correct?
Ms Labelle: It went from me, although we had an understanding that he would keep a number of people informed, especially PCO Treasury Board, because he would have very often to test ideas. He was keeping me in the picture on a day-to-day basis but there were times that, indeed, he was communicating directly but kept me informed about - at least that is the understanding that I had with him that he would keep me informed about his discussions with others outside of transport.
The Chairman: No tension between you and Mr. Broadbent?
Ms Labelle: No. Mr. Broadbent was taking a lot of space trying to fill his job but certainly he was doing his best, I think, at that time to complete his assignment.
The Chairman: Who recommended Mr. Broadbent to you as chief negotiator?
Ms Labelle: During that period I spoke to a number of colleagues. His name would have been raised by a number of people.
The Chairman: Was it raised by Mr. Barbeau?
Ms Labelle: No.
The Chairman: Okay.
Ms Labelle: Although I discussed with Mr. Barbeau before I hired Mr. Broadbent and, you know, we - I think he agreed with me that at that time Mr. Broadbent seemed like a reasonable person to have.
Senator Kirby: Just in response to the chairman's comment, you said that you worked smoothly or closely.
Ms Labelle: Closely.
Senator Kirby: You worked closely but also well - smoothly, I thought was the word you said - with Mr. Broadbent. But there's a little bit of inconsistency in my mind between that and your comment earlier that he often wanted things done faster than you felt was - I'm not sure reasonable - than you honestly felt you could deliver. Did that element of it create a tension between the two of you?
Ms Labelle: It did not create tension but it certainly, you know, we had a number of discussions about these things over the course of the months that he was the chief negotiator.
Senator Kirby: Were his demands, in your opinion, were his demands reasonable or unreasonable in terms of the time pressure he was putting on to get things done?
Ms Labelle: Well when we could not meet, you know, his demands - when, in a sense, they were unreasonable for what we were capable of producing then, of course, I indicated it to him and indicated that we would find the best way to bring to him the information that he needed or the analysis that he needed.
Senator Kirby: But the way - your phraseology of that makes me - creates the impression in my mind that he was not very happy when you didn't meet. You were unable - I don't mean you personally, I mean the department, your staff, was unable to meet his demands, even if they were unreasonable.
Ms Labelle: I think when I would inform Mr. Broadbent of what it was that we could do, he would express his frustration if he was frustrated and otherwise would express his understanding if he understood and just went on and continued his work.
Senator Kirby: Okay. Several times today - and this is just curiosity from someone who was in the PCO for quite a while - several times today you've talked about the frequency with which you kept the PCO informed of what was going on. That's kind of unusual in this sort of a contract negotiation. I mean it's not that they wouldn't be updated periodically but the impression that I get from you is that they were very, very much on top of this file - perhaps almost as much as you were. Am I right in that perception and, if so, can you shed any light as to why that was the case?
Ms Labelle: I think the PCO at that time kept a very close brief on all the major files. This was one of the major files and, therefore, you know, they were, they kept informed of what was happening. This was also a file where there were frequent discussions with cabinet ministers and in that case, of course, PCO would be involved on that as well. So that, yes, PCO was kept in the picture, was informed. They kept themselves informed as well of the evolution of this file. It was not outstandingly different at that time in the history of the government than the number - than the way that PCO was behaving in terms of keeping on top of all the big files that ministers had to deal with.
Senator Kirby: So in other words, their practice was to keep a tight level, a high level of involvement type control over major issues?
Ms Labelle: Yes.
Senator Kirby: Just as a matter of curiosity, do you have any idea why the modernization of two airport terminals became such a major issue? Any government I've ever been with in the last year before an election was concerned about a heck of a lot of things but the modernization of two air buildings doesn't kind of grab you as the sort of thing they'd really focus on.
Senator LeBreton: Jobs, jobs and money.
Ms Labelle: Well, I guess this was a file that had been outstanding in their mind for a number of years. I think Senator LeBreton raised a number of jobs. This was not a huge number of jobs but they were jobs and at that time the recession was hurting.
Senator LeBreton: The taxpayer's money.
Ms Labelle: So these were some of the reasons that,you know, that were raised. However, I think that's one question I'm sure you'll want to ask others.
Senator Kirby: Have no fear, we will.
Just one question on the desire to get it done. A lot of the documents we've seen have various dates in them but clearly there was a target date of on or about May 31 or June 1. That was the thrust -
Ms Labelle: This is certainly the outside date.
Senator Kirby: What was the significance of that date? Do you have any idea why that date took on such importance in the minds of a number of people?
Senator LeBreton: I think the date was earlier a number of times and then eventually became that particular point. There was certainly a leadership convention at that time. There could be changes in players, including ministers. So, my sense is that people just wanted to see this completed before the next, you know.
Senator Kirby: Before the next what?
Ms Labelle: Well, before the summer took on and where there would be a new Prime Minister.
Senator Kirby: I thought you answered that last piece pretty skilfully.
Can I ask you a question about the end of Mr. Broadbent's term?
Ms Labelle: Yes.
Senator Kirby: I'm just guessing; I don't know how he was hired, but I assume that he was hired on a term contract like we normally would with someone in that position. By the way, when did the term expire? 'Cause he kind of left and then you brought in Bill Rowat. That's sort of odd. Was he at the end of his contract?
Ms Labelle: Yes. Mr. Broadbent was hired for a term contract which was to end in mid-June. And perhaps I can clarify one of the statements in Mr. Broadbent's statement to senators. When it became evident to me that we were likely going to be slipping beyond mid-June, I spoke to Mr. Broadbent and asked whether he would consider an extension of his contract if invited to do so. At that time, he indicated to me that he had other plans for the summer and although was non-committal, was not enthusiastic about pursuing this option. So that as the days went by and I was informed that there would be a new associate deputy minister coming to transport, someone who in PCO had been following the file - he was the senior officer looking after I think the operation side of government. Certainly our department was one that we were working through him in PCO. So he was someone who knew the file well and at that time so that in the last days Mr. Broadbent was not invited to renew his contract by myself, with the concurrence of the minister.
Senator Kirby: And the fact -
Ms Labelle: Because we had someone who was coming to us who already had a good knowledge of the file; who would be, you know, in transport working as associate deputy minister. And that added to the fact that Mr. Broadbent had indicated to me earlier his lack of enthusiasm for continuing, that was a number of weeks before, because of other plans that he had for the summer, made that decision rather easy.
The Chairman: It wasn't a case of him quitting or him being fired, it just was a mutual "fed-upness".
Ms Labelle: Well, I think it was a number of circumstances coming together and the fact that Mr. Rowat was appointed as associate deputy minister I think, and coming to transport with already a good knowledge of the file, I think made it easy for me to advise that this is the course of action that we should follow. And at the same time - so Mr. Broadbent at the end, in the last days, was not invited to have his contract extended, but I think it also met with his - the fact that he was lukewarm a number of weeks before that since, you know, he indicated to me that he had other plans for the summer.
Senator Kirby: In the course of the negotiations, obviously there is a give and take - at least there's normally a give and take on both sides and a number of things that occurred in the course of the negotiations, a passenger diversion clause was introduced, there was an early start option, there was a rent deferral, there were a lot of things that were on the table in the negotiations, many of which, looking in retrospect, you can get the impression the government - I was going to say "lost" - conceded something to the other side in order to move the negotiations along.
Senator Tkachuk: How did we get that, Senator Kirby?
Senator Kirby: Just look at the contract.
Senator Tkachuk: Well, what evidence do you have that we conceded something to the other side that we weren't planning to concede to the other side?
Senator Kirby: Oh, well, I don't know. Sorry, I have no idea what we were planning to concede.
Senator Tkachuk: No, if we're going to debate these issues, let's debate them in the Senate. But if we're going to ask questions, then -
Senator Kirby: Okay. Then let me make my question absolutely factual, 'cause I'm only interested in a process question. I'm not interested in the substantive issue here.
Senator LeBreton: He's looking for a media spin.
Senator Tkachuk: We can all make speeches, you know.
Senator Kirby: I wasn't making a speech. I can't possibly make a speech in a minute. It's just not possible for me.
Senator Tkachuk: You were reading things into it, Senator Kirby. I had made up my mind after last week with this thing - and I'm sorry for disturbing this, chairman, but if we're going to be making assumptions without - we've got enough assumptions without facts here. Let's just keep to the facts and then if we're going to make assumptions, let's say they are.
Senator Kirby: Then let me ask a very simple question. In the course of negotiations there are inevitably changes made to an initial proposal. We'll deal with what the specific ones are when other people are here. My question is - I'm just trying to understand the process. A negotiator goes out, reaches - you know, there are proposals on the table from both sides. What was the approval process? Like, did Mr. Broadbent have the authority to kind of make concessions or get concessions from the other side - just to make Senator Tkachuk happy or -
Senator Tkachuk: I'm always happy, senator.
Senator Kirby: Or was he required to come back and seek approval and, if so, can you tell me precisely what the approval process was?
Ms Labelle: He was required to seek approval because at the end, you know, whatever was in the contract, had to be approved, including up to Treasury Board. And, therefore, it would have been quite useless for him to come up with proposals and agree to proposals which would not have been accepted by those at the end.
Senator Kirby: Right.
Ms Labelle: We would have had to recommend to Treasury Board the content of the agreement. So, on a day-to-day basis, he would check with me on some of the discussion that was taking place. I had an intradepartmental committee where I mentioned before I had there the vice-president of personnel of finance and administration, our lawyer, our senior lawyer, our head of the aviation group, because there were some safety questions we had to be concerned about, and periodically invited PCO, finance and Treasury Board. Similarly, when we dealt with some of the much bigger issues at that time, you know - and periodically we would have an information session where the clerk of the Privy Council would be present along with the head of - the secretary to the Treasury Board and sometimes a senior officer in finance to review progress, review major issues, review where we were going on these. Simultaneously, we had regular briefing with our minister on all the key areas that we were debating with the company, with Pearson development. And so that there were sort of the three tracks that were working simultaneously. One intra, intratransport with the corporate other departments and also, of course, with the minister on a regular basis.
Senator Kirby: Mr. Chairman, I only have about another ten minutes but I think we've got to break anyway; we're going to adjourn and I would just like to pick up when I come back, but I don't have much more left.
The Chairman: A couple of comments. When we started this three weeks ago, I mentioned at the outset of the remarks that Senator Kirby and I had agreed that we were not going to be unnecessarily acrimonious. That's not to say that we weren't going to be adversarial at times. So, we should understand that.
Senator Kirby: I think we've owe honoured that, have we not?
The Chairman: Yes, I think we have. Madam Labelle, is it convenient for you to joint us again at 7:00 o'clock?
Ms Labelle: Of course. I'm pleased to be here..
The Chairman: All right. We will adjourn until that time.
The committee adjourned until 7:00 o'clock.
Ottawa, Tuesday, August 1, 1995
The Special Senate Committee on the Pearson Airport Agreements met this day at 7:00 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.
A couple of announcements. We have now received the testimony of Mr. Broadbent in both official languages. And is it your wish that it be distributed tonight?
Senator Kirby: Yes, Mr. Chairman, I think that's a good idea.
The Chairman: Thank you.
Now, following the continuing testimony of Madam Labelle, we will hear from Mr. Hession. And it may be necessary, if it is so wished, that Mr. Hession would continue tomorrow. So, if it is the wish of the committee, I would like to save the extra half-hour. Is it the wish to meet at 9 tomorrow morning?
Senator Kirby: We would be happy to do that, Mr. Chairman. Let's just agree that we're going to start at 9 o'clock tomorrow morning.
The Chairman: Now, when we adjourned, Senator Kirby was questioning, and then I had Senator Tkachuk and Senator Jessiman.
Welcome again, Madam.
Senator Kirby: Thank you. I should tell you, there is something difficult about being the Tuesday witness. The only witnesses that have been held over for a second session have been those who have appeared on Tuesday. Maybe we have had too much time to get questions ready, right?
Thank you, Mr. Chairman. I just have three or four questions.
Can I get back to a response you made earlier to the issue of the creation of Mergeco? And the question I believe that was asked to you - I will paraphrase it, but the question essentially was, had you been involved or had you personally instigated the creation of Mergeco, and you said no.
Ms Labelle: No.
Senator Kirby: I believe that was what you said. To the best of your knowledge, did anyone in the government do anything to encourage the formation of Mergeco? That is to say, "anybody" being other people in the PCO or in the minister's office or anywhere else for that matter?
Ms Labelle: I was certainly not told that either, that the minister, for example, was involved in the creation of Mergeco. I had a call from the Clerk of the Privy Council around Christmastime indicating that, you know, it was likely that these two companies may come together, but that is the extent of my knowledge.
My next meeting or, rather, the next representation I had was from Paxport and Claridge who informed me in mid-January that they were in discussions.
Senator Kirby: So your information came from the Clerk -
Ms Labelle: Just that this would - that there was a possibility that the two companies might be getting together. So I think, you know, you may want to ask him where he got his information.
Senator Kirby: You don't know where he got the - okay, fine. We will certainly do that.
