Proceedings of the Special Senate Committee on the
Pearson Airport Agreements
Evidence
Ottawa, Tuesday, August 22, 1995
[English]
The Special Senate Committee on the Pearson Airport Agreements met this day, at 3:00 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: Order, please.
I would like to welcome Senator Grafstein, who is substituting for Senator Gigantès, and also Senator Stewart, who is simply representing himself.
Colleagues, ladies and gentlemen, we begin week five of the testimony before this Senate examination. By the end of this week we may have passed the half-way point in these hearings.
Turning now to the week we have ahead of us, this afternoon we'll be hearing from representatives from the Treasury Board. Those who have been with us from the beginning will know that in our first week of hearings we heard from Treasury Board officials regarding general procedures and now we'll get down to specifics regarding the Pearson airport contracts.
This evening, Mr. Ran Quail joins us. He has a long history with Transport Canada and acted as the first negotiator after the December 7th announcement.
Tomorrow morning, Mr. John Simke of Price Waterhouse will fill in any details left over by Mr. Paul Stehelin of Deloitte & Touche. We remember that Price Waterhouse was involved in two different capacities in relation to Pearson. First, he was involved in the evaluation of the corporate opportunity and, secondly, the establishment and supervising of the evaluation process.
The committee will then deal with the lobbyists on this file. We're very interested in hearing of the possible influence exercised by this group in the performance of their contracts with the parties concerned in the development of the Pearson International Airport.
Now, as an aside, I am very gratified by the attention given to our committee - the committee hearings - due in large part to the live television coverage provided by the Canadian Parliamentary channel and replayed in full on the weekends. Because most viewers do not have access to the evidence which is provided daily to the media and to others, or through Internet by request, there have been questions to the committee members and staff to define or to elaborate on the meaning of certain phrases or terms which have arisen frequently in the past few weeks.
So, in response - and I hope I'm not boring present company in this room - I have prepared a brief glossary of those frequently used terms and phrases.
First of all - the best overall acceptable proposal. Now, there was five criteria used in the evaluation process. There was the evaluation of the proponent qualification, the management and operation plan, the transfer plan, the development plan and the business plan. Claridge was adjudged the best of one of these five criteria, the proponent qualification, and Paxport was adjudged the best on the following four.
Now, the evaluation team were unanimous in their point system and the way they operated, but I wanted to make it clear that the best overall acceptable proposal was not the awarding of the contract. That has come up time and time again and it's been a bit of a nuisance to the Chair because, rather than call a witness out of order, we have disagreements coming back and forth. But I would prefer now that we all accept the fact that the best overall acceptable proposal was not the awarding of the contract.
To quote Mr. Rowat:
The government, in all of its contracts, after declaring the best overall proposal, then outlines to them the pieces of that winning proposal that the government feels should be renegotiated, the largest pieces of it.
Mergeco and the Pearson Development Corporation - for all practical purposes, they mean the same thing. Mergeco is the term used when the two proponents, Paxport and Claridge, announced a partnership on the 1st of February, '93 and subsequently registered as the T1T2 Limited Partnership. Then it was agreed that a company known as the Pearson Development Corporation would be the managing general partner of each of the partnerships and its board of directors would act as a management committee in respect of the two partnerships.
Passenger diversion - this refers to the covenant established between the government and the Pearson consortium that Transport Canada would not divert any traffic within a 75 kilometre radius of Pearson airport to another facility unless the passenger stream at Pearson rose above 33 million - actually, 31.5, because they reserved the right to move 1.5 million people. Had the government chosen to divert traffic prior this level being reached, it would have been obliged to pay the consortium compensation.
Now, protected radius refers to the same thing, except that it's only applicable to the local airport authorities already established; Vancouver, Montreal, et cetera. They are prohibited from diverting passengers within a radius of 75 kilometres surrounding a local airport authority. It just differs slightly from the passenger diversion. This caused some confusion.
Rent deferral - this refers to the agreement whereby the government agreed to forgo on three years rent to the value of $11 million per year to be repaid over ten years at a rate of prime plus 2.5 per cent. The agreement was struck following the Crown's insistence on $96 million in capital expenditures during the initial stages of the development of Pearson.
Passenger facility charge - this is a head tax levied on people as they pass through an airport terminal. It's usually levied on embarking passengers. Vancouver is the only airport in Canada to charge a PFC - $5 for flights within the province, $10 for interprovincial flights, $15 for international flights. This is applied on top of the airline's rent.
Under the Pearson contract, no PFC was envisioned until year four. Thereafter it would increase in scale until year 10, where it would be at approximately equal to that charged at Terminal 3.
And of course, in connection with that we heard evidence to indicate that the rate charged to airlines should always keep in mind that they're in competition with other huge airports in the United States.
The Air Canada sandwich - this was a situation wherein Mergeco did not become aware until June '93 of the guiding principles and Air Canada's apparent long-term lease at Terminal 2. Upon discovery of this, negotiations between Mergeco, Air Canada and Transport Canada began to resolve the issue. The result was an agreement between Air Canada and Pearson Development Corporation recognizing the right of Air Canada to a long-term lease at Terminal 2. In addition, PDC and Transport Canada agreed to a rent deferral for the first three years of the new lease.
And finally, synergy - simply defined, it means working together. The relevance to Pearson airport is the positive effects of the interrelationship among the three terminals being under the same control. For example, overflows and backlogs of planes could be handled with little disruption to the travelling public; redevelopment or modernization of one or more terminals could take place more easily as air traffic could be relocated from one terminal to another as modernization took place.
I'm sorry if I sound like a school teacher, but this was for the benefit of those people who are almost as confused as committee members listening to the testimony before this committee.
Is there any dispute? Did I get any numbers wrong or does anybody have any quarrel with that simple definition?
Senator Lynch-Staunton: Before you call the witnesses, may I be allowed to make a - I don't know if it's a point of order or point of information or a point of clarification, but it's a point of some sort. You can define it after I've made my plea.
That is that on Thursday, Mr. Stehelin of Deloitte & Touche advised us that he had seen a Nixon report whose conclusions were different than the official report that we have before us. What I would like to ask the Chair or Mr. Nelligan or both - and both if need be - is has any effort been made to find that report that Mr. Stehelin swore - or told us under oath he had seen that had a different conclusion than the report which had been officially presented to the Government of Canada and is now before us today?
Mr. John P. Nelligan, Q.C., Counsel to the Committee: Senators, when we heard the answer from Mr. Stehelin, I was aware of a report which has been presented in the litigation which could be considered a second report and I obtained a copy of it the next morning and sent it to Mr. Stehelin, but unfortunately, we were not able to communicate on Friday afternoon and he's been involved in other litigation in Toronto this week. So I haven't been able to get a definitive answer, but I can assure you that I will clarify this matter with Mr. Stehelin as soon as he's available and will report to the committee at the first possible instance.
Senator Lynch-Staunton: The report which the government released on Thursday or Friday following Mr. Stehelin's testimony has the same conclusion as the official report, but it also refers to chapters and appendices and I was wondering if we had all that documentation with the release of the report or that we only have the release of the second report.
Mr. Nelligan: That's all we have, sir.
Senator Lynch-Staunton: Could you -
Mr. Nelligan: I intend to follow that up.
Senator Lynch-Staunton: - through you, Mr. Chairman, see that we get the full documentation which accompanied the so-called second report?
Mr. Nelligan: If I may explain, on the Thursday afternoon, we discussed with the officials looking after the production of documents making available to us all of the Nixon documents and they assured us that they were doing that. The difficulty was that apparently, they had been filed in different places, returned to their origin, and they were still getting them together, but so far as they were aware these documents didn't exist, but they were still looking for them.
Senator Lynch-Staunton: So we have a draft report which suggests that there is documentation appendices which are not available, we have a final report which has been challenged by Mr. Stehelin, and we have maybe a third report which draws conclusions which the official report doesn't. So I think, Chairman, maybe we should hire our own gum shoes and get cracking on this and find out how many reports there are and which one is credible. Thank you.
The Chairman: Mr. Nelligan, would you please introduce our witnesses.
Mr. Nelligan: Senators, we have three witnesses before us today to deal with Treasury Board issues. Mr. Al Clayton was with us, of course, in the first week of hearings and he is on the Treasury Board secretariat. Joining him today is Mr. Mel Cappe, who is the Deputy Secretary of the Program Branch of the Treasury Board secretariat and Mr. Sid Gershberg, who is the Assistant Secretary of the Economic Programs Sector.
You have been provided with a bundle of documents which relate to memos and documents which they prepared during the course of the negotiations for the Pearson contract.
I'm sorry, Mr. Cappe is now the Deputy Minister of Environment.
I'm sorry, Mr. Cappe, I missed that.
The Chairman: You're aware of the fact that we're swearing witnesses, gentlemen.
(Mel Cappe, sworn:)
(Sid Gershberg, sworn:)
The Chairman: Mr. Cappe, it's good to see again, as I told you on the elevator. You are certainly no stranger to parliamentary committees. I remember the days when you used to appear before Senator Ian Sinclair, who we miss very much. I was his deputy chairman at the time and we used to look forward to your appearances and we used to have a fair amount of fun together.
I recall that at one hearing you had just changed departments and he said to you, "Mr. Cappe, is your new minister a nice man?" And you said, "Yes, Mr. Chairman." He said, "Does he treat you well?" You said, "Yes, Mr. Chairman." "He doesn't bully you or do anything like that?" "No, Mr. Chairman." "Do you get along well?" "Yes we do, Mr. Chairman", which is some idea of the respect and affection he had for you because he was, as you know, outwardly he always appeared to be a bully, but you always stood your ground and I'm sure you will today.
A few weeks ago, Senator Kirby, who is the vice-chairman of this committee, said - I'm sure humorously - that when I was as public servant, he said, I stayed away from the Treasury Board as much as possible.
Mr. Mel Cappe, Deputy Minister, Environment Canada: Wise man.
The Chairman: So what is this mysterious group, this central agency that you were once with? Is it in a basement somewhere in Ottawa? What does it do? What is its function? What is its purpose in government affairs?
Mr. Cappe: Thank you, Mr. Chairman, and it is indeed a pleasure to appear before this committee. I have a prepared text that I would be pleased to go through which I hope will answer your question.
My name is Mel Cappe and I'm the Deputy Minister of the Environment. However, from January 1990 to May of 1994, I was the Deputy Secretary, Program Branch, in the Treasury Board secretariat. In two weeks, I'll be celebrating my 20th anniversary in the public service of Canada and I'm quite proud of that.
[Translation]
On my right is Mr. Sid Gershberg, who was then and still is Assistant Secretary for Economic Programs with Treasury Board's Program Branch. Mr. Gershberg reported to me during the period in question and is responsible for program and policy issues relating to federal departments with an involvment in the economic domain. And of course Transport Canada is one of those departments.
On my left is Mr. Al Clayton, Executive Director of Treasury Board's Bureau of Real Property and Materiel. As you will recall, and as Mr. Nelligan mentioned, Mr. Clayton has appeared before you once already, on July 12. As you know, he is responsible for real-property management policy.
[English]
I'd like to explain for honourable senators, as Senator MacDonald has asked the question, roles and responsibilities of the Treasury Board and then for the Treasury Board secretariat, and I make a very important distinction here between the Board of Ministers and the secretariat, so that you can better understand the documentary evidence that you have before you.
The Treasury Board is the only statutory committee of cabinet. The Board was first established by Order in Council July 2, 1867, right after Confederation, but subsequently was recreated by the Financial Administration Act. The Board of Ministers has powers with respect to financial, administrative and personnel management of the public service and Crown corporations. Its powers flow from the Financial Administration Act, the federal Real Property Act, the Public Service Employment Act and the Official Languages Act, among others. The Board of Ministers has the responsibility of approving expenditures of government, establishing policies which other departments use in managing their affairs and as employer of the public service. The Board of Ministers is traditionally interested in the financial implications of government decisions, the quality of service to Canadians, the fairness and treatment of employees and so on.
Therefore, for a major initiative such as T1T2 at Pearson, the Treasury Board, at a minimum, would be required to approve the overall project prior to the issuance of an RFP, to subsequently approve details related to such issues as adjustments to Transport Canada funding levels, to employee transfers and official language issues and, finally, to provide approval of the terms and conditions of the land transfer and related agreements prior to signature by the initiating minister.
The Treasury Board secretariat, as distinct from the Board, is responsible to Parliament through the President of the Treasury Board but has a complex accountability. It is accountable to the President of the Treasury Board as its minister, but has as well the responsibility to give the Board, as a collectivity, its best professional advice.
The secretariat is organized into a number of branches which have changed over the period. At the outset of the Pearson affair, there were no less than eight groups involved in one way or another in the Pearson file, as are reflected in the documents.
There was Program Branch, of which I was the head, responsible for expenditures and financial issues; Personnel Policy Branch, as the employer of the public service; Human Resources Development Branch, responsible for training and development of those public servants - and those two branches were subsequently amalgamated into the Human Resources Policy Branch. Administrative Policy Branch was responsible for both contract policy and real property management. Official Languages Branch was responsible for language policy. Legal Services in Treasury Board secretariat was responsible for advising us as Justice lawyers attached to the Treasury Board Secretariat. And, in addition, there was the Comptroller General, responsible for accounting policies and financial liabilities as well, who was also interested and involved.
The Program Branch is the only one of these organizations or groups within the department that was organized along portfolio or departmental lines. So we had a division dealing with Transport and Environment and a few analysts dealing with Transport. Therefore, although several of the issues in the Pearson file would have fallen to my colleagues in other branches - for instance Mr. Clayton and colleagues in Personnel Branch - the Program Branch played the coordinating role in combining those concerns into a corporate perspective or TBS position and reflected in notes going to the Secretary, to the President, and ultimately to the Board.
The secretariat plays an important challenge function in the government decision-making process. They raise issues and questions for ministers and officials to ensure that they're taken into account in the decision-making process. Their objective is to ensure that all the right questions have been asked and that ministers have adequate information with which to come to a judgment on a file.
In most departments across government the TBS is viewed as a necessary evil. If I may be allowed a bit of a personal perspective, I wasn't out of the Treasury Board secretariat for very long before I had that same view.
In my current responsibilities, I can honestly say that we realize we have to satisfy the TBS and their concerns in order to move our files along. However, it is our view from time to time in the Department of the Environment that they do get in the way. We have very good initiatives and sometimes they find fault with them. And, yes, they can slow things down. However, in the end, perhaps I, better than many of my colleagues in the Department of Environment, have a better appreciation of why they're being so nasty.
Let me explain how the secretariat does its job. Our responsibilities, as I've mentioned, are to advise the President and the Treasury Board and to see that the right issues are being raised around town. We do some analysis ourselves of the issues, but we try to get the line departments to do the analysis we think is required. We, as a central agency, have to have our antennae out all the time, acquiring information and trying to understand the various different views among line departments and other central agencies.
As we have noted, Transport Canada was responsible for the management of the file and for negotiating the deal. However, as officers of the Treasury Board secretariat, we monitored the file so that there would not be any decisions taken which would presume the authorities or decisions of the Treasury Board. Therefore, we participated in many meetings with the Department of Transport, our negotiator and our colleagues in other central agencies, particularly Finance and Privy Council Office. Indeed, we worked closely with colleagues in other central agencies as we often had similar perspectives on such matters.
As I looked back over the weekend in reviewing these documents, I was struck by the fact that the Treasury Board secretariat did its job. As I said earlier, we were to see that the questions got raised and that ministers had the information necessary for them to make decisions. Ministers, of course, would take into account the full range of considerations on the file. At the time, and in retrospect, I'm satisfied that we did our job.
In conclusion, we would like to help the committee understand the record and we would be pleased to answer any questions you have. And, within the context of our responsibilities to protect cabinet confidences, we will be as forthcoming as we possibly can. Thank you, Mr. Chairman.
The Chairman: Thank you, Mr. Cappe. I think that answers my question.
Senator Kirby: I thought you were playing the straight man.
The Chairman: The 30-minute limit is in effect again, colleagues. The first questioner, Senator Tkachuk, and Senator Kirby following.
Senator Tkachuk: Good afternoon gentlemen. I'm going to continue a little follow-up from the presentation you made, Mr. Cappe, but before we do that, I want to - going through these documents there are a lot of names come up; people that were copied and everything. So what I would like to do first of all is establish who's who and where they sort of fit in the totem pole of authority, so when their names are brought up, we know who we're talking about.
So let's start with your position. You were in charge of the Program Branch, so you would report to who?
Mr. Cappe: I was the Deputy Secretary, Program Branch, and I reported to the Secretary of the Treasury Board.
Senator Tkachuk: Who was?
Mr. Cappe: Ian Clark.
Senator Tkachuk: He would be the equivalent of a deputy in a department?
Mr. Cappe: Yes.
Senator Tkachuk: So were you second in command or were there others, sort of did the line go this way from him at the top or were there - that were involved in the file besides yourself?
Mr. Cappe: Well, hierarchy is difficult to describe and so I won't try, but what I will tell you is that I was Deputy Secretary of Program Branch and was responsible for the activities of the branch and responsible for signing the memoranda to him, for instance. You'll see my signature on many of those.
Senator Tkachuk: Yes.
Mr. Cappe: There was the Comptroller General, who is also a deputy minister to the President of the Treasury Board. There was as well other deputy secretaries -
Senator Tkachuk: Who would that be?
Mr. Cappe: That was Andy Macdonald. There was also a number of other deputy secretaries in the Treasury Board secretariat dealing with the file. In particular, at the time, Jean-Guy Fleury, who was the Deputy Secretary of Human Resource Policy Branch who was responsible, at least in the latter part of the period, for dealing with the personnel issues. And you'll see his name there frequently.
Senator Tkachuk: So he would be the equivalent title to yours?
Mr. Cappe: Quite; deputy secretary, yes.
Senator Tkachuk: Now, Mr. Gershberg, what would his - assistant secretary, so what would his - what would your position be?
Mr. Sid Gershberg, Assistant Secretary, Economic Programs Sector, Treasury Board: I'd be reporting to Mr. Cappe and I dealt with the -
Senator Tkachuk: On this file or this is as part of your job you report to Mr. Cappe?
Mr. Gershberg: Yes. And would, in general terms, be responsible for managing a number of files across the economic sector so that Transport Canada would be one of the departments in my portfolio. There would be quite a number of others. And so at any given time we would be managing a fairly large number of files of which Pearson was one.
Senator Tkachuk: Okay. Mr. C. Swan - or I shouldn't use Mr. or Ms. I have no idea. C. Swan?
Mr. Cappe: Ms Swan is Carol Swan, who was the Director of the Transport and Environment Division, and she reported to Mr. Gershberg.
Senator Tkachuk: Okay. And then Mr. Cleevely, I think it is. Is that right?
Mr. Cappe: Mr. Cleevely was a senior analyst in Ms Swan's division and, as I indicated in my opening remarks, we had two officers dealing with Transport issues, and Mr. Cleevely was one of those two officers, and he was the one who handled the Pearson file for the Program Branch and played that coordinating role that I described in terms of the responsibilities of the other -
Senator Tkachuk: So Cleevely reports to Swan?
Mr. Cappe: Yes.
Senator Tkachuk: Who reports to Gershberg who reports to you?
Mr. Cappe: Fair comment.
Senator Tkachuk: That's fair enough?
Mr. Cappe: I should tell you that the Program Branch operates as a fairly flat organization, notwithstanding the hierarchy you've just described.
Senator Tkachuk: Okay. I have another name here that I don't want to mispronounce: Maria P-A-G-L-I-A-R-E-L-L-O.
Mr. Cappe: Maria Pagliarello is the other officer who dealt with Transport issues at the time reporting to Ms Swan.
Senator Tkachuk: So Cleevely and Maria report to Swan equivalently, or is there differences in rank there, too?
Mr. Cappe: Yes, but they're at the same - that's why I say hierarchy is hard to describe. They were at the same level but indeed they were classified differently.
Senator Tkachuk: I just want to know who we're dealing with. That's why I'm going through this process, so bear with me please.
Now we have Nicole Desormeaux.
Mr. Gershberg: She was essentially my secretary, administrative assistant.
Senator Tkachuk: Okay, so Nicole works for Gershberg.
Mr. Gershberg: That's right.
Senator Tkachuk: Then we have Paul Gonu.
Mr. Al Clayton, Executive Director, Bureau of Real Property Management, Treasury Board: Maybe with that name I'll go down my side of the chart.
Senator Tkachuk: Where are you in all of this? I was going to get to you.
Mr. Clayton: Well, you have.
Senator Tkachuk: I knew that.
Mr. Clayton: One of the deputy secretaries, equivalent to Mr. Cappe, was Richard Paton at the time, who is the Deputy Secretary of Administrative Policy Branch. I reported, as the Executive Director, the Bureau of Real Property and Materiel, to Mr. Paton. Mr. Gonu, within the Bureau of Real Property and Materiel, we have - at that time we had, I guess, four directors. One of them, Mr. Bill Lye, dealt with issues related to, amongst other things, Transport Canada land issues. Paul Gonu reported to him. Mr. Gonu, amongst his many duties, was the person that dealt with Transport Canada land issue across the country.
Senator Tkachuk: Okay. I think I've got everybody that are mostly copied. There's probably others, but I think most of them are copied on the memos.
Now, within Treasury Board - I know from my experience in government, ministers would say they had to actually lobby Treasury Board. It is the sort of place where you authorize something to happen, especially when it concerns money.
Mr. Cappe: That's a fair characterization, but imprecise, if I may, senator. The Financial Administration Act creates the responsibility and obligation of the Treasury Board to approve government expenditures, but the Treasury Board can delegate that authority to ministers, and so not all expenditure decisions come to the Board and indeed ministers can delegate to officials. So that's why I'm trying to add precision to your comment but, by and large, that's not a bad characterization.
Senator Tkachuk: I was just taking it from Norman Ward's edited version of Dawson's The Government of Canada, which -
Mr. Cappe: And I'm not going to argue with Mr. Ward.
Senator Tkachuk: - who said that the Board's chief function is one that can be expressed in a single word, "no". So that's sort of where I got the question from.
But let's go back to the genesis of the deal. When was it first brought to the attention of the Treasury Board; the issue of - was it the issue of the RFP or was it the actual leasing policy itself?
Mr. Cappe: Let me give a general answer then ask my colleagues to comment, but one of the points to keep in mind is that the issue of the treatment of airports has an issue and the financing and determination of expenditures for airports was something that was dealt with in policy discussions prior to the Pearson deal. So one has to look at cabinet and Treasury Board and other considerations of those policy files as the issue of management of airports was dealt with by government and then, Pearson came along in that context. The precise date I couldn't put my finger on.
Mr. Gershberg: Just following on that, I think you'd have to go back to, I think it was in 1987 policy on the development of airports which included the local airport authority policy and the possibility of privatization. So it really stems from that period.
Senator Tkachuk: Would that have been a Treasury Board discussion, or a minute, or would there have been - did it need approval from Treasury Board?
Mr. Gershberg: There was a policy announced by the government in that regard.
Senator Tkachuk: So does it relate to Treasury Board or was it announced without Treasury Board discussion or approval?
Mr. Cappe: Honourable senators, you're getting at the question now of what the Treasury Board did or didn't discuss and, with respect, I think that we're starting to -
Senator Tkachuk: Let me put it another way: decide.
Mr. Cappe: Even worse. May I just suggest that we try not to get at the question of whether the Treasury Board did or didn't have this on its agenda and discuss it at a particular time because we're then getting into the issue of cabinet confidences. What I'd rather talk about, and I think the original question was would this kind of issue come forward to the Treasury Board for approval and how would it be dealt with in the normal process. And if we can generalize it in that context I think the answer would be that, as I indicated in my opening remarks, before the RFP would have gone out in the normal course of events for an initiative like this, the Treasury Board would have seen those kinds of issues.
Senator Tkachuk: Well -
Mr. Clayton: Maybe to help be as specific I think as we can be, on major lease projects, which this is, there is a Treasury Board policy and process called preliminary project approval and preliminary project approval, which is provided by Treasury Board on major project initiatives, involves essentially reviewing the rationale as to whether a project should or should not proceed, what the options are, and providing authority, in the case of an RFP process, in terms of reviewing the conditions or the general theme of the RFP, and that sort of approval is required before the initiating minister can proceed.
Senator Tkachuk: Well what would happen in a hypothetical case? What kind of preparation would Treasury Board - what would you do to get prepared for an event like this?
Mr. Clayton: Maybe I can talk about the relationship with Transport airports and then to your question. There was, literally going back to 1987, because of the nature of the initiatives going on within Transport Canada airports related to land - if you think about it, the initial policy statements, the airport management, the local airport authority initiative, the Terminal 3 initiative - an almost continuous relationship between the Treasury Board secretariat and officials of Transport Canada. Therefore, there were, in effect, at the staff level, sort of no surprises of anything that was going to come to the Treasury Board ministers. In effect, by the time anything would show up there had obviously been ongoing communications for literally quite often months; years. And that is, I think, it would be fair to say, also was occurring with the other central agencies with Transport Canada.
Senator Tkachuk: Would it be fair to say it's almost like a parallel process?
Mr. Cappe: I'd rather say that it was a continuous process, that -
Senator Tkachuk: That's fair enough.
