Proceedings of the Standing Senate Committee on
National Finance
Issue 6 -- Evidence
Ottawa, Thursday, May 2, 1996
The Standing Senate Committee on National Finance, to which was referred Bill C-7, to establish the Department of Public Works and Government Services and to amend and repeal certain Acts, met this day at 11:00 a.m. to give consideration to the bill.
Senator David Tkachuk (Chairman) in the Chair.
[English]
The Chairman: This is the second meeting to examine Bill C-7. We have two groups of witnesses: the Association of Consulting Engineers of Canada and the Canadian Environment Industry Association. We will try to confine each group to 45 minutes so we can be out of here in an hour and a half. If we are done, it does not mean that we have to use up the time, but that is about as long as we are going to be able to go.
I will ask you to limit your opening statements, if you can, to ten or twelve minutes. That should give us sufficient time for questions, because there is a lot of technical detail, which we got involved with yesterday, that we would like your own points of view on. We will proceed from there.
I would like to introduce, from the Association of Consulting Engineers of Canada, Pierre Franche, the President and Chief Operating Officer, and Kenneth Hyde, Philippe Lefebvre and Dale Craig.
Gentlemen, I understand that you have an opening statement. Mr. Franche, would you begin.
Mr. Pierre A. H. Franche, President and Chief Operating Officer, Association of Consulting Engineers of Canada: Thank you, Mr. Chairman. It is a pleasure to be before the committee.
[Translation]
I have to say that the Association of Consulting Engineers of Canada has no objections to the proposed Bill C-7, with the exception of sections 10 and 16, as you well know.
Last week, we submitted a brief to the committee members. In the interest of time, I will not go over it in its entirety.
I would, however, like to focus in on a few points in light of the discussion that I witnessed yesterday evening and also ultimately suggest a way of resolving the confusing situation that we face.
[English]
I think yesterday, Mr. Chairman, the minister referred to the example of an architectural firm that supported the bill. Of course, I will leave it to the architects to comment on this; the RAIC will appear next week. Nevertheless, I want to assure the committee members, through you, the Chair, that the association has on file in the order of 150 letters from our member firms to the previous minister of public works opposing this bill. If it is the wish of the committee, we are prepared to table those letters.
Secondly, I think the statement was made that the ACEC, my association, had met with the previous minister of Public Works and Government Services. Unfortunately, that is not the case. We have met with Minister Marleau, and we thank her for that; it was the first time since this government has been in power. We were consistently refused access to the previous minister on this very major issue.
Yesterday, according to Ranald Quail, the minister referred to the fact that there is fear and distrust from the association with respect to public works. I have to agree with that: There is fear. There is distrust. If you look at the statements that were made in Hansard upon second reading in the other place, it instilled fear in us, and that is how we became aware of the implications of this bill. I will also give you shortly seven examples of why we have this fear.
There is distrust, yes, because when we are told, "We do not want to compete with the private sector, but we do want the powers requested under articles 10 and 16," yes, we are concerned about it because, Mr. Chairman, ministers change, officials change, governments change over time. I think yesterday there was even reference to the fact that this legislation has been there since 1867. So that instills into us some distrust and concerns.
Also, in the committee at second reading stage in the other place, we were told by a government witness that there were no new powers in this bill; however, I humbly suggest to this committee that there are new powers, when we refer to the fact that it is to be elsewhere. The two words "or elsewhere" do not, so ffar as we can determine, exist in either of the two previous Acts.
Also, the Minister of Supply and Services Canada under the existing legislation has certain powers that are referred to in this new bill; I agree, but they do not apply to engineering and architecture, because it does state that he can only apply those powers to that for which he is responsible, and it is the Minister of Public Works who is responsible for engineering and architecture and not the Minister of Supply and Services. Therefore, we are extending those powers to engineering and architecture.
[Translation]
We are also concerned by what Minister Dingwall stated in his letter to MP Marchand, namely that section 16 does not intend to make PWGSC a relentless competitor with the private sector.
One can infer from this letter that PWGSC could nevertheless become a player in private sector markets and this gives us cause for some concern.
[English]
I said I would give you examples at the beginning of my statement, and I have seven examples. Last night I went back and looked at my files after hearing the testimony.
The first example is GIS Implementation, Davis Inlet Relocation Project, September '94. Public Works Canada competed and won the contract after a consulting engineering firm had submitted a sole source proposal.