Can I move on then, just to sort of mop up on a couple of issues that came up earlier. I think it was in response to a question from Senator Hervieux-Payette about the rumour that was rampant that an executive assistant or a former employee on the exempt staff of Mr. Jelinek had asked to be involved in the negotiations. And your response was that you had ruled that out because it was inappropriate. I think "inappropriate" was your word.
I really have a couple of questions. First of all, why would anyone on Mr. Jelinek's staff - he was in revenue at the time, am I correct?
Ms Labelle: Yes.
Senator Kirby: Why was he even remotely involved in the Pearson Airport question, since it clearly wasn't Transport, Finance, Treasury Board? What was his connection with the issue, do you know?
Ms Labelle: No.
Senator Kirby: Okay. Do you have any idea why a member of his staff would have contemplated the idea of wanting to be involved in the negotiations?
Ms Labelle: No. I was - when the negotiations started, in one of the first major round of negotiations, I was informed and people sought my advice as to whether there should be "outside people" taking part in the discussions, either from within government or from outside of government. And this person was identified as someone who was present and had indicated an interest in sitting in on the negotiations.
My decision at that time was that we should not have people who are part of - you know, who are not part of the negotiating team being present in negotiations as much as possible, unless they were special advisors like lawyers or accountants that both sides were bringing on board.
However, I understand from Mr. Nelligan, just before this meeting, that he had different information than the one that I was given at that time, and therefore, I think it should be clarified now, Mr. Chairman, with your - because when this happened, people came to me with that information. I understand that that information may not be completely accurate and, I think, if it is not, then it should be clarified at this time.
Senator Kirby: Since I, for one, am lost, Mr. Chairman, I am happy to have our counsel clarify the situation.
Mr. Nelligan: By coincidence - is it a Mr. Kozicz that you were thinking of?
Ms Labelle: Yes.
Senator Kirby: Greg Kozicz?
Ms Labelle: Yes.
Mr. Nelligan: By coincidence, Mr. Greg Kozicz was in the room this afternoon for the first time. I met him at the end of the proceedings. He doesn't seem to have come back.
But when he told me the situation, I asked him to give me a note on what the circumstances were, and he promised to do that at the end of the interval, but I guess they've had trouble finding a restaurant in the area.
But my understanding is that Mr. Kozicz never worked for Mr. Jelinek but did work for another minister of the government, but had been in private employ for some several months and was sent down as an observer by the Matthews Group, ostensibly because of his experience in government. But I was to get a memo on that and, when I get it, then we can either have Mr. Kozicz, or I can ask this witness what she knows about it.
Senator Kirby: That's fine. I was just trying to follow -
Mr. Nelligan: But I gather he was coming in on behalf of Matthews and was an employee of Matthews at the time and wanted to sit in as an observer. And obviously, Ms Labelle felt there was no place for observers.
Senator Kirby: Because he was not part of the negotiating team.
Mr. Nelligan: Yeah.
Senator Kirby: Just to get back on the deadline question for a minute, you said earlier that it was one of the major priorities of the government and, therefore, that was your explanation of the reason for the PCO being so closely involved.
And in response to a question - I think it might have been by Senator LeBreton, I'm not sure who asked the question - you were asked if you had ever been told by the Prime Minister that there was a deadline and this was important. Your answer was that you had never been instructed to meet a particular deadline by the Prime Minister. I understand your answer.
My question then, I guess, has nothing to do with the Prime Minister. It really has to do with the role of the PCO which I still find sort of odd in the way it was handled. Were you ever told by the PCO or, to be specific, the Clerk, for example, or by Mr. Rowat, who, I guess, was the key PCO official on this file, that there was a particular urgency to get this issue dealt with by the end of May or beginning of June?
Ms Labelle: I am trying to recollect, Mr. Chairman. I do not recollect a specific direction. I think there was just a sense from, you know, the various targets that had been established and then pushed back, that there was an urgency to complete the work on this file since it had started a long time before. But I was not instructed by PCO to, you know, end the negotiations at a particular point in time.
Senator Kirby: When you went to the ongoing briefings and the bringing up to date of the PCO, were PMO officials present, or was it strictly public servants?
Ms Labelle: No, they were not.
Senator Kirby: Strictly public servants.
Ms Labelle: Yes.
Senator Kirby: With respect to just two other minor issues, because they will come up in more detail over the next three or four witnesses, with respect to the Air Canada arrangement - that is to say, whether the guiding principles were in place and what the lease was, which appears to suddenly have - it sort of reappeared later on in the day.
In terms of your own - of the department's involvement in it, I guess I am sort of surprised that, in reading the various documents we have had over the last couple of weeks, that, at one point, the perception seemed to have been created that Air Canada had the guiding principles and the long-term lease. And then subsequently, there seemed to be a perception that Air Canada was, in fact, in favour of the Paxport agreement. And then, suddenly, as you start to move on in the negotiations, it appears that the Air Canada lease becomes a major stumbling block.
I guess I have difficulty coming to grips with the notion that a 40-year lease on the terminals - or at least with options that run to 40-years as a lease on the biggest, most important terminal in Canada, kind of, sort of, got forgotten along the way for a while? How did that ever happen? It is a very odd arrangement or an odd history.
Ms Labelle: As you know from the documentation, 1989 was when Mr. Shortliffe signed a letter to Air Canada saying, here are the guiding principles.
Senator Kirby: And just so we are clear, that was Mr. Shortliffe as Deputy Minister of Transport, not -
Ms Labelle: Deputy Minister of Transport.
Senator Kirby: Just, in fairness to him, we ought to identify the circumstances under which he did it.
Ms Labelle: Sending a letter to Air Canada indicating that the principles that were attached, you know, were principles that they had discussed and agreed to.
I think Transport Canada always took the position that the lease that they had with Air Canada was the official legal document that would be, you know, guiding any relationship with Air Canada in the future. And when it expired, then, of course, you negotiated another deal - another agreement but that, at that time, the guidelines would serve as guidance to the negotiation of the next agreement with Air Canada.
When, indeed, Air Canada and Paxport, I understand, were in discussions about being partners, or at least have an alliance in - up until, I think, the spring of 1991 - perhaps Mr. Hession will be able to clarify that better than I can, but based on correspondence that I saw - at that time, Air Canada decided to withdraw from the discussions that had been taking place with Paxport and, I think, informed Paxport accordingly.
Now, when we issued the RFP, you will remember that one of the important clauses in the RFP, on page 27, stated quite explicitly that there were - you know, the first sentence, just to remind ourselves, was that:
Air Canada's capital investments were made with the expectation that it would have the ability to enjoy the benefits of those investments over a reasonable and normal amortization period.
And so on. So that we thought it was important for any interested party to be able to know this, that Air Canada had put its own money in the - in Terminal 2, in the remodelling of Terminal 2, and should be able to have recognition for that financial, in one way or other.
It was in the spring of '93 that it came to my attention that the guidelines and a letter from Mr. Shortliffe, as deputy minister of transport, had not been put into the data room, per se.
I immediately re-looked at the RFP to ensure that what was there would have directed people to the fact that there was something special with Air Canada.
I also ascertained with Air Canada, by speaking to the president of Air Canada at that time, what he saw - you know, what he thought those guidelines meant, to have a sense of where Air Canada was coming from. And his sense or his comments to me was that this was a document that was still valid with Air Canada at this time and that would guide them in future discussions. And I immediately prepared a letter to Hollis Harris, the president of Air Canada, to deal with our discussion.
I also wrote to Jack Matthews who was the person from Paxport that we had been dealing with in the last few months, and to Peter Coughlin, the two seniors in the two firms that had come together, copying my correspondence and letting them know that I had done that.
Now, in looking back, we have to remember that we had a statement in the RFP that was quite explicit. Air Canada and Paxport had been working together earlier. And certainly, during the month of January, I think that Paxport and Air Canada had had some discussions. Whether they were satisfactory or not, you know, might be another question.
And at the same time, I had personally urged both the Mergeco group, as well as Air Canada senior officers, to come together since the beginning of the year, in a way, to enter into discussions, so that they could come forward, hopefully, with an agreement that would be suitable to both themselves.
Now, I think that, you know, there will be further testimony on that, and various parties will express their views as to how easy or difficult these discussions might have been. But this is really some of the background, senator, to that particular question.
Senator Kirby: As I hear you, you are saying that - the background is actually useful because the story has been a bit confusing.
Are you saying that, essentially, you told the two sides through your letters that it was up to them, between themselves, to deal with - between Mergeco, or Paxport early on, and Air Canada - to deal with lease issue, as opposed to the government getting involved in attempting to solve it?
Ms Labelle: From the beginning, our position was that we wanted the two parties to try to resolve that.
Eventually, at the time that I was leaving, this was becoming sufficiently difficult to do, to achieve, that, you know, I had decided, along with the officers working on the file, Mr. Broadbent was involved in that, that we would invite the two parties to come together and be present.
This happened immediately after I left, and Mr. Rowat was the person to do that.
Senator Kirby: Does that mean that the federal chief negotiator, whether it was Mr. Broadbent or Mr. Rowat -
Ms Labelle: Yes.
Senator Kirby: - got involved, essentially, in trying to - would you call it broker, arrange, get the two parties to agree, arbitrate - whatever word - I don't want to put words in anybody's mouth - to try to get the two sides together, as opposed to saying, "The RFP said that you had to settle with Air Canada. We're backing off." In fact, the federal negotiator got involved in trying to resolve that problem?
Ms Labelle: At the end, yes. Originally, no. For the period of the spring, we had hoped that the two parties would be able to come to an agreement and felt that it was better if that happened that way then if we got involved, since these are two parties that would be working together in the future.
Senator Kirby: Who made the decision for you to get involved?
Ms Labelle: It reached a stage where it seemed that there was a stalemate. And immediately before I left, I think it was basically a collective decision on the part of the chief negotiator, myself, and there might have been other people involved for all I know. But I think the purpose at that time was not to negotiate for, but the purpose - at least until the time that I left Transport was to try to see if we could play a role in bringing the two parties together and start working towards an agreement.
Senator Kirby: When you were down to that stage in the negotiations, was the Air Canada element, sort of, the final, major stumbling block?
Ms Labelle: No, but it was an important one.
Senator Kirby: What else was still out there at the time?
Ms Labelle: I think we were still completing the transfer documentation in terms of employees. I would have to refresh my memory, but I know that this was not the last issue at that time, in June.
Senator Kirby: You didn't come in because it was the last piece on the table, is what I'm saying.
Ms Labelle: No, but it was - no. But it was an important piece, however, and one that had been difficult to handle up until that time, it seemed, by the parties involved.
Senator Kirby: Thank you very much, Mr. Chairman.
Thank you, Madam Labelle.
The Chairman: Madam Labelle, I hope this is not too dramatic when I say this, kind of, strains credulity a bit.
Glen Shortliffe signed a letter which Air Canada believed was the beginning - or legal lease for a long period of time, and he did that in 1989. And as the deputy minister and the assistant deputy minister of airports, neither one of you became aware of this until April, you say, of '93?
Ms Labelle: I would just like to clarify, Mr. Chairman. I was aware of that letter in the previous, you know, about a year before, because one of the vice-presidents of Air Canada sent me correspondence to that effect, indicating that this had been - that he had a letter, an undertaking, from my predecessor, that - you know, to have these guidelines that they had agreed to together, be part of their future discussions.
What I was not I aware of until the spring was the fact that these documents had not been placed in the data room which was made available to the proponents who were putting in an RFP.
But this documentation was there. And I guess any reasonable persons would believe that, with all the discussions that there had been between Air Canada and Mergeco and, before that, Paxport, that that information would have probably been available to them as well. However, I wanted to make sure that it was conveyed officially to what had become, probably, by that time, the Pearson Development Corporation. That's why I did send that letter. And I wanted to clarify it further.
The Chairman: Yes. But that information was obviously not - it didn't form part, or the material part it should have, in the request for proposals.
Ms Labelle: The request for proposal statement on page 27 is a very important statement where it indicates very clearly that Air Canada - you know, that whoever - that proponents putting in proposals would have to keep in mind that Air Canada's capital investment in Terminal 2 would have to be considered and that Air Canada had expectation that it would have the ability to enjoy the benefits of those investments over a reasonable and normal amortization period. And there is more in the RFP about Air Canada that went out.
What was not in the data room was the letter from the then deputy minister of transport Glen Shortliffe, along with the guidelines. That part was not there. And when it came to my attention, I wanted to clarify what those guidelines meant to Air Canada. And once I did that, I made sure that I put this on paper and also wrote to Messrs Matthews and Coughlin informing them about that.
The Chairman: Senator Tkachuk?
Senator Tkachuk: Thank you, Chairman.
Madam Labelle, I just want to, as the Chairman says, plow the old ground. And I want to just make it really clear about the process itself. And so - I hope I don't bore the rest of the senators with this, but, you know, I read the papers and I'm trying to figure out the process from the papers, right? So maybe we're doing something wrong here. We are not making this real clear.
When the minister in 1990 announced that the policy paper, which was published in 1987, was going to have some reality to it, and that the government would look at leasing Terminals 1 and 2 to the private sector, you came on shortly thereafter.
Did you put someone in charge of the RFP process, the request for proposal?