Mr. Cappe: Mr. Clayton's comment that there should be no surprises was really our objective so that when, as I tried to characterize in my opening remarks, when the case came to the Treasury Board, we, as officials serving the Board, would like to be in a position to advise them that we had seen the deal and been aware of what the proposals were and looked at it from different perspectives and been able to advise the Board. So it's in the interests of the departments - and now I'm speaking as the Deputy Minister of the Environment - it's in my interest to make sure that the officers of the Treasury Board are au currant with the proposals that I would bring to the Treasury Board or my ministry would bring, so that they're in a position to be informed and advise in an informed fashion.
So in a general principle I think that's fair, that we're out there trying to work with departments from the Treasury Board perspective.
Senator Tkachuk: Was there a formal process set up to deal with the T1T2 issue? Did you organize yourself with people in charge and all of that stuff?
Mr. Cappe: Internally we had established a loose working group which brought together the various interests of the different divisions and branches of the Treasury Board secretariat. So that there's reference in the documentation I saw to bringing this loose group together from time to time to deal with issues. At one point there was a question about trying to provide a single window so that we could get our own act together inside the Treasury Board secretariat and provide easy access, if you will, to our own experts. And at that time we sort of formalized this loose group into a more formal group. All that "more formal" means is that sort of everyone made sure that they would talk to each other and meet from time to time.
Senator Tkachuk: You were in charge of this group?
Mr. Cappe: No. This would have been done at the working level, as Mr. Clayton indicated, so it would include some of the other people that you - some of the officers that you identified earlier.
Senator Tkachuk: Who would be in charge of it?
Mr. Cappe: I frankly don't remember that there was somebody in charge of it in that sense. As I indicated before, the Program Branch, because we had an officer who specialized in the Department of Transport, would have called meetings from time to time of the various sectors and groups of the Treasury Board secretariat. So we would have played a bit of a coordinating role. I'm trying to distinguish being in charge. I mean I don't think there was anybody in charge in that sense. The file touched a lot of people in their own responsibilities. We tried to bring people together to have a coherent approach to it.
Senator Tkachuk: About how many people would have been involved in this process?
Mr. Cappe: I indicated there were about eight different groups involved at different times. My guess is that you'd have three to five people from time to time. Remember, the transfer of the employees was the primary Treasury Board concern in terms of our own responsibilities in that regard. And then in terms of the Board's concern, we were bringing together people from Mr. Clayton's area, from our branch and a number of others.
Senator Tkachuk: There would be a number of differing opinions, I would take it, in Treasury Board about whether something is good or bad or indifferent?
Mr. Cappe: We were there as professionals coming to -
Senator Tkachuk: Mr. Clayton is smiling. Am I understating it, Mr. Clayton?
Mr. Cappe: Well, we go can get into whether you're over- or understating. I think the issue is that we had different functional specialists. So we had people in Mr. Clayton's area, whose expertise were the nature of the contracts and the nature of the land lease. And I know in Mr. Clayton's earlier testimony he described that extensively to you.
We brought people from the Comptroller General in who would be financial experts. We brought people from Personnel Policy who would be personnel experts. So we were bringing people together with different areas of expertise, as opposed to people with different views.
Senator Tkachuk: I'm just trying to go through some of the documentation that was delivered to the committee and I'm going to ask a couple questions because - what's my time like, Chairman? How am I doing here? I want to get rid of some of these things and I've got lots more questions to ask.
The Chairman: You're doing very well. You have 19 minutes and 36 seconds.
Senator Tkachuk: Great, I've got lots of time.
The Chairman: Can I ask one quick question?
Senator Tkachuk: Sure.
The Chairman: Did the resources of Treasury Board with respect to airports generally accelerate dramatically over the years to the present time?
Mr. Cappe: If you go back to 1988, I would think, the Treasury Board secretariat, in the Program Branch, the area I was responsible for, would have had six officers dealing with Transport. Over the course of that period, there were budget cuts that we were reflecting in our own department of the Treasury Board, and therefore we went down to what I described to Senator Tkachuk as two officers. So we went from six to two. So "accelerating" is a little bit difficult to answer.
On the other hand, on the airport file we did put Mr. Cleevely, who was a senior and experienced officer, on that file because we thought it was an important file and he was an experienced officer.
Senator Tkachuk: Who would have been, through your term there, who were the ministers of the Treasury Board, say from - let's go from 1990 when the issuance of the RFP? Who were the ministers? Who did you work for?
Mr. Cappe: This is very embarrassing. This may be the most embarrassing part of this testimony.
Senator Tkachuk: You can't remember your bosses' names.
Senator Kirby: Some were quite forgettable.
Mr. Cappe: I can work forwards. In 1990 it was the Honourable Robert de Cotret. I think that that changed in '91 to Gilles Loiselle and then in 1993, at the transition to the new government, it was the Honourable Jim Edwards.
Mr. Nelligan: You get a 95 on that, Mr. Cappe.
Mr. Cappe: Thank you, Mr. Nelligan. I hope I didn't leave anyone out, believe me.
Mr. Nelligan: You were two months out on one.
Senator Tkachuk: I'm going to try and go through some of the documents to show that there was a lot of discussion about this, which is probably the way it should be according to what you said earlier on. And I have got a couple questions on them and they're just a couple things that I would like to have - maybe you could help me out with.
I think there's a document which is 001267.
Mr. Cappe: What's the date of that?
Senator Tkachuk: Just a minute. November 26, 1992. Anyway, it's a short memo from Mr. Cleevely to yourself, Mr. Cappe - or had a copy to Mr. Cappe and also Mr. Gershberg is listed on the copy list. So it just sort of says "See Below". So it's to a whole bunch of people; Gershberg, Swan.
Mr. Cappe: Yes.
Senator Tkachuk: And he's discussing the inclusion of the T1T2 project in the Prime Minister's speech in Toronto. He says:
Fin did not have a note on the issue, and asked if I would object if they sent our note to the Pres up (I had given them a copy).
By the "Pres" you mean the President of the Treasury Board?
Mr. Cappe: Yes.
Senator Tkachuk:
I said no, it wasn't a problem.
This may be a done deal.
What is that memo about?
Mr. Cappe: A little context if I may, senator. We used, in the Treasury Board, electronic mail as a way of communicating quite extensively so that everyone would be up to speed on all the events as they transpired. So this was a very effective way of saying, after someone had spoken to someone or an event had transpired, to inform everyone. So this is an electronic mail message which has been printed and then put on the file and then transmitted via Justice to the committee.
The particulars here are that indeed, if you look at the first sentence, which you did not read, Senator Tkachuk, you note that it says there is talk about putting the project in the Prime Minister's speech. And that was the speech which the Prime Minister was to give in Toronto just following that date, in late November, early December, and I frankly forget the particular speech. But then the Prime Minister was going to make a public statement about the project and the issue here, as I understand it in looking back at it, was that we were indicating that there would be a public statement which might have an effect on the government's treatment of the process and putting out the - in dealing with T1T2.
Mr. Gershberg: If I might just add to that, senator, about a week later, and part of the context - and I frankly don't know, I can't recall whether this was in the Prime Minister's speech or not, but it was in the government's economic statement that the Minister of Finance at the time put out. I think it was December 2nd or 3rd.
Senator LeBreton: December 2nd.
Mr. Gershberg: And that, I suspect, was the real context, that quite clearly if this was going to go in the speech, then there would have been a positive announcement to go forward with the private sector development. I think until that time we didn't know whether it was going forward or not.
Senator LeBreton: Just as a point of clarification for the record, Mr. Chairman, the Prime Minister did not have a speech in Toronto in late November or indeed early December. In fact, he did speak in Toronto a full week before this memo was dated. They have the memo dated November 26. He in fact spoke in Toronto on the 19th and, according to his calendar, was not back in Toronto again until March. And I got a copy of his speech, just for the record, and there was no reference whatsoever - the speech was about NAFTA, free trade, and the only reference to anything to do with anything transportation was one sentence. He was talking about the direction of the government in the next little while, quote, "to create new jobs by opening up foreign and domestic markets and by upgrading our communications and transportation infrastructure."
That's the only reference in the whole speech to anything that could even remotely resemble anything like this. So I just thought I'd put that on the record.
Senator Hervieux-Payette: Mr. Chairman, can we have the exact reference, since we are supposed to clarify the date and the location, and maybe if there is a title or whatever. Sometimes there is.
Senator LeBreton: There's a memorandum.
Senator Hervieux-Payette: To whom?
Senator LeBreton: The memorandum that Senator Tkachuk referred to. It's document number 001267. It's dated November 26, 1992.
Senator Hervieux-Payette: I'm talking about the speech you were quoting that we don't have.
Senator LeBreton: The speech is on the public record and it was on the occasion of a fundraising dinner in Toronto on November 19, 1992, one full week before this memorandum was prepared.
Senator Hervieux-Payette: Thank you.
Senator LeBreton: Of course, to confirm, that Mr. Mazankowski did indeed make an economic statement in the House of Commons, which is on the public record, at 3:15 p.m. on Wednesday, December 2nd.
The Chairman: Senator Kirby, you had a supplementary.
Senator Kirby: Mr. Chairman, just since the document is in front of us.
Mr. Cappe, the last line of that electronic mail piece that Senator Tkachuk read out said, and I quote:
This may be a done deal.
What did they mean by "this"? Can you explain what that means? I don't what the "this" is.
Mr. Cappe: At this juncture I think what we were referring to was the notion that there would be a development, an airport development. At the time, the issue of whether there would be an airport development was still up in the air.
Senator Kirby: Even though this was only a week before the winner - or the best overall acceptable proposal was announced? I'm looking at the date. The date is the 26th of November.
Mr. Gershberg: It's difficult to know for sure, senator, but it may be that - I mean the announcement, I think, was the 7th.
Senator Kirby: Yeah. I said a week. Sorry, ten days.
Mr. Gershberg: It may be that the officer at the time wasn't aware what the final results of the evaluation were and whether it was going forward. I just don't know.
Senator Kirby: So the answer is we're really not sure what the statement "this may be a done deal" means; is that fair?
Mr. Cappe: That's fair.
Senator Jessiman: It would appear that someone maybe had some knowledge that they were going to make an announcement.
Mr. Gershberg: I think his assumption was if there was going to be an announcement - as it turned out there was an announcement, and it was six or seven days later, but it was by the Minister of Finance in his economic statement where he announced - he didn't announce the winner, but he announced there would be a development. And I guess in the discussions that -
Senator LeBreton: It's sort of obvious by then.
Senator Tkachuk: The reason I bring this document up - I'm going to bring up a few more here - is because a lot is made of some of these documents by other senators. So I'm just bringing this up, right. So as long as we know that in the case of Mr. Cleevely here in this document he didn't quite know about the speech. He got the speech - you know, what I'm trying to do is say we don't know what these things mean, I don't know what these things mean, and the speech he's referring to is a speech the Prime Minister's already given. Not in the loop, I would say.
So I'm just going over some of the memoranda because we've got lots of gossip here and I'm just going to try and go through it. Some of it's gossip, some of it's good memoranda and I'm just trying to sift through it.
Senator LeBreton: Certainly open and transparent.
Senator Tkachuk: I would like to go to another memo which is document 00304 -
Senator Grafstein: Mr. Chairman, are we allowed to come back to this particular memorandum?
Senator Tkachuk: Sure, you can come back to it.
Senator Grafstein: I don't want to interrupt the senator's train of thought, but one can derive other conclusions from the notes in this memorandum on the face of it.
Senator Tkachuk: My point was this is November 26th and Mr. Lane's group is already going through the - has gone through and is now considering the two proposals and they're sitting in a room somewhere with a whole bunch of people while Mr. Cleevely is writing this document.
So anyway, I'm just bringing that up. I'm going to go to a document, 00304, dated March 12, 1993 from Mr. Cappe to Mr. Ian Clark - 00304. And on page - I want to make sure I get it right here.
You've got, on page 2 of the document, the report of Deloitte Touche. This is written by you, Mr. Cappe, to Mr. Clark. You say:
The report of Deloitte & Touche (copy attached) is very clear. Paxport is non-compliant with the RFP. Subsequent meetings between Transport, Paxport and Deloitte & Touche Inc. have not resolved any of the issues raised in the report.
Yet we had Mr. Stehelin here last week, and this was not the conclusion of Deloitte & Touche in March and certainly was not the conclusion in August.
Could you sort of help me through your conclusion at the time of memo, Mr. Cappe?
Mr. Cappe: Sure. Let me start and ask my colleagues if they want to contribute.
What we meant by "non-compliant" in this context was that having put the airport out with an - put the RFP out, we had three, and then narrowed down to two, responses, and we had the determination that there was a best overall acceptable proposal, which the Chairman has just explained the meaning of. And what we meant here was that it was non-compliant with the RFP in that the government was not able to grant the - to do the deal, if you will, on the basis of the proposal it had before it because Deloitte & Touche had found that it was not financeable, or that the financeability was called into question.
Mr. Clayton: I think maybe I can add. You will see in many of the memos, between the period of the announcement in December of the best acceptable proposal and the final negotiations which start in May, there is an awful lot of to and fro traffic back related to the business of the financeability of Paxport, the ability that the proposal be financeable. From our viewpoint, and this reflects it, until, in effect, that issue was resolved, they were non-compliant - that process was still open and they were non-compliant with it until they had provided that evidence.
Senator Tkachuk: Which is why the second proposal was still on the table.
Mr. Clayton: Well, the second proponent had decided to leave. You can judge why, but essentially at some stage there was the option still to go to the second proponent.
Senator Grafstein: Again, that date was?
Mr. Clayton: March 12.
Senator Grafstein: That was after the decision in effect to move forward with Paxport? Am I getting the timing right?
Mr. Clayton: No. The decision was to designate that Paxport was the best acceptable proposal.
Senator Grafstein: That was in December. And then in March -
Mr. Clayton: Until Paxport had provided - met certain conditions that the government put, they in effect - there was not, quote, a winner of an award. And this was in that period where there was only discussions with the Paxport proponent in terms of meeting the conditions the government had put on, the major one of which was the financeability of the proposal.
Senator Grafstein: So that was one of the five criteria. I'm sorry, Mr. Chairman.
Mr. Clayton: No, this was after the initial proposal.
Senator Grafstein: Part of the preliminary, before you got to that stage, was to get through the first net there were five criteria, one of which was financial viability. And in December a decision was taken that the best application, based on the five criteria, including financial viability, was Paxport. And then in March there is now a review of that in detail to say, okay what is that -
Mr. Clayton: One of the conditions the government put on the decision in December that they were the best acceptable, is they had to meet - that is the best acceptable to Paxport - certain tests and certain things still to be met. One of them was the financeability of their project, which, in particular, included bringing their issues with Air Canada. And until that was met, or not met, they were in effect non-compliant. That's what this was trying to do, and that goes on for many months, essentially, that status.
Senator Grafstein: Mr. Chairman, I apologize to senators. I'd like to come back on that later on when I have a chance, but I just was trying to get some clarification of that point.
The Chairman: I should have made reference. Mr. Barbeau, Assistant Deputy Minister of Airports, wrote Paxport immediately following their choice as the best acceptable overall proposal and said, "However, your proposal contains certain provisions which concern the government and cannot be accepted in whole or in part. The following are some examples of some of these provisions."
That's when the negotiations began on the Paxport proposal, which obviously was the one most acceptable but lacking - but obviously inviting further negotiations.
Mr. Clayton: Senator, maybe, because words do become important here, what was going on was consultation. Negotiations, which is a technical word, only could occur once Paxport had met the criteria. So between that decision in December, that was consultation, it was not negotiation, and there a difference.
The Chairman: Okay.
Senator Jessiman: But the non-financeability was that there was a concern in the government that the rents they wanted to charge to the airline were going to be too high. The airlines themselves have financial problems and it was the airlines' problem. If the airlines were in great shape financially, that proposal may have been acceptable and financeable. But because the government knew what the situation was with Canadian Airlines and Air Canada, they were concerned that that kind of a proposal was just too aggressive at that particular time. Is that not correct?
Mr. Gershberg: It was partially that, senator. It was also the fact that Air Canada I think was indicating that weren't - they had a lease till 1997 and they weren't prepared to pay those high rates up front. So without Air Canada on side, it becomes non-financeable.
Mr. Cappe: There's a second element.
Mr. Gershberg: If I could add as well, senator, if I might, that in the same memorandum we indicate - and I think this is important - that when it was obvious, or when government had concerns about the financeability, that Transport Canada, in January, did engage Deloitte Touche to look into that issue. And so the time between January and end of February or beginning of March, when they reported, is really the time when Deloitte Touche was looking at this issue of financeability. So there's a bit of a delay in a sense. Not much was happening in that period. Then you get to March where Deloitte Touche indicates that they are non-compliant and they haven't met the financeability criteria.
So I think it is important to note that, that there was this independent financial advice.
And the issue, I think, of the financing, I mean it was very clear that - and this was an issue obviously that continued over the whole period, that without Air Canada on board there was going to be a continuing problem. That was a continuing issue right through to July or August.
Senator Tkachuk: Many of the issues arising from financeability were also those issues raised by the developers themselves in the proposal, contingent on "providing we do this", "providing this is true", Mr. Cappe?
Mr. Clayton: Yes, I think you're accurate. The RFP, as put out - and I believe you have Mr. Simke on later who could probably find certainly much more details than us - was an RFP which was looking for creative proposals. And when you have that sort of RFP, which is very much a development proposal, you do get creative proposals you then have to respond to as such. And part of the creative proposals on both sides were in effect financing proposals which may not have initially been thought of in terms of how the government was looking at the problem.
Senator Tkachuk: That's right, and they would do this to protect themselves so they wouldn't get into a bind of saying they could do something that, in the end, they couldn't do.
Mr. Clayton: Yes.
The Chairman: Senator Stewart, on this point?
Senator Stewart: Yes, I was curious about a couple of paragraphs in that same memorandum. You say:
Paxport officials (Messrs. Hession and Matthews) met with Mme Labelle last week and expressed outrage at what they see as bureaucratic stalling.
Paxport officials questioned the credibility of everyone, including Deloitte & Touche.
And then we have another paragraph:
Since last week, Paxport has increased their pressure via PMO and Ministers.
Now, were you relying on Deloitte & Touche, their analysis, or did you do an independent analysis?
Mr. Cappe: As I indicated in my opening remarks, senator, we were trying to identify the concerns that we had in getting Transport to deal with the issue. And so from our perspective we said that we - we told Transport that we thought they needed financial advisors, and they hired Deloitte & Touche. We did not do an independent analysis, if you will, of this. We were relying on Deloitte Touche.
Senator Stewart: Now, while we're on it, it says that there was increased pressure.
The Chairman: I think, Senator Stewart, that we're straying afield here a little bit.
Senator Stewart: All right. Thank you, Chairman.
The Chairman: Senator Tkachuk.
Senator Tkachuk: I've got more questions on the memo.
The Chairman: Okay. You're over your time, but you -
Senator Tkachuk: Let me just finish this one document.
Senator Grafstein: We stole some of his time.
Senator Tkachuk: I've got lots more to go.
Senator Kirby: Can I just say that if we have a document and - I mean let him finish his questions but then if anybody else has questions on the document, can we finish with the one document before we then move on to the next question? It just makes a more orderly discussion, that's all.
Senator Tkachuk: I have another one here. No problem. Paxport, in the same document on page 2 - I'll read a little context here.
Paxport officials questioned the credibility of everyone -
- which is what Senator Stewart had reached.
They also raised their concerns that until they are declared "the developer" by Transport Canada, Air Canada would not take them seriously.
Since last week, Paxport has increased their pressure via PMO and Ministers.
What did you mean by that?
Senator LeBreton: I'm kind of curious as to who they were talking about, because I was there.
Senator Tkachuk: Who were you talking about?
Mr. Cappe: Just to begin, let me say that I certainly had no personal knowledge of any such pressure. I know that, however - I think, Senator Tkachuk, you began the questioning by putting the two paragraphs together and indicating that Messrs Hession and Matthews had met with Madame Labelle and expressed outrage, et cetera. And I guess in all our dealings with Transport officials and other central agencies it was our understanding that Paxport was going to be increasing their pressure to get the deal dealt with differently. I know that the committee has heard testimony on this issue of how fast or not fast the Department of Transport was operating and we were reflecting what we understood Paxport was going to be doing.
Senator Tkachuk: What was Paxport - they expressed outrage, right, at what they see as bureaucratic - what did they want that the government wouldn't give them?
Mr. Cappe: Well, again I recall that the committee's had testimony on this and I don't want to write revisionist history with poor memory that I have. My understanding of that is that indeed they wanted, as is indicated in that middle paragraph, to be chosen as the developer and that if indeed they were chosen as the developer, that they believe they would be able to deal with Air Canada on a different basis. I know that Mr. Stehelin indicated that he didn't think that would matter.
Senator Tkachuk: What do you mean wouldn't matter? What wouldn't matter?
Mr. Clayton: I believe that there is - certainly none at this table was at that meeting that is referenced, but I believe you had witness last week from Transport Canada that was at that particular meeting and had minutes of it, and this is, in effect, I think, a reflection of what happened at the meeting from Transport officials.
Senator Tkachuk: Okay. Let me go back to, they wanted the recognition. In other words, they wanted the contract. They wanted the contract. Is that what Paxport wanted; or Mergeco by this time?
Mr. Cappe: What we're saying in this memo is that they raised the concern that until they are declared the developer by Transport Canada, Air Canada would not take them seriously. That's what we were getting at there. They wanted to be declared the developer so that they could engage Air Canada in those negotiations and be taken seriously, as we put it in the memo.
Senator Tkachuk: Okay. My point is, or what I'm trying to get to is that -
Senator Kirby: Just a second. I thought, Mr. Chairman, you said we were going to finish -
Senator Tkachuk: I'm still on the same memo. What I'm trying to get to is trying to figure out... They wanted to be the developer and they were saying that they were putting pressure on or rumours were - this was all - this was third party about something else. This wasn't - this was your particular interpretation of what you had heard about putting pressure on?
Mr. Cappe: M'hm.
Senator Tkachuk: You didn't hear about it -
Mr. Cappe: I had no personal knowledge of Paxport and who they called or anything else, no.
Senator Tkachuk: Right. You're kind of in control of the process at this time in a way in the sense that -
Mr. Cappe: No, Transport's in control of the process. Transport is dealing with all of the parties. We are dealing with Transport. I indicated at the beginning that we dealt with Transport, the negotiator and our central agency colleagues.
Senator Tkachuk: I have -
Mr. Cappe: I never met with any of the parties who were trying to acquire the airport. We only dealt with other officials in other departments.
Senator Tkachuk: Okay. I have to come back, Chairman, but I think my half hour is gone. It has taken a little longer than I thought.
The Chairman: Just before Senator Kirby; Mr. Clayton, you corrected me, I think quite properly, when I referred to negotiations, and you said, "I would prefer the word consultation". I have to say I'd prefer another word than "consultation". That was the model from which you started something, because that was the model you wanted, or, sorry, Transport wanted. So, if it wasn't negotiation, which I understand it wasn't because "negotiation" had a formal significance to it, it was something else. And I shan't cavil, but maybe you can give me a different word that might describe it later on.
Senator Kirby: Mr. Chairman, a couple of my colleagues have questions just to finish off that one document. Can we finish with that one document then I'll start my 30 minutes?
The Chairman: Go ahead, that's fine.
Senator Grafstein: Your latter response to the information that you received about pressure, and you are saying that you did not receive any direct word from the parties to the issue, but I take it that you would have received that information from other officials in government?
In other words, you didn't create this out of whole cloth. I assume you got this information from a source other than yourself, and since people did not talk to you directly about it, I assume from what you said in your latter comment, response to the last senator is that there were other officials, and I would assume that the other officials would have the been the source of that information to you. Am I correct in that?
Mr. Cappe: In general terms, we were dealing with our colleagues in other departments, in the central agencies, and discussing the way the file was developing. And indeed, in the course of those discussions, we would have exchanged on what we understood to be happening. And indeed, that was what we understood was going to be happening.
Senator Grafstein: So it might not have been direct contact with you, but that would be the information you would have garnered from speaking to officials in other departments and other places within the public service or within the government?
Mr. Cappe: Yes, in dealing with other -
Senator Grafstein: I am making no distinction here between other officials which would be officials who would be public servants and those that would be appointed officials for term.
Mr. Cappe: Well, I would because I was not in contact with anyone other than public servants on this file, so any of this would have come from my discussions with them.
Senator Grafstein: Again back to the memorandum, and I will try to limit my questions to the memorandum at this time, and that is that curious comment on the last page of page 2 of the memorandum, it says that:
We understand that Minister Corbeil has indicated to his officials his preference to award the contract to Paxport, but wishes to respect the system.
What does that say to you?
Mr. Clayton: Again, what you had - the situation at this stage when this memo was written that you had Paxport that had been named the most acceptable proposal.
What that reference - in looking at it now - was that the minister obviously wished - Paxport had to be awarded the contract, that is eventually through a stage you then had to say they were the recognized "winner," but that required Paxport to meet certain hurdles which they had not yet met. Therefore, he wished that to happen, but he wished to respect the system, which means that the system, which is the public tendering system, would say that unless Paxport met the hurdles, they in effect could not be awarded the contract.