The second example is Newfoundland and Labrador Housing Corporation, July '94, in an environmental site assessment. A private-sector firm had tendered a price, then Public Works put in a price, and Public Works did withdraw its proposal following our association's complaint, because there was a potential conflict of interest since Public Works was the owner of the land anyway and was asking to do an environmental assessment on its own land for somebody else. I thought, from a conflict of interest point of view, that was not quite proper.
The fourth example involves the Department of Transportation and Communications of Nova Scotia in 1992. They were planning highway upgrades under a federal- provincial agreement. The department in Nova Scotia advised some of our firms that there would be a request for proposal for the environmental work. Later, they advised that there would be no request for proposal as Public Works Canada would do the environmental work.
The fifth example is Fort Nelson Airport, high-intensity approach lighting. A contract was awarded in 1991 to Moneco Agra. Then after the design was completed, the project was delayed to 1992 because of lack of funds. That happens. However, in 1992, without notifying Agra, Public Works Canada modified the plans, tendered the projects and did the construction supervision themselves. The answer we got was that there was too much staff that had no work in Edmonton.
This is the sixth example: On the occasion of a conference in Rio de Janeiro, Public Works Canada, through its Edmonton office, put an advertisement in a magazine, or a brochure of the conference, I think, that was available for other governments. That is of concern, and I will be tabling that advertising today, with your permission, Mr. Chairman.
My seventh example shows Public Works Canada, Environment Services, advertising in the environmental services, claiming that they had conducted studies for the cities of Brandon, Manitoba and Halifax-Dartmouth-Bedford. I also table that document, Mr. Chairman. Those are the seven examples I did want to bring to your attention.
Maybe today there is no intent to compete. I do not doubt that, but please understand our fear, in light of these examples, and also recognize that people will change and they will hold different functions.
Comment was made yesterday by one of the honourable members of this committee that public servants must have work that is interesting to attract a competent public service. Granted. We agreed with that. But it is even more important that the private sector be given, on a regular basis, the opportunity to develop its own expertise through projects at home, in order to export. You do not export, Mr. Chairman, what you do not do at home. I would ask you to recall that Canada is the fourth largest exporter of consulting engineering services in the world -- and a very competitive world it is.
So in order to achieve that, the private sector must, in our opinion, always be the leader and be able to request secondments through public-private partnerships, something that is possible under the present statute, I humbly submit.
Reference was made to the Hong Kong traffic vessel management and other examples elsewhere. I cannot believe, Mr. Chairman that that was done illegally. I do not believe that, and they used, I think, the Canada Commercial Corporation. That is fine.
So, yes, we have to resolve this fear and distrust. We agree with that. We agreed at the last meeting with the minister. When Ran Quail suggested to me that we should have a memorandum of understanding, I said yes. We asked for one -- and I referred to it in the brief -- in March of 1991. We discussed it again in June last year. Finally, on April 15, following the meeting with the minister, we agreed that we would work towards a memorandum of understanding, and I can tell you the intent is we will have something signed by June 21. But that is not to replace whatever is in the legislation. The legislation is the first thing that is important, and from there we proceed.
If we want to rebuild trust, I suggest to the honourable members of this committee that the first step is to modify this bill. That will help us go a long way. Now, if our proposals for amendments, which are in our brief, are not acceptable to the minister or to the government, then in order to resolve this imbroglio, I would suggest, very humbly, another way of modifying this bill, recognizing that I am not a lawyer, just a humble engineer before you.
Under "Activities of the Department", clause 5 of the bill, on page 2, as it is right now reads as follows:
5. The Department shall operate as a common service agency for the Government of Canada, and its activities as a common service agency shall be directed mainly toward providing the departments, boards and agencies of the Government of Canada with services in support of their programs.
Our suggestion is that you add the words:
...on the understanding that the department will never place itself in direct competition with the private sector.
If we had that assurance, then we would not worry about all the others because that would cover them. If there was a very specific case where there was no competition, so be it.
[Translation]
That concludes my presentation, Mr. Chairman. I will be happy to answer your questions to the best of my ability. In the meantime, let me assure you that the ACEC on whose behalf we are here today wishes to build new bridges with its client, Public Works. Thank you, Mr. Chairman.
[English]
Mr. Chairman, I would like to table this document, please.
The Chairman: Honourable senators, we can keep the document on file or we can have a motion to attach the document to the proceedings. What is your wish?
Senator Cools: I so move, Mr. Chairman.
The Chairman: It is moved by Senator Cools, seconded by Senator Bolduc. Those in favour? Those against? Carried.