Ms Labelle: Yes. What we did, at that time - you will remember, too, that when Mr. Lewis announced that, he indicated that this would follow; the RFP would be issued after the report of the environmental assessment panel for additional runways, you know, would be made public.
So, at that time, we, of course, concentrated and put a lot of our energy on that one to get this out of the way so that we could then proceed with the other steps.
Senator Tkachuk: One was not contingent on the other. My understanding from Mr. Lewis is they were parallel.
Ms Labelle: Yes. At that time what we did was we hired Price Waterhouse to start assisting us, working in developing the RFP. And, indeed, you know, staff started to work on that right at that time.
Senator Tkachuk: Who was in charge?
Ms Labelle: Victor Barbeau, as the assistant deputy minister of airports, would be the senior officer in the airport groups. But the team that started to work on that were some of the people that you have met: Mr. Wayne Power, who was at the airport, part of a group there responsible for the airport development.
Senator Tkachuk: But in the hierarchy of it all, the minister makes an announcement; the deputy minister says, "Gee, I better get moving on this stuff"; appoints someone in charge; and then that person in charge begins the RFP process.
Now, Mr. Barbeau, how long did it take him to put this together?
Ms Labelle: See, one of the things that we were - it was a process that continued over a period of time because there were decisions that were needed in order to complete the development of the RFP.
For example, if we were not going to have additional runways, the specifications were going to be quite different than if we were going to have runways.
So that there were a number of pieces that we were waiting to have the final results in order to be able to complete our work, and that was one example.
But there were two major pieces that were started right at that time; one was hiring Price Waterhouse to start working with us in developing the content of the RFP; the other one was also to get the valuation study done which was very important, to get an independent valuation of Terminals 1 and 2, because, you know, along the way, you needed to have something to measure the proposals against. So that, too, was taking place. So that, you know, there were a number of pieces being developed simultaneously at that time.
Senator Tkachuk: Lots of people were interested during this process, the two people who finally ended up being the major competition for the proposal. Was there anybody else in town at the time who was talking about the proposal as well and who was, maybe, interested?
Ms Labelle: During that period, the British Airways - airport authority consortium - and I'm sorry if I don't have their exact name, Mr. Chairman, were certainly one group who were very interested in getting involved with the redevelopment of Terminals 1 and 2. Paxport -
Senator Tkachuk: Was the British airport consortium in town?
Ms Labelle: Yes. They had an office in Toronto.
Senator Tkachuk: Did they come and visit you?
Ms Labelle: Yes.
Senator Tkachuk: What about - when was that?
Ms Labelle: This would be probably during 1991, late 1990, 1991.
Senator Tkachuk: So they knew about this all the way to London - news travels - that this was going to happen? No? They must have. Someone must have phoned them and said, "Hey, guess what, we've got an opportunity here. Let's go visit. Let's find out what's happening."
So here we are, announced in 1990, in the fall, and in 1991, shortly thereafter - I shouldn't say "shortly thereafter", because I ought to take my own advice.
In 1991, the British people are here looking at the possibility of making a proposal.
Now, we have had testimony here before, that one of the other people interested is a partner of Paxport which is AGRA Industries out of Saskatoon at the time and, now, unfortunately, Calgary. So we have all the way to England, and we have all the ways to the prairies - all the way to Saskatoon, for God's sake, you know, people know about this proposal. This is not a big secret.
Senator Kirby: By the way, Mr. Chairman, I have no difficulty at all with what my colleague is saying. I just can't resist pointing out that his current speech has gone on substantially longer than mine did when he commented earlier.
Senator Tkachuk: I am just trying to sum up here. I am just trying to make a point. I am doing my best.
Senator LeBreton: Try last Thursday.
Senator Kirby: I'm not complaining. I just thought I'd make the observation.
Senator Tkachuk: I'm just trying to catch up, Senator Kirby, that's all.
Senator Kirby: That will take a while.
Senator Tkachuk: I know, I know.
Mr. Barbeau is in charge of this thing now. He is putting this proposal together. He is consulting with you, I would think?
Ms Labelle: Yes.
Senator Tkachuk: Other people around the government?
Ms Labelle: Yes.
Senator Tkachuk: Justice?
Ms Labelle: Yes.
Senator Tkachuk: What other departments?
Ms Labelle: Justice, Treasury Board, Finance, Privy Council, you know, there were a number of departments, especially central agencies.
Senator Tkachuk: All over the place, trying to get this right.
Ms Labelle: Yes.
Senator Tkachuk: Then the request for proposal was ready about when?
Mr. Nelligan: The final request for proposal was ready at the time that it was issued. But there were - as I mentioned, this was a process that was following a number of other - or that accompanied a number of other files that were proceeding simultaneously which had an impact on the substance of the RFP.
So that along the way, various stages in development of the RFP was achieved, but it was ready to be put on the street at the time that it was. Once the government announced that it wanted to go ahead with an RFP, which was, I think, in February of 1992, around that time, we were out within a number of a few weeks - within a few weeks, with the request for proposal.
Senator Tkachuk: Now, did you expect Mr. Barbeau to have examined closely this request for proposal?
Ms Labelle: Yes.
Senator Tkachuk: Would you have been getting your advice from him?
Ms Labelle: When such a document is prepared, you have to remember that this is one that will go to the Treasury Board because we needed to have approval to proceed with the request for - with the RFP. So that there would be, within Transport, our finance department, our personnel department was involved, Justice representatives were involved on a day-to-day basis. Other specialists, engineers, were part of the team that had developed the RFP. And, of course, it eventually was considered by Treasury Board.
Senator Tkachuk: Let me do that one more time here. You would have expected, though, that he would have a close look at this, that he would have studied this. He would not have said, "Gee, what do you think, Mr. Lane? Looks good? Okay, I'm passing it on"? Or would you have expected him to say, "Thank you very much, Mr. Lane, I'm going to have a look at it"?
Ms Labelle: Well, I expect everyone to have a look at it that was involved. I certainly had a very close look at it myself, because I did not pass it on.
Senator Tkachuk: So you would have expected him to read it.
Ms Labelle: Yes.
Senator Tkachuk: Would he have known that the evaluation team set their own timeframe for evaluating the proposal?
Ms Labelle: I think the evaluation team - we asked the evaluation team what they thought was reasonable in order to be able -
Senator Tkachuk: Would he have known that?
Ms Labelle: I guess he would.
Senator Tkachuk: He would have known that the evaluation team set its own time limits for how long they would take to review the proposal?
Ms Labelle: The evaluation team, we asked them how long it would take them. They said, we think we can do it in this period of time. It made sense to us, and we said fine.
Senator Tkachuk: And Mr. Barbeau would have been part of that discussion -
Ms Labelle: Yes.
Senator Tkachuk: - and part of that meeting?
Ms Labelle: Yes.
Senator Tkachuk: So it would not be a big surprise to him that they were sweating away in Toronto -
Ms Labelle: No.
Senator Tkachuk: - working weekends, missing holidays and all that stuff. There is no big deal here? He would have known that they themselves decided that they would do that -
Ms Labelle: Yes.
Senator Tkachuk: - out of courtesy, good manners?
Ms Labelle: Yes.
Senator Tkachuk: Canadians, being good Canadian citizens?
Ms Labelle: Absolutely.
Senator Tkachuk: Very good. I want to clarify that because that is not the impression that I got during his testimony, and I just wanted to have your impression of that.
But now, we have the proposal out there, and we have the people competing, and we have been through all that ploughed ground, and finally the evaluation team. And it is all done and there is a recommendation comes forth. And it came forth from the evaluation team. Where would it go?
Ms Labelle: Once the evaluation team had completed their work and had really closed the file as far as they were concerned, they had done, from beginning to end, what they were asked to do, then I put together my intra-departmental committee to get a briefing from Mr. Lane on the result of their findings of how - again, went over how they had proceeded to make sure that it was in conformity with the original plan. And at that time, we - very shortly after that, I also met with Mr. L'Abbé who was with the Raymond, Chabot, Paré auditor who did the validation and monitoring of the process, to receive his report.
And at that point then, took both of these to the minister, and eventually went to cabinet with the final recommendation, which remained the same.
Senator Tkachuk: So what the evaluation team recommended was, went through the process, going through Mr. Barbeau, going to you, and you recommended, yes, this is what they said.
Ms Labelle: Yes.
Senator Tkachuk: Now, during this time, did you get calls from the minister's office saying, "Make sure that Tory gets it. Make sure that Conservative guy gets it", or what?
Ms Labelle: No, there was no interference from my office or from his office -
Senator Tkachuk: So no one was -
Ms Labelle: - in the process of reviewing the RFP.
Senator Tkachuk: They didn't ask you what the politics were of the other people who were partners?
Ms Labelle: No.
Senator Tkachuk: They didn't say, what's the president of Agra Industries, what's his politics? They didn't say that, did they?
I am asking you because this is very, very important. This all came about because of all of this. So I just want to make sure that people weren't all over you, you know, making sure that that Tory principal guy in the Paxport group was the guy who got the contract. That did not happen?
Ms Labelle: That did not happen. To me.
Senator Tkachuk: There are two problems - well, there is one particular problem. That airport thing bothers me, and it was brought up by the Chairman. When this came about, when you found out that the lease - that the Air Canada agreement that was made -
Senator Kirby: I'm sorry, you said "airport". You meant Air Canada. Okay.
Senator Tkachuk: Sorry. The Air Canada lease, did you have a talk with Mr. Barbeau about this? Who took responsibility for what I think is like - I shouldn't say - I'm going to take responsibility for what I say here, too. Who took responsibility for this?
Ms Labelle: Well, the people that were preparing the data that would go in the data room had a mass of information to put there. I mean, this was not a few piles of paper. It would not be unlike some of the documentation that you have been receiving in quantity. So there was, you know, a lot of files to look up, a lot of pieces to put in there.
And, you know, at the end, I think they made decisions about what they thought was needed, was essential, and - for example, all the leases were there of all the tenants, documentation about the airport itself, the various systems, the architecture, you know, various - the state of various aspects, whether it was security or otherwise, of the whole airport. So -
Senator Tkachuk: But this is a big deal. This is a contract that was very, very important. This lease or this agreement between Air Canada and Transport Canada became very important to the contract itself. These people are putting in numbers on false assumptions, financially false assumptions, which would have effect on their bottom line, would have effect on their revenue, would have effect on their construction. It would have effect on a lot of things. So that you call him on the carpet and say, "Mr. Barbeau, how did this happen?" Did you ask the question?
Ms Labelle: No. I certainly asked, you know, what - first of all, was the information missing; secondly, what had happened? But again, I have to return to the RFP which was quite explicit in indicating to anyone who wanted to make a proposal that Air Canada had an expectation of long-term amortization of the investment that they had made in the terminal.
So one would expect the proponents to, really, in looking at this, would want to find out a bit more about what that was at that time. So that it was not, you know, a black and white situation. There was a very strongly worded warning.
Senator Tkachuk: We're talking about Mr. Bronfman here; he didn't know. He didn't know. Not only did the winning proposal not know; the losing proposal didn't know. Nobody knew.
Ms Labelle: I guess my point is that the RFP was very clear that there was a downstream impact to the Air Canada investment. That is important to remember in this context.
Senator Tkachuk: Let us jump to December 7. The proposal is released and Paxport is the winner. Mr. Barbeau was put in charge of negotiating this thing now? Was he, like, the person in charge?
Ms Labelle: At that time, we were not - what we were seeking from Paxport was additional information on the financeability of their proposal, prior to entering into negotiations. So we were not in negotiations but primarily clarifying a number of issues that had been identified by ourselves. And we identified those issues to Paxport, but also, as you remember, the communiqué that went out, informing Canadians that Paxport had the best overall proposal, indicated that the first step would be determination of financeability prior to entering into negotiations.
So this is what was happening at that time, senator.
Senator Tkachuk: Okay, did the government, once they - what I'm trying to get at here - and I want to say this right so I don't get heck from Senator Kirby.
The government was very clear that the proposal that was won by Paxport was contingent on financeability, was it not?
Ms Labelle: Yes.
Senator Tkachuk: So this was no big surprise to anybody? No?
I only have a couple more questions and then we're done. This has been kind of fun. The letter -
When you turn 50, this is fun, right?
Ms Labelle: Then I've been having fun for a few years.
Senator Tkachuk: Did you get a letter from Mr. Bronfman saying, "I think the process was unfair that Paxport won"?
Ms Labelle: I did not get any letter from Mr. Bronfman.
Senator Tkachuk: Did people complain from Mr. Bronfman's company, that it was unfair?
Ms Labelle: I don't think that the firm - that Claridge, who were the other proponent, complained about the fairness of the system. I think that they would have preferred not to see the privatization at that time of Terminals 1 and 2 and the continuation of the status of that airport at that time. But, no, I did not get a letter.
Senator Tkachuk: Did you get a letter from the leader of the opposition, from Mr. Chrétien, saying, "Holy smokes, what has happened here? How did this take place?"
Ms Labelle: No.
Senator Tkachuk: Did you ever get a letter from him?
Ms Labelle: No. I don't get letters from leaders of the opposition.
Senator Tkachuk: So people at the time - there wasn't a lot of complaints at the time that this was a big problem, that your process was unfair.
Ms Labelle: I did not get any letters from anyone.