Senator Stewart: Could we have what this on the record? Senator LeBreton is giving us testimony.
Senator LeBreton: Which is something that the minister in his statement in December 1992 said, those very things, which is supported by this memorandum.
Senator Grafstein: Is that statement on the record?
Senator LeBreton: Yes, it is. That is the problem when you are not here every day. Yes, I will. I will find it for you.
Senator Grafstein: Fine, thanks.
Senator Grafstein: Mr. Chairman, may I continue?
The Chairman: Yes.
Senator Grafstein: Still on the same memorandum. Again, this statement this is on page 3:
Even if the Airport Terminals Development Group withdraws it is bid (unlikely), the government could be subject to severe criticism from the AG and others if it proceeds to negotiate with Paxport on a sole source basis for this $500 million plus project.
What is meant by that and what concerns were you trying to raise with the government at that stage?
Mr. Gershberg: Senator, it is the same issue. It is the question of being compliant with the RFP. Remember at this time we had the Deloitte Touche report saying they were non-compliant because of financeability, so even if the other bids were off, you would still have to be compliant with the RFP on financeability before you could proceed to negotiate.
Mr. Cappe: What we were trying to do here was indicate our interest in the integrity of the process. And indeed, as Mr. Clayton has indicated, that you would be consulting with the best overall acceptable proposal, or the best overall acceptable proponent, but that you wouldn't be negotiating yet, and that had the minister then gone to a sole source basis, that that would have called into question the integrity of that RFP process.
Senator Grafstein: So, again, referring to the memo, it says and I quote:
It is almost impossible for Transport to negotiate with Paxport on a sole source basis while the other bid is still on the table.
This is confusing to me. Let me see if I can understand it. On the one hand, until you have concluded a satisfactory bid that meets your criteria, both pre-release and post-release, the decision - in other words, they meet the preliminary criteria, you then move to determining whether or not those criteria are concrete enough to satisfy your ultimate test, so it is a pre-selection and then a post decision-making process based on your own criteria. I am looking at financing alone.
Now - and you say that during that process, this is after making the award that allows you then to have, not negotiations but consultations - you have to have the existing other three bids or two bids, whatever they are, two or three, on the table?
Mr. Cappe: No. If you go back -
Senator Grafstein: In other words, when can you move - I should like to get it from the witness.
Senator Jessiman: Just understand, there are irrevocable offers on the table, that is what they have, that are both open for acceptance.
Senator Grafstein: I want to get it from the witness, if you don't mind. I am just here to try to get it from the witnesses.
Senator Stewart: You are slow. He is trying to help you.
Senator Grafstein: That is great, Mr. Chairman. I would like to get it from the witnesses if I could. It is a hard thing to do, but maybe the witnesses could help me.
Mr. Cappe: What we had, if you go back to the first paragraph on that page, proceeding to negotiate on a sole source basis with Paxport would be very difficult to justify, and what we were saying there was that, as indicated in the first part of the memo as Senator Tkachuk had pointed out, it was our view that they were non-compliant as proposed. What we were doing, as Mr. Clayton indicated, was the government was consulting with Paxport, insofar as Paxport was the best overall proposal, to see if they could get up over that hurdle, if you will, to become compliant and then if they were compliant, we would then get into the negotiations.
What we were indicating here was that if there was an interest in negotiating on a sole source basis with Paxport that that would be subject to severe criticism because the other bidder was still live, as it were, by being on the table. The Airport Terminal Group had not withdrawn its bid at that point.
Senator Grafstein: Just a final question on this, at what point do you move from consultation to negotiation without worrying about possible legal or other criticism?
Mr. Clayton: At that stage when in effect the government is satisfied that the conditions that were put out in December, mainly financeability, had been met by Paxport.
Senator Stewart: I have a question for clarification.
Senator Tkachuk: I have a couple of questions on what Mr. Grafstein has asked on this because it regards the same memo I was dealing with. On the financeability issue, this is a very confusing thing and has been from the very beginning. There was some question by the developers themselves as to what financeability meant, correct?
Mr. Cappe: I am not going to comment.
Senator Tkachuk: From what we have heard.
Mr. Cappe: You have testimony I don't have.
Senator Tkachuk: The RFP did not precisely address the questions of financeability that the government on December the 7th said they wanted as financeability, is that not correct?
Mr. Cappe: That is correct.
Senator Tkachuk: Good. So once the winning bid or the winning proposal was announced, the government put conditions on it. I want to just go through this process clearly here. On December the 7th the conditions were placed, is that not correct?
Mr. Clayton: That is correct. Mr. Barbeau's letters reflects those set of conditions.
Senator Tkachuk: One of the major problems concerning financeability was the question of leases and the situation with the Air Canada contract with Transport Canada which the developers were not aware of, is that not correct?
Mr. Clayton: I cannot comment on what the developers were or were not aware of. One of the issues throughout was obviously the relationship with Air Canada, period, in terms of getting Air Canada on board. If you think about it, Air Canada is a very large head tenant, and on any development deal, the developer better have an agreement with their head tenant in terms of how they will operate.
Senator Tkachuk: Correct. And then the government began consultation, negotiation, whatever, to address these problems, correct, of which Treasury Board was signalling to the government that they should do, is that not correct?
Mr. Clayton: To be accurate, I think what the government said to Paxport is, "you resolve the issue with Air Canada." That is not the government, but it was in effect -
Senator Tkachuk: But they didn't know that is what it meant. I am just going by testimony of Mr. Hession here.
Mr. Clayton: I am not aware of that.
Mr. Cappe: The testimony of Mr. Stelehin was the commentary on the financeability issue, and it was with reference to whether the deal could go ahead and whether it was financeable or not. It was that judgment that the government was operating on.
Senator Tkachuk: He also said in March on that same document that there was not a question that the partners could put up the $61 million, is that not correct? It was just a question of what he interpreted to be financeable rather than Paxport determined to be financeable, and there was an argument going on here.
Mr. Cappe: I will give you the Treasury Board perspective on this. Our concern was that we didn't want Transport Canada independently coming to a judgment on financeability without the advice of outside financial advisors.
Senator Tkachuk: Sorry about that. I just wanted to clarify that. We have heard this before. I am just doing this for your own -
Senator Grafstein: I want to put an additional question then. It strikes me - this is a question to the Treasury Board - that anyone proceeding with a project of this dimension would have to take into account in their original projections and their original proposal on or before December the 7th some assumptions with respect to an Air Canada lease or an Air Canada use because Air Canada was the principle tenant. Now, am I missing something here?
Senator LeBreton: Yes, you are. The lease. You are missing the lease.
Senator Grafstein: I am not talking about the lease, I am talking about the business proposal made by the proponents.
Mr. Clayton: Maybe if I talk about the catch-22 philosophy for a moment, one of the problems - and again, you may want to ask in more detail others about that whole process - is if you have a competitive process in which you have a head tenant, if you asked before you have sort of gone through the acceptable proposal stage for a deal to be made with the head tenant, the head tenant is controlling the process, that is Air Canada, because they obviously can make a deal with one or the other, and whoever they make a deal with is obviously going to be the one who will have a massive advantage.
So, you have a process set up that says you don't want that to be concluded until after you have gone through a process so that Air Canada has not controlled the whole process by themselves in terms of who they deal with. So you have the situation of having then got the best acceptable proposal and both of the bidders made assumptions about Air Canada. Then you start having to deal with Air Canada.
And as has been noted, albeit that was a very difficult negotiation, to some extent, for whatever you wish to say who knew, who didn't know, it was always going to be a difficult negotiation because Air Canada to some extent had leverage, and to another extent they wanted an airport that worked. So that was the discussion process initially that was going on, and I guess later the negotiation process when there was a declared contractor.
Senator Grafstein: Thank you, Mr. Chairman.
Senator Stewart: My question relates to the second memorandum. It is signed by Mr. Cappe to Mr. Ian Clark. Toward the end of the memorandum, there is a comment,
This file is extremely messy...
Senator Lynch-Staunton: So is C-22.
Senator Stewart: Is that a germane comment?
Senator Lynch-Staunton: I was just passing on a reflection to Senator Jessiman.
Senator Stewart: This is very enlightening.
I am going to ask you to explain this now because you say:
Overall our preference would be to wait for the LAA for Pearson to be established, and for Transport to quickly transfer the responsibility for the terminal redevelopment and new runway projects (another possible problem file) to the LAA for execution. This is what is happening in Vancouver where the LAA is currently proceeding with terminal expansion and a new runway.
And then you go on to mention that finance officials have the idea for a Crown corporation. Now, when you say "our preference," who do you mean? Does it mean your program branch? And if not, who was it? And, on what basis would you prefer that particular approach?
Mr. Cappe: Well, the issue was extremely messy indeed because we had eight different groups in the Treasury Board secretariat involved in this. It was a very complex deal, in excess of $500 million. And there was the prospect of public controversy, and indeed there were newspaper reports on the subject through the period. So indeed, from that perspective, we saw it as messy.
We had a preference for the LAA because of the complexity, which is why it was messy, the complexity of dealing with the prospect of the T1, T2 being owned by a group that was different from the people who owned T3. Having someone else deal with the runways, having someone else be the LAA, and in that sense this could become quite a messy file. And we were concerned that the government was getting caught up in this process of dealing with each of these pieces seriatim.
Our preference, by that I mean the Treasury Board secretariat advising the secretary, and I described earlier how I was speaking on behalf of the secretariat, the concern we had was if this is such a complex deal, the easy way to deal with it was there was an LAA group forming who were interested in becoming responsible for the airport and we could pass off all of our messy problems to someone else in the process.
Now, that was not going to solve the problem, but it was going to avoid the public tendering problem that we were faced with and the negotiations complex and the dividing up of the airport into these four interests.
Senator Stewart: You were confident of course that the secretary pass on this advice to the board?
Mr. Cappe: No. I want to be very explicit about that. I have no knowledge that this was passed on to anyone. This was for the secretary's information. If we had intended on briefing the President of the Treasury Board, we would have written him a memorandum which then Mr. Clark would have signed to the president. So if this is a memorandum to the secretary, it was for his use only.
Senator Stewart: But, most curious, one interpretation of your answer is that Mr. Clark, the secretary, was a fellow in need of private education, so you are giving him a private education. Another is that indeed this was part of the normal bureaucratic process and that you intended that he would use it within the governmental process.
Mr. Cappe: Yes. I think we wanted to make sure that the secretary was informed and current with the file as it was developing and could deal with his colleagues in other departments, and as the case may be, if necessary, with the ministers. But I wanted to just make the distinction that had we felt at this time that it was necessary to involve the president, we would have sent the president a memorandum, and indeed there is one or two in here that we did that with.
But, this was meant for the secretary as he might need it and as he might use it, and Senator Stewart is quite right that he could have used it in dealing with colleagues in other departments or with ministers.
Senator Stewart: Thank you, Chairman.
Senator Tkachuk: I have a further question on that because this is an important little paragraph here and it was on - at this time - see this is March 12th. The minister of the Crown, the Minister of Transport - there are a couple of decisions made here. The previous minister had made a decision as to how the government would proceed, and the government had made a decision on how it would proceed.
Then, there was an RFP process announced and then there was a proposal call, and then there was a winner dependent on certain conditions announced in December. Yet, three months later, there is a recommendation to your superior that the way to get rid of this problem was to just get rid of it to someone else.
Mr. Cappe: Well, that is an interpretation of it. I would rather think of it in terms of trying to deal with the Lester B. Pearson International Airport in an integrated fashion. What we wanted was an authority that could deal with the management of the airport on both air side and land side, would be able to manage the terminals or decide how to contract for someone to manage the terminals, and someone who could finance the runways or find someone to finance the runways.
Senator Tkachuk: Go ahead, sorry.
Mr. Gershberg: Perhaps to add to that, it is around this time that the Minister of Transport decided to go out on an RFP for the runways as also a potentially private sector deal, and that wasn't the case back in December when we had agreed to the announcement at that time. So it was getting more complicated.
And we had also at that time some experience with Vancouver where indeed the LAA was managing both the runways and terminal development through the LAA, so there was some concern about managing all of these files and managing Pearson as an airport. And we are also at a period, as you remember in March, where things were a bit stalled. There was that financeability issue, there was a problem with Air Canada and so on, so things were in a bit of a hiatus. One way around that might have been to go the LAA route.
The Chairman: Could I ask you a question on that? On September 17th - the document is - you will have to go back to the index.
Senator Kirby: What year?
The Chairman: September 17th, 1992 and the number is 000346S. And the only way you will find it, because it is marked out, is to go back to the index.
Mr. Cappe: 00346.
The Chairman: Yes. Mr. Gershberg writes to Mr. Mel Cappe in 1992, and there is no such thing as an LAA in Toronto or anywhere near it, and he says, and I quote the last paragraph:
Transport officials are looking at having a local airport authority for Pearson set up and in operation for 12 months.
It never happened.
The idea is that the LAA would assume responsibility for the T1 and T2 redevelopment project and for building the new runways. It is not clear to us, however, that it is feasible to have an LAA in operation within 12 months, nor whether the ministers would want to proceed this way. We suggest you not raise this possibility in your meeting.
Mr. Cappe: Is there a question?
The Chairman: Just a comment from you. A reaction to this?
Mr. Gershberg: It is hard to know what was happening precisely at that moment, but you know at that time you are right, I do not think there was a serious proposal on the table for an LAA. I think the situation had changed by March where there was.
Senator Jessiman: Not true.
Senator Kirby: There is conflicting evidence. Mr. Chairman, the witness said I think something. Surely he is allowed to express his own views. The guys on the other side can't start saying we disagree with what he thinks.
Senator LeBreton: Last time I looked, I wasn't a guy.
Senator Kirby: I take that on a non-sexist term.
Mr. Gershberg: I think the other point if you go back to the original memo on March 12, we indicated we didn't think it would be possible to get a contract at that time for probably another six months. It was our assessment in terms of the Pearson T1, T2 development that it might take longer than perhaps we had imagined originally so therefore there might have been time for an LAA.
The Chairman: All right.
Senator LeBreton: Because Senator Stewart asked when we were dealing with the document he was asking me what I was referring to on document 00304 when it said,
We understand Mr. Corbeil has indicated to his officials his preference to award the contract to Paxport. He wishes to respect the system.
And then I interjected, as he announced in December 1992. And then he asked me what I was referring to. So just for the record it is in Tab K of our briefing books. Briefing book was prepared by the Library of Parliament. It is a copy of the December 7th, 1992 release announcing the proposal from Paxport as the best overall acceptable proposal, and then in the document Mr. Corbeil goes on to talk about the importance of Pearson cannot be overstated, and then if you will like I will quote from the document or I will simply take it out of the book and provide a copy to Senator Stewart.
But in the document it says:
Because of the economic restructuring taking place at Canada's two major airlines, the government wants to assure itself that changing financial realities are addressed fully before any construction begins. Consequently, Paxport Inc. will have to discuss with stakeholders and be in a position to satisfy the Government of Canada as to the financeability of the initiative before the federal government enters into negotiations to reach an agreement within the framework of a request for proposals. We are confident these consultations could be completed quickly so that negotiations could begin as soon as possible.
So this is just to support what our witnesses are saying, that that was listed by the minister. Just as an aside, when I read all of these comments on the various memos, I am rather encouraged that you ask so many questions. It certainly was a very open and transparent process and a lot of people had a lot of views on various subjects.
Senator Jessiman: I just have one question. I am looking at the same memorandum, 00304, first page, and I just want you to explain it. At the top it says secret. I want you to explain it, it says originator B. Cleevely. What does that mean?
Mr. Cappe: That is an indication that indeed Mr. Cleevely, about whom we spoke earlier, was the officer on the file and would have done the drafts of this memorandum. I am the one who signed it and I am the one who was responsible for it. I can answer for it.
Senator Jessiman: The one I have isn't signed.
Mr. Cappe: There are two versions of this memoranda. Just to prove that the one I signed is important, I have an unsigned and undated version in my documents, and I will speak to the one that I signed.
Senator Lynch-Staunton: History repeats itself?
Senator Kirby: This scribble constitutes a signature.
Mr. Cappe: The version I have, and I do not know - I hope my sources are the same as honourable senators, it says original signed by.
Senator Grafstein: I assume that we still follow the old tradition of drafting a memorandum, correcting it and then signing it after you are satisfied that it is complete? Nothing new about that I take it?
Mr. Cappe: I hope not, no.
The Chairman: Senator Kirby?
Senator Kirby: It is hard to believe, Mr. Chairman. Thank you very much. What I would like to do is to take you fairly quickly I hope through a series of memos and notes and various documents essentially in chronological order. So I will begin. This, you will have discovered, is for purposes of my assistant, so we will begin with F. I have done this so I have made copies and will actually give you the copies. Saves us from looking through all the books.
This is a report on a meeting held on the 18th of March in the DM's board room. I guess it is DM of Transport. My question to you is if you look at the long list of people, are any of those Treasury Board people? And I ask because it seems to have a cross section of people involved. Are any of those your people?
Mr. Cappe: No, they are not.
Mr. Nelligan: Excuse me, senator, I wonder if you could read the document number for the record.
Senator Kirby: I am sorry, 00007.
Mr. Cappe: Most of the people on this list I recognize as names as Transport Canada officials, and Mr. Broadbent of course who was not, and there is one name I do not recognize, and there is also Justice lawyers.
Senator Kirby: Can you look at the bottom of the first page, there is a statement that says, and I will read it to you:
Clear indication that the joint venture is a product of the government (PCO/politicians)
The joint venture being the Mergeco proposal. Can you either comment on that or can you tell me in fact how you think Mergeco came about? What is your understanding of the origins of Mergeco?
Mr. Cappe: As to the particulars of this note, you should ask the person who created it because I have no comment.
Senator Kirby: There were no Treasury Board people at the meeting. That is okay. What is your understanding of how Mergeco came about?
Mr. Cappe: We observe on December 7th when the press release came out that the government had indicated - Minister Corbeil had indicated there was a best overall acceptable proposal. We were consulting, as Mr. Clayton referred to, with Paxport on dealing with those two issues that Senator LeBreton raised, the consultation with stakeholders and the financeability. We left that - that was actually Paxport's responsibility to deal with, but of course we, Transport Canada at the time, was consulting with them.
In the mean time, as has been referred to several times, Airport Terminal Development Group did not withdraw their application and so the strength of ATDG's proposal was indeed as indicated in the press release it referred to them as having a proposal of "high quality". And their high quality came largely from the financeability. Paxport's was problematically stronger, and the two of them had, in a sense, complimentary proposals. As to how the joint venture came about, I don't know the answer to that.
Senator Kirby: When did you first hear about Mergeco being created, roughly?
Mr. Cappe: I really could not - I am bad with dates.
Mr. Clayton: I don't know the precise date, but I guess it would be well after many people in Transport heard about it. It was quite late in the process.
Senator Kirby: From Treasury Board's perspective, was the idea of the two bidders combining into one a good idea or a bad idea? I ask that only because generally one does better if you are negotiating when there are two potential players as opposed to one?
Mr. Cappe: The notion that there was still two proposals on the table was not a bad thing from our perspective in that that would allow the prospect of better negotiations, if you will, or stronger negotiations on the part of Transport Canada. However, after extensive consultation, and we still had not been able to satisfy anyone that the financeability was there -
Senator Kirby: This being what time frame roughly are you talking about?
Mr. Cappe: We had been going through that period from December through to whenever without having satisfied the financeability. Then the dynamics change, of course, and the question of whether it is better to have two people competing still or one person who might be able to deliver it, it is a judgment call and I don't have a particularly strong view.
Senator Kirby: Okay. Can you tell me a little bit about the role of the PCO in all of this because I want to come to some particular memos in a minute, but can you just give me your overall view about -
Mr. Cappe: Mr. Rowat was here and testified as to his involvement and I am not going to testify to his involvement.
Senator Kirby: Mr. who?
Mr. Cappe: Rowat.
Senator Kirby: But just from your overall perspective, was the PCO more involved in this issue than a lot of routine business issues, less involved, how would you describe it?
Mr. Cappe: First of all, I wouldn't have characterized this as a routine business issue. This is a very large development of the largest airport in Canada with significant implications for the country.
So one of the points that Mr. Gershberg responded to earlier was we had been involved with many files over this period. I had asked my secretary to go back and look at my agenda to see how I had been involved in meetings, and I have the list of the five meetings that I attended, many of them in the Privy Council office in the clerk's boardroom.
At the time though she had to sift through many of the meetings I was attending with the clerk because we were in the process of budget preparation, and I had attended with the clerk on a number of files of significance at meetings related to other issues, so it is very hard to judge whether this was usual or unusual. That is something you can come to a judgment on. I was participating in many of those.
Senator Kirby: The clerk was Mr. Shortliffe at the time?
Mr. Cappe: Yes, that's right.
Senator Tkachuk: Is there an author of this memo?
Senator Kirby: You have the memo in front of you as well. I don't know. Clearly, it is the minutes of a meeting. I don't know who wrote it.
Senator Tkachuk: None of these people were at this meeting?
Senator Kirby: I don't know that until I ask him the question.
Senator LeBreton: It says that. List of people in attendance.
Senator Kirby: I asked him at the beginning. In fairness, there were a whole bunch of names I didn't know. Were any of them Treasury Board people? That to me didn't seem to be an unreasonable question. I wonder if I can move on to the next document which I have given a letter of G to, and this is a letter from Mr. Paul Gonu, am I pronouncing that right? Is that the right pronunciation - to you, Mr. Clayton dated March 24, 1993. In that document -
Mr. Nelligan: Number, please?
Senator Kirby: You want the number. I am sorry. I keep forgetting. My numbers are pretty vague. It looks like 001102, but the numbers are sort of half cut off so I think I am about right.
Mr. Clayton, if you will look over on page 3 of that memorandum, it says and I will just quote from it, excuse me paragraph 12:
...it appears as if Broadbent's mandate is to "get the thing settled".
And then it goes on to say:
Most MOT people, both headquarters and Region are reluctant to discuss "officially" what Broadbent may be up to and how he is going to achieve it.
What does discuss "officially" in quotes mean, and secondly why were people reluctant to talk about it?
Mr. Clayton: I guess when Mr. Broadbent took over, before Mr. Broadbent took over as the chief negotiator, there had been a whole series of very strong informal contacts with Transport officials everywhere which is part of our job. Particularly in the early stages of Mr. Broadbent's taking over, the perception was from our people was the first thing was that he had created a team of people under him that was somewhat different from some of the people we had been dealing with before, and that for an interim stage in effect the communication with Treasury Board secretariat was a lot less open than it had been previously. As the Broadbent era went on that tended to loosen up, so that sort of reflected that sort of moment in time in terms of relationships with MOT staff.
Senator Kirby: In that sense, do you know who gave Mr. Broadbent his mandate, was that given by who?
Mr. Clayton: I assume it was given by the Deputy Minister of Transport.
The Chairman: You know Mr. Cappe, earlier I was going to suggest that Senator Tkachuk withdraw a remark he made with respect to gossip as well as information.
Most MOT people, both headquarters and Region are reluctant to discuss officially what Broadbent may be up to and how he was going to achieve it.
How do you square that with Mr. Paul Gonu? Who is he again?
Mr. Clayton: He is the staff officer that in fact works in my organization. He had been dealing with Transport Canada on land airport issues by then for about a decade.
The Chairman: This is common place, this kind of thing going back and forth and opinions of people and how he will do it?
Mr. Clayton: That is a staff member to me writing to myself in terms of his perceptions of what is going on at Transport from the knowledge of somebody that in effect deals with them every day and has been for 10 years.
Mr. Cappe: We were operating in the Treasury Board secretariat on the basis of our relationships with Transport, and the extent to which they were being forthcoming with us and open was to the extent to which we had any information on the details of this. There is a number of places, not just in this memo, where that is indicated that there was more or less. I think after Mr. Rowat went there, you will find places where we indicate that we have more information.
The Chairman: Could I ask you, have you ever asked a person who writes a memo like this what his source of information is?
Mr. Clayton: I don't know whether I asked the person specifically on this one, but yes, sure. We talk all the time in terms of relations that are going on with departments.
The Chairman: You just don't put it in.
Mr. Clayton: This is an internal memo.
Senator Stewart: So the fact that it is included here implies that you are satisfied that this didn't come out of whole cloth?
Mr. Clayton: The officer that wrote this had 10 years experience dealing with MOT and I think was one of the leading experts in the subject. I trust what he says.
Senator Kirby: I wonder if I could ask you a question about paragraph 14. It is on the same page:
I understand from transport that Broadbent will be seeking advice from I.D. Clark about how far he can negotiate a deal with Mergeco without contravening any TB policies.
Did those discussions take place? And if so, what did you tell him?
Mr. Clayton: I am not aware whether Mr. Broadbent talked to Mr. Clark. He did not talk to me.
Mr. Cappe: At a number of meetings I attended, we did discuss the issue of how far one could go in a consultation mode and continue to not be negotiating.
The Chairman: That is a very good point.
Senator Kirby: Did you reach any conclusions on that question?
Mr. Cappe: Yes. I was satisfied that we did not go so far as to not be consulting. That means that we were satisfied.
Senator Kirby: You were satisfied you were not negotiating?
Mr. Cappe: Yes.
The Chairman: Could I draw your attention to a document, 002202?
Senator Kirby: What is the date? I have my stuff filed by dates, not by numbers.
The Chairman: The date is 22nd of March, 1993. It is a memorandum to Mr. Clark from Madam Labelle. This of course goes back to Mr. Clayton's and my discussion on semantics. Madam Labelle writes in a paragraph in the second page, this one paragraph. Do you have it?
Mr. Cappe: Yes.
The Chairman: It says:
Not only would this involve a hiatus we can ill afford if the desired progress is made in a timely fashion, but using the Claridge bid as a basis involves a significant drop in technical merit, probably considerably more than would be the case if we were to "negotiate down" from the Paxport proposal.
Now, all I want is an explanation as to really what the hell was going on at that time?
Negotiation - we have had this up and down the stairway several times, but you describe it to us as to what the hell is really happening at that time? You had the best overall proposal.
Mr. Cappe: Can I just note that indeed, Mr. Chairman, in reading this into the record you actually corrected a typo which was here because indeed this was a draft that was not signed. So just so we can establish that this was a letter that wasn't sent, as far as I know wasn't sent, it may have been and I am not aware of it. I think, Mr. Chairman, you have picked on the same point that is consistent with what we were talking about earlier which is the ability to take advantage of the strengths of the two proposals.
So, if the desired progress - by using the Claridge as a basis involves a significant drop in technical merit because as I had indicated there was a generally accepted view that the best overall proposal was the Paxport proposal, and I can't speak to Ms Labelle's interpretation of what she meant or whoever drafted this for her, so I will not interpret the words that are here.
But it was our view that we wanted to stay within the framework of the RFP, and as long as we stayed within that framework, coming back to my response to Senator Kirby, it was important to stay within that framework so we did not create any legal liabilities or expose ourselves to the Claridge group being able to pursue us for having violated the framework of that RFP process.
The Chairman: I am just trying to get the - you mentioned the frustration that I had with the word - refer to Mr. Clayton - that the word consultation and negotiation, when does one start and when does one finish? When did you -
Mr. Clayton: I think maybe again, I do believe the letter wasn't signed, but just to talk about the general situation at that time. You still had the Paxport bid on the table, Paxport bid had been designated in December as such as the most preferable. And we were trying to at that stage - it is not negotiate, sorry. I say the same thing. You are still consulting with Paxport.
I think Transport officials mentioned this too. There was a real - I mean Transport officials wanted the Paxport deal to be the deal on which you negotiated from because it was better financially and it was better from a technical viewpoint. You cannot turn around - while Paxport is there you can't turn around and deal with Claridge, that is the Claridge bid.
I think what this reflects is that if you in effect were in the situation if you declared the Paxport bid non-compliant, that is they did not meet the financeability at that stage, you would then go to Claridge who would then be the only person in the process, and you are trying to negotiate up with the only person who was left in the process which is not exactly a very strong negotiating position. So I think, this gets into my earlier thing, you certainly have in this process in effect to say we really like the Paxport type of bid that was there. I am not talking about the corporation, I am talking about the bid that was there as the basis of any future negotiation.
Mr. Cappe: I would further note that we are talking about a memorandum that is filled with typographic errors, and as far as we know has not been signed. The context, as I see it, whoever drafted this has indicated that Mr. Broadbent is starting meetings with Mergeco officials to find out exactly what it is they are proposing to Air Canada. It is in that context that the Air Canada relationship - I think that this is written, and indeed there is even a sentence excerpted, so it is difficult to see exactly what that is referring to.
Senator Lynch-Staunton: This is not the first time that we have discussed documents which are really drafts unsigned and sometimes undated. I am just wondering whether, you know, it is not an embarrassment to the writers of that who were doing their homework at the time and submitting draft opinions to have their unofficial documentation made public this way. The final draft, if ever was sent, may be completely different than what is before us.
Senator Kirby: We are referring to the document.
Senator Lynch-Staunton: We have had many before.
Mr. Nelligan: It would appear, and if you look at the next document and I can't be sure of it, that it was sent to Mr. Shortliffe along with the next letter, but I can't be sure of that.
Mr. Cappe: But that is also indicated draft.
Mr. Nelligan: It is a draft as well, yes. There are a lot of them.
The Chairman: We had a draft. Mr. Farquhar wrote a draft anticipating a situation with respect to the formation of the LAA in Toronto.
Mr. Cappe: Well, to further complicate this, Mr. Chairman, you have a cover fax sheet which may indicate it has been sent or not sent.
Mr. Nelligan: To Mr. Shortliffe, but not to Mr. Clark.
The Chairman: Mr. Farquhar, we had to bring him back to explain that he had written the draft in anticipation of his minister deciding on a particular course of action which didn't happen so it was never sent, but we got it. It took quite a bit of time in this committee to straighten that matter out. So why the hell are we getting these things?
Senator Kirby: Am I still on, here?
The Chairman: When I started the stopwatch, that was an hour and 15 minutes ago.
Senator Kirby: I think it is fairly self-evident that I certainly wasn't doing that. You understand the problems we have.
I am going to use a document which is my letter I. This is a memorandum dated - you want the number sorry 00298. It is a memorandum from Mr. Gershberg to Mr. Cappe dated April 1, 1993. No significance to the fact that it was April Fool's Day, I trust. The opening paragraph again - obviously, messy is a good Treasury Board word is since it is the second or third memorandum where we have this situation described as extremely messy.
What I really want to ask you are a couple of questions over on page 3. The comment, Mr. Cappe, that you have been making about this final distinction that you draw between negotiations and consultations. And in the first paragraph it says and I quote:
Paxport officials (Messrs. Hession and Matthews) have stated that Transport has really "awarded" the contract to Paxport and are outraged at what they see as bureaucratic stalling.
First of all, this is a period of time at which you felt you were consulting, you were not even negotiating. And how is it possible that Paxport would feel that they had already been awarded the contract? There is a long way between being awarded a contract and government officials believing they are consulting with someone about a potential negotiation which might lead to a potential contract.
Mr. Cappe: That indeed was the nature of our concern in this was to stay within the framework of that RFP process. And indeed, the terms "best overall acceptable proposal" were meant to indicate that yes, we were prepared to consult, but no, we had not awarded the contract. Paxport may well have interpreted that differently and felt that they had a preference.
Mr. Gershberg: Senator, some of the other things that we may have talked about earlier, which is that - I am guessing and we have heard this - I think you have heard this from previous testimony, that Paxport was frustrated in the sense that they felt they wouldn't be taken seriously by Air Canada until they were declared sort of the developer. I think that they felt they were sort of caught out. So I mean, it was a dilemma. We were in that period until Mergeco was formally formed if you wish on May 5th, for that whole period over a number of months where in some sense things were stalled. We couldn't move forward because of the financeability issue and the Air Canada issue.
Senator Kirby: Is it possible that one of the reasons Paxport thought they had already been awarded the contract is because of what is said in the next sentence in the memorandum which says that:
We understand that Minister Corbeil has indicated to his officials his preference to award the contract to Paxport.
Senator LeBreton: Continue reading.
Senator Kirby: ...but he wishes to respect the system.
Senator LeBreton: Thank you.
Senator Kirby: It was clear at that point, was it, that - I guess who I am asking Mr. Gershberg or Mr. Cappe - was it clear to you and Treasury Board at that time that the Minister of Transport clearly wanted to award the contract to Paxport even though you were still only consulting with them?
Mr. Gershberg: As indicated earlier, that was the government's position as of December 7th, so we were always working on that assumption. I don't think I can comment beyond that.
Senator Kirby: In the next paragraph you talk - you now get into some obvious concerns you had about potential lawsuits or indeed in the next paragraph you talk about potential severe criticism from the auditor general if it proceeds to negotiate with Paxport on a sole source basis for this $500 million plus project.
And farther down you will find and indeed on the next page you are clearly concerned about potential lawsuits. Can you tell us what were your concerns about being sued? Why were you so concerned about the process that you even later on say that Justice should be the one providing advice in order to keep the department out of a lawsuit? What were you worried about?
Mr. Clayton: Again, to go back to the situation we are in, we had - through a competitive process, the government identified Paxport as the preferred developer. Whatever, could never quite get that term right, but anyway, December 7th, that was still the live bid and they are trying to in this process deal with meeting tests related to financeability.
If at that stage you decided, without having dealt with financeability issue, to say Paxport is a winner, okay, we are going to negotiate with them. You are then in a situation that you have gone outside the RFP process, you are sole sourcing with Paxport, and clearly Claridge, whose bid is still there, could take legal action against the government related to the RFP process. So this reflects a concern that goes on for several months to say that we have to sort of observe that RFP extended process in terms of dealing with the Paxport bid that is still on the table before any other options are looked at.
Senator Kirby: I am still not clear in my own mind, maybe you can help me explain, what your real concern was. And indeed, I also don't understand the last - I guess it is the last two sentences on page 4 in which you say in the second to last sentence:
The Minister of Transport has put the department in a box by pursuing his preferred bidder approach.
What box did he put the department in? What do you mean by pursuing his preferred bidder approach?
Mr. Gershberg: Pursuing his preferred bidder approach is shorthand for the best overall proposal. We use it in quotes quite often in notes.
Senator Kirby: What box did he put the department in?
Mr. Gershberg: Again, it is the difficulty that over this extended period where the department was in a sense trying - I mean, we had the two bids on the table. We had the financeability issue outstanding. We had the Air Canada issue outstanding, and as you can see from some of the other drafts, there was an issue of really how far can you go? Could you begin to negotiate with Paxport? Our view was no, you probably could not. What do you do with the second bid and so on. There really was that period from virtually February through to the May 5th some difficulty in knowing how far one can go and how to pursue it, which is why in the end that we thought Justice. In terms of providing guidance on any - if one were to begin negotiations for example in this period, would there be legal liabilities?
The Chairman: What was significant about May 5th?
Mr. Gershberg: May 5 was the date, as I recall, that Mergeco was officially formed and that negotiations could begin with Mergeco.
Mr. Gershberg: Claridge went through their bid.
The Chairman: On May 5th you knew that issues of financeability were out of window. They were gone, they were no longer at issue.
Mr. Gershberg: But also financeability, but perhaps in this context, more importantly the process. There was no longer two bids on the table.
Mr. Cappe: This was focusing on the issue of the process.
The Chairman: But it took them, not you, from the time of their intent, January, from the time that the marriage so-called took place, the terms of the union had not been resolved to your satisfaction until May the 5th at which time an awful lot of the veil fell away from your sweaty brows?
Mr. Cappe: Without commenting on veils and sweaty brows, the concern was the withdrawal of the Claridge bid because as long as -
Senator Kirby: You wanted it withdrawn?
Mr. Cappe: I didn't say we wanted it withdrawn. I said we were running the risk of procuring potential liability by negotiating on a sole source basis with one of the proponents while the other proposals stayed on the table.
Senator LeBreton: Common sense.
Senator Stewart: Thank you, Chairman.
The Minister of Transport has put the something in a box in pursuing his preferred bidder approach.
The implication of the sentence is that there was an alternative and it would have been a better alternative. Could you describe that alternative?
Mr. Gershberg: I guess there are - I mean, I don't have any great wisdom on that particular issue. I think as I say, our real concern was, you know, the legal issues surrounding this whole question that was -
Senator Stewart: I understand that. But the implication is that there was an alternative which would have avoided legal problems to which you have made reference again and again.
Mr. Gershberg: I mean, there are a variety of alternatives. One might be to declare somebody a winner. I don't think that we wanted to go that far. As I say, I think our real concern here were the potential liabilities of pursuing a negotiation on a sole source basis.
Senator Stewart: If I had received that memorandum, I would have interpreted that sentence as meaning that you were communicating to Mr. Cappe an implied criticism of the minister. "The minister has put the department in a box." Now, he wouldn't have put it in a box if he had done something else, is that not correct?
Mr. Gershberg: I honestly can't comment, senator. I really don't recall what was being referred to at that moment other than, as I say, you have to look at the next sentence in terms of the guidance and the general concerns we had in the memorandum.
Senator Stewart: You are saying, reading the two sentences together, you are saying that the department has been put in a box by the minister and that consequently, that Justice should be the one providing guidance to keep the department out of a legal suit. Justice as opposed to whom?
Mr. Cappe: I guess, at this point we were, as officials of the Treasury Board secretariat, dealing with the Department of Transport advising them on the process. And as Senator MacDonald asked, we were engaged on this discussion on process. We were concerned that we were into a domain of legal liability here where we really needed professional advice, not just specialized expertise.
Senator Stewart: In other words, it means that Treasury Board secretariat would not be competent to deal with the situation which had been created by the minister, the box?
Mr. Cappe: It was again the process that was being followed. We were trying to stay within the bounds of that framework of the RFP and still move as far as we could within that framework to negotiate or to - sorry to be very precise - to consult with the best overall acceptable bidder.
Senator Tkachuk: Mr. Chairman, to clarify on that because the box refers or must refer to what the minister did. The minister must have said something or did something.
If you go back to the same memo, status of negotiations with Paxport announcement on T1 and T2,
On December 7, 1992, the Minister of Transport announced that in response to a Request for Proposals, (RFP), Paxport submitted "the best overall acceptable proposal". However, before proceeding the Minister of Transport publicly stated that Paxport Inc. would have to discuss the overall project with stakeholders, and satisfy the government as to the financeability of the initiative before negotiations could begin. The Minister noted that the other proposal submitted by the Airport Terminals Development Group (owner/operator of Terminal 3) was also of "high quality".
Mr. Cappe: Yes.
Senator Tkachuk: That is what the minister wanted, no?
Mr. Gershberg: Yes.
Mr. Cappe: That is what the press release had indicated as Senator Lebreton had read out.
Senator Tkachuk: That is what he wanted, right? If that is what he wanted, now we go back to - you know, which is a nice word. Like I say, there is so much gossip in this stuff. This is what the minister wanted, so therefore, there was difficulty in achieving what he wanted, is that not correct? Is that not what you are referring to here?
Mr. Clayton: I think maybe also to clarify in that conclusion, the sentence before it talks about Air Canada as not willing to play ball, and the box - the catch-22 that had been created was the relationship of having to bring Air Canada on as part of that deal and the relationships, the difficulty with doing that.
Senator Tkachuk: Called by many, Air Canada sandwiches, by Mr. Hession and others. You don't use that word?
Mr. Clayton: Other lurid language.
Senator Tkachuk: Okay. Thanks.
Senator Grafstein: Mr. Chairman, I am now really confused from a process and legal position vis-à-vis the minister's preference or the government's preference.
Now, I assume - tell me if this is fair or not. Officials statutorily required to review financial transactions of this nature. You officials look at this transaction. The application who gets through the first net on December the 7th is flawed. The other application, the other proposal -
Senator Tkachuk: Explain yourself, why is it flawed?
Senator Grafstein: Excuse me.
Senator Tkachuk: You asked the same question of Senator Lebreton when she brought an interjection. I want to know where it says -
Senator Grafstein: I am asking the witness. If they are having difficulty grasping what I am saying they can ask for clarification.
Senator Tkachuk: Senator Grafstein asked a question. You are making a statement here. You assumed - I want to know where it is flawed.
Senator LeBreton: That is the Nixon report. He is ahead of himself.
Senator Grafstein: Because the department came to the conclusion and the minister came to the conclusion or other people came to the conclusion that they could not proceed with choice number one.
Senator Tkachuk: That is a very good question.
Senator Jessiman: Or choice number two.
Senator Grafstein: So I am saying choice number one had flaws. Choice number two had flaws, but what gave the Treasury Board the right to determine that a merger of A and B, both of whom were flawed, would be satisfactory without contravening the Treasury Board guidelines, lay aside the legals?
In other words, you are trying to preserve the transparency and the fairness of the process. It is a public process. People embark on that public process and they provide offers or bids or proposals. Because of the process, they are whittled down to two, and one in effect gets through the first net but it is flawed, it is not total. It is not complete. The second one, also of high quality according to the minister, is also flawed because it does not meet all the correct parameters.
Now, what then gives the Privy Council or the Treasury Board or anyone the authority to deal with a merged bid without flawing the process?
Mr. Cappe: Well, with respect, Mr. Chairman, what we are talking about is whether indeed the RFP process has been violated or whether we have stayed within that framework of the RFP process. So we are not saying that this is better or worse. What we are saying is that once - and we have confused two events which are actually different, one is the creation of Mergeco, but actually it took, as I recall, a day or two before the Claridge bid was withdrawn. It is the withdrawal of the Claridge bid which then removed the prospect that they would have recourse against the Crown for going without the bounds of the RFP.
Senator Grafstein: Mr. Cappe, that was not my question.
Mr. Cappe: Okay.
Senator Grafstein: You were concerned with maintaining from a statutory standpoint - this is fulfilling your statutory responsibilities - that a transaction met certain financial requirements in due process, due process being the terms of reference you set out to the public, not just these applicants, these proponents, but others. Then application one goes through the process, flawed because it doesn't meet all the parameters. Application two, flawed because it does not meet the parameters, and then somebody in the government decides, the way we will get out of - and I am projecting this as a hypothetical proposition, how do we get out of this box, is that they we put the two together.
Senator Lynch-Staunton: Point of order -
Senator Grafstein: My question -
Senator Lynch-Staunton: Point of order.
Senator Grafstein: It is not a point of order. I am asking the questions of these witnesses.
Senator Lynch-Staunton: You are suggesting the government put these two together?
Senator Grafstein: As a hypothetical situation.
Senator Lynch-Staunton: As a hypothetical question, you are absolutely wrong.
Senator Grafstein: Let me finish my question here. It is a hot summer, right.
Senator LeBreton: You have not been here for two months.
Senator Grafstein: I should go away. I apologize for this, but I am trying to get at the principles. I am trying to get at the public policy principles. The public policy principles are, with a great degree of dispatch and care, the officials of the Treasury Board say we have to maintain the integrity of the process which is a public bidding process. As a collateral to that, the officials in these documents - you are concerned that it not only meets the integrity of the Treasury Board process, but also it meets the legal requirements of the process. There are two parts, but different parts of the same process. And as an official, I can see as I read through the memorandums the concern on both.
Now my question is again, having been concerned about the integrity of the process, and I don't question that, how is it that the process can then result in a merged bid that does not meet in any way, shape or form the bidding process which means gives a third party opportunities to come in and bid the process yet again?
Let me conclude. So that one of the options to the government, subject to a time constraint, which I assume is the real box here, was to say "look, this process has not worked." Let's start again and let the public be given an opportunity to bid again. Now that has happened in other places a number of times when in fact, the government concluded that the bids were not financially viable or the bid coming in wasn't financially viable, so it is a question I ask your officials.
Mr. Clayton: Senator, clearly throughout many stages of the process you could have cancelled it. I think what you are getting at in terms of this process, the Paxport bid was still the bid. It may have changed the ownership, but that happens in bids. In effect, that was the bid in which the government had accepted in December as the best overall bid. The government had, after that, something quite different from the RFP, had opposed other conditions because situations had changed on that preferred bidder or on that most acceptable bid. And by the time you get to May and the recognition finally of Mergeco, it is still the Paxport bid which is dealt with. Right to the end, it is the Paxport bid. It is changed, it is revised, but it is revised according to conditions the government had put on the bidders.
Senator Grafstein: Let me finish, please. But the ownership, the end result is a significantly and materially transformed bid in terms of ownership, financing, business plans, criteria, all the criteria you set out at the beginning. So if you started one, two, three, four, five, they didn't fulfil any of the one to fives at the end of the process because it was a different animal. My only question is the process, not the legalities here, because you stress the legalities and I understand that.
Mr. Clayton: Clearly the ownership had changed. From our understanding right to the end the concern was that the final process was consistent with the original framework of the RFP process and we were satisfied - just as satisfied that that was what had occurred.
Senator Kirby: I have one last question.
The Chairman: I just want to give Senator Grafstein assurance. I will make a note to recognize you before these witnesses leave to be able to ask them the direct questions that you have been getting to about a flawed process and an adequate contract. I will give you the chance to ask that question of them before they leave tonight.
Senator Grafstein: I appreciate that, Mr. Chairman.
Senator Kirby: One last question, then I realize we are at 5:30, but it finishes with that document. Given your concern about process, and obviously you were really concerned about process because given all the other transactions the government goes through, you don't have Treasury Board memoranda concerned about legal lawsuits, you don't have Treasury Board memoranda concerned about the auditor general, there was obviously something really different about this process compared with normal. It was a special process in some sense. What made it so special? I mean I have seen enough Treasury Board memorandums that all of these concerns about AG and lawsuits and stuff are very, very unusual.
In fact, I can't recall seeing one. So what made this so special and why?
Mr. Cappe: There were a number of elements that made this unusual, and indeed, we indicated that this was an extremely "messy file" in quotes.
The first element I described earlier was the nature of the treatment of four parallel processes in the treatment of Pearson. The second element was the complexity from the Treasury Board secretariat's perspective of touching all the different elements of the secretariat. Frankly, it is an unprecedented initiative to deal with an airport of this magnitude, of this size, in this fashion, so we were learning as we went. The last part, and I will defer to Mr. Clayton, is this issue of staying within the framework of the RFP process. And I understand the point that Senator Grafstein was making earlier that there is a difference between the legalities and the appearance of the process. I guess from our perspective we were concerned about both the public perception and the legal issue, and we were desperately trying to come up with a solution that would be good for Canada and at the same time stay within the process.
In all of this process, the primary Treasury Board secretariat preoccupation was as employer of those 200 public servants who were going to be transferred, so that in terms of those things we were actually responsible for, that was our preoccupation. In terms of the other elements of advising the board, that full range of activity was all implied.
Senator Kirby: Would the unprecedented nature of this whole process have been easier to handle had you not been so jammed for time, had there not been a fixed deadline by which things had to be done?
Mr. Cappe: We made it clear, and indeed in this memorandum it says, "It seems unlikely to us that any contract for construction could be struck within the next six months", so it was our view that the time frames were sufficiently compressed, and indeed we were proved right in the end.
Senator Kirby: Unrealistic in that sense. Mr. Chairman, I think we are at 5:30.
The Chairman: It is 5:30.
Senator Tkachuk: Are they coming back?
The Chairman: Gentlemen, you will be back tonight.
Mr. Cappe: We are at your service.
The Chairman: Mr. Quail has agreed to come at eleven o'clock tomorrow. Now when we come back Senator Kirby, how many more minutes do you want?
Senator Kirby: Mr. Chairman, I have quite a bit more, however, I am happy to pass at this point and come back to me subsequently.
The Chairman: All right. The questioning will begin with Senator John Lynch-Staunton at seven o'clock, right? We are adjourned until then. Thank you very much.
The committee adjourned until 7:00 p.m.
Ottawa, Tuesday, August 22, 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. Gentlemen, we are grateful to you for coming back this evening. We will go until 9:30. For the benefit of our colleagues, we start again tomorrow at nine o'clock with Price Waterhouse.
Now, I think Senator Lynch-Staunton wants to begin the questions this evening. Please proceed.
Senator Lynch-Staunton: Thank you, Mr. Chairman. I must say I have been very impressed from what I have heard, getting an appreciation of the significance of the role of the Treasury Board in the activities of the Government of Canada, and for that alone, this afternoon has been well worthwhile.
As I understand it, the Treasury Board really acts as a check on the enthusiasm of individual departments and as a watchdog and as one that limits, as much as it can, or tries to control, as much as it can, the activities of departments to respect the budgetary decisions that have been taken.
As a matter of fact, rather than give my assessment, I would like to quote from Politics in Canada by Robert Jackson and Doreen Jackson - I don't say this to flatter those in front of us - a comment which applies to all of them:
Among the staff of the TBS are some of the brightest and most efficient members of the public service.
I don't think that would have been written without support.
But this is also something I found very interesting:
It is the only committee that does not position itself into a circle for policy deliberations, but sits like a jury, facing any petitioners and acting as a tribunal.
Will you agree that that is the role of Treasury Board, or is that a little too esoteric in practical terms?
Mr. Mel Cappe, Deputy Minister, Environment Canada: Well, it actually - without disclosing cabinet confidences, it is actually a unique cabinet committee because typically, in a cabinet committee, ministers would sit around the cabinet table and the Chair would preside and officials might come from time to time to sit beside their minister or behind the minister. In the Treasury Board meetings, ministers sit down one side of the table and officials of the Treasury Board secretariat sit down the other, and officials of the secretariat present the cases to ministers and then ministers deliberate and decide.
That is unique in a sense, and in my opening remarks I made reference to the unique accountabilities of the secretariat. We can't only serve the president. We have an obligation to give our best professional advice to the Board itself.
Senator Lynch-Staunton: So I want to relate all that and emphasize the role that you played in what became the Pearson agreements.
As I understand it, the Treasury Board was involved right from the beginning. For instance, when the request for proposals were being drafted, was Treasury Board being consulted or asked to approve the request for proposals before it was sent out?
Mr. Cappe: Again, without reference to the specifics, the process which indeed was respected would have had the Treasury Board ministers approve, as Mr. Clayton indicated earlier, preliminary project approval, because this was a major Crown project, and that would have gone to the Treasury Board before the RFP went out.
Senator Lynch-Staunton: Mr. Clayton was very helpful when he came here last month to give us a three, four-step process which was involved in the management of Crown property, but I just want to relate all that background to exactly what Treasury Board contributed to the process which is under examination.