Senator Tkachuk: You didn't get any letters.
Ms Labelle: No.
Senator Tkachuk: Okay, I don't have any more questions. Sorry, I took so long. I didn't really mean to.
The Chairman: Madam Labelle, when you set up the evaluation team, you had to go to Treasury Board to get the money to finance it.
Ms Labelle: Yes.
The Chairman: How much money did you ask for and get?
Ms Labelle: I would have to double-check, Mr. Chairman, because I don't want to -
The Chairman: Would it be around $10 million?
Ms Labelle: No, I think it was less than that, but I would like to double-check and make sure that I provide you with the right information because there were, you know, a number of figures on different aspects that we - of this project. So that, I would like to double-check that and, for the record, provide it to you.
Senator Hervieux-Payette: Just to clarify the question, do you want to know the amount of money it cost for the evaluation process, or for the longer period? Just to make sure that we get the right -
The Chairman: No, no.
Ms Labelle: For the evaluation.
The Chairman: Yes. Madam Labelle would have to go to the Treasury Board to ask for money to set up and finance the evaluation team, just the evaluation team and its report.
Senator Hervieux-Payette: Okay.
The Chairman: Senator Jessiman and then Mr. Nelligan.
Senator Jessiman: Dr. Labelle, I may be repeating some of the things some of the people said, and I apologize for that.
I want you to know, though, that some of the main things that people are complaining about this particular transaction was, first, in this particular transaction, there were no expressions of interest sent out.
Second, on the request for proposals, we only had 90 days. There are some people say 90, some people say 95.
Third, the local airport authorities were not part of the process.
Fourth, there was influence of lobbyists.
Fifth, the signing of the contract on approximately October 7, 1993, was either illegal, immoral or contrary to some tradition.
I would like to deal with you only on the first four, because I do not think you are able - you may be able, but it is - October 7, '93, you are no longer there, and that is something that really is a constitutional question.
So let's deal with expressions of interest. In 1986, the minister then of Transport, Mr. Crosby, on September 11, '86, gave notice that they were going to have the private sector involved in Terminal 3. And we're told they did have expressions of interest.
And I understand, and you correct me if I am wrong, that, at that time, neither Transport Canada nor anyone in Transport Canada, nor anyone in the government, really knew who the players were, who the persons were who could build terminals of this size in Canada. Am I correct on that?
Ms Labelle: Yes.
Senator Jessiman: And when they did send out their expressions of interest, I'm told and evidence has been given here that about seven or eight people indicated that they might be interested. And I am also told that, in fact, there were really only four consortia that actually bid? Am I correct on that?
Ms Labelle: This was before my time, senator, but that's my understanding of the facts.
Senator Jessiman: Let me just tell you who those four were.
There was Bramalea-Ward Air, and we all know, or at least most of us know that Bramalea had some problems; Ward Air had some problems and are no longer with us; Cadillac Fairview was the head of another consortium; Falconstar, which was really the earlier Paxport. And then there was the Airport Development Corporation which was Huang and Danckzkay, but I understand the Bronfmans had an interest in it. And those were the four that actually bid. Am I correct on that?
Ms Labelle: That's what I understand.
Senator Jessiman: And that Huang and Danczkzay won the bid?
Ms Labelle: Hm-hmm.
Senator Jessiman: And at that time, the Bronfman Group were a minority interest in the Terminal 3 airport, and then, later, they became the majority factor because they bought Huang and Danczkzay out.
Now, following that, there was some indication that there was going to be some repairs done, or something at Terminal 1-Terminal 2. And we were told, to start with, or at least in reading Mr. Nixon's report, I was informed that there was one unsolicited offer, and that was by the Paxport group, where, in fact, there were really three unsolicited offers. Am I correct on that?
Ms Labelle: That's my understanding as well. It was in the summer before I arrived in Transport.
Senator Jessiman: And those three people, or those three companies, were the Paxport Group, Canadian Airports Limited and Airport Development Corporation. And those were three of the companies that were interested, that were able to do the job if they were granted it.
So when the announcement was made that they were actually going to go ahead - and then 17 months followed before they actually had requests for proposals - your department, Transport Canada, really knew who the players were? Is that not correct? I mean, you generally knew who was going to bid on this thing, who were able to bid on it?
Ms Labelle: We certainly knew who had, you know, identified themselves as being interested. We didn't know if there were going to be someone else, but I think we could assume that this was well known in the country because it had been announced that it would happen quite a long time before.
Senator Jessiman: Right. So it is not unreasonable, under those circumstances, to go - because, it is not always that you have expressions of interest. You know that because you have been in other departments. It is only when you don't know who the likely players are that you're going to say, "Who is going to bid on this?", so you ask for expressions of interest. But in a lot of cases, you don't ask for expressions of interest. Isn't that correct?
Ms Labelle: That's fair.
Senator Jessiman: And in this case, a decision was made. We know who they are. We're going to publicize it. We're going to tell everyone. They have 17 months since they made the announcement. And so you went for requests for proposals.
And now they complain about the 90 days. Is it not true that when they announced that it would be 90 days, that the minister did in fact say in the House of Commons - and have other people say to other persons, and I remember at one meeting, two weeks following, about 200 persons - that if there were some serious players out there that thought this was an unfair number of days, that they would give an extension of time?
Ms Labelle: Yes.
Senator Jessiman: That's correct. Thank you. Okay, another matter - maybe I didn't touch on this before. I will go back a little bit, because the third thing we talked about were the local airport authorities.
And I think your evidence was that, up until May of 1993, they hadn't gotten their act together, as far as you were concerned, and you left in June of '93. You weren't suggesting by that, that, although you said May, that they had gotten their act together in June?
Ms Labelle: No.
Senator Jessiman: And it wouldn't surprise you - and if you'd read the correspondence that I have, that you'd find that, by October of 1993, they still didn't have their act together. Do you understand that? Do you know that to be a fact? I can give you a letter to show you that, but do you know that as a fact?
Ms Labelle: I have not followed the file, senator, after I left Transport, but I will take your word for it.
Senator Jessiman: But it wouldn't surprise you. Because Mississauga, part of the municipality of Peel, never had agreed that - the airport in downtown Toronto had to be part of this, they were insisting upon it. And the federal government says, "Look, we don't control part of it. We can't have that as part of this." Isn't that correct?
Ms Labelle: Yes.
Senator Jessiman: Thank you. Now, we also had something about the environmental assessment, and there has been a lot of concern that the minister made a decision to not wait until he got the environmental assessment on the runways before he decided to do something about the terminals.
And his answer - and I thought it was a logical one - was, he said, we are going to run them parallel.
And do you know that the environmental assessment came through in November of '93? Did you know that?
Ms Labelle: I think that the environmental assessment was completed by the previous year, by '92, and I think -
Senator Jessiman: I will take your word for it.
Ms Labelle: I think it's just a year ahead of the one you said, senator.
Senator Jessiman: Fine, thank you. And the contract was awarded in December, right? I'm sorry, you're right, November of 1992, and the contract, the winner, was declared in December.
Ms Labelle: Yes.
Senator Jessiman: So if the minister had waited, as some were suggesting he should have waited, we'd have lost whatever time it took to get us to where we were. Is that not correct?
Ms Labelle: That is correct.
Senator Jessiman: Now, the request for proposals, I think you've explained earlier, did they have any outside help in drawing those?
Ms Labelle: Yes.
Senator Jessiman: Who were the outside people?
Ms Labelle: Price Waterhouse was involved in assisting in preparing the request for proposal.
Senator Jessiman: And also, the request for proposals also anticipated, did it not, that you might, notwithstanding you proceed with awarding a contract, that you could anticipate that a local airport authority may take over that contract because the government, under the request for proposals, had the right to assign the ground lease to a local airport authority. Is that correct?
Ms Labelle: Yes, in terms of, I think it is page 31 of the lease, of the RFP, we indicated that proponents should know that the local airport authority might eventually take over.
Senator Jessiman: Right.
Ms Labelle: Administration of the airport. The overall administration of the airport and lands.
Senator Jessiman: I just have two other matters. I know you've already said this, but I'd like you to say it again, if you don't mind, and I am sure you're going to say the same thing.
The question of lobbyists, Mr. Shortliffe was asked by Mr. Nelligan:
Mr. Nelligan: How were the lobbyists were handled, what was the protocol for lobbyists in the department; how far or did they have any influence?
His answer, and I'm asking you to answer after you hear this:
Mr. Shortliffe: They were listened to. They were received courteously, I trust, most of the time, unless they were persistent, overly persistent. Did they have any influence? I must say, sir, that I have watched over a number of years a lot of lobbyists get paid a lot of money and their actual influence on the way projects are developed, negotiated or decided upon is zip.
I don't know if that is a familiar word to you but "zip" means "zero" to me.
And that's my answer to your question.
Now, I ask you the same question.
Ms Labelle: There was no question that, while in Transport, as well as in other departments, there were a number of lobbyists representing different groups at different times who would call on me. I can only speak for myself; I can't speak for others.
Certainly, in my case, I took their phone calls, received them, listened to them, as Glen Shortliffe indicated. And at the end, they did not have an influence on how - the quality of my advice or how I would advise my ministers, whoever ministers may be.
Senator Jessiman: My last question has to do with that Air Canada lease and how it is expressed in the request for proposals.
Did you say that Mr. Barbeau was responsible to you in respect of the drawing of this, of the request for proposals?
Ms Labelle: Mr. Barbeau was responsible to me at that time for -
Senator Jessiman: And he is the one responsible for drawing this document?
Ms Labelle: He was responsible to make sure it was drawn.
Senator Jessiman: And you said that it was quite clear that, when we used these words, and I am going to read it just so we have it on the record again:
Air Canada's capital investments were made with the expectation that it would have the ability to enjoy the benefits of those investments over a reasonable and normal amortization period.
You stopped there. What this says - now, that says that Air Canada has some expectations. This is what you're holding out. This is what Mr. Barbeau was holding out:
Air Canada currently has a lease for the space which it occupies in Terminal 2. The term of this lease -
- and this is the important part -
- and options to renew will terminate in 1997.
Now, if they had a letter out there, and somebody in your department, if you're the one responsible, knew they had a letter that they were claiming gave them an extension by way of option, this statement that is expressed - it is not an expectation, it is a fact - will terminate in 1997.
You really did misrepresent to those persons that were trying to bid on this.
Ms Labelle: I think you have to look at the whole paragraph.
Senator Jessiman: All right, let's go further.
Ms Labelle: You have to keep in mind that first line.
Senator Jessiman: Tell me what else is said.
Ms Labelle: Just that first line again. Those two lines are operative. They are very important.
Senator Jessiman: But what Air Canada's expectations are is one thing. I can understand they have got some expectations. But you're holding out, at this time, to these bidders that the lease and the options to renew will terminate in 1997.
Now, I suggest to you, doctor, that anyone reading this really can't be expected to take those first two lines that you say I must read with it, and say, "Well, maybe they've got something that gives them an option to renew for another 40 years", or whatever it is.
I think it was unfair to those that were bidding. It may be unfortunate. I am certain it wasn't meant, but I think it was unfortunate.
Thank you, Mr. Chairman.
The Chairman: Mr. Nelligan?
Mr. Nelligan: Dr. Labelle, not to criticize Senator Kirby, who professed to suggest that civil servants didn't take an oath of office, I would call your attention and his to the provisions of the Public Service Employment Act, in which I think you had some activity. Section 23 says:
Every deputy head and employee shall, on appointment from outside the Public Service, take and subscribe the oath or solemn affirmation of allegiance and the...affirmation set out in Schedule III...
So are we agreed that you're all in this together.
Ms Labelle: I stand corrected.
Senator Kirby: I didn't know that either. I don't know that it has ever been applied.
Senator Tkachuk: Counsel, he was a deputy. How would he know?
Mr. Nelligan: Secondly, on the question of Mr. Jelinek's assistant. I have, senators, a statement here from Mr. Kozicz. And I suggest, rather than call him, I will read the statement and ask this witness to comment on it. It is very short. It reads as follows:
During Dr. Labelle's testimony, in answer to a question from senators, Dr. Labelle stated that a member of Minister Jelinek's staff had requested to participate on the negotiating team and that this request had been denied. Dr. Labelle went on to explain that she believed the individual was no longer with Mr. Jelinek's staff, at the time the request was made, but was, in fact, an employee of Paxport or the Matthews Group.
I was present during this testimony and would like to offer the following clarification since I believe that Dr. Labelle was referring to me. I was a Foreign Service Officer from 1986 to 1990 and subsequently a member of Federal Science Minister William C. Winegard's exempt staff, first as Executive Assistant and then as Chief of Staff. I was in Minister Winegard's office for approximately 3 years.
Upon leaving Minister Winegard's staff, in January 1993, I joined Matthews Group Ltd. in Toronto. In May of 1993, I was asked by my employer to assist the Pearson Development Corporation (Mergeco) in its negotiations with the government. This assignment lasted approximately four weeks.
I believe that my past employment, both as a public service and as a member of the exempt staff may have caused some confusion on the part of those negotiating on behalf of the government.
I wonder, Dr. Labelle, is there anything in that statement that you don't agree with, or do you have better facts than that?