So the RFP was, if I understand it, was scrutinized by Treasury Board before it was issued or made public?
Mr. Cappe: The Board would have - as I say, the Board would have had to have approved it before - had approved it before it was made public.
Senator Lynch-Staunton: Right. Now, when the proposals were received, did Treasury Board involve itself in the evaluation of those proposals?
Mr. Al Clayton, Executive Director, Bureau of Real Property Management, Treasury Board: No, they would not.
Senator Lynch-Staunton: They would not.
Mr. Clayton: The Treasury Board secretariat was involved or -
Senator Lynch-Staunton: When I say "Treasury Board", I mean -
Mr. Cappe: Neither the Board nor the secretariat.
Mr. Clayton: Would be involved with the evaluation of the proposal.
Senator Lynch-Staunton: Would or would not be? I'm sorry.
Mr. Clayton: Would not be.
Senator Lynch-Staunton: Would not be. It would be up to the department itself to do the evaluation; is that right?
Mr. Clayton: Yes.
Senator Lynch-Staunton: And once it had, well, in this case, had decided on Paxport, then would it submit the Paxport proposal to Treasury Board for its assessment?
Mr. Clayton: Again, you're getting into that difficult line in terms of what - in terms of advice to ministers and the actual procedure and what the board -
Senator Lynch-Staunton: All right. Well, then -
Mr. Clayton: Let us say that the contract, in a sense, requires - that is, the final contract - requires Treasury Board approval.
The Chairman: Surely you can be a little more forthcoming than that.
Senator Lynch-Staunton: I don't want you to divulge any of what we recognize are privileged discussions between yourselves and ministers. What I'm trying to establish, if it is there, is the closeness with which Treasury Board followed the whole process from beginning to end on the assumption that Treasury Board is a watchdog of the government and has an important role to play in seeing that the whole process is respected and is a check, yes. I don't want you to tell me, you know, "I had to tell the minister", or, "I could not tell you what I told the minister."
I want to know how strong that role was played and how far it went.
Mr. Cappe: Just before Mr. Clayton responds, I want, Mr. Chairman, to be clear that we would like to be as forthcoming as we can, but that the agendas of Treasury Board are in themselves a cabinet confidence. So we are trying to find a way of generalizing a little bit to give you a better flavour for it, and clearly the agreement -
Mr. Clayton: Maybe a way of getting to your question is that - with again, trying to generalize it - after the RFP process, as such, the Minister of Transport does not require the Treasury Board to approve designating somebody as the preferred candidate. That in effect is within the authority of the Minister of Transport. What the Minister of Transport would require, or any other proponent minister, is approval of Treasury Board of the terms and conditions of the final deal.
Senator Lynch-Staunton: Okay. Now, it was decided at various stages to hire outside experts to help in the evaluation and to help in the other aspects of the deal. Does Treasury Board have any say in the choice of those experts that are selected by individual departments?
Mr. Cappe: As the record indicated, we had expressed some concern for some time, and I don't - we wouldn't have had a preferred consultant, but we would have tried to assure ourselves that the consultant chosen would have had the credibility that they would have satisfied our concerns.
Senator Lynch-Staunton: But are there some consultants in this area that we are looking in which did not meet your assessment of what a consultant should be?
Mr. Clayton: I think maybe a way of dealing with that question is that in terms of - we obviously, as a secretariat, not at Treasury Board, talking as individuals, provide advice to Transport officials or anyone else, would say, "You know, this may be the type of person you need. This is the type of expertise you need."
Senator Lynch-Staunton: I see. So the question of -
Mr. Clayton: Not this firm or that firm.
Senator Lynch-Staunton: So whether we disagree on the individual chosen, the more important thing is the advice given.
Now, the advice given by the various -
Senator Stewart: Chairman, just for the sake of clarity, I noticed that, perhaps understandably, sometimes the expression "Board" or "Treasury Board" is used to refer to the Board of Ministers. At other times, it refers to the public servants who work for the Board. I think it would be good if we could keep those two entities distinct, because the implication at times is that a decision was made by the secretariat, whereas in fact it was made by ministers, perhaps on advice, but that's another matter.
Senator Lynch-Staunton: If you allow, Senator Stewart, I'm not very good at making the distinction between one and the other, so when I use the term, they can correct me if it's not Treasury Board or Treasury Board secretariat. The point is that certain officials made certain decisions, whether it's - I find this is splitting hairs, so I would just as soon not be interrupted by that sort of thing. Treasury Board is Treasury Board.
Senator Kirby: You guys have been interrupting us all afternoon. I think this is a matter of fact.
Senator Jessiman: Is the secretariat only the bureaucrats?
Senator Stewart: Yes.
Senator Grafstein: Then the board is who?
Senator Lynch-Staunton: Are we going to differentiate between the department and the minister and the political stuff?
Senator Stewart: Yes, sure.
Senator Lynch-Staunton: You are, but I'm not.
Senator Stewart: In this case, it's very important.
Senator Lynch-Staunton: We're talking layman's language here, and don't bog me down in unnecessary details.
Senator Stewart: No, no, it's not unnecessary, because in one case -
Senator Lynch-Staunton: Well, it may not be because you're an academic and I'm practical, and I'd just as soon stick with the practicalities.
Senator Grafstein: Senator, how do you get from the public servants the view on the political side? They clearly said to us this afternoon time and time again, "Please, within our knowledge, we'll testify. We won't breach cabinet solidarity, or secrecy. In addition to that, don't ask us to ascribe decisions or motives to ministers, because that's not within our purview."
Senator Lynch-Staunton: I haven't.
Senator Grafstein: When you asked your question, it's difficult to follow what we're asking about the Treasury Board. Is it the public servants, or is it the political arm of the Treasury Board? There are two parts of it. It's not a distinction without a difference; it's a distinction with a mega difference.
Senator Lynch-Staunton: Whatever you call it. All I'm trying to establish, whether you approve or not, is the role of Treasury Board or Treasury Board secretariat, call it what you want, the identity called "Treasury Board", which is in our language called "Treasury Board", which has had a significant role to play in the process which led to the conclusion of the Pearson contracts. And all I'm trying to establish is how close were they at every step. Now, whether it was the secretariat or whether it was the President is irrelevant. It's still Treasury Board.
Senator Stewart: But the -
Senator Lynch-Staunton: I hope this is not going into my time, Mr. Chairman.
The Chairman: We won't penalize you.
Senator Stewart: But here is the point -
The Chairman: Without cavilling too much, let's just say "staff" or "ministers". Just to get -
Senator Stewart: Why not say "board" or "secretariat"?
Senator Lynch-Staunton: You say it. I will use my language.
Senator Stewart: The trouble is you're prone to confuse.
Sen. Lynch-Staunton: You just started confusing it. I was very clear until you came into it.
Senator Stewart: You're going to confuse a group of party politicians, on the one hand, ministers -
Senator Tkachuk: The government.
Senator Stewart: That is an another difficult term.
Senator Tkachuk: The government. Mr. Stewart, there is the government. There is the Treasury Board. The officials act to the government and advise the government, but it is the government that makes the decision.
Senator Lynch-Staunton: Mr. Clayton is identified as the Executive Director, Bureau of Real Property Management, Treasury Board, stop. All I'm using are the official designations.
Senator Grafstein: Mr. Chairman, again, I just beg to differ with my friend. We heard in their preliminary testimony today, unless I misread or misheard what they said, that they, the secretariat, have a statutory function which is separate and distinct from the government in the terms that you're suggesting. What we are trying to do is allocate the thought processes here, the decision-making processes, and they are quite distinct. The public service has a statutory responsibility to do certain things. Then the government has the power to do certain other things. All we are trying to figure out is, when Senator Lynch-Staunton asks a question, who is he referring to? That's all.
Senator Stewart: There is nothing sinister. We just want to make sure.
Senator Jessiman: Why not ask them.
Senator Grafstein: I agree, but -
Senator Stewart: Ask them to make the distinction.
Senator Jessiman: Tell us, what is the difference, if there is a difference?
Mr. Cappe: We'd be pleased to make the distinction in response. I think the Board of Ministers has a statutory responsibility under the Financial Administration Act. The secretariat is created in statute to serve the Board, but the - we do make a distinction between the secretariat and the Board. The Board is the Board of Ministers, the president is the cabinet minister responsible for presiding at the Board meetings, and the secretariat serves both the president on the one hand and the Board on the other.
Senator Stewart: Would it be fair to say ministers do not always take your advice?
Mr. Cappe: It would be very fair to say that.
Senator Jessiman: Do you meet separately and together at times?
Mr. Cappe: We do our job as public servants in our offices and around other offices around town.
Senator Jessiman: Do you meet as a secretariat without political people with you?
Mr. Cappe: We have meetings among bureaucrats to prepare our materials, and then from time to time the Board meets, and the secretariat would participate with the Board.
Senator LeBreton: What is the government department called?
Mr. Cappe: The Treasury Board secretariat.
The Chairman: Let's get on with this.
Senator Lynch-Staunton: I don't know why we got onto this. All I'm going on is the official Government of Canada info source, Sources of Federal Government Information, which describes the Treasury Board as the Treasury Board and a committee of the federal cabinet. That's all I'm talking about. I don't know why we have to bog down on these, just because I have a certain rank I have a certain responsibility. We want to know the Treasury Board's contribution to the execution - not the execution, to the approval of these contracts.
Now, you did say, Mr. Cappe, that there could be times when the advisors chosen by a department may not meet - would not be necessarily the ones that you would have chosen, which is certainly - I mean, we all have different views as to who can give us the best advice. But the advice given by outside experts such as Price Waterhouse and Deloitte and others, those advices were scrutinized by Treasury Board, and were they found to be helpful and constructive and objective and detached from any outside influence?
Mr. Cappe: The secretariat reviewed those reports in trying to come to a judgment of whether there were other issues that had not been addressed or whether the Deloitte Touche study, for instance, had addressed the issues, and it's fair to say that the secretariat would have reviewed that. I don't - I couldn't say, I wouldn't say if I knew, but I don't know - whether that information was ever presented to the Board, but I - as I say, I couldn't tell you if it was.
Senator Lynch-Staunton: All right.
Mr. Cappe: Since I don't know, I can tell you.
Senator Grafstein: You're free of restraint.
Senator Lynch-Staunton: The conclusion of all this is that I would like to quote to you from document 001360. It's handwritten. The memo is dated September 27, '93, to the president, signed by I. D. Clark, dated September 27, 1993, and TBS Comments. Because we heard TBS, and I will use their language, all afternoon. The conclusion is:
It is unfortunate that any confidential government documents have been leaked.
Because the memo has to do with certain reports in the Ottawa press.
From our point of view, however, we considered it worth noting that:
Transport followed normal government approval procedures on this file, (i.e. Cabinet and Treasury Board), and obtained independent legal and financial assistance in negotiating the terms of the redevelopment project.
That is a conclusion of the Treasury Board secretariat?
Mr. Cappe: Yes, it is.
Senator Lynch-Staunton: Yes. So can we interpret that as meaning that, despite all the questions and all the not necessarily unanimous views on Pearson development, that, at the end, Treasury Board or TBS is satisfied or was satisfied and is still satisfied that the proper process was followed and that the procedures which were followed were the correct ones?
Mr. Cappe: What - I will not agree that one can draw a conclusion about the advice that we would have given to the president in such a memorandum, but I will certainly say that Transport followed normal government approval procedures on this file in respect of cabinet and Treasury Board and obtained independent legal and financial assistance in negotiating the terms of the redevelopment project.
Senator Lynch-Staunton: Okay. Now, because Treasury Board played such a significant role all the way through, it must have been approached by a lot of people interested in the contracts. Were any of you or any of your colleagues approached by lobbyists, say, to influence whatever they would like you to be influenced to or on or about?
Mr. Cappe: Having anticipated this question, Mr. Chairman, up until the weekend, I had one answer which actually changed on reviewing these documents, because I was prepared to say that, indeed, I had never been approached by any lobbyist on this file. As I reviewed the documents, I noticed there was a fax from Capital Hill Group. I recall I have a colleague and friend who works at Capital Hill Group, and I had met with him and I continue to meet with him from time to time every couple of months and chitchat about different things. I recall meeting David Dwyer once where he told me he was acting for Claridge, and he went on to extol the virtues of the Claridge proposal. That was the only contact I had with anyone outside of the government bureaucracy or ministers on this file.
Mr. Clayton: In terms of my answer, our office - I happened to miss a meeting - was briefed by Mr. Hession and his part - this would be the 1990 period when he was promoting his proposal, that is, Paxport's proposal. So we got sort of the briefing that he was giving in terms of his proposal and was left with his brochure or his package, and that's the only involvement that I know of for myself or our office related to any proponents.
Mr. Sid Gershberg, Assistant Secretary, Economic Programs Sector: I have not been or was not approached by anybody on this file.
Senator Lynch-Staunton: Mr. Hession was acting at the time as president of Paxport rather than as a lobbyist; is that correct?
Mr. Clayton: He was president of Paxport at the time.
Senator Lynch-Staunton: Is it fair to say that none of you was the subject of excessive lobbying, if you were subject to any lobbying at all? Can we draw that conclusion?
Mr. Cappe: I would certainly say that - again, I would go back to my factual statement, which was that I had one occasion when someone talked to me.
Senator Jessiman: That friend didn't influence you; right?
Mr. Cappe: It may be a comment on the efficacy of the lobbying, but I didn't remember it until I read the documents.
Senator Lynch-Staunton: We're starting to have questions about their efficacy too.
Are you aware of any of your colleagues at the secretariat who might have complained to you about excessive lobbying?
Mr. Clayton: I'm not aware of any.
Mr. Cappe: Neither am I.
Senator Lynch-Staunton: As I understand it, the Treasury Board itself is made up of six cabinet members. Is that still true, or is that a -
Mr. Cappe: That in itself is the cabinet.
Sen. Lynch-Staunton: Just a moment now. It exists of six cabinet members as the Treasury Board. This is from that paper here. So is it correct that the Treasury Board is made up of the president and five or six colleagues?
Mr. Cappe: It really depends on the government of the day.
Senator Lynch-Staunton: At the time - I'm interrupting you. At the time of these discussions, do you recall how many members there were on -
Mr. Cappe: At various times, there were three members with a number of alternates. And as I recall, it would have gone up to five or six members.
Senator Lynch-Staunton: So it varies, then. It's not a static figure.
Mr. Cappe: It really depends on who the Prime Minister appoints.
Senator Lynch-Staunton: Did any one of them as members of the Board make or try to influence Treasury Board's activities in this file?
Mr. Cappe: I would not want to comment on any cabinet deliberations on this file, so I would not answer, but I would say that none of them spoke to me about that.
Senator Lynch-Staunton: Okay. Now, I have one last item I would like to cover, Mr. Chairman, and then I'll be through, and that is to go over the chronology of events which led to the famous November 7 release of documents by Prime Minister Campbell.
Senator LeBreton: October 7.
Senator Lynch-Staunton: October 7, thank you. And what I'm trying to determine is the significance of these events in so far as they bind the Government of Canada, if they do at all.
Now, on the 18th of June - I'm following the chronology as described by the Library of Parliament. On the 18th of June, the government and T1T2 signed a letter of understanding. We have found another document. This is a non-binding letter of understanding. But I don't think we've seen that letter yet, have we? Although we've asked for it. It's in the files. I apologize. I should have consulted first.
That letter of understanding, how do you interpret it? How far are we in the process of coming to a final contract that you can write or exchange a letter of understanding? What in your mind does it mean, that letter of understanding, in this particular case?
Mr. Cappe: I really have no knowledge of the status at that point.
Mr. Clayton: When you get into that, I think you get into some legal interpretation.
Senator Lynch-Staunton: You were not involved in that.
Mr. Clayton: I would not -
Senator Lynch-Staunton: Treasury Board or TBS was not involved in that. That's strictly between Transport and -
Mr. Gershberg: I was aware at the time that there was a non-binding letter. I was aware at the time that there was a non-binding letter, but I really don't know much about the details.
Senator Grafstein: What date are we talking about?
Senator Lynch-Staunton: The 18th of June.
Senator Grafstein: What year?
Senator Lynch-Staunton: In 1993.
Now, the next event, according to this chronology, is on the 27th of August, 1993, Order in Council authorizes Minister of Transport to enter into a lease and development agreements with T1T2 limited partnership (on basis of Treasury Board approval). What is a Treasury Board approval that this note refers to?
Mr. Clayton: I'm now going to go into the ultimate catch-22. Of course I cannot tell you about Treasury Board approvals, but you do have in your package an order in council which mentions a Treasury Board approval. There are many items subject essentially to law - this is under the Federal Real Property Act - in which the Governor in Council must approval on the recommendation of the Treasury Board.
So there is a two-stage approval process: The Treasury Board makes a recommendation, that is, the ministers. So the Treasury Board ministers make a recommendation to a separate body called the Governor in Council. The Governor in Council doesn't have to accept it, but that is - the Governor in Council then makes their decision and an Order in Council is issued which reflects that decision.
And because of the nature of the land deal that was involved with Pearson, an Order in Council approval was required under the Federal Real Property Act.
Senator Lynch-Staunton: Once you have, for any project, Treasury Board approval and an Order in Council, which is cabinet approval, can that be considered confirmation of a deal between two parties?
Mr. Clayton: I guess I'm going to duck the question in the sense that it seems in terms of - well, there are, I guess, out of my understanding, various legal issues involved. It depends to a great extent the nature of what is being approved. I really - in this one, frankly, that's a legal question. It is certainly not the final approval. But what its status is, I frankly cannot provide a judgment on that.
Senator Lynch-Staunton: Well, the argument I want someone to challenge, and last week with Mr. Rowat and Desmarais and Jolliffe we pretty well established, but not confirmed, just established, that the August 27 Order in Council and Treasury Board approval could be considered a binding agreement by the Government of Canada with T1T2. While there were a lot of loose ends, many loose ends to be taken care of, in effect the two parties had shaken hands and had agreed that they were well on their way, so much so that they had a deal.
Mr. Clayton: As I said, each deal tends to be somewhat different. And frankly, if you want, it seems to me if you want to get deeper into that, you would have to ask the Department of Justice for other legal interpretations in relation to this particular sequence of events what the status of that is. I really cannot go - sort of provide any comment beyond that.
Senator Lynch-Staunton: I can appreciate that. You play your role, and you weren't really there at the finishing line, but I just want to see, and we will ask others.
So if I took it further on in this chronology, I guess I get the same answer. You wouldn't be prepared to analyze the significance of Mrs. Campbell's approval on the 7th of October. You may have a personal opinion, but you don't have an official opinion. So you're not the -
Mr. Clayton: Once this process is over, that's a matter that goes on quite separate from the Treasury Board Secretariat and the Treasury Board.
Senator Lynch-Staunton: I will certainly not burden you with that.
Well, I'm delighted to hear you were involved in this process. I'm delighted to read the conclusion that Mr. Clark signed off on, and I'm particularly pleased, and I think we should all be, that despite what we have read and what has been repeated, that you were able to carry your whole responsibility through completely without any outside interference other than a casual conversation here and there. This is another indication that many things said about these contracts will, in time, be completely refuted.
Senator Kirby: Can I just ask one supplementary in response to Senator Lynch-Staunton? Before supper break, Mr. Cappe, you described the process as "unprecedented". That was your word to me. In response to Senator Lynch-Staunton, you described the process as "normal". How can you have a normal unprecedented process? Which is right?
Mr. Cappe: It is a normal unprecedented process. What I have indicated in this memorandum, that Transport followed normal government approval procedures on this file, is that indeed all of the legal obligations that had been set in place were met. So we had Treasury Board approval; we had the Order in Council; we had all of those steps. We met - we stayed within that framework of the RFP as we were consulting with one of the bidders while the other piece was on the table. What we are talking about here is the approval procedures.
What I was talking about earlier in terms of the unprecedented nature of this project was really the project itself. That we had not transferred - it isn't often that we transfer assets of this magnitude and this significance and -
Senator Kirby: Under this time pressure too.
Mr. Cappe: That's a fair comment. Under this time pressure. Therefore, it was unusual in that respect. That's why we were - I made the comment earlier that we were, if you were, elaborating the process as we went along. And so that it was both the normal government approval procedures on this file were followed, and it was an unusual project.
Senator Kirby: Unprecedented process, I guess. Mr. Chairman, I'll stop.
Senator Lynch-Staunton: Wait a minute. I'm not through now. Unprecendented process. Don't let it hang there. It's good that we do have unprecedented things happening in this country, breaking new ground. Now -
Senator Kirby: Depends really. Breaking some ground is a good thing; breaking other ground is not.
Senator Lynch-Staunton: That's a question of judgment. What we are trying to find out here is whether the appropriate procedures were followed.
Senator Kirby: Nobody argued it didn't break ground.
Senator Lynch-Staunton: You brought it up.
Senator Kirby: Nobody argued that.
Senator Lynch-Staunton: This government is continuing with it. I don't know what your argument is.
Were you involved in the T3 negotiations? Talking about new ground, that was newer ground than T1 and T2.
Mr. Cappe: Once again, without revealing cabinet confidences, the T3 project did go to the ministers of the Treasury Board, and so the Treasury Board Secretariat had been following that process as well, and obviously it preceded this.
Senator LeBreton: It was unprecedented as well.
Senator Lynch-Staunton: That was unprecedented and somehow didn't cause the same flurry that this one does.
Mr. Cappe: There are elements of these unusual projects that I believe Mr. Clayton had testified to in July where there were unique financing arrangements. I think at some point the Tokyo embassy and the CBC headquarters buildings and others were mentioned. So that there are elements of each of these projects which were unusual.
I was referring to the issue of Pearson airport in particular, where we were simultaneously dealing with - just coming off the T3 case, dealing with T1 and T2, dealing with the runways, and still out there forming was the LAA. In that sense, that was an unprecedented project, because it was quite complex, and indeed, the words we used were messy, extremely messy, in fact. So there was an element of that that made this an unprecedented project. We did Vancouver LAA as a single negotiated arrangement, and that was also a large project, but it was done in a more straightforward and simple manner.
Senator Lynch-Staunton: Whether it was the Vancouver LAA, unprecedented, or Montreal and Mirabel, or T3, or T1T2, or the CBC or Bell here in Ottawa, was there any difference? Was there any unusual outside influence exerted in any one or all of those deals?
Mr. Cappe: Well, I will only comment on the particulars of the case we are dealing with. I am not aware of any.
Senator Lynch-Staunton: All right. Maybe we should have an inquiry into some of the others. We are not.
We can argue about the policy, whether it should be LAA or the management of public assets should remain with the government, whether private enterprise. We can argue about the policy. What we are trying here to establish is once the policy is decided, as controversial as it may be, that at least the procedures and process which were adopted and followed conform to normal behaviour, and that there was hopefully, and this is what we are trying to establish, no undue excessive lobbying, that there were no ministerial aides knocking on key doors, that there were, et cetera, et cetera, which is what we have heard all along.
So far, you are confirming that from your point of view, your vantage point of view, everything leading to the conclusion of these contracts, whether we agree with them or not, was done in a proper and honest fashion.
Mr. Cappe: Well, the original question was, and I will repeat my answer, that Transport followed normal government approval procedures on this file, yes.
Senator Lynch-Staunton: Thank you, Mr. Chairman.
Senator Stewart: Point of clarification. Before the RFP went forth, had the Secretariat of the Treasury Board considered alternative methods of dealing with the terminals, such as establishing a local airport authority for Pearson?
Mr. Cappe: Yes, quite, indeed, and in the documentary record, we have a number of cases where we had indicated that it would be simpler and more straightforward, and indeed we had a preference for a local airport authority.
Senator Stewart: So the decision to go with the RFP route, which resulted in the two proposals, neither of which independently was viable - perhaps that's too strong a word. Flawed, I guess is the word that was used earlier -
Senator Tkachuk: Wrong. W-R-O-N-G, wrong.
Senator Stewart: Non-compliance means they are both out of the court. They just don't qualify.
Senator Tkachuk: They didn't say that.
Senator Stewart: I used the word "flawed" because it was used earlier today and because it wasn't as fatal to the proposals as non-compliance.
Senator Tkachuk: The government was concerned in the proposal and made that clear.
Senator Stewart: We understand that you don't like that word, so I will go back.
Senator Tkachuk: I'm just trying to find it in testimony. You're making it up. That's fine. Go ahead and say what you want. I can argue with you if you're going to have public debate on the issue.
Senator Stewart: The problem is that I can't finish a sentence before you get in a paragraph.
Senator Tkachuk: No. Finish the paragraph, and then you can ask the sentence.
Senator Stewart: Then I can ask the sentence?
Senator Tkachuk: Ask the question.
Senator Stewart: I will finish the paragraph.
Senator Tkachuk: Please.
Senator Stewart: The government decided, contrary to the advice of the secretariat, to go with the RFP; is that correct? Is that too strong?
Mr. Cappe: Two points I would make: The first is, in answering your earlier question, I realize now that you were talking about the period pre-RFP.
Senator Stewart: Yes.
Mr. Cappe: I should indicate that our documentary evidence that I referred to was actually post-RFP. I should just clarify that.
The second thing is -
Senator Stewart: All right. Would you refresh my memory as to what you said which now applies post-RFP?