Ms Labelle: Mr. Chairman, I would have to go definitely by the statement that was made by Mr. Kozicz himself. When I was informed, in 1993, of the situation, this is how the facts were presented to me, and I take it that we should go with the correction because obviously the individual should be able to better represent himself.
Mr. Nelligan: And I think Mr. Jelinek's staff would be a matter of public record that anybody can look at. I just wanted to clear that up. Fortunately, the witness was gratuitously in the room at that very time.
The next question is on the Air Canada lease, and I think I should alert you, Dr. Labelle, to the fact that it is possible that some witnesses will be here who may suggest that, while the matter remained quiet for a time, that the possible binding effect of that committing letter became known to the department sometime early in 1993.
I wonder if you can tell this committee when you first became aware that there may be a binding, rather than a non-binding, letter in force with Air Canada?
Ms Labelle: I was informed, I think it was in early April, end of March, early April, that the guiding principles and the letter from Mr. Shortliffe had not been placed into the data room.
Following that, what I did, as I mentioned before, was to, first of all, review the RFP to see what we had there; sought legal advice from our own people to try to determine the status as far as our own legal advisors of that document, because it seemed that there were different points of views as to the legality of guidelines; and as to the extent to which they could be considered binding on anyone.
So that, you know, it took a little while for that to be clarified.
And then I spoke to the president of Air Canada who asked me for a short - you know, a week or so, to review the file himself and come back to me. And when, in his views, he felt this was still a substantial document, this is when I decided to immediately put this on paper and sign a letter to him, followed by a letter to Messrs Matthews and Coughlin.
Mr. Nelligan: Yes, because it may be suggested that disclosure was made to Matthews and Coughlin on June 11. Would that be your recollection?
Ms Labelle: The official, yes, was made - certainly, the letter that I signed was at that time. But, I think, in looking back, Mr. Chairman, I think people will have to also keep in mind that Air Canada and one of the major proponents, Paxport, had been in discussions to come together the previous year; that Paxport had been in discussions with Air Canada during the winter, that is January, February, of that year, of 1993; and that indeed, Mergeco, the new company, had also had further discussions with Air Canada.
So, you know, to what extent was that piece of information not put on the table by Air Canada, I don't know, but I think a reasonable person would expect that some of that information would have become known during that period of time.
Mr. Nelligan: The next matter I'd like to raise with you is some references which have been found in the Nixon report and, in particular, at page 9, chapter 4, entitled, "The Politics of the Process". And under the heading of, "The Role of Patronage", there is a reference to certain persons.
First of all, did you ever have any dealings with Mr. Donald Matthews prior to the awarding of the - or rather, the announcement in December of '92?
Ms Labelle: No.
Mr. Nelligan: Did you ever have any dealings with him afterwards?
Ms Labelle: I met with him and Mr. Bronfman once in the presence of the chief negotiator at the time, and I think Mr. Coughlin was there as well.
I also, met, I think, once in my office, with Don Matthews at a later date, as we were, you know, advancing the state of the file during the negotiations. But the first time, to my recollection, that I met with Don Matthews was with Mr. Bronfman, and this was, I think, in February of 1993.
Mr. Nelligan: Are you aware of any role that Mr. Otto Jelinek played in the process?
Ms Labelle: Mr. Jelinek was, you know, a member of cabinet.
Mr. Nelligan: But did he take any part of which you are aware?
Ms Labelle: Other than member of cabinet?
Mr. Nelligan: Yes.
Ms Labelle: Not that I am aware of.
Mr. Nelligan: I will read you a sentence at a time. In the next paragraph Mr. Nixon says:
It is clear that the lobbyists played a prominent part in attempting to affect the decisions that were reached, going far beyond the acceptable concept of "consulting".
Can you make any comment on that, please, and tell us whether you made any observations in that regard?
Ms Labelle: I think that the observations that I made to Minister Nixon were very much in keeping with the discussion that we have had today. He would have been asking the same kinds of questions that senators asked.
Mr. Nelligan: Well then, in your experience as a deputy minister, were the exchanges you had with lobbyists in this matter, did they go beyond the acceptable concept of consulting, in your view?
Ms Labelle: No, the representations that I had from lobbyists during the time that I was Deputy Minister of Transport were regular, frequent, on their part, but it did not influence my - the kind of advice that I gave to my minister.
Mr. Nelligan: Then it says:
When senior bureaucrats involved in the negotiations with Government of Canada feel that their actions and decisions are being heavily affected by lobbyists, as occurred here...
Does that include you, as a senior bureaucrat?
Ms Labelle: As I mentioned, I did not feel that my actions or advice was influenced personally by lobbyists.
Mr. Nelligan: All right. Then he goes on to say:
...there was the perception that political staff were interested in this transaction to a highly unusual extent.
Was that your perception?
Ms Labelle: A lot of people were interested in this file, sir, and certainly political staff were interested in the file. A lot of people from outside of government were interested in the file as well; lobbyists were interested in the file, so, you know, this was a file that brought interest on the part of a lot of people.
Mr. Nelligan: Would you classify their interest as highly unusual?
Ms Labelle: There were certainly - I think if I look back on all the files that I have been responsible for in the many years that I have been a deputy minister, I would put the interest fairly high, but to say that it was unusual, I guess not.
Mr. Nelligan: Thank you.
And then it says:
...this climate of pressure resulted in several civil servants being re-assigned...
Were you aware of any civil servants being re-assigned because of the climate of pressure?
Ms Labelle: Certainly in Transport Canada, other than the case that we discussed today, I was not aware of public servants being - I would have been responsible for it, so I did not reassign other public servants, except to assign them to the file.
Mr. Nelligan: Yes.
Ms Labelle: Or to major files that were important at that time.
Mr. Nelligan:
...or requesting transfer from the project.
Did any of your staff request transfers from the project?
Ms Labelle: Not to my knowledge; not that it came to my level.
Mr. Nelligan: And you have already told us that you spoke with Mr. Nixon.
Ms Labelle: Yes, I did.
Mr. Nelligan: And told him what you told us today.
Ms Labelle: Yes.
Mr. Nelligan: Was there anything in addition to that that he might have asked you or that you might have told him?
Ms Labelle: Not to my recollection, counsel.
Mr. Nelligan: How long did you spend with Mr. Nixon?
Ms Labelle: I spent about 50 minutes at a first meeting and about 15 minutes at a second meeting.
Mr. Nelligan: Thank you very much. Those are all the questions I have, Mr. Chairman.
The Chairman: Thank you Dr. Labelle for being with us and for your forthcoming testimony.
Mr. Nelligan will introduce our next witness.
Mr. Nelligan: Senators, our next witness, Mr. Ray Hession, was at one time Deputy Minister, Supply and Services Canada, but was, more importantly from our point of view, the president of Paxport from its inception until early March, 1993. He is presently in business for himself as president of Hession, Neville & Associates. He, I believe, has a prepared statement. After he is sworn he has copies of it, I think, to distribute, and has some other documents.
(Raymond Hession, sworn:)
The Chairman: Will you proceed, Mr. Hession, please.
Mr. Raymond Hession, Hession, Neville & Associates: Yes, thank you Mr. Chairman. I know it has been a long day for senators, but a long day for some of us preparing for this event as well, I might say.
I believe, Mr. Chairman, I am the first speaker from what one might describe as the bitter side of this issue, you having heard over the course of the last several weeks from government officials, local airport authority representatives and the like. This is an introduction to my plea to senators and to you, Mr. Chairman, that I be given a little more time than you might otherwise like, and certainly than I might otherwise like, to make an opening statement, because I, like you, am anxious to get to your questions and equally am anxious to get to my answers to some of your questions.
So with that, Mr. Chairman, I beg your indulgence. I think I might be speaking for as long as 20, 25 minutes and I beg the indulgence of all senators.
As a matter of procedure, Mr. Chairman, I don't know what your wish is with respect to the distribution of copies of my opening remarks. Would you prefer I do that after or before?
The Chairman: We can take them now, please, if you have them.
Mr. Hession: I have them here, if the clerk would like to distribute them.
My remarks make reference to other documents, Mr. Chairman. My opening remarks make reference to other documents including, for example, the table of contents of the Paxport proposal. Perhaps the clerk would like to distribute those as well.
Similarly, Mr. Chairman - bear with me - my remarks also make reference to the members of the Paxport team; the companies and consultants that assisted us in our proposal. So that is, I think, material to my opening comments.
If all of the documents have been satisfactorily distributed, Mr. Chairman, may I begin with my remarks?
The Chairman: Yes, please.
Mr. Hession: Thank you. I am here this evening to help, like you, get at the truth, but also I am here to help clear the air of what I believe to be fallacious reviews, bureaucratic sandbagging and unwarranted defamatory attacks on responsible Canadian businessmen.
Up until the award to Paxport was announced on December 7, 1992, I had led its development and proposal team for almost three and a half years. After that date, my role became that of an advisor leading to the eventual termination of my contract.
Today, six year after Paxport's venture began, the obstacles to the growth and efficiency of Pearson airport remain. I believe that the public interest is best served by prompt action at Pearson given the long development process ahead before runway and terminal facilities will be adequate to support current and future demand. Mr. Chairman, in this regard I provided your committee with a copy of Transport Canada's Passenger Traffic Forecast as it was in 1992, and I believe the clerk had previously distributed that forecast.
Senators have noted the significant drop in traffic in 1991. In that year, passenger traffic dropped by about 2 million on an annual basis, from about 21 million to 19 million. Since 1991, as forecast, there has been a steady increase in traffic volumes. Notably, the Transport Canada forecast of 21,500,000 for 1995 - and again this was the forecast as in 1992 - may well this year be exceeded. We may well approach 22 million passengers at the airport this year. The point is that the forecast is more or less on track toward the 25 million to 26 million passengers forecasted for the 1999-2000 timeframe in which the now cancelled terminal development project's improved facilities would have been completed.
In other words, as the need for more efficient facilities grows with the inevitable rise in passenger traffic, these facilities would be in place in a timely way. The needs at Pearson, in the present circumstances, are not being satisfied in a timely way.
In this regard, Mr. Chairman, and again I beg your indulgence because what I am about to say I think senators have heard from others, but I want to put forthrightly the context in which I and my colleagues went forth in 1989.
The circumstances at that time included the following observations: First, the award by Transport Canada to a private consortium led by Huang & Danczky to develop the new Terminal 3 at Pearson had been announced based on a 60-year lease.
Second, the devolution of the management and control of the operations of Vancouver, Calgary, Edmonton and Montreal airports to not-for-profit local airport authorities was under way.
There was a gap of approximately $1.5 billion between the funds available to Transport Canada and those needed for capital improvements and maintenance for Canadian airports.
There was growing aviation demand at Pearson Airport, badly straining existing facilities, as you have heard from many other commentators.
There was deep concern at Air Canada that its competitive position in Terminal 2 and its growth plans would be eroded by Canadian Airline International's use of the new modern Terminal 3.
There was significant international interest from foreign airport operators, notably BAA plc, and it was being shown in Canada's airports with particular focus on Pearson International.
North American gateway capacity concerns were already leading to expansion planning in Pittsburgh, Detroit, Cleveland, Buffalo and Newark, as well as, I might add, Cincinnati, all of which are regional competitors of Pearson airport.
The Free Trade Agreement had recently been concluded, paving the way to what we now know as Open Skies.
And finally, most evidently, Terminal 1 was falling apart.
And so, on August 19, 1989, the Minister of Transport announced his plan to develop Pearson International Airport to what he called its optimum capacity. The minister's announcement set out a comprehensive strategy, including the potential development of additional runways and the modernization and redevelopment of Terminals 1 and 2.
In this same timeframe, unsolicited proposals from Huang & Danczky, under the name of Airport Development Corporation, and Air Canada were being presented; the former to expand its influence beyond the development and ownership of Terminal 3 to embrace Terminals 1 and 2 in the context of its own development master plan. Air Canada's several unsolicited proposal attempts were aimed at getting its Terminal 2 facilities upgraded urgently to compete with the new modern Terminal 3 and to cope with both current and anticipated aviation growth.
Paxport was not proposing the privatization of Pearson International. Paxport was proposing the redevelopment of Terminals 1 and 2 plain and simple, whether in cooperation with Transport Canada or in cooperation with the local airport authority.
Paxport's business goals also included the promotion of an industrial strategy. Counsel mentioned in his opening comments that I used to be the Deputy Minister of Supply and Services. I was also the Deputy Minister of Regional Industrial Expansion as well and had a particular interest in Canada's economic benefit in this context. That industrial strategy would position an indigenous Canadian airport development industry to compete internationally for the $55 billion international market expected in the decade of the nineties. In its proposal, Paxport had committed $50 million over a period of years to develop foreign airport projects for the long-term economic benefit of Canada. We were busy, and indeed I was in particular personally busy, including leading substantial Canadian trade missions to South America, Southeast Asia, Eastern Europe and the United States; activities, I am sorry to say, that stopped dead with the cancellation of the contract.
Paxport's process through this entire period was open and transparent. I advocated the private sector alternative for Pearson terminal development through face-to-face meetings with a host of public officials and private sector users over three years. In each case, I explained our approach and its benefits. I sought and received many constructive suggestions, all of which found their way into our winning plan.
In the year prior to the issuance of the request for proposals, active discussions had taken place with Transport Canada officials regarding the proposal call process. Should it be a two-stage process, a single-stage process, or something else? The Terminal 3 process, as senators know, had two stages; a pre-qualification stage and a bidding stage. The Terminal 1 and 2 process was a single stage because, I believe, the probable bidders had made themselves known to Transport Canada months and, in some cases, years in advance. The industry in Canada was nascent. By that I mean, Mr. Chairman, there is a very small, limited industrial base for airport development in this country. It is a nascent industry and was not expected to go beyond the known bidders at that time. There were an adequate number of potential bidders for a fair competition and public notice of the government's intentions, as has been noted, had been made more than a year earlier.
In any case, with very few exceptions, in all the years that I have been involved in contracting and procurement in the Government of Canada, government proposal calls rely on a single stage process and this one was appropriate in the circumstances.
I might add parenthetically, Mr. Chairman, that the process is completely, absolutely consistent with the government contract regulations.
I have noted the commentary from senators and witnesses regarding the length of time available to proponents to respond to the proposal call; namely, the initial 95 days that were eventually extended to nearly 120 days. The initial 95 days were certainly, undoubtedly, demanding. But, to characterize it as unfair or inappropriate, as some have done, is dead wrong and not consistent with an understanding of how these processes have operated year after year in public sector contracting, nor is it consistent with an appreciation - and I emphasize this, Mr. Chairman - an appreciation of how effectively the private sector in Canada can respond when it has to.
In any case, in the 95 days available to us, we marshalled a Canadian team of principals and consultants in one project office on Bloor Street in Toronto. That team, working days, nights and weekends, eventually submitted a 2000-page proposal that was deemed to be best overall. I provided senators with the table of contents of that proposal so that you can each get a better appreciation of its scope and the detailed attention paid in particular to the public interest. I and the others involved in this am very proud of the work of that team, Mr. Chairman, which, at its peak, numbered nearly 60 of the most talented people Canada's private sector could muster. This talent was drawn from some of Canada's leading companies. Again, Mr. Chairman, I provided you with a list of those companies so that your committee can judge for itself the high quality of the Paxport team.
If I may digress briefly, this evening, as I appeared here, I noted some of my former colleagues have come on their own volition. I didn't expect them to come. One person in particular, Mr. Allan Robinson, is with me. Mr. Robinson was the proposal administrator for our proposal. He did a magnificent job. He was a major factor in achieving the results we did in the 95 days available to us and I want to personally congratulate him once again for his enormous contribution.
Mr. Chairman, in developing our strategy, the passengers at Pearson Airport were foremost in our minds. We sought to satisfy their stated preferences discerned from opinion surveys we conducted right up to the point of proposal submission. These surveys were conducted on our behalf by Decima Research. We proposed a modern airport design and operation that would fulfil their stated expectations at a cost per passenger which was less than the very successful Terminal 3 and less than the average cost per passenger of the major airports on the North American continent. There was no plan to charge the kind of $10 fee per emplaning passenger that we see now in Vancouver.
In arriving at our $700 million investment strategy, we assessed the attributes of the best airports in the world and, indeed, entered into a formal exchange agreement with one of them; namely, Amsterdam Schiphol Airport. Schiphol, Mr. Chairman, is regularly ranked as the world's number one airport. That is what we wanted Pearson to become in North America.
In summary, Mr. Chairman, our proposal was based on the following logic: number one, to provide a return to Canadian taxpayers so that they would be better off than before. Number two, to provide the airlines with modern facilities at fair market rents so they could be competitive and efficient. Number three, to provide these modern, efficient facilities to passengers at a cost per passenger below the North American average. Number four, to achieve a reasonable and adequate return on investment for Paxport shareholders.
That, Mr. Chairman, is a fair summary in point form. Moreover, it is a model responsive to the recommendations of the Royal Commission on Passenger Transportation; the same user-pay recommendations that appear now to be driving the new government's transportation policies in all modes; air, land and sea.
Paxport's proposal was chosen as the best overall acceptable following exhaustive evaluation by a team of exports drawn from the public and private sectors numbering as many as 100 people, I understand, along the way, and also after a complete audit of the whole evaluation process by a reputable firm - reputable audit firm indeed - to assure the minister of its fairness, prudence and probity.
Last Thursday, the committee was told of initial management fees of 24 per cent, rising to 42 per cent in five years. They were characterized as "exorbitantly high". That assessment, Mr. Chairman, is badly mistaken. Paxport's management fees, which included those fees paid for the transfer of technology and knowhow from Schiphol Airport, were based on a formula of 3 per cent of revenue and 6 per cent of profit. Such a formula is akin to those that hotel management firms charge, for example. It includes an obvious incentive to control expenses and achieve adequate profits for the shareholders.
The Nixon report, in its appendix A, shows an overall 13.8 per cent rate of return and assumes, notably, Mr. Chairman, no profits on management fees for the first ten years of the project. Mr. Nixon says that the overall 13.8 per cent rate of return "could well be viewed as excessive" although it is quite consistent with "utility" rates of return and no knowledgeable people that I can find in the investment and banking communities agree with Mr. Nixon anyway.
So, we have Mr. Nixon and Ms Edlund making representations about management fees and profits that are dead wrong and misleading.
It gets worse, Mr. Chairman. Ms Edlund says Paxport relied on a public offering in 1996 to finance its project. There was no such reliance, Mr. Chairman. Ms Edlund says Paxport relied on the immediate renegotiation of all leases. That, Mr. Chairman, is absolutely false. The lease that had to be renegotiated immediately was the Air Canada lease, obviously, because the plan was to make major improvements to its space.
The quick and dirty Edlund report seems to ignore the built in safety of Paxport's financing plan, that is, new capital investment in terminal redevelopment was only made as passenger demand grew. This basic idea made Paxport's development phasing both prudent and realistic; not overly optimistic as Ms Edlund suggests. She also says that the cost to concessionaires would rise. In fact, Paxport proposed that minimum rents paid by concessionaires would fall.
Ms Edlund and Mr. Nixon have some things in common, Mr. Chairman. They were both given incomplete information and very little time to analyze and report. She took five days after a two-day crash course on airport operations and financing in Toronto by reviewing two massive proposals. Mr. Nixon took 30 days. It defies common sense and good judgment to believe that a deal this complex could be adequately and conclusively analyzed in the circumstances confronting them, even if they had had directly applicable experience.
The reports of the Transport Canada evaluation team, with the experienced, professional, impartial and apolitical resources it applied over the unconstrained period of the summer of 1992, should surely be relied upon rather than what I would characterize as the rush-to-judgment findings of Ms Edlund and Mr. Nixon. That rush-to-judgment inclination seems to persist as I observe some of the spin-doctoring coming out of this committee, Mr. Chairman.
The Transport Canada evaluation team did its job in the most ideal circumstances that one could reasonably expect. Nevertheless, the kind of equivocation I heard from the Assistant Deputy Minister, Airports in answers given this committee on whether or not the process was fair, defies logic and reason. The officials involved should all be proud of how they managed the proposal call and its evaluation. In my long experience in public sector buying and contracting, this process, up to the point of award in December of 1992, was not only fair; it was exemplary. It was after this date, however, that the bureaucratic sandbagging started. Early warning of the possibility of bureaucratic delaying tactics arose in exchanges between the Assistant Deputy Minister, Airports and the managing director of Amsterdam's Schiphol Airport. In the long run-up to the proposal call, at different times, Victor Barbeau opined to Karel Noordzy, the managing director of the airport, that he was seriously questioning the project. Mr. Noordzy expressed concern to me that Mr. Barbeau appeared to be opposed in principle to such a significant private sector role at Pearson Airport. Mr. Barbeau suggested that such a role should be left to local authorities.
Even though his minister was known to be moving in a different direction at Pearson, Mr. Barbeau said to the Standing Committee on Transport, on April 3 of 1990, and I quote:
...an awful lot of private businesses would very much like to take over Pearson. The answer to this in terms of the process in our policy is a very definite no. It is not in the cards. We turn those expressions of interest off very quickly.
The evaluation of the competing proposals was completed and ready for cabinet consideration, as I understand it, by October of 1992. Following the announcement of the award to Paxport on December 7 of 1992, Transport Canada headquarters decided that the post award contract negotiations would take place in Ottawa, not in Toronto. Indeed, the Pearson Airport personnel, who had done such a commendable job of managing the proposal call, sat on their hands for weeks while the Ottawa headquarters got up to speed. Eventually, they are relegated to a supporting staff role in the negotiations.
The agenda was unclear in the early weeks of the preparations for negotiations as Transport Canada appeared to struggle to get its act together and lay out a focused plan. It soon became apparent that the government's desire to move expeditiously to a negotiated deal was not shared by some of Transport Canada's senior officials. Let's look at two examples of their dilatory approach.
Following the announcement of the award to Paxport, after he had cancelled an earlier meeting, we finally met with the Assistant Deputy Minister, Airports on December 15 to discuss the conditions in the letter he had sent to me on December 7 advising of our success. The key condition, as senators know, related to assurances by Paxport that the project was financable.
When I asked him what evidence he needed beyond that contained in our proposal, he said he would not answer my question but rather would rely on a financial advisor to determine the adequacy of our response. Only then, at least two months after the completion of evaluations, was he proceeding to acquire the services of that financial advisor. It turned out that the advisor, Deloitte Touche, was appointed about one month later and naturally needed additional time thereafter to gain an understanding of this very complex file.
One would have expected, Mr. Chairman, in light of the priority the government attached to the project, that the financial advisor would have been ready to go coincident with the announcement of the award. At least eight weeks, in our opinion, were lost to this apparently calculated delaying tactic.
The second example, Mr. Chairman, was a shocker. It involved a 1989 agreement between the then Deputy Minister of Transport and Air Canada. This agreement, which was not disclosed by Transport Canada officials in the Pearson proposal call documentation, assured Air Canada of a 40-year lease extension and other benefits in consideration of Air Canada's investment in the improvements to Terminal 2 and other matters. These improvements occurred in 1990 and 1991. The preferred lease arrangements had a potentially significant and deleterious effect on the financial assumptions and offers made by Paxport.
Without disclosing the 1989 agreement, Transport Canada, for a period of three to four months, pressed us to resolve the future lease terms with Air Canada as a prerequisite to the formal start of negotiations. This gave Air Canada high expectations and an effective veto over the negotiations. The issue, known cynically within Transport Canada Airports Group as the "Air Canada sandwich", was finally resolved in June 1993 by the government agreeing to accept financial responsibility for its own actions in 1999 (sic). But the massive damage to the negotiating schedule had been done by this act of bad faith bargaining by some Transport Canada officials.
When the election of 1993 was called in September, I began getting calls and inquiries from friends in the media about Pearson. It was explained to me that the usual pre-election brown envelope avalanche was upon them, with much of it coming from disgruntled Transport Canada officials on the Pearson file. These are some of the same people, I presume, Mr. Chairman, who told Stevie Cameron that "Hession was having lunch with Shortliffe every day" during the negotiations.
Mr. Chairman, I have never had lunch with Glen Shortliffe, although I would certainly accept an invitation at any time.
In any case, the media representatives would read me excerpts from the representations of these unnamed sources. They were pieces of dated information, usually presented out of context. Issues resolved by negotiations in May were being presented as current in September and October, for example.
Concurrently, I began reading about the outrage of Toronto's local airport authority proponents - Bob Bandeen being their spokesman - outrage to the effect that they had been cut out of the Pearson negotiations. The reality was not that at all. The proposed Toronto local airport authority had its own problems in meeting the prerequisites applied to any other local airport authority proponent. It was simply ill prepared and unqualified. To this day, now 1995, $1 million later, with $5 million or $6 millions more to go, it has yet to show that it has the qualifications to manage the centre-piece of Canada's aviation system. But nevertheless, its representatives had been told time and time again that the deal negotiated by Transport Canada in the public interest would be assignable to the new local airport authority when it was eventually formalized.
Mr. Chairman, I conclude where I began six years ago. Pearson International needs major investment and improvement if it is to succeed in its central role in Canada's aviation system. Our collective energies should be focused now on making that happen in the public interest.
Ironically, however, the structure of a financing deal sponsored by the Greater Toronto Airports Authority will, I expect, end up as a more expensive version of the Pearson Development Corporation deal that the government quashed.
Mr. Chairman, thank you for your indulgence. I am ready for your questions.
The Chairman: Thank you Mr. Hession. Our lead questioner will be Senator Bryden.
Senator Bryden: Thank you, Mr. Chairman.
Before I start, even though the time is late, Mr. Hession, would you like to have a cup of coffee?
Mr. Hession: No, I am having a glass of water, thank you very much, senator.
Senator Bryden: When were you first engaged by the Matthews Company and then continued your engagement with Paxport?
Mr. Hession: December of 1988. I was engaged as a consultant at the time. And the second part of your question, senator?
Senator Bryden: And then continued with Paxport. At what time did it become Paxport?
Mr. Hession: Paxport, I believe, became a reality in June of 1989; May or June, but in that time frame.