Mr. Cappe: That we certainly had a preference -
Senator Stewart: For the LAA?
Mr. Cappe: - for the LAA, and I believe it was in March when we were talking about that.
Senator Stewart: Yes. Prior to the time that the government decided to go with the RFP route, did the secretariat give any advice?
Mr. Cappe: Again, we are in this funny position where we won't tell you what our advice was. Whether indeed we thought there were better ways for the government to deal with this is a difficult issue to come to grips with and would be speculative, because I don't think I have anything in my records to indicate what it was. I don't recall, quite frankly. I don't. Unless my colleagues do.
Mr. Clayton: I guess, to go back, as part of the preliminary project approval process, on your normal process, that those issues would have come up, and the secretariat probably would have provided advice, but, as noted, we have difficulty explaining what that advice would be.
Senator Stewart: I'm sorry, you would have difficulty?
Mr. Clayton: That would be in effect our advice to Treasury Board, to a cabinet committee, that you would be talking about.
Senator Stewart: Okay.
Senator Grafstein: Sorry, I didn't quite follow that answer.
Mr. Cappe: Advice to ministers is exempt under the Access to Information Act, so that -
Mr. Clayton: What I was trying to say is I talked about -
Senator Stewart: Just a minute. How does the Access to Information Act bear upon the work of this committee?
Mr. Cappe: It need not. You're quite right. I apologize for that.
Senator Stewart: Okay.
Senator Grafstein: I didn't understand the response that the previous witness gave.
Mr. Clayton: I explained earlier, as part of the normal process, there is a thing called preliminary project approval, which normally Treasury Board would provide before an RFP would go out. As part of the preliminary project approval, options analysis would be done about the various options and the secretariat would be providing advice under a normal process to ministers related to options.
Senator Grafstein: Just to take the point, it's possible before the proposal stage that the Treasury Board would have provided options as well as dealing with the RFP, the proposal process itself. Is that -
Mr. Clayton: It is possible that the secretariat would have provided advice to Treasury Board ministers about those options.
Senator Grafstein: There is a difference, material difference.
Senator Stewart: There is also the possibility, consistent with what we heard earlier, that the Board turned down the advice of the secretariat?
Senator Tkachuk: In this particular case?
Senator Stewart: I say there is a possibility that the Board turned down the advice.
Senator Grafstein: The alternatives.
Mr. Clayton: That's always a possibility.
Senator Stewart: Thank you.
Senator Tkachuk: It is a bit confusing from time to time about what's the advice to the minister and what's interoffice memos, and what's the Secretariat and the Treasury Board, but when there was a transition, there was a new government in after the election of Ms Campbell to the leadership of the Conservative Party. You would have treated that in the Treasury Board as a new government, a transition?
Mr. Cappe: Yes, there would have been a new government.
Senator Tkachuk: Your new minister was Mr. Edwards?
Mr. Cappe: Yes.
Senator Tkachuk: The new president of the Treasury Board. Mr. Edwards was not a previous minister of the government.
Mr. Cappe: That's right.
Senator Tkachuk: So not only was he a new minister of the Treasury Board, he was a new minister.
Mr. Cappe: Yes.
Senator Tkachuk: Would you have provided advice to him in the transition of the government, as you would in any transition of a government?
Mr. Cappe: We would have prepared transition books that would help a new minister deal with the issues that that minister would have to face.
Senator Tkachuk: What kind of a preparation would you have? Like, what sort of steps would you take in your department to get that process going and get that process completed?
Mr. Cappe: We would have put together a number of binders which would include one or two-page summaries of the major issues that the President of the Treasury Board would have to deal with in the - to govern.
Senator Tkachuk: I would say this would be an important issue that you may have or you may have briefed the minister on.
Mr. Cappe: Well -
Senator Tkachuk: No particular secrecy here. Did you brief the minister on this?
Mr. Cappe: We would have - I would make the point, senator, that we would have prepared a binder with a number of one or two pages, and then as the minister settled in, we would provide him with further briefings on issues as they developed. So it's hard for me to recall whether indeed this was in that first round of issues or not. I just don't know.
Senator Tkachuk: Well -
Mr. Cappe: As you point out, we were briefing a new president, a new minister who had no government experience, and so that binder would have talked about - and I recall parts of it - the role of the Treasury Board, much as my opening remarks talked about the role of the Treasury Board. So that it would - it may have been premature to have put this issue in. I can't put myself back to June 23 to recall whether indeed I had that in or not.
Senator Tkachuk: Within a short period of time, that briefing would have taken place, I would have thought.
Mr. Cappe: Yes.
Senator Tkachuk: When would you have started this process?
Mr. Cappe: My recollection is that the swearing in was the 23rd of June.
Senator LeBreton: The 25th.
Mr. Cappe: The 25th.
Senator Tkachuk: When did you start preparing for it?
Mr. Cappe: We would have been preparing as we saw the prospect of the change of government.
Senator Tkachuk: So in -
Mr. Cappe: Couple of weeks to a month.
Senator Tkachuk: When the leadership was taking place, or at the time of the leadership convention, or when the former Prime Minister resigned?
Mr. Cappe: Well, you don't have to be prescient in those days to see that there was going to be a change of government. So we began the preparations of our briefing material over the course of a period of a number of weeks. Three, four, five six weeks, I don't recall.
Senator Tkachuk: You say that as a secretariat, you preferred the local airport authority option. You would, of course, have made these views known to the new minister?
Mr. Cappe: Well, I want to make a distinction between where we were in the transition to the new government from the - and where we were at that point in time. But indeed, since my written record reminds me, the answer is yes.
Now, I want to be careful here, because I will not divulge advice to ministers. So it's not our advice that that should go. But we did indicate that there should be a local airport authority. We did, however, indicate to the president of the Treasury Board after the swearing in of the Campbell government that the secretariat had a preference for a local airport authority. That doesn't mean that our advice was that they should at that point do that necessarily.
Senator Tkachuk: Right. Was there a local airport authority at this time in Toronto?
Mr. Cappe: Well, we know that there was a group forming.
Senator Tkachuk: But it has not been formed. Still not formed.
Mr. Cappe: That's right.
Senator Tkachuk: Now, you then had the meeting in August where Treasury Board - let me just go back a little bit. You have a new government. You have hundreds of decisions taking place in this time period between the time of the new minister and the August 27th meeting. Thousands, hundreds? Help me here.
Mr. Cappe: Well -
Senator Tkachuk: Documents would roll into the secretariat, through the secretariat, from all of the departments into Treasury Board for them to consider.
Mr. Cappe: I'm not going to disclose the cabinet confidence of how many decisions were taken or what they were, but I can say that -
Senator Tkachuk: I'm not asking you what they were. I'm saying, I'm asking you, would there be lots? Would you have divided ones that are sort of mundane and regulatory and usual and important?
Mr. Cappe: Sure.
Senator Tkachuk: I would say the Terminal 1 Terminal 2 phase would have been on the sort of important pile.
Mr. Cappe: That's a fair statement, yes.
Senator Tkachuk: There would be lots of them?
Mr. Cappe: There would be many important files. That was one of them.
Senator Tkachuk: You mentioned that at the Treasury Board meetings, the officials are there, the ministers are there, the proponent is there.
Mr. Cappe: No, I did not say that.
Senator Tkachuk: The proponent is not there. Not necessarily, but could be there.
Mr. Cappe: Very seldom.
Senator Tkachuk: Very seldom. So it's a discussion between yourselves and the ministers. Your advice is given; the ministers discuss it. At some time, a decision is made. Now, on the 27th, then, was that an in camera meeting?
Mr. Cappe: All the meetings of the Treasury Board are in camera. I don't know what reference to which Treasury Board meeting.
Senator Tkachuk: Would you be excluded?
Mr. Cappe: Sorry. Which meeting are you referring to?
Senator Tkachuk: The one that approved the T1T2 contract.
Mr. Cappe: You're referring to the Order in Council now?
Senator Tkachuk: I'm referring to the Treasury Board minute, the Treasury Board meeting that resulted in the Order in Council. Would you not have been there?
Mr. Cappe: We are getting into this delicate area of what happened inside the cabinet room. I really would rather not -
Senator Tkachuk: You were there, though.
Mr. Cappe: - comment.
Senator Tkachuk: You were there.
Mr. Cappe: I'm not going to comment.
Senator Tkachuk: Well, you know, Chairman, I'm not asking him what he said. I'm not asking him what he advised. I'm asking him whether he was there.
Mr. Cappe: Well, it strikes me that whether I was personally there, I don't recall. Quite frankly. I don't recall.
Senator Tkachuk: Were other members of your group there that had some knowledge of this?
Senator Grafstein: This is unfair.
Senator Stewart: If you're not going to ask the content of what he said or someone else said, what is the relevance of his mere physical presence, asleep or awake?
Senator Tkachuk: I want to know if he was there, Senator Stewart.
Senator Stewart: But why?
Senator Tkachuk: Well, I don't have to answer to you. I'm asking the witness.
Senator Stewart: I'm asking the chairman if we are wasting time here.
Senator Tkachuk: Chairman -
Senator Stewart: What if he were sleeping at the meeting or asleep at home?
Senator Tkachuk: Senator Stewart, I've been at this thing since June and May. I'm asking a reasonable amount of questions, as some of us have been here. I'm not asking anything that I haven't asked before. I want to know if these people participated at the meeting of the Treasury Board.
Mr. Cappe: You see, the only reason I'm hesitating, I indicated to you that I personally don't recall. Okay?
Senator Tkachuk: That's fair enough.
Mr. Cappe: But the reason I'm hesitating is you asked earlier whether this was an in camera meeting, and I said all the meetings are in camera, I misinterpreted what you meant. You meant was it ministers only.
Senator Tkachuk: Yes.
Mr. Cappe: Indeed, from time to time, the Treasury Board of Ministers goes into in camera sessions when they deal with personnel matters, individual cases of personnel, et cetera, and other reasons. So I'm now getting into what actually happened in the cabinet room, whether the president of the Treasury Board asked officials to leave or not. Now, whether he did or not, I don't know, but if I did know, I couldn't tell you.
Senator Tkachuk: He'd be able to answer that question.
Mr. Cappe: Yes, indeed.
Senator LeBreton: Then we should get him.
The Chairman: There is another way of doing it. When the Treasury Board meets to approve a submission, is it usual to have members of the secretariat present?
Mr. Cappe: Yes. Thank you.
Senator Tkachuk: And you would have prepared for this meeting. You would have prepared a series of documents, or you would have prepared recommendations to the Treasury Board by the secretariat on the contract.
Mr. Cappe: The process is that the minister responsible, in this case, the Minister of Transport, would sign a submission to the Treasury Board, which is a confidence in itself, but then the secretariat would cover it with a summary and its advice, its recommendation.
Senator Tkachuk: Now, I'm not going to ask you what the advice was, but is it possible that I could ask whether, during that time period, because it was a brand new government, during that time period, did the government make a habit of not taking the advice of the Treasury Board? He asked a supposition of whether it did. He presupposed that it did.
Mr. Cappe: Senator Stewart asked a similar question earlier. I guess, let me try to generalize the point. You can take my testimony for what its worth. The Treasury Board secretariat gave its best professional advice to the Board. It was not an unusual circumstance if the Board accepted that advice, and it was not an unusual circumstance if the Board rejected that advice. Ministers would have other considerations. And indeed, in my opening remarks, I said that the secretariat would provide its advice to the Board, and ministers would take the full range of considerations into account to come to its judgment.
Senator Tkachuk: So during the time period of the new government, June, July, August - I'm not asking about generally over, you know, a period of years - would that statement that you gave just earlier on be true 10 per cent of the time, 20 per cent of the time, 5 per cent of the time?
Mr. Cappe: Without revealing a cabinet confidence, I would be prepared to say that it was a new Board and that that statement more or less was correct, that the statement I used to apply in general would apply to that Board.
Senator Tkachuk: Okay. Now, then there was an election and a new government was being sworn in. And do you go through the same process during the election preparing for whatever government would be in power?
Mr. Cappe: Indeed.
Senator Tkachuk: And the new minister was appointed shortly after the election; right? And you would have made a presentation to him briefing him on what was going on?
Mr. Cappe: Once again, the President of the Treasury Board, as he was appointed on - or as he was sworn in on November 4, was a new Member of Parliament as well as a new minister as well as a new member of the Treasury Board. Therefore, we went through a series of extensive briefings on the processes of the Treasury Board and outstanding issues as we would do with any change in government.
Senator Tkachuk: And the appointment of Mr. Nixon and what the government was saying during the election would have led you to do what in response to this?
Mr. Cappe: Well, we, as good public servants anticipating - this was a public controversy during the election campaign.
Senator Tkachuk: Yes.
Mr. Cappe: It was obvious to us that whatever government was going to be elected, of any stripe, would have to deal with this issue, as long as there was an opposition party. And therefore, it was our view that we would want to be in a position to advise ministers, the new ministry, of what had transpired, without revealing the previous government's confidences, or governments' plural, governments' confidences, so we prepared a chronology, and we prepared descriptions of the process that went on and obviously gave - were prepared to give the new government advice.
Senator Tkachuk: Did the secretariat have the same concerns about legal problems and all the rest of it that it seemed to indicate during the other process? Would there have been documents written up and people, like, sending letters to each other and stuff, saying, "Gee whiz, what are you going to do if they cancel it or something?" Is it still a messy file?
Mr. Cappe: We were certainly pulling together options. Mr. Clayton referred to the role of the secretariat in providing the government of the day with options. We were preparing options for what the government could do after an election. Again, be it whatever result for the election, the government was going to have to deal with the Pearson issue. And notwithstanding the release of the documents in escrow, there would have to be further considerations given as the project proceeded. So we had to prepare ourselves for that, yes.
Senator Tkachuk: When you were organizing yourself and you made the presentation, you made a presentation to the minister of the Treasury Board, were you now dealing with Transport and Justice officials at this time as well?
Mr. Cappe: It's fair to say that we would be talking with Transport and Justice officials throughout the period, yes.
Senator Tkachuk: So the file became an ongoing continuing file?
Mr. Cappe: Yes.
Senator Tkachuk: Theoretically speaking here, you would have had to point out your job, which is the financial implications of what would happen if the contract was cancelled following the Nixon report recommendation?
Mr. Cappe: Yes.
Senator Tkachuk: Did you let him know previous or during the time the report was being written?
Mr. Cappe: I couldn't tell you what our advice would be, but, I mean, we were doing our own sort of policy consideration of options. Once Mr. Nixon had been appointed, it was out of our hands, and we basically sat back and waited for Mr. Nixon to deliver his report.
Senator Tkachuk: So this matter obviously would have had to been dealt with at some time in Treasury Board?
Mr. Cappe: I don't think you can come to that conclusion, senator. There was no consideration of the process that Mr. Clayton described earlier of preliminary project approval and the approval of the lease, et cetera, that would require Treasury Board approval.
Senator Tkachuk: You're telling me that the government of the day, which is the same government as today, would have made a decision of this magnitude, which ramifications were, according to even Minister Young, of hundreds of millions of dollars, without consulting Treasury Board?
Mr. Cappe: Once again, the president of the Treasury Board is a member of cabinet, and we would have been advising the president on issues that he could raise in the cabinet discussion which would take account, then, of all of the full range of considerations, as I put it earlier.
Senator Tkachuk: But we all know what Treasury Board is. I mean, Treasury Board is the one that sort of worries about where the money is being spent. Wouldn't this have been something that Treasury Board should have been concerned with and consulted with?
Mr. Cappe: Well, once again, all the members of the board are members of cabinet. The president of the Treasury Board is a voice in cabinet for those considerations, and that would have been a way for the - I didn't say it didn't go to the Treasury Board. I'm merely telling you that it need not have gone to Treasury Board.
Senator Tkachuk: It need not have gone to the Treasury Board.
Senator Lynch-Staunton: Can I have a supplementary, Mr. Chairman, on this? Is the advice that you prepared for the incoming minister the document identified as 00304, Terminal 1/Terminal 2 privatization, and somebody has written in "redevelopment of".
Mr. Cappe: When I read that document, it certainly looked out of order, but there is no date on it.
Senator Lynch-Staunton: That's correct. There is no date on it, except if you allow me to interrupt you, there is a reference to monies expended to November 1, 1993, 20, 25 million, so it's a fairly fresh document. It seems to have been prepared for a new government.
Mr. Cappe: As far as we know, this was a document which, to the best of my knowledge, was prepared in the Department of Transport. But I don't know that for a fact, but that was my understanding.
Senator Kirby: Mr. Chairman, not to be controversial, but just by way of clarifying the record, that document you're referring to, we were told last week by Mr. Rowat, I believe, was in fact prepared in the Department of Transport, after the election.
Senator Lynch-Staunton: We don't have to bicker over it. Although it's not identified, this is -
Senator Kirby: Just trying to be helpful.
Senator Lynch-Staunton: I appreciate it. I want to put down "prepared by Department of Transport". We'll have to ask them why they prepared again a third document.
If I may stretch my supplementary, because of the Treasury Board and Treasury Board Secretariat's close association with these contracts that are under scrutiny here, and the intimacy or intimate details many of you have of them, were you called in front of Mr. Nixon to give any advice or any documents or any testimony or whatever you wanted?
Mr. Cappe: I had no contact with Mr. Nixon.
Mr. Clayton: I had no contact.
Mr. Gershberg: Neither did I.
Senator Lynch-Staunton: When I say "Nixon", of course I mean his advisors or anybody hired by him. Are you aware of anybody from Treasury Board Secretariat that might have been called in?
Mr. Gershberg: I'm not personally aware.
Senator Lynch-Staunton: Thank you, Mr. Chairman.
Senator Tkachuk: I have just a few more questions. During this time, the Treasury Board Secretariat, what was their feelings at this time on what the government should do?
Mr. Cappe: Well, you see, you're getting at -
Senator Tkachuk: I'm not, because I asked you earlier about your preference on the LAA, and you said the secretariat's preference was the LAA.
Mr. Cappe: Indeed.
Senator Tkachuk: What was your preference as to what the government should do now? I don't ask you what you told the government. What was your preference?
Mr. Cappe: Quite frankly, I will go then to the documentary record, which is - and it was the memorandum which, senator, you drew my attention to, of the 27th. Sorry, the 20th of July. And in there, on page 6 - this is document 002052. On page 6:
TBS would prefer that Transport pursue negotiations with the Toronto LAA on a fast track basis ...
That was back in July. That's all I have on the documents, and that's all I can recall.
Senator Tkachuk: This is a memorandum to the -
Mr. Cappe: Sorry, if I may, senator, just to go to the last sentence in that paragraph:
... this may not be possible on T1 and T2 unless the proposed deal being negotiated with Mergeco collapses.
Since that deal did not collapse, I guess what I'm saying is you cannot draw an inference of what our advice would have been, whether it was worth keeping the deal or scrapping it. And our preference would have been our advice. That's why I'm trying to walk this very fine line here.
Senator Tkachuk: Okay. Well, these memorandums to the president, these are all previous to -
Mr. Cappe: These are the Campbell government.
Senator Tkachuk: Right. Do we have any memorandums or documents here after the election in the fall of '93?
Mr. Cappe: I have not seen any.
Senator Tkachuk: Not any? Did we receive any documents that would be rolling in? These aren't just documents amongst bureaucrats and Treasury Board officials. These are memorandums to the president of the Treasury Board, who I assume is the minister.
Mr. Cappe: Yes.
Senator Tkachuk: Well, did everybody in the secretariat stop writing during the election, or what?
Mr. Cappe: I will have to defer to Mr. Nelligan and his relationship with the Department of Justice, who provides him with documents.
Senator Tkachuk: See, our mandate, Mr. Chairman, is cancellation, and I noticed that the rain stopped when the election was called, and I'm sure there was a deluge of documents that would have been forthcoming, and we can't get to the end of the process if we have Treasury Board officials here who participated in the process and not only to the time the election was called but during the election and immediately post the election during the Nixon time period, and when they leave, we're done with them. And yet there isn't one piece of paper, not one piece of paper, that's here after the - I want to know who makes these decisions.
Mr. John P. Nelligan, Q.C., Counsel to the Committee: If I may help you, sir?
Senator Kirby: Can I just make one comment, just by way of trying to be helpful? Any government I have ever known has never had a Treasury Board meet during an election campaign. Once the campaign starts, ministers are out all over the country, and so other than routine transactions, you do not normally have a Treasury Board meeting.
Senator Tkachuk: Senator Kirby -
Senator Kirby: I'm trying to be helpful.
Senator Tkachuk: I know you're trying to be helpful, and I really appreciate it. I really do. But my point is that there are hundreds of them out there, and there is nobody writing one memo to anybody. I don't believe it. This is what these people, frankly, do for a living, is write this stuff. They analyze, and once they analyze, unless they tell someone, they go crazy. They got to write it down, send it, and that's why we got all these documents there. I have some experience with this.
Senator Kirby: You certainly understand central agencies.
Senator Tkachuk: To believe that it stopped the day of the election and has not - there was not one piece of paper written to the time that the decision was made to cancel the contract, well, frankly, I don't believe it.
Senator LeBreton: Can I make a point? I support Senator Tkachuk. Did the Treasury Board Secretariat stop? We've got binders full of memorandums, of interoffice memoranda, you know. True, the Treasury Board ministers may not meet during an election campaign, but did the whole place go away?
Senator Tkachuk: This is when they run the place. Right?
Senator LeBreton: Furthermore, the mandate of this committee is right through the process up to and including the cancellation and the Nixon report, so surely if we are going to study this whole file, we have to have these documents.
Mr. Nelligan: I can point out one document that postdates the election, and that is the memorandum prepared by Mr. Rowat which we have been told in evidence was sent both to Mr. Nixon and to his minister. I note, for instance, that the memorandum dated July 20 is entitled "President's Information". I think that in light of your comments, when I talk to the Department of Justice officials again, I will ask that similar memoranda on this subject subsequent to the election up to a reasonable period thereafter should also -
Senator Tkachuk: Up to the closing.
Mr. Nelligan: Up to the cancellation should also be made available. Because we've already made the distinction, as the witnesses have, that there is a difference between submissions or advice to a minister or to the Treasury Board, and memoranda for information. We've had one to Mr. Mulroney, and here we have one to the president of the Board on July 20, and we will ask for all other similar documents which came after the election was over.
Senator Tkachuk: Okay. So in that case that we do get the rest of these documents, I would say, if we wish, we would request the witnesses to come back to deal with the same kind of documentation that we received here for the previous time period. That wouldn't be a problem, I take it.
The Chairman: Might be, but we'll consider it.
Senator Jessiman: On the same subject, Mr. Chairman, I should like counsel to inquire as to who are the persons in Transport that are determining what documents are being given to this committee. I know we're going to get the Justice people in here, but they're not going to even know that, I don't think.
There is somebody at Transport that's saying, "Look, there's the file." The room is filled with folders and files. Somebody there is taking this and saying, "These are the documents we want them to see." And we don't know whether they're taking it - obviously you get memos from or to Brian Mulroney, and you get memos to the president of the Treasury Board, all beforehand. Then everything happens, and it stops. Not only we're not getting the correspondence between the bureaucrats. Surely we should find out and at least know who is doing it. Is it one person, ten people? And who determines which document they have decided we should see.
We are told that 4,500 pieces of papers went to Mr. Nixon. We are told that there is 200,000 going to come to us. Is there a million in total? I don't know. But somebody should know. We should know who is making that decision. It certainly isn't this committee.
Mr. Nelligan: Well, I would suspect it's not an ongoing decision, but someone has simply described a body of documents. It may well be that they have selected a date which is a little bit premature for the purposes of this committee, and I will investigate that and report back.
I note particularly that these Treasury Board documents, of course, come from a different source entirely. They come from the Privy Council office, or I think that's where most of them emanated from. But in any event, they don't come from Treasury Board, or not from Transport. So there are a number of persons who must be making decisions on these, and we will inquire.
Senator Tkachuk: I don't have any more questions at this time.
Senator Grafstein: Thank you, Mr. Chairman. I would like to go back with one train of thought emanating from the cross-examination of the witnesses by Senator Lynch-Staunton, and that relates to usual versus abnormal and so on.
I would like to refer you, Mr. Cappe, to a memo dated October 12, 1993, document 002068.
Mr. Cappe: Yes.
Senator Grafstein: I think it's in the book somewhere. It's a one sheeter.
Mr. Cappe: Yes.
Senator Grafstein: And this memorandum takes place shortly after, if I'm not incorrect, the approval of the final documentation with respect to this project.
Mr. Cappe: That is my understanding as well.
The Chairman: What is the date, please?
Senator Grafstein: October 12, 1993.
It is very short. I will just read it into the record. This is from Mr. Cappe, and I won't give you the rest of the references, but it is "Re: Pearson Airport Review".
Andy, we should prepare a complete file on this. Sid, could you pull our stuff or at least a chronology on it together should the AG or the next gov't decide to do something.
It is signed "Mel".
Mr. Cappe: Yes.
Senator Grafstein: Then there is, on the same page, a memorandum from Andy Macdonald to you, and to Clark - Ian Clark and to others, this date is the same date - as a matter of fact, it is sort of curious in a way because your memorandum is timed 4:03 p.m. and the subsequent memo on the page is timed 3:28 p.m.
Mr. Cappe: Just to explain, senator, the bottom part is the incoming message and the top part is my response.
Senator Grafstein: Fine.
Mr. Cappe: We are very efficient in responding quickly.
Senator Grafstein: I see E-mail sort of works but I didn't quite understand how it worked in that way.
Let me read this into the record, and I will quote it directly, it is very short.
At the DM retreat last week, Jocelyne Bourgon -
I hope I pronounce that correctly.
- asked my advice on a study she was contemplating..a review of the entire decision and advice process in the Pearson airport decision. She is more than a little concerned that some public servants might get hung out to dry on this one at some future date, and wanted to have a complete file on the entire process. I said -
That is you, Mr. Cappe.
Mr. Cappe: No, that is Mr. Macdonald.
Senator Grafstein: Is that Mr. Macdonald?
Mr. Cappe: Yes.
Senator Grafstein: Okay. Mr. Macdonald said:
I said that it sounded like a reasonable thing to do, but that I would touch base within the TBS to solicit other reactions from affected parties. What do you think about this proposal?
A rather curious memorandum.
Senator LeBreton: Quite a reflection on the next government I would say.
Senator Grafstein: Later on, there is a little note on this, and I can't make all this out, but there is a line that says: "Paul Gonu. Please note. Please discuss any release of your documents with me before providing (if possible). L." Then it has a date 93-10-14.
Now, I am trying to, if I can, put this into context of this being a usual, normal completion of a usual, normal process, after the event. It doesn't sound to me - and I don't want to put words in anybody's mouth - that this would be a usual memorandum coming from senior officials about this usual transaction.
Mr. Cappe: I think I want to go back to the precise words that I was using earlier, and I will then compare them to what I was intending in this circumstance.
My answer earlier, I believe it was to Senator Tkachuk, was that - perhaps it was to Senator Lynch-Staunton, I think. "Transport followed normal government approval procedures on this file." "Normal government approval procedures on this file" is indeed that we had cabinet and Treasury Board approval as was appropriate.
On October 12th, we were -
Senator Jessiman: What year?
Mr. Cappe: Nineteen ninety-three, just prior to the election, in the heat of an election campaign at that time, the Pearson airport project was becoming an issue in the campaign. As senior public officials, we were all interested in how that debate was playing out in the public's mind and among the contending parties and understood, as I said earlier, that any government was going to deal with this in one way or another, but that, indeed, the chronology and the facts of what was actually done would be required, and I guess we can either claim to be prescient or just having good antennae in this, but indeed, as noted by the bottom comment in writing, "It is going to get public anyway", and indeed here we sit reading it.
So I guess we were just anticipating that a process, whatever the process might be, would likely happen, and so we were pulling together our views. It was clear that in the run up to this, as I indicated earlier, even going back to July and - sorry, going back to March, the issue - in fact, I guess I could go back to December, when the press release from Minister Corbeil indicating the best overall acceptable proposal, in quotes, was issued, that there was a bit of public commentary at the time in the media and that this was becoming an issue of some interest to the public. And so it was in that context that we said, and I have indicated here, and as Senator Kirby earlier noted, "...a chronology on it together should the AG" - meaning Auditor General - "or the next gov't decide to do something."
Senator LeBreton: Can I make a point on this?
Senator Grafstein: I just want to lead you to the next -
Senator LeBreton: I just want to make a point.
The Chairman: Will you permit a supplementary, senator?
Senator LeBreton: Thank you, Mr. Chairman.
The Chairman: Is it a comment or a question?
Senator LeBreton: It is on this memorandum.
Senator Grafstein: I am not finished with it.
Senator LeBreton: It is a point of clarification. It was Tuesday, October 12th, we have already had testimony about the 3rd and the 4th, the advice that was sought of the Prime Minister on the 7th, you know, the Prime Minister in Toronto campaigning on the 6th of October. This is the 12th. As a matter of fact, I was quite surprised to see you introduce this in because to me I read this, as we had public servants following due process, we had them give testimony here, and to me I don't - I think this is a very reasonable thing for Jocelyne Bourgon to have done because here is a group of public servants that acted in good faith and now are fearful of what, you know, obviously what is going to happen as a result of their participation in this process. I mean I see that as a reflection on what is to come, not what had gone by. This is a statement.
The Chairman: Put the question, senator. Ask if that is a characterization that Mr. Cappe would agree with.
Senator LeBreton: Thank you, senator.
What were you so fearful of? I mean, you know, like what was Jocelyne fearful of? Was she fearful that because everybody had participated in this process following the policy of the previous government that somehow or other there was going to be some - there was going to be some -
Mr. Cappe: It is not my objective to give you questions to ask the former Deputy Minister of Transport. You would have to ask her what she had in mind.
I can tell you what I had in mind. What I had in mind was that it was clear that this was a controversial issue; that there had been allegations of concern over pressure that had been put, and there had been allegations over the substance of the agreement. We wanted to pull together the facts as we knew them, but that the allegations of pressure and political interference and other concerns as expressed in the public debate were things that got us interested in pulling together the facts, recognizing that there would be some kind of followup that would be done thereafter.
Senator LeBreton: And the facts, of course, is what we are after here.
Senator Stewart: Would it be fair to put it this way? That there was a fear that in the atmosphere of controversy there would be a failure on the part of the public to distinguish between the advice and performance of the public servants on the one hand and what was done by ministers of the Crown on the other hand?
Mr. Cappe: I have gone out of my way through - I don't want to - I've gone out of my way through the course of this testimony to make a clear distinction between what public servants have done and how the secretariat has performed in assessing the file and the decisions of ministers as reflected in the announcement and the decisions that have been manifest.
What I was getting at here was, again, getting the record right. By that I didn't mean getting rid of documents, clearly -
Senator Stewart: But your concern was to protect the standing and reputation of public servants.
Mr. Cappe: In general, yes.
Senator LeBreton: So therefore would we not be correct to assume then that, to follow up on what Senator Tkachuk said, that we should not have the documents that were generated as a result of this before us to consider?
Mr. Cappe: My sense - if I could just answer that, senator, Mr. Chairman, it is my sense that what you have here is very much that. I am not aware of any other documents because remember I am talking about a retrospective from October 12th; and I think the issue that was raised earlier by Senator Tkachuk was a prospective.
So, in terms of what we had talked about here in an E-mail on October 12th and what we have before us here, I think you have got a fairly detailed chronology.
Senator Grafstein: May I, senator?
Senator LeBreton: Certainly. I am finished.
Senator Grafstein: So, on October 12th, a senior bureaucrat involved in this process says she is more than a little concerned "that some public servants might get hung out to dry on this one at some future date"?
Mr. Cappe: Yes.
Senator Grafstein: And so back to Senator Stewart's point that there obviously is an echo in that comment from your previous memorandum which says we are concerned about the integrity of the process and therefore we better make sure that at least from the public servants' side we have sustained that process in some fashion, or supported that process in some fashion?
Mr. Cappe: It was my intention here, and one can read this as senior public servants trying to cover their behinds, and it is not intended that way, but it was an intention to try to ensure that the record would be complete and that the concern expressed in the incoming E-mail is one that I think is a reflection of Madam Bourgon's concern. I was sharing that to some extent, as you can see from the handwritten comments as well others did, that we wanted to put together the facts of what we did.
Senator Grafstein: Fine.
Senator LeBreton: On a point of order, Senator Grafstein was - I hope that those were your words when you said you were concerned about the integrity of the process. He is talking about process. You've put the words in and I just want for the record that that was Senator Grafstein that talked of the integrity of the process, not the witnesses.
Senator Kirby: What?
Senator LeBreton: He just said in his question, "You were concerned about the integrity of the process," and I just wanted to put on the record that that was Senator Grafstein that said those words.
Don't look so confused, Senator Kirby. That is what he said.
Senator Grafstein: I don't think that is a fair conclusion from the thrust of my questions, but I don't want to debate with senators. I really want to see as best I can, Mr. Chairman, to get from these witnesses their -
Mr. Cappe: I will not back away from the words because, indeed, there are documents in here which say that we had concerns about the integrity of the bidding process. Those are earlier and I reiterated them in my earlier testimony. So I was not using those words as applied in the circumstances.
Senator Grafstein: I am not trying to put words in your mouth. I am trying to describe or echo in summation what the trends of your memoranda were; and one of the trends were, and you correct me if I am wrong, I don't want to put words in your mouth, correct me if I am wrong, that you were concerned about the integrity of the process when it came to the public bidding process. You were concerned about the legalities. You were also concerned mightily about the pressure of time.
Mr. Cappe: In April -
Senator Grafstein: Is that correct?
Mr. Cappe: In April, I had written a note, which is in the documentation, indicating that I - we had expressed concern about the integrity of the bidding process.
Throughout the documentation you can see that we were very sceptical about the capacity to deliver a signed deal in the six month period, or by May 31st, by June 31st, and then there is a later document which says or by July 31st. So, yes, we were concerned about the speed with which we were aiming to get the project done.
Senator Grafstein: You had other concerns, and I want to deal with them now, Mr. Chairman, if I might, to continue the process back to April the 5th, which was very propitious.
The Chairman: Give me one quick supplementary? The integrity of the bidding process. What do you mean by the word "bidding"?
Mr. Cappe: That has to be viewed in the context - I am glad you asked for clarification, Mr. Chairman. I was making a particular reference to a document which was April 5th to which I think Senator Grafstein was just going to take us, in an electronic mail memo I indicated that I am reporting on a meeting I had with a number of other senior officials and I said:
I told them from a TBS perspective the hierarchy of issues was:
And I will just read the first lines of each of them: "The protection of the integrity of the bidding process; the personnel issues; ground lease and land issues..." But it has to be seen in the context of April 5th.
Senator Grafstein: Mr. Chairman, I want to start with that timeframe and now move forward from the period April 5th onwards because I have concluded that at the end of the process there was this memorandum from Mr. Clark back and forth from Mr. MacDonald about the concern of - I don't want to use the word "protecting" but at least supporting the public service actions or conduct throughout this process, and we can come to different conclusions about that. The witnesses come to one conclusion and Senator LeBreton has come to another, but it is open for us to draw conclusions from that, but it is a fact. And now we are back to the process to examine and I want to tell you where I am going so that there is no misunderstanding. I want to test the answer that the witness gave that on the one hand this was an inordinate, out-of-the context, complex, one only, one-off, unprecedented process; and on the other hand the conclusion reached in a memorandum on April - on September 27th that it was in the normal process, that all the normal processes be done. So between cup and lip there is some sort of Niagara Falls that I would like to explore here for a moment based on memorandum and the trail of memorandum that we have.
I just want to make it clear to everybody what I intend to do and see if the words match the conclusions - not that I disagree because we can all disagree.
Let's start with April 5th, and again I am referring to the memorandum dated April 5th, document 011 - I am sorry, 001103, and it is a memorandum from Mr. Cappe to a number of others. It is to Mr. Clayton. It is to Mr. Gershberg. And it is apparently to all the members of the Treasury Board. Again, I won't reiterate what is on the face of the document because it indicates all the people that were involved.
But it is Mr. Cappe talking about the process, and he is speaking to Mr. Bennett, Mr. Rowat, HL and Broadbent where he discussed the issues.
I want to give a larger quote than Mr. Cappe, and this is what he said, and I quote from the memorandum:
I told them from a TBS perspective the hierarchy of issues was:
i) the protection of the integrity of the bidding process. This could be called into question from either the existing two (three with Mergeco) parties or for that matter third parties. I indicated we were most concerned about the legal liabilities but that there might be "political" liabilities as well.
My question to Mr. Cappe is: Tell us what you meant by that statement - those statements, I should say.
Mr. Cappe: As we were discussing earlier, our overriding concern, and I - if I may, I would like to read a sentence out of the next paragraph which says:
I indicated that if it weren't so primordial, that the bidding issues would NOT be first and that we were MOST concerned about the personnel issues...
So I - we had this responsibility for the personnel issues as well and that would have been first, but we were most concerned about the integrity of the bidding process. And the concern related to the discussion we had had earlier about how far we could deviate from the request for proposals process without creating a legal liability of either or any of Paxport, Claridge or Mergeco, and what we were - because at this point on April 5th, as I recall, the Claridge bid had not yet been withdrawn.
What I referred to later on, there may be "political" liabilities as well, was a reflection of my concern as a senior official that as the issue was playing out in the media that ministers could run the risk of being subject to critique by the media or the public at large that they were not respecting the process. I think earlier on in the discussions Senator Grafstein had made the point that there were both concerns about the legal formula, if you will, or process, and the general issue of staying within the process that had been identified earlier.
So we had both a legal and a political concern, if you will, political in quotation marks, because as senior public servants we were not going to be partisan political but we were concerned or interested in serving the government of the day by using our intuition, if you will, to provide them with advice that they were going to run certain political risks.
Senator Grafstein: So this is, again, and correct me if I am wrong, this was again out of the normal process, this was something a little different than the normal process, your concern about all of these issues?
Mr. Cappe: To generalize a bit, I think that those - that is the role of senior public servants and that it would be appropriate to do that on a large array of issues. This was a very large process - a very large project. It was an unusual process as you put it - I guess I am not sure I would call it unusual as much as one which had a lot of factors at play and which was drawing a fair bit of public attention.
The other thing that it did was it was set up in a way that created winners and losers.
Senator Grafstein: It was also a one-off.
Mr. Cappe: I wouldn't say that.
Senator Grafstein: It was a one-off. Give me another precedent in Canada. You didn't have a precedent.
Mr. Cappe: We did the LAAs that way. That is why I want to be careful.
Senator Grafstein: But it was a one-off.
Mr. Cappe: Well, after -
Mr. Clayton: Maybe I could comment? I think on these large land lease deals, as I said last time, every one of them is a one-off.
Senator Grafstein: No, no.
Mr. Clayton: So this is different.
Senator Grafstein: No, no. Let me just explain to you what I mean by one-off and correct me if I am wrong, this is a one-off deal, it was an unprecedented transaction because there was no precedent -
Mr. Cappe: It was unlike any other.
Senator Grafstein: It was unlike any other; and, in fact, you were groping your way through the terms of reference to come up with something that would meet the public interest criteria. This was not an easy process to follow because you have explained that there were many parties, many pieces, and it was difficult to manage the process. In that sense, it was large, it was unprecedented, it was a one-off, and it was complex, and it was messy - these are all almost fair conclusions from your memoranda.
Mr. Cappe: Those are all words we used at different phases to describe the process.
Senator Grafstein: Fine. I am trying to deal with this in some fashion.
Mr. Clayton: I would add it was not unique, if I may -
Senator Grafstein: Let's move on.
Senator Tkachuk: Could you just finish?
Mr. Clayton: It is not unique in that these very large development projects all have these elements within them. I could be - you could be having hearings on the fixed link to Prince Edward Island where the same types of issues in different ways would be brought up there. So, certainly all of these was messy but it was not unique.
Senator Lynch-Staunton: Let's go through the unprecedented deals that are unique, messy and complex and one-off.
Senator Grafstein: Mr. Chairman -
Senator Lynch-Staunton: No, just a moment. You are using words out of context.
Senator Grafstein: May I speak, Mr. Chairman?
As I understand it, I have been patient and I have followed the process here. Yes, I haven't been at other committee meetings and I am standing in for a previous member but I have tried to brief myself on this. I was following in the normal course my understanding of committee processes: A member of the committee goes forward, cross-examines the witnesses, I then - he comes to a certain conclusion.
Senator Lynch-Staunton: We don't cross-examine witnesses. We are not in court.
Senator Grafstein: I then look to the memorandum and the facts and ask amplification of questions. Now, as I am trying to complete at least a line of thought, and I assumed I was given the time to do that.
Senator Tkachuk: Senator Grafstein -
Senator Grafstein: I keep getting interrupted. I am not suggesting that I want to take all the time, but at least let me conclude my train of thought here because I am losing my train of thought.
Senator Tkachuk: Senator Grafstein, when I was asking questions the first time there were a number of occasions when you and Senator Stewart came to the fore and asked questions.
Senator Grafstein: But he is asking - he is now -
Senator Tkachuk: You did, too.
Senator Grafstein: No, I didn't parallel the questions. I was trying - I was asking for an amplification.
Senator Tkachuk: All I did is I asked the witness to finish the questions and you looked like you were upset that I asked the witness to finish answering the answer.
Senator Grafstein: Senator, there is a material difference from trying to get a clarification of a question so one can understand what the responses are and then having parallel questions. Certainly, there is a difference.
Senator Tkachuk: What did he just say, then?
The Chairman: Order. Senator Grafstein has one point. But, Senator Grafstein, at one stage of the game just indicate when you will permit a supplementary question and those - instead of making comments on the nature of his questions ask the witness a question. Just ask the supplementary questions whenever the opportunity arises.
Senator Grafstein: Let me see if I can grasp the thread of a slender idea that I had a few moments ago.
Let's continue on that memorandum, if we could, Mr. Cappe, and you have been very helpful so far.
Let me conclude, again excerpting that memorandum, and this is your words, I take it, and I quote:
Overall, there was a concern that TBS rules and procedures would get in the way. I told him that we would give him priority, streamlined treatment and that we would give him direct access to senior officials as needed and one window if he wanted. I told him that we would give him priority treatment, but would not commit to quick turn around. I said that if he presented us with a complex difficult problem that we would give it priority treatment, but, we would not guarantee quick turnaround but rather serious and high priority treatment.
Now, my impression from this is that inordinate - and I use the word - inordinate time pressures were being placed on the decision-making process. Is that a fair conclusion to draw from your memorandum?
Mr. Cappe: We were concerned about the notion that there was a deadline and, indeed, the documentary evidence or the documents before you note on several occasions that there was a notional deadline of either May 31st or June 1st or, later on, July 31st, and we were concerned about that.
On the other hand, we wanted to not gratuitously be in the way. And I indicated in my opening remarks that we - that the Treasury Board has this challenge function to ask tough questions and therefore slow the process down to ensure that the right questions get asked. And we found in this case that, as the documents indicate, Mr. Broadbent had indicated he had a deadline and we were trying to ensure that while - that we could give him as fast answers as possible, so we weren't getting in the way in that sense, that nevertheless we were doing our job, and that by doing the job meant reviewing the material, coming to an informed and reasoned judgment and then getting back to him with an answer.
Senator Grafstein: Fine. Let me move to the next element here and that is a document shortly thereafter, April 27th, and again it is along the same lines. It is document 002101. This is a document of a - I think it is a note for an interdepartmental meeting of that date on human resources, which was one of the issues you raised in your previous memorandum.
Mr. Cappe: Yes, okay, that is just a few pages on.
Senator Grafstein: Does everybody have that? I don't want to race ahead.
Mr. Cappe: Is this the secret document entitled, "Interdepartmental Meeting" on T1T2 "Human Resources Issues"?
Senator Grafstein: Yes. Again, I look to the second sentence and it says - this is just based on a very important aspect of this, and that is the timing for an agreement of a ground lease, et cetera.
This timetable is extremely tight and we understand from Allan MacGillivray that every effort will be made by David Broadbent to ensure that nothing compromises the attainment of this objective.
That is in upper case and I assume that comes right from the memorandum so that you are obviously trying to draw - or people are trying to draw that issue to everybody's attention, that this is a tight timetable. Fair or unfair?
Senator LeBreton: Excuse me, senator. What page were you reading that from?
Senator Grafstein: Right from the top of the memorandum. It was paragraph 1 on page 3.
Mr. Cappe: Mr. Chairman, I don't know the source of this document and I really can't comment on it because I was not present for the meeting.
I shouldn't guess, but I will guess that it is a Privy Council document, or perhaps from the personnel policy side of the Treasury Board Secretariat, but I have no knowledge of this document, and I don't know who Mr. MacGillivray is.
Senator Grafstein: You may give the same answer to this response as well. I want to now move to document 00269 which is dated April 29th, and this is from Carole Swan to Mr. Gershberg, with copies to Mr. Clark and Mr. Cappe, and maybe either you, Mr. Cappe, or Mr. Gershberg might comment on this, and again I will quote to put it in the record but we would like the entire document to be in the record, Mr. Chairman.
Senator LeBreton: Can you give us the document number again?
Senator Grafstein: It is 00269 and it is dated April 29th from Carole Swan to Mr. Gershberg, one of the witnesses. And I am quoting now:
Mr. Shortliffe has called this meeting to check on the status of the negotiations/discussions on the redevelopment project for T1 and T2. There remains serious concern at PCO over meeting the deadline established of June 1, 1993 to arrive at an agreement with Paxport Inc. or Mergeco.
So, again, it appears that there is a time pressure concern now emanating from PCO.
Mr. Cappe: There were - I want to put this in context. There was - this was at a time in April when the redevelopment project was becoming important as one of the few Crown projects - or it wouldn't be a Crown project - but one of the few projects on Crown land that would be seen as an economic development project and there was certainly testimony that ministers were keen to see this advance during the - during that period when Toronto was going through some difficulty in economic terms.
As well, there was an understanding that a number of - that senior officials had, certainly, that there was a need to get on with the project and that it should be completed as quickly as possible. So that clearly - it was made clear to all of us that there was a deadline established of June 1st and that was something that we thought was difficult to meet.
Senator Grafstein: Why June 1st?
Mr. Cappe: I have no idea quite frankly.
Senator Grafstein: Who established it then? Did that come from Privy Council?
Mr. Cappe: I don't know the answer to that. But, clearly, it was my understanding from meetings with Mr. Shortliffe and Mr. Broadbent that there was a June 1st or May 31st variously described.
Senator Grafstein: So your best knowledge is that - we will get it from someplace else - your best knowledge is that it probably emanated from PCO to bring this to some speedy conclusion.
Mr. Cappe: Mr. Broadbent, recall, was on contract to Transport, but one of the two.
Senator Grafstein: Fair enough. We will get it from them.
Let me move on, again dealing with the test of "in the normal course". Again, there is a comment on page 2 of that same memorandum - and, again, if you have no direct knowledge of this or you can't comment on this I will quite understand, but I want to put it on the record, and I quote from page 2:
Below are some background notes on the remaining agenda items and some questions you may wish to ask. It is currently very difficult for us to stay on top of this file since Mr. Broadbent is dealing bilaterally with senior officials at PCO. As well, the people at Transport working with Mr. Broadbent are reticent to discuss issues.
What does that mean? Is that in the normal course?
Mr. Cappe: No, that is not in the normal course but then we didn't - did not typically hire an outside consultant to be the negotiator on such a file. So that was not in the normal course either.
What I described earlier as when Mr. Rowat took responsibility for the file, we had better access to information. I think that came up in the question on Mr. Gonu's memorandum earlier. So Mr. Broadbent was dealing with Privy Council Office and, at the working level, our staff was not getting as much information as they wanted.
Senator Grafstein: And now on page 4 of that same memorandum, I will quote:
The deadline of June 1 still appears extremely optimistic. Negotiations are to be completed with sensitive personnel and financial issues still to be worked out.
Now, again, we are talking about this on a date which is April 29th, not much time to June 1st.
The deadline of June 1 still appears extremely optimistic.
And then the last sentence:
Locking in a complex deal under a long term lease in such a short period may not be very prudent.
What is meant by that if you can tell us? Is that in the normal course?
Mr. Cappe: Once again, we were trying to handle a very complex, messy - all of those words - file and this says "Locking in a complex deal..." as it was - we had a number of concerns which are evident in the previous pages of this memorandum relating to the transfer of the personnel, relating to the financibility of the project, and you have heard other testimony on that subject, that it was our view that in the month remaining from April 29th to June 1st that we would not be able to resolve those issues. Indeed, that was a theme that we had established earlier in the memoranda where we said we did not think that we could meet that deadline. And, indeed, the project was not resolved on that deadline.
Senator Grafstein: Earlier on, back to the top of page 4 under "Timetable" this quote:
Mr. Shortliffe may indicate the need to meet regularly to keep things on track for June 1.
Again, that arises in that memorandum dated April 29th.
It would be helpful if there was also a briefing of other officials on a regular basis before DMs meet.
I want to leave that quote for a moment and come back to the next document because I think there is a parallel here. The next document is a memorandum from Carole Swan or Bill Cleevely for Carole Swan to Mr. Gershberg in preparation for this meeting with Mr. Shortliffe.
Mr. Cappe: That is 00272?
Senator Grafstein: This is 00272 dated May 10. Here we are 10 days later, 12 days later. I want to read this and get your response to this.
Mr. Shortliffe has called this meeting to check on the status of the negotiations on the redevelopment project for T1 and T2. There remains strong pressure to meet the deadline of May 31, 1993, to arrive at an agreement. The Minister of Transport announced on Wednesday, May 5, 1993, that "Formal negotiations based on the proposal submitted by Paxport are currently under way" (see attached press release).
Where was this strong pressure coming from, Mr. Gershberg or Mr. Cappe?
Mr. Gershberg: Well, strong pressure in the sense that there were a number of meetings and there was discussion, continuing discussion over the deal and of course with the Mergeco group starting on May 5th. The deadline didn't move. I mean it was quite clear, as one went to these meetings, that the goal, if you wish, was to try to complete the negotiations by the date of May 31st.