Senator Bryden: You told the House of Commons Transport Committee that the reason you were engaged by them was because "the shareholders of Paxport believed I could help them be successful in acquiring the rights to develop and manage Terminal 1 and 2 at Pearson International Airport." That was your goal and that was your mission statement?
Mr. Hession: No.
Senator Bryden: No?
Mr. Hession: That was what I said to the Commons committee and that was true, what I said to the Commons committee, but our goal is what I explained in my opening remarks, included the pursuit of an industrial strategy aimed at the creation in Canada of an indigenous airport development industry that could access an enormous international market.
Senator Bryden: You also - and you may want to expand on this as well, told the Standing Committee on Transport how you would accomplish at least the getting of the contract for Paxport to develop T1 and T2, and I quote to you again, that you would do this through an intensive lobbying campaign:
...through face-to-face meetings with officials of Transport, Finance, Justice, Industry, International Trade, the Treasury Board and the Privy Council Office. I also met political staff at the Departments of Transport, Industry and Finance, the Treasury Board and the Deputy Prime Minister's office and the Prime Minister's office. As well, I met the ministers of the Crown, including the Ministers of Transport, Finance and Industry, the Treasury Board, and opposition Transport and Finance critics and members of Parliament.
That's an accurate quote.
Mr. Hession: Yes, I believe it is, although I don't have the statement in front of me. But let me just add if I may, senator, you asked me to expand on this. I said in my opening statement that Paxport's process was open and transparent, and I meant what I said. I met with every significant player on the issue of Canada's fiscal condition, its ability to finance its infrastructure, Transport Canada's ability to fulfil its obligations in not just Pearson but other airports, and all of the business leaders that I could find in Toronto who had an interest in seeing Pearson fixed so that the delays that were killing them in terms of their own productivity could somehow be ameliorated. I met the CEOs of every major employer in Toronto, some of whom, I am happy to say, wrote to the minister, as indeed you heard Mr. Lewis say, saying, "Yes, let's get on with it." That's what I was lobbying to achieve, senator.
Senator Bryden: To carry out that lobbying strategy, you couldn't do it all yourself so you engaged some lobbying assistants, among them being Mr. Bill Neville?
Mr. Hession: Yes.
Senator Bryden: Now, I would like to refer you to two or three documents, if we can. I wonder, in the interests of not having to move each document back and forth, if the clerk or assistant clerk or someone would just deliver - these are documents that had been provided to this committee by Mr. Hession.
The first document is a memo from Ray Hession dated July 12, 1990 to Don Matthews, Jack Matthews, Peter Goring, Trevor Carnahoff. And in it you report a meeting that you had with Glen Shortliffe where you deal with some, what I would say are pretty detailed criteria and so on in relation to the -
Mr. Nelligan: Excuse me, senator, can you identify the document so the reporters can look at it in the original, please. There should be a number on the page.
Senator Bryden: Is that 478? It is Mr. Hession's document. It's the documents that Mr. Hession provided to the committee.
Mr. Nelligan: I think they have been numbered.
Mr. Hession: Mr. Chairman, if I may, senator, with your indulgence, these are not documents that I provided to the committee. I frankly - I recognize the documents, but I don't know their origin, frankly.
Mr. Nelligan: I think they might have come from Justice, those particular ones, and they would have been in the Justice binders, but I believe there's a number on every page.
Senator Bryden: There is not a number. There is a number on every page. I have 478 in the top corner, but these documents were provided. It is my understanding that they are in the so-called library and I would ask the clerk if that's true, because I'm getting a little bit concerned that every time I refer to a document somebody says, "Mr. Bryden you can't use that document."
I can go through these as I would in court, take them one by one to Mr. Hession and get him to identify them, if that's the way that the chairman wants to do it.
Mr. Nelligan: This is only for the purpose of the reporter. If you can give the precise date, then the reporters will be able to see it after.
Senator Bryden: The precise date is July 12, 1990. It's from Ray Hession. The subject is Paxport update on LBPIA, and the mailing list is Don Matthews, Jack Matthews, Peter Goring, Trevor Carnahoff.
I would like to refer you to the middle of page 2. In your report to the Matthews, you state at the middle of page 2:
Bill Neville met with Warren Everson the day before yesterday.
Who was Warren Everson?
Mr. Hession: Let me check the date. I believe at that time he was the executive assistant to the Minister of State for Transport; Shirley Martin specifically. I think that's the case.
Senator Bryden: And then it says:
His report follows.
I wonder if you would read, for the record, since everyone does not have a copy of this, what you reported, starting with "I had a full debriefing..."
Mr. Hession: In fact it's Bill Neville's report that you're asking me to read, not my report. I'm just passing it through.
Senator Bryden: You're passing it on to your boss.
Mr. Hession: Exactly. You want me to begin with the quotation in particular?
Senator Bryden: Yes, please.
Mr. Hession:
I had a full debriefing yesterday -
Meaning July 10 -
- from Warren Everson re the situation post-last week's P and P -
Meaning Priorities and Planning -
- meeting.
Senator Bryden: Can I just stop you there, because we are not all familiar with the letters. What does P and P refer to?
Mr. Hession: Priorities and Planning.
Senator Bryden: And that's a committee of cabinet?
Mr. Hession: It is.
Senator Bryden: And Mr. Neville had given you a report that he had received a full debriefing from Mr. Everson who is an executive assistant to a minister.
Mr. Hession: Yeah, I think he was at that time.
Senator Bryden: Yes. And that was following the Priorities and Planning committee?
Mr. Hession: Yeah.
Senator Bryden: If you can't remember who the ministers were, what types of ministers would be included there?
Mr. Hession: Priorities and Planning?
Senator Bryden: Yes.
Mr. Hession: The tradition - and this was equally the case in the Mulroney government - was that the Priorities and Planning committee of cabinet was the senior committee of cabinet, hence senior ministers.
Senator Bryden: Is it normal for anyone to receive a debriefing from an executive assistant following a meeting of senior cabinet committee?
Mr. Hession: Your question is is it normal?
Senator Bryden: Yes.
Mr. Hession: A lot depends on the subject-matter I would say. Normalcy would cross the line if it was deemed cabinet secret discussion, but if it was general opinions and the drift of what went on in the meeting, that's not an unusual discussion to have.
Senator Bryden: Perhaps you would continue.
Mr. Hession: Sure.
Essentially, Lewis -
Meaning, I presume, Minister Lewis -
- has promised the Prime Minister he will be before Cabinet in September with specific recommendations on:
1) runway expansion;
2) short-term upgrades for Terminals 1 and 2 (the current $62 million Air Canada program plus some additions);
3) an "efficient" competition process to select a developer for full-scale redevelopment of 1 and 2.
Meaning, I take it, Terminals 1 and 2.
Senator Bryden: That sounds like a pretty specific debriefing to me. It doesn't sound like a debriefing that says, yes there was a meeting of a senior cabinet. Those are pretty specific things that came out of that meeting, or at least that Warren Everson claimed -
Mr. Hession: I understand where you're headed on this, senator, but I also think that the public record would show that these matters were already under discussion quite generally in the department and a whole lot of people were aware of this. It's almost, in a sense, incidental, although I never downplay the importance of cabinet meetings and cabinet committee meetings. But I don't find anything particularly earth shattering about these points.
Senator Bryden: It's not surprising that Mr. Neville would receive a debriefing about a P and P meeting?
Mr. Hession: Well, you're using language that I don't fully comprehend. If you mean surprising; I mean I'm not surprised to the extent that these conversations do occur.
Senator Bryden: I wonder if you would continue.
Mr. Hession: Sure.
Senator Bryden: Please, on the latter point, which is the efficient competition process.
Mr. Hession: Yes. Shall I carry on beyond that?
Senator Bryden: Yes.
Mr. Hession:
On the latter point, Everson described Lewis as "quite nervous" about any attempt to, in fact, jump over some form of competition to a unilateral decision even given Air Canada's role ("they are not, you know, any longer a 'chosen instrument' of the government) and the acknowledged advantages in terms of time and dollars of this course.
That is to say the course of, I presume, a unilateral decision vis-à-vis Air Canada's role.
Senator Bryden: And Mr. Neville's report to you of the executive assistant's debriefing to him continues with a - it says, "Everson lists the problems as including..." Would you read 1?
Mr. Hession: Sure. If I may, senator, just for the benefit of all senators, just again reflected on the date, and that last comment about this jumping over the competitive process, senators must bear in mind that Air Canada had, as a matter of days before this event, if my dates are correct, made a proposal to the minister respecting the upgrading of Terminal 2. They had an unsolicited proposal. So I can now, as I think you can, the relationship between that "being quite nervous" comment, in light of the urgency of Air Canada attached to this and having just made a proposal.
I shall read, if you like, the paragraph.
Senator Bryden: Yes, please.
Mr. Hession:
Everson lists the problems as including:
1. The fact that terminal redevelopment may have to be subject to some form of environmental assessment which in itself will slow down decision-making. He admits this is not a certainty: indeed some (including Glen Shortliffe) are arguing that EARP should be reserved for the Pearson "master plan" and not applied to the terminals per se.
Senator Bryden: If you would just continue with 2.
Mr. Hession: I hope senators aren't getting tired of my voice. I'm doing an awful lot of reading here. Shall I carry on then?
Senator Bryden: We got quite used to it in your 40-minute opening statement.
Mr. Hession: Yes. I do my best to accelerate things, as you probably noted in all the lobbying that I have done. Speechmaking isn't one of them, apparently.
Senator Bryden: The chairman will remind me that I do my best to slow witnesses down.
Mr. Hession: Very good, very good.
Senator Bryden: We are interested in the facts here and it doesn't matter how long you take.
Mr. Hession: Thank you. Item 2 then, senator?
Senator Bryden: Yes, please.
Mr. Hession:
2. The existence of internal analysis by MOT officials advising the Minister that, in their judgment, major expansion of T1 and 2 is not required before 1997.
Senator Bryden: Okay. And 3.
Mr. Hession:
A Coopers, Lybrand valuation that the current terminals are worth $1.6 billion and that valuation should be reflected in any privatization.
Senator Bryden: Why, in his debriefing about the policy and planning committee, would Warren Everson list these things as problems? Is it a problem that MOT officials believe that you don't need any expansion until 1997?
Mr. Hession: I don't see it as a problem personally, but the author of this apparently did.
Senator Bryden: The author of this was you, sir.
Mr. Hession: No it wasn't. No it wasn't. This is a report, as I understand it, from Mr. Neville in conversation with Mr. Everson, which I am simply passing through.
Senator Bryden: Which Mr. Neville - let's be clear - which Mr. Neville, who was hired by you as a lobbyists, and in his role of having been hired by you is reporting to you of his debriefing of an executive assistant to a minister on a policy, a senior cabinet committee meeting.
Mr. Hession: Yes. Although I think in this section, if I may, senator, this section that the list of problems is out of context vis-à-vis apparently what was discussed in the Priorities and Planning meeting. I think these are Everson's own points.
Senator Bryden: No, it is not.
Mr. Hession: Is that the way you interpret it?
Senator Bryden: I don't interpret it. It's written here and it's included in the quotes. Would you read -
Mr. Hession: You may be right.
Senator Bryden: Would you read number 4?
Mr. Hession: Number 4:
Heavy pressure from the other potential bidders, including increasing threats by BAA partners Bitove and Cogan that they might well launch legal action if they are denied a fair opportunity to compete.
Senator Bryden: Can I just ask if you could - we know who - I think all of us know who BAA partners are.
Mr. Hession: Yeah.
Senator Bryden: Who are Bitove and Cogan?
Mr. Hession: I'm not sure in absolute sense, but I suspect that's John Bitove, who has the food and beverage concessions in Terminals 1, 2 and 3, and I think Mr. Cogan is a developer - or was a developer at the time - in Toronto. And I do recall that these gentlemen were part of the BAA consortium, which I believe was called Canadian Airports Limited at the time.
Senator Bryden: Would you continue with the balance of number 4 then.
Mr. Hession:
Between now and September, Lewis is supposed to negotiate the key points with other interested Ministers - principally Mazankowski, Wilson, de Cotret and the PMO - and secure their support for the proposed cabinet package.
Senator Bryden: Thank you.
Would some of those ministers have been on the P and P committee?
Mr. Hession: Yes, they would all have been on the P and P committee; at least those three.
Senator Bryden: And Mr. Neville's report to you goes on:
Other points of interest from the conversation:
That is, his conversation with the executive assistant.
Mr. Hession: Yeah.
Senator Bryden: Once again, would you read number 1?
Mr. Hession:
1. Not unexpectedly, the BAA group is on the counter-offensive on the foreign membership issue. Their main line: The BAA interest in the group (25 percent) is no higher than the current foreign equity in Air Canada itself. (Obviously, it does not quite answer the point re operational control and the loss of potential Canadian capability to develop for-export, airport development expertise.)
Senator Bryden: If you want, for completeness, you may read 2, although it's not necessary for me, but perhaps you should -
Mr. Hession: I would be happy to do that for your colleagues.
Senator Bryden: - to make sure that no one thinks we're trying to leave anything out.
Mr. Hession: Yeah, sure.