As Mr. Cappe stated earlier, we were always sceptical that we could do that in that timeframe, and indeed it turned out that we couldn't. You know, I think it is fair to say that deadlines are not unusual in a variety of projects. One always tends to work to a deadline, sometimes they are realistic and sometimes they are not realistic, and often they move. There is no question through that period -
Senator Grafstein: I don't mean to interrupt your train of thought, and you will come back, but we get these other words in these memorandums, it is not prudent. It is not a question of just a time line, the complexity of the issues. It is not prudent, we are being told by public servants to themselves.
Senator Lynch-Staunton: Where is that?
Senator Grafstein: In the memorandum that I previously quoted that is on the record.
Senator Tkachuk: Could I ask a supplementary?
Senator Lynch-Staunton: Where does the word "prudent" appear?
Mr. Cappe: It is 00269, page 4 at the very bottom.
Senator Grafstein: Page 4 on the timetable of previous memorandum:
Locking in a complex deal under a long term lease agreement in such a short period may not be very prudent.
Senator Lynch-Staunton: That is an opinion; that is right.
Senator Tkachuk: I want to ask a supplementary, Senator Grafstein, which is just - it relates strictly to his question, okay, on the pressure.
Were you getting pressure from the minister, your minister of the Treasury Board?
Mr. Gershberg: That is again getting into discussions with the minister, but let me say -
Senator Tkachuk: Was Carole Swan getting pressure from the minister or B. Cleevely getting pressure from the minister? Was he phoning Mr. Cleevely and saying, "Gee, Mr. Cleevely, move this file"?
Mr. Gershberg: Let me say, senator, that in meetings that Mr. Cappe and I attended on different occasions it was clear that we were working to this May 31st deadline and there was a real hard attempt to complete the project by that time. We always had concerns about the possibility of doing so and the fact of the matter is that we weren't able to do so. There were difficult issues on the personnel side. There were official language issues.
Senator Tkachuk: That is fine. That is good you guys are doing that. Were you getting calls from the Minister of Transport?
Mr. Cappe: I think the strong pressure that we are referring to here was certainly a common understanding among officials that there was an urgency to this project. We had heard that ministers had been concerned about - and, indeed, the reference to the Minister of Finance's economic statement in announcing it going back to the previous year had indicated that it was important. The strong pressure I think was a reflection of the number of meetings that were being called; Mr. Broadbent coming back from his negotiations indicating that he wanted to see progress quickly because he needed to deliver May 31.
Senator Tkachuk: Mr. Broadbent?
Mr. Cappe: I mean there is no - we have not said that there are ministers who are telling us as public servants this, but there was a common understanding among senior public servants that there was an urgency to the file to get the deal done by May 31st.
Senator Tkachuk: Okay.
The Chairman: Could I have a supplementary, too, Senator Grafstein?
Senator Grafstein: Sure, Mr. Chairman, help yourself.
The Chairman: Miss Swan wrote on April 29th in which she looks up to heaven and asks: Does Mergeco exist? And on May 10th apparently it does. That is 11 days later. Transport Canada has indicated it is now officially negotiating with the new company Pearson Development Corporation.
My question to you is this: This is a week or so before the arrival of Mr. Rowat. Was it not true that personnel matters and a variety of other things were almost immediately resolved on his coming, and the Air Canada contract begun?
Mr. Cappe: The difference on the status of Mergeco was May 5th because in May 5th in that intervening period between April 29th and May 10th Mergeco formally became the people with whom we were negotiating because Claridge had withdrawn its bid.
Mr. Gershberg: Mr. Rowat, I think, came on board June 15th.
Senator Grafstein: Mr. Chairman, may I?
The Chairman: Go ahead.
Senator Grafstein: One can conclude something different than that. The person that calls these meetings and seems to be coordinating this appears to be Mr. Shortliffe.
Mr. Cappe: Mr. Shortliffe certainly had called a number of meetings in that period, and I attended a number of meetings in his boardroom, as I did with Madam Labelle in her boardroom on the file in that period.
Senator Grafstein: Let me focus on Mr. Shortliffe and then leave Ms Labelle alone. Again, is it usual for the Clerk of the Privy Council to take hold of an issue like this and provide a weekly, almost daily, supervisory overview or oversight on a transaction of this nature? Is this usual?
Mr. Cappe: I have already commented too often on the word "usual" so if I may try -
Senator Grafstein: I am trying to do it a fact at a time.
Mr. Cappe: Okay. It is not usual for the Clerk of the Privy Council to be involved in all manner of files. As I indicated earlier, this was a complex file and a large one. There had been obvious ministerial interest in this as reflected in the public record. I mean we had a number of ministers commenting. You had ministers from Toronto who were keen to see this go ahead. So in that sense it is - over that same period as I was calling out the number of meetings I had had with Mr. Shortliffe, I was struck by how many I had had on other subjects as well.
So we were then in the process of dealing with budget matters. We were also dealing with -
Senator Grafstein: What I am trying to suggest is this -
Senator Lynch-Staunton: Listen to the answer. Let him finish.
Senator Tkachuk: I want to hear the answer.
Mr. Cappe: - other issues.
Senator Lynch-Staunton: Other issues.
Mr. Cappe: Other issues of grand moment and of significance to ministers were issues that Mr. Shortliffe would get -
Senator Lynch-Staunton: Exactly, and that is his reply.
Senator Grafstein: I am not denying that. What you are saying, and tell me if I conclude fairly from what you have said, Mr. Cappe, and I don't want to take it out of context, is that you - I don't want to take it out of context and you can correct me if I am being inappropriate here. I am trying to look at the memorandum, listen to the evidence and trying to deduct a fair conclusion; and if it is not fair, please correct me, and that is this: The Treasury Board has a lot of interface, you, the secretariat, with the Clerk of the Privy Council, on a myriad of matters, and you meet with them regularly on a myriad of matters. What I am concluding from this, to see if it is fair, is that there appeared to be an inordinate or unusual attention on this one issue, not the myriad of other issues that you had with the Privy Council, on this particular set of circumstances.
Mr. Cappe: That calls for a judgment which I am not prepared to make, but you can - I am sure that different senators would come to a different judgment on that and neither would be unreasonable.
Senator Grafstein: Fair enough. Then, factually, there was more than an unusual number of times that you met with the Privy Council, the Clerk of the Privy Council, on a singular matter.
Mr. Cappe: All I can do is give you examples, and this is why I would like to go back to this. As we were doing the fiscal framework and the budget, I was meeting with Mr. Shortliffe on those kinds of issues. As we dealt with aid to Russia, I met with Mr. Shortliffe on those kinds of issues. As we dealt with the issue of South Africa from time to time, I ended up in a meeting with Mr. Shortliffe.
So that if you want to come to a judgment about whether it was usual, you then have to assess whether it was an issue of significant moment that would interest and be important to the Clerk. I really suggest that you have that conversation with Mr. Shortliffe.
Senator Grafstein: Fair enough. I don't want to take something out. I am trying to draw a reasonable conclusion from your memoranda and the information that we have, the traffic pattern. I am trying to assess the traffic pattern and say how much traffic was spent on this particular dossier compared to the other myriad files that obviously is traffic patterns that are normal with respect to you and the Treasury Board and the Privy Council. We will all come to our own conclusions but the facts will speak for themselves.
Senator Tkachuk: The documents here are documents on this file. We don't have documents from all the other files, right?
Mr. Cappe: You can ask Mr. Shortliffe.
Senator Tkachuk: I am asking you: Do you have documents from all your other files in your book?
Mr. Cappe: No, I don't. I have given a couple of other examples.
Senator Grafstein: Mr. Chairman, it is nine o'clock. I would like to explore another topic that I think is within the knowledge of and the responsibility of this particular group, and I will tell you what it is, and it may not be appropriate to open this topic at this time, but I think it is relevant. May I at least set it out and then you can determine, Mr. Chairman, if it is appropriate to deal with it now or later, but it certainly should be from these officials, and it all emanates from our good colleague Senator Lynch-Staunton here about what is normal, what is usual. Shall I tell what it is?
The Chairman: That would be helpful.
Senator Grafstein: There is a lot of confusion in my mind with respect to the Mergeco, and I would like to start that discussion on Mergeco with an agreement based on a document I have received, 002064, dated January 14th, 1993. It is an agreement between the parties that is the first agreement that I found dealing with Mergeco, and this follows on December 7th there was an approval of Paxport, and we have talked about -
The Chairman: Okay. You have given me notice of what you are going to ask. All I want to ask you is this: It is now nine o'clock. How much time do you want? We usually leave a bit of time for Mr. Nelligan.
Senator Grafstein: I understand that which is why I raise it now.
The Chairman: Can you do it in 10 minutes or can you try?
Senator Grafstein: I can try, but I think that they are rather complex issues and it goes to the heart, I think, of one of our concerns here.
The Chairman: All right, go ahead.
Senator Grafstein: And that is the nature of the transaction. It is a financial analysis. It is a financial analysis.
On December 7th the process which you are surveiling allows one party to get through the process and we call it - it has been called the preferred bid or the winner or whatever. Tell me, on December 7th what is the legal - the appropriate legal definition of what Paxport picked up? What did it get on December 7th in law?
Mr. Clayton: I would not like to provide legal opinions. I am not a lawyer.
After a bidding process, Paxport was identified as, in effect, the best overall acceptable proposal, which I then in my administrative hat, not legal hat, said under that process that they would then get as the best overall the first shot at meeting conditions that the minister set out in his December the 7th -
Senator Lynch-Staunton: The answer, if I may, is found in document 2186 prepared by Transport. It is all there.
Senator Grafstein: Excuse me, senator. I am really trying to get the knowledge of those officials who had responsibility for surveiling this transaction. I am trying to get their knowledge. It may be imprecise.
Senator Lynch-Staunton: Transport made the award, so-called.
Senator Grafstein: Excuse me, I am trying to get their knowledge. Because they were fulfilling their responsibilities I want them to tell me what they think they had to do pursuant to something that somebody else did. They are here. This is a direct - this is direct cross-examination.
Senator Lynch-Staunton: I didn't know we were in court. Cross-examination?
Senator Grafstein: Direct questioning then.
Did any of you have knowledge of this document and do you have this document?
Mr. Clayton: We do not have this document now.
Senator Grafstein: Did you have it?
Mr. Clayton: I think somewhere since then I have seen the document.
Senator Grafstein: But at the appropriate time you didn't have this document?
Mr. Clayton: I think it is important to note maybe talk about the process that follows after that minister's announcement. It was up to the Minister of Transport, through various vehicles, the minister obviously with his officials, in order to go through a process related to meeting those criteria. The Treasury Board Secretariat -
Senator Grafstein: This document speaks to those financial criteria in quite a substantive way.
Mr. Clayton: Yes. I am saying that is essentially in the process, the Minister of Transport's then responsibility and officials to deal with that so it is them that is dealing much more with it than us.
Senator Grafstein: When the merged package reappeared in whatever form, you then approved it in some fashion, or at least advised on it. I am trying to follow Senator Lynch-Staunton's very direct questioning about all the approvals were taken, Treasury Board - did Treasury Board ultimately approve the completed contract so that it met all its financial and other criteria that were established in the proposal?
Mr. Clayton: As I think was talked about earlier, there is an Order in Council in your note reference to Treasury Board approval in August of 1993.
Senator Grafstein: I am trying to start that process to see - we are talking about process here and whether it was usual or unusual or what happened because we are trying to take a look back and it is very difficult from documents to do so, but documents are helpful, and timing of documents are helpful. I think this is for me a helpful document. I just wondered at what time did treasury secretariat see this document, or at least examine it or opine on it.
Mr. Clayton: I would not - frankly, I would not remember, but I think, as I mentioned earlier, it was not in January when that was going on. It was considerably later.
Mr. Cappe: Just to remind honourable senators that it is Transport that is dealing with the proponents. So that we are sort of in the background dealing with Transport.
Senator Grafstein: I am trying to get from your knowledge because we will have to deal with Transport on this; when would you have seen this document for you to give any opinion on it? The reason I say this is because this goes to the heart of the value to the public, the value to the government. You know, it is back to all of the principles of was this a fair contract in the circumstances; was it properly financed and so on. I am just trying to examine that now for the first time. I am trying to open this line of inquiry.
Senator Jessiman: What is the number of the document?
Senator Grafstein: It is 002064. It is a document dated January 4th and it is the first document that I see which says: "This letter sets forth the agreement between ourselves with respect to the proposed acquisition of the right to lease, develop and operate Terminals 1 and 2 at Pearson International Airport and the ownership..." and it is directed to a Mr. Jack Matthews.
Senator Tkachuk: From?
Senator Grafstein: From T3LPCO Investment Inc.
Senator Tkachuk: What do these guys have to do with it?
Senator Grafstein: They are one of the bidders.
Senator Tkachuk: What do these witnesses have to do with the document?
Senator Grafstein: I am asking that question.
Mr. Cappe: I guess we are saying that we have never seen it - sorry, we don't have it in our package here, so I don't know whether we have ever seen it or not.
Senator Tkachuk: Have you ever seen Elvis?
Mr. Cappe: I refuse to answer on the grounds that -
Senator Tkachuk: On the grounds that it may be advice to your minister.
Senator Grafstein: According to the CBC, Elvis is alive and well in the Annapolis Valley.
Senator LeBreton: Typical of CBC.
Senator Jessiman: The date of the document?
Senator Grafstein: January 14th, 1993.
Senator Grafstein: It goes to - what it does is spell out -
Senator Jessiman: Is it a letter?
Senator Grafstein: It is a letter agreement. You have it. We have received it. It is a letter of agreement between the two so-called parties that was signed and it sets out the economic relationship between the two.
Mr. Cappe: Is this between Paxport and Claridge?
Senator Grafstein: I don't know - I assume.
Senator Lynch-Staunton: You are reading it. Who is it from and who is it to and what does it say?
Senator Jessiman: Read it out.
Senator Grafstein: It is T3LPCO Investment Inc. and it refers to an agreement between - requiring the approval of the directors of Paxport and the board of directors of T3LPCO Investment Inc. I assume from this, based on my reading, that it is a letter of agreement dealing with the merger - Mergeco. It is signed, I guess, let's see, it is signed by TLPC Investment Inc. and Paxport, and then it is signed by Toronto Investors, Airport Terminals Development Group, Airport Terminals Development Group.
Senator LeBreton: It is your friend Senator Kolber and the Bronfmans.
Mr. Nelligan: I think one of the problems, senator, may be that that party has not appeared - it might have been a preliminary agreement, but I don't think it is a final agreement between the parties at all.
Senator Grafstein: I don't know what it is.
Mr. Nelligan: I am suggesting maybe that is why they have never seen it because I don't think that particular corporation was involved in any way in the ultimate negotiations between the parties.
Senator Grafstein: Then let me move - I will lay that aside.
The Chairman: Senator Grafstein, we are getting out of time, and as a matter of fact the chairman has some questions to ask, too. So if you - can you get - you have gone way over your time. I have given you lots of time.
Senator Grafstein: I appreciate that.
The Chairman: I want to get at a few things before we break at 9:30.
Senator Grafstein: Two last questions. I will try to be precise. It goes to the value of the contract.
The Chairman: No, it doesn't. It is not relevant at all. You are in January. Why don't you cut to the chase? Why don't you get to the August letter of Deloitte & Touche?
Senator Grafstein: I am. That is exactly where I am.
The Chairman: No, you are not. You are in January.
Senator Grafstein: They told me they have no information on this and I am going to pass on to your point.
The Chairman: To August?
Senator Grafstein: Yes.
The Chairman: Go ahead.
Senator Grafstein: At the end of the day, what was the rate of return, guaranteed - I shouldn't say - what was the rate of return available to the various investors as a result of this transaction? In other words, to assess the deal -
Mr. Gershberg: My understanding is that at the end of the day we were looking at about a 14 per cent, over the life of the contract, return. I can't tell you who was getting what.
Senator Grafstein: Mr. Chairman, forgive me, I apologize for this, but did you make an assessment or did the officials of the treasury secretariat make an assessment of that, that analysis; or was that done by your third party consultant?
Mr. Gershberg: Again, it was Deloitte & Touche who did that.
Senator Grafstein: Thank you, Mr. Chairman. I just wanted to set the basis of asking that question if it is Deloitte & Touche, and then I will ask my questions of them.
Mr. Nelligan: They have already testified, sir.
Senator LeBreton: Read the testimony on last Thursday.
The Chairman: Okay, gentlemen, is it fair to ask you whether or not the advice of the Treasury Board Secretariat was taken at the submission to the Treasury Board of the 26th of August, approximately?
Mr. Cappe: No, it is not fair to ask that question, senator. I don't mean to be glib, but I think you are asking really what the Treasury Board decision was and what we advised and so I really couldn't get into it. I think it is fair to say that the Treasury Board came to a decision which was to approve not because we have said so but because you have the Order in Council which refers back to that decision.
The Chairman: Then the Treasury Board did approve the transaction?
Mr. Cappe: Yes, that is true.
The Chairman: On or about the date I have mentioned?
Mr. Cappe: That is true.
The Chairman: The Governor in Council followed shortly afterwards?
Mr. Cappe: That is right.
The Chairman: Now, then, all matters had been resolved that were referred to in Mr. Desmarais' letter immediately following the decision with respect - the unanimous decision on the best available overall proposal, all matters that he had raised had been resolved?
Mr. Cappe: I can't speak to Mr. Desmarais -
Mr. Clayton: Mr. Barbeau's letter.
The Chairman: Mr. Barbeau, rather.
Mr. Cappe: In Mr. Barbeau's letter?
The Chairman: Yes.
Mr. Cappe: The best I can do, Mr. Chairman, is to draw your attention to some of the memoranda we were dealing with back in either July or September. In July, we were still advising - this is July 20th and document number 002052 to the then new President of the Treasury Board, we had a TBS overall assessment which indicated that there was still several concerns remaining, but what you will notice is that these concerns are different than the concerns that we had expressed in the documents earlier on that, indeed, the deal looked different because a lot of those issues had been addressed.
Now, you can come to a judgment of whether they were resolved or not, but they were certainly addressed and therefore we were concerned that the government will likely pay a heavy price for redevelopment because of the Air Canada support, push any risks back - there is a number of issues here that we have identified; but these are different issues or issues of a different order of magnitude than they had been.
The Chairman: I understand that, but going back to the issues raised by Mr. Barbeau in his letter. I am referring specifically to those. They were resolved?
Mr. Cappe: In terms of the financibility?
The Chairman: Wait a minute now.
Mr. Cappe: I don't have Mr. Barbeau's letter.
The Chairman: Financibility went off the table when the merger thing became a fact.
Mr. Cappe: Fair enough.
The Chairman: And so did everything else. So did the Allders lease and the problems of the majority interest and things of that nature. Everything went off the table when the marriage was to the satisfaction of the negotiating team. The matters that you are referring to, are those the matters that caused the documents to be put into escrow until they were met? Were those the matters?
Mr. Clayton: No. I believe you are talking about - again, talking about Mr. Barbeau. Our understanding is you are talking the December 7th, '92 letter. I don't have it here. I mean maybe you could talk about the specific items. I assume they had been addressed by that stage.
Mr. Cappe: Or are you talking about the -
Mr. Clayton: Or are you talking something later?
Mr. Cappe: September?
The Chairman: I am talking about the end of the day was for all practical purpose August.
Mr. Clayton: So you are talking after the Order in Council those issues that needed cleaning up before the signature?
The Chairman: Yes, and matters that were not material, didn't require them to go back to the Treasury Board for instance.
Mr. Clayton: We cannot then comment whether they had been addressed or not. We were not involved with the process at that time.
The Chairman: As soon as the play is around the goal mouth you seem to be leaving.
Mr. Clayton: Once - to understand the process, once the Treasury Board Secretariat, Order in Council, has approved at that level, that is then a very legal thing which the Department of Justice and Transport deal with each other in terms of closing the deal. We were not part of that process.
The Chairman: I have three final questions which I thought Senator Grafstein was going to ask.
After the Treasury Board approved the submission made to them, and after the Governor in Council, and after the documents were put in escrow, and after the date of October 7th had been agreed upon, as early as July, as the date in which the documents would be released, at that time, or even now, could you tell us in what way was the process flawed?
We know what your attitude is toward what should have been done and so and so, you have made that clear, and you quite properly wouldn't answer the question of was your advice rejected when the final submission was made. I am not asking you that. I am asking you now for any evidence that the process was flawed as of that time.
Mr. Cappe: Well, as I said in our memorandum that you read into evidence, we were concerned that the deal not expose the government to any legal liabilities, and it did not. Our concern about keeping the process within the framework of the RFP process was satisfied to our - to the extent that we were concerned.
The Chairman: Yes. So the process - Mr. Clayton?
Mr. Clayton: Yes. As we have said, the process according to - and you have now got it beyond Treasury Board approval but also Governor in Council approval was followed.
Mr. Cappe: The normal government approval procedures were followed on the file, yes.
The Chairman: Did you see any indication that the process was flawed? One at a time, please, starting on the right.
Mr. Clayton: I think I am avoiding using the word "flawed". It is a subjective word. I think the answer is that what I saw the process according to the approval processes that are required was followed.
The Chairman: Was what?
Mr. Clayton: Followed.
Mr. Cappe: Once again, I would say that we were - we had concerns about the liabilities that the government could be exposed to and they were dealt with by confining ourselves within that process of the RFP, and we were satisfied that the normal government approval procedures were followed as well.
The Chairman: Mr. Gershberg?
Mr. Gershberg: I would agree with Mr. Cappe on that.
The Chairman: And starting from left to right, Mr. Gershberg, was this an adequate contract?
Mr. Gershberg: That is, again, I think a very subjective issue and one that obviously ministers at the end of the day have to come to conclusions on. We didn't discuss some of the issues I guess this evening, but you know there were a number of issues that we raised along the way. Some were met; some weren't.
The Chairman: Pardon me. If the word adequate is subjective, was it an inadequate contract?
Senator Kirby: That is also subjective.
Senator Stewart: Six of one and half a dozen of the others.
The Chairman: Inadequate means that there is a clear reason.
Mr. Gershberg: I don't know what we mean by "adequate". The reality is there was a negotiation. In any negotiation there is give and take. Sometimes what is desirable is not always achievable. Certainly, from the point of view -
The Chairman: Mr. Rowat's expression was everybody had to put a little bit of water in their wine.
Mr. Gershberg: The Treasury Board Secretariat is always trying to maximize the returns to the Crown and protect the Crown's interests. You know, whether that is done or not I think at the end of the day is really up to ministers to decide.
Mr. Cappe: I would answer that the issue of adequacy is really a judgment that ministers have to bring to bear; that in some respects we would never be satisfied with a deal that would come forward. On the other hand, and as Mr. Gershberg said, we had residual concerns. And so we advised ministers what those concerns were and ministers came to a judgment of the adequacy of the contract.
The Chairman: Mr. Clayton?
Mr. Clayton: I think I conclude that the contract as finally done met the original objectives of the government which started back with the RFP.
The Chairman: Mr. Clayton -
Senator Jessiman: Do the other two agree with that?
The Chairman: They have been asked. Apart from those references that have been made your friend Dave Dyer, and to anyone else you chance to meet, did you see any evidence of political manipulation? Mr. Clayton?
Mr. Clayton: I saw no evidence.
The Chairman: Mr. Cappe?
Mr. Cappe: To the best of my recollection and my personal knowledge I am not aware of any facts of political manipulation.
The Chairman: Mr. Gershberg?
Mr. Gershberg: No, neither am I.
The Chairman: That is all I have.
Senator Grafstein: Mr. Chairman, I was going to remain silent, but I was thankful that you raised these issues, but I would have characterized the questions somewhat differently, along exactly the same lines, and see if I got the same response. May I just take a minute or two on exactly your points?
Senator Tkachuk: We have Mr. Nelligan -
The Chairman: No. I will tell you why you shan't, Senator Grafstein, because we are sticking with the rules of the game as pronounced by Mr. Nixon, and we are using the exact same expressions that he used in his report. That is the questions I put to these witnesses. I am not going to have you redirect them or change them around to arrive at some kind of a different conclusion. Just that simple straightforward, "adequate contract, "political manipulation", or "flawed process".
Senator Grafstein: You chose not to hear the questions. You are the chairman.
Senator Stewart: You are the majority. You will determine the outcome. This record will be very decisive as to the report.
Senator Grafstein: Mr. Chairman, I did allude earlier to a form of questioning about what started and what was completed. To my view it was very different in terms of what started the process and what was completed in the process in terms of who the parties were. They were different parties that started the process.
Senator Lynch-Staunton: We all agreed to that.
Senator Grafstein: Excuse me. They were different parties, according to the evidence we have heard, different parties that started the process and different parties that concluded the process. That was a material change.
Senator Lynch-Staunton: So? Is it a good deal or a bad deal? That is what we want to find out. You guys can't be that desperate.
Senator Tkachuk: Is that why Mr. Nixon cancelled the contract?
The Chairman: Mr. Cappe, did any of the three of you know of anybody who was speaking to different people at different times who asked to be relieved of their responsibilities on this file?
Mr. Cappe: I am not aware of any.
The Chairman: Was anybody fired from the file?
Mr. Cappe: I don't know the answer to that.
The Chairman: I see. Is there anyone else before we adjourn?
Senator Kirby: Mr. Nelligan.
The Chairman: Mr. Nelligan doesn't have any questions.
Nine o'clock tomorrow morning. We adjourn.
The committee adjourned.