2. While MOT obviously is aware of all the talk re CAL's problem in financing their T3 participation, MOT frankly does not believe a lot of it and at this stage does not believe CAL will walk away completely from T3. A more feasible option, in their view, is that CAL may slow down the pace of its move from 1 to 3 and continue to use 1 for a while for either domestic or international.
Senator Bryden: Yes. And then the memo continues with "Back on the central issue..."
Mr. Hession: Shall I?
Senator Bryden: Please.
Mr. Hession:
Back on the central issue, it is clear at this point that Lewis of his own accord is not prepared to move unilaterally to award development to PAXPORT/Air Canada. He will have to be pushed/ordered - which, I guess, begs the question whether that is a smart strategy even if it is doable. I have my doubts.
Senator Bryden: Can I just ask you; you been a long-term civil servant, you are perhaps one of the most knowledgeable people on the Hill, in quotes. In our system, cabinet system, who is in a position to either push or order a cabinet minister?
Mr. Hession: There's only one person who could do that.
Senator Bryden: Who's that?
Mr. Hession: That's the Prime Minister.
Senator Bryden: That would be Brian Mulroney, at this time?
Mr. Hession: Yes.
Senator Bryden: Would you continue, please?
Mr. Hession: Now the paragraph, "As to how"?
Senator Bryden: Yes.
Mr. Hession:
As to how an "efficient" competitive process might work, Everson says they are still interested in the CDIC model of overall once-removed management with MOT itself providing the support in policy issues and the manager able to tap non-government sources for support in vetting financial and legal options.
Senator Bryden: Just once again, I know what it means because I wrote it out and I left it on a yellow slip of paper. What does CDIC mean? Do you recall?
Mr. Hession: CDIC means the Canada Development and Investment Corporation.
Senator Bryden: Okay, thank you. Would you continue?
Mr. Hession: By the way, I see your colleague. There's another organization called CIDC. By the way, I think my colleague Bill Neville got them wrong. He meant the Canadian Development and Investment Corporation, but he wrote it as the Canada Deposit Insurance Corporation. I think that's just the acronym getting a little bit turned around. I can't imagine the Canadian Deposit Insurance Corporation having an interest in an airport.
Senator Kirby: That's what threw me when I first read it.
Senator Bryden: Would you continue? We haven't got much more.
Mr. Hession: I'm happy to.
When you try to pin him down -
I'm not sure who the "him" is here.
Senator Bryden: It's still a quote from Mr. Neville, so Mr. Neville is trying to pin down Mr. Everson -
Mr. Hession: I see, okay.
Senator Bryden: - who is the executive assistant to the minister.
Mr. Hession: Very good, very good.
When you try to pin him down on what "efficient" means, he admits that even if you can shortcut many of the hassles of the T3 process (e.g. frequent submissions to Treasury Board, document translation delays), you still are talking six months - RFP in the fall; decision by late winter/early spring of 1991.
Senator Bryden: Just to give you a break so you can have a drink of water -
Mr. Hession: Yeah, thanks.
Senator Bryden: - this memo is July 12, 1990, just to put -
Mr. Hession: The one we just reviewed.
Senator Bryden: Yeah, the one we're on, and we're not done yet.
Mr. Hession: Oh, are we not? All right.
Senator Bryden: There's only three paragraphs, so would you - there's one more on the page you're on.
Mr. Hession: Would you like me to complete the prior memo?
Senator Bryden: Yes, please.
Mr. Hession:
Our fundamental concern that appropriate timing and financial viability of development is best achieved through direct negotiation is still valid and will remain so up to the point of the cabinet decision in September 1990. That decision, in light of all of the facts -
Senator Bryden: Excuse me, I don't mean to interrupt, but would the cabinet have announced in advance that they would be making a decision in September of 1990?
Mr. Hession: Frankly I'd have to review the document, but that's improbable that they would make such an announcement.
...the cabinet decision in September 1990. That decision, in light of all of the facts (including the undesirability of foreign interests achieving control of terminal management at Pearson; the undesirability of monopolistic dominance of terminal operations by ADC; et cetera, as we have been arguing), could sway the cabinet to proceed with direct negotiation or accept a competitive process highly favourable to our cause.
We must, therefore, maintain the intensity of our efforts and, I believe, broaden their scope to include full cabinet and caucus.
Senator Bryden: What efforts are we talking about here?
Mr. Hession: I don't know, to be honest. I'm reading this faithfully.
Senator Bryden: Well, you wrote it.
Mr. Hession: I did. Again, I'm conveying the comments of Mr. Neville.
May I carry on?
Senator Bryden: Sure.
Mr. Hession: Yes.
We also need to sharpen our arguments with more facts and deal with the misconceptions currently influencing the Transport Minister (e.g., T1/T2 valuation of $1.6 billion).
On the question of the Air Canada/PAXPORT relationship, I believe that only one condition should govern. That is, if the government proceeds with a proposal call and it is explicit that the yield to the Crown is a major if not dominant factor in the decision, we should agree to deal with it jointly to win or discontinue the relationship.
Senator Bryden: You also hired another lobbyist to assist you; a person by the name of Andy Pascoe.
Mr. Hession: That is correct.
Senator Bryden: I refer you to - I think your notes are Tab 2.
Mr. Hession: I have a Tab B.
Senator Bryden: For counsel and the press's benefit, it's to Bill Neville.
Senator Jessiman: It's for the reporter that takes down the information, not the press.
Senator Bryden: Oh, I thought he was concerned about the interests of the press. I would easily provide copies to that lady.
It's to Bill Neville from Ray V. Hession; date, February 21, 1992; subject, Pearson RFP - Government Relations. There isn't a number.
Would you, without going through the whole thing, because I think this clearly is all -
Mr. Hession: No, no, I'm well familiar with this memorandum.
Senator Bryden: Would you please read the last sentence of the first paragraph?
Mr. Hession:
That organization chart shows you, Andy Pascoe, John Legate and Hugh Riopelle in the government relations box.
Senator Bryden: Okay. And would you please read paragraph 3?
Mr. Hession:
3. Andy Pascoe will deal strictly with the Province of Ontario and the Metro Toronto municipalities.
Senator Bryden: Would you tell the committee what Andy Pascoe was to do?
Mr. Hession: Yes, I'd be happy to do that. My purpose was to brief, personally, every mayor, every economic development commissioner, every chairman of the regions that make up Metro, including the Metro chairman, and the airport task force which was struck by then mayor of Toronto, and I did so, and he organized it for me.
Senator Bryden: What was Andy - let me turn it this way because it will be quicker: Mr. Pascoe was a former member of Minister Doug Lewis's staff, isn't that correct?
Mr. Hession: That is true.
Senator Bryden: And less than a year before you hired him, Mr. Pascoe was deeply involved in the issues of T1 and T2 from the government side.
Mr. Hession: That is also true.
Senator Bryden: And we can refer to the documents to support it, but you can recall this - and indeed represented the minister at an important meeting held on April 15th with Transport officials where you were lobbying for Paxport's case.
Mr. Hession: April 15th of what year, senator?
Senator Bryden: April the 15th of 1991. I would refer you to item C.
Mr. Hession: Yes, I remember that meeting. We're dealing here with February 21st, 1992, almost a year later.
Senator Bryden: But not a year later.
Mr. Hession: No, I agree, it's not quite a year later, I agree. It's ten months.
Senator Bryden: Would you, just for the record -
Mr. Hession: Yes.
Senator Bryden: - would you please read the first paragraph of this document dated April 16, 1991. That's number C, the one with the C tab on it.
Mr. Hession: Oh yes, thank you very much. The first paragraph?
Senator Bryden: Well, I have to do this for the reporters.
Mr. Hession: I understand.
Senator Bryden: April 16, 1991, to Don Matthews, Jack Matthews, Lorne Sinclair, Trevor Carnahoff from Ray Hession; Subject, Pearson International Airport.
Mr. Hession: Indeed, indeed. First paragraph:
On April 15, 1991, an important meeting was held with officials of Transport Canada. Representing the department were Gerry Berigan and Wayne Power. Andy Pascoe represented the Minister's office along with John Moore of Coopers, Lybrand who has been retained by the Minister to ensure the probity of the proposal call process.
Senator Bryden: Thank you.
Was there any concern by you that there might be a problem with the conflict of interest code here?
Mr. Hession: None, which is why I very explicitly, very deliberately, arranged for Andy's role to be focused solely on the province and solely on the municipalities. He had no - under my direct orders - no business with the federal government.
Senator Bryden: I would ask, Mr. Chairman, if counsel would please review the conflict of interest code and, in particular, article 59. And also, in light of that, whether it would be of use or help to this committee to have Mr. Pascoe appear before us.
Mr. Nelligan: I will check.
Senator Bryden: To save me coming back tomorrow, since we have this report before us, would you mind - if I have the right report - mind going to paragraph 4?
Mr. Hession: This is the April 16 memorandum, senator?
Senator Bryden: That's right.
Mr. Hession: Yes.
Senator Bryden: Would you please read that into the record, the one that refers to a key factor in the first -
Mr. Hession: Yes.
There is, however, some degree of continuing disagreement on a key factor. The Minister has linked the proposal call schedule for the terminal redevelopment to the completion of the environmental assessment of his proposal to add new runways at Pearson. Transport Canada believes that the environmental assessment report will be available to the Minister in October 1991 and that the proposal call would go out then.
Senator Bryden: Right. And the next paragraph deals with the possibility of an expression of interest/prequalification call and your response to that. Would you read that in, please?
Mr. Hession: Yes, happy to do so.
In the meantime, within the next 90 days, the department may issue an expression of interest/prequalification call. At the meeting, we declared that such a call was an unnecessary and a costly step in light of the existence of at least three qualified bidders adequate for a fair competition. Time will tell if our arguments prevail on this point.
Senator Bryden: Okay. And would you go to the next page? The next page deals with - I think you referred to them in your statement - the results of a Decima survey that showed -
Mr. Hession: Yes.
Senator Bryden: And I think you were quite adequate - I'm sorry, of course you were adequate in your statement.
Mr. Hession: Thank you, senator.
Senator Bryden: But I think your reference to the impact of those were adequately covered in your statement.
Mr. Hession: Yeah.
Senator Bryden: But under the heading of "Other matters discussed", down at the bottom of the page -
Mr. Hession: Yes, I have it.
Senator Bryden: If you go to page 2 -
Mr. Hession: Which is really page 3?
Senator Bryden: Which is really page 3, the second bullet -
Mr. Hession: Yes.
Senator Bryden: Would you please read that into the record for us?
Mr. Hession: Yes, senator.
The "contract definition" approach to the proposal call should be taken to give the Minister, his colleagues and the department maximum flexibility in resolving master plan issue with the chosen developer;
Senator Bryden: Can you explain to the committee, just in layman's terms, what the "contract definition" approach is?
Mr. Hession: Yes. It's a tried and true method of procurement in the Government of Canada, not often used, but used in those circumstances where there is a very limited source of supply for whatever the services, whatever the goods might be, and that the government, in cooperation with usually two, sometimes less, sometimes more, companies or consortia of companies, will call for the definition of a contract by the companies themselves. It's an opportunity for the government and the businesses to work more closely together to in effect create a capability. If, for example - and this was in your back yard, senator - this technique was used - this procurement technique was used for the frigate program, for example. There was a Montreal company and a Saint John company. There wasn't a shipbuilding capability for that kind of vessel in this country so a contract definition method was used.
Senator Bryden: I see.
Mr. Hession: Yeah. And in this case, as I pointed out, and I want to emphasize this, this is fundamental to my own thinking and the thinking of my company. There was not in Canada at the time, nor is there today, an indigenous airport development industry. We were trying to create one by virtue of the Pearson project. That's why this was recommended, senator, to get that flexibility.
Senator Bryden: That you were recommending that?
Mr. Hession: Yeah.
Senator Bryden: What you ended up with wasn't that.
Mr. Hession: That's correct, but what we did end up with was a proposal call that had an industrial regional benefits section in it which allowed the proponents to come forward with their best ideas about how one can take the Pearson project, turn it into a capability in Canada that we can then take to market internationally and go to market against the British airports, the Frankfurt airports, the Schiphol airports, et cetera, who are out there right now eating our lunch.
Senator Bryden: Would you please read bullet 3?
Mr. Hession: Bullet number 3?
Senator Bryden: I'm sorry, bullet number 5.
Mr. Hession:
Municipalities and prospective Local Airport Authority...candidates should be precluded from bidding;
Senator Bryden: Okay. And I just want to complete this. And would you read the last bullet, please?
Mr. Hession: Yes.
To protect the integrity of any future devolution of airport management to an LAA and to mollify the concerns of LAA proponents, Transport Canada should decide the trade-off between up front "lump sum" payments to the Crown and deriving value from down stream cash flow. The more value that is taken up front, the less that is available to a prospective LAA down stream.
Senator Bryden: Thank you very much.
Mr. Chairman, it is now 9:30, and since we have agreed to do this, it's a good place for me to stop, if I can continue tomorrow.
The Chairman: Yes. Mr. Hession, you will be available tomorrow at 9 a.m.? That's agreed?
Mr. Hession: Yes, Mr. Chairman.
The Chairman: We will adjourn.
The committee adjourned.