Senator Nolin: I have one question. Is it possible to have the text of what is proposed as an amendment to section 5?
The Chairman: That is not in your written brief?
Mr. Franche: No, it is not in my brief. I did this last night, trying to find a solution to this, and it is not legal wording I am suggesting to you; it is an intention.
The Chairman: Well it is on the record, senator, but do you want it right now?
Senator Nolin: In order to discuss that later on with them here, maybe we should have a copy of that even if it is not in both official languages.
Mr. Franche: These are just handwritten notes from last night.
Senator Kelly: Mr. Chairman, could I suggest that Mr. Franche might want to specifically say again what he recommends, in terms of amending clause 5, and that that become a document that we have available.
The Chairman: Yes. We can all write.
Mr. Franche: Mr. Chairman, I will read it again slowly. The idea is to add the following words to the end of clause 5:
...on the understanding that the department will never place itself in direct competition with the private sector.
[Translation]
Senator Poulin: Thank you for being so frank, Mr. Franche!
Mr. Franche: I have been living up to my name for 62 years!
Senator Poulin: It suits you very well.
Mr. Franche: And I have every intention of going on for some time yet.
Senator Poulin: Thank you very much for your presentation. Could you tell us a little about the Association of Consulting Engineers of Canada and the members whom you represent?
Mr. Franche: The Association of Consulting Engineers of Canada was established in 1925. Today, it represents approximately 750 consulting engineering firms which provide independent consulting engineering services to various clients.
We have members in every province and territory. Our board is composed of 19 members appointed by our provincial associations commonly called "member organisations".
We also have an export division consisting of approximately 60 consulting engineering firms specializing in exports.
As I mentioned earlier, we are ranked fourth in the world. For several years, we were in third place; we slipped to fourth, then to sixth, but we have now regained our fourth-place ranking.
Our competitors are the United States, England, and, quite surprisingly, Holland which holds the number three spot. It is a highly competitive environment.
Briefly, that is what we do. I am the full-time President of ACEC. That is how I earn my living. We have a staff of approximately nine other persons. We provide a range of services in a variety of fields.
Our association has approximately 35,000 members employed in firms across Canada.
Senator Poulin: What percentage of the overall number of engineers in Canada is employed by the 750 consulting engineering firms that you represent?
Mr. Franche: That is very difficult to determine. It all depends on Statistics Canada's definition of consulting engineers.
Two statistics are important in this case: firstly, the percentage of firms doing consulting engineering work and, secondly, the percentage of employees.
As a rule, we represent approximately 30 per cent of all consulting engineering firms, but over 75 per cent of the employees in this field. You have to remember that many consulting engineering firms across Canada have only four, five or six employees. The smallest firms often decide not to join our association. However, their members may join on their own. Some firms such as SNC, Lavallin and Monenco Agra have between 5,000 and 6,000 employees. We run the whole gamut.
I must say, however, that almost 80 per cent of our consulting engineering firms have fewer than 50 employees.
Senator Poulin: What is the mission of your association?
Mr. Franche: Our mission is to promote and safeguard the interests of the consulting engineering industry in Canada and abroad. When a problem arises at the provincial level, we leave it to our provincial associations. Our primary focus is our relations with the federal government -- and I can assure you that we keep you quite busy -- and at the international level as well. Increasingly, we are doing a lot of work at the international level.
[English]
Senator Kelly: I was impressed with the clarity of your presentation. It is clear that you have certain views that are not entirely in accord with what you heard yesterday or what the past has suggested. I have a couple of questions that I want to get some help on.
In the discussion with the minister and the deputy minister yesterday, reference was made to partnerships. Could you say what experience you have had with this partnership arrangement. It was vague to me just exactly how it worked. Could you clarify that a bit for me.
Mr. Franche: I can understand that you would find it a bit vague, senator. I can suggest, I think, that although it may not be the flavour of the month, so to speak, it is the flavour of the year right now, this public-private partnership idea, which you did not hear much about three or four years ago.
It is where the client works very closely with the consultant to achieve a design, and so forth. But in most cases it is not where the client does the engineering but has the overall direction, and I would even defer, I think, to those who accompany me today, who have had more experience in this than I have.
I have never been a consulting engineer, but I have hired many of them for years. But we did not have public-private partnerships in those days. Maybe my chairman would like to comment on that.
Senator Kelly: Just to be sure that we all understand what you are saying, when you speak of the client, you are speaking of the public sector.
Mr. Franche: Yes.
Senator Kelly: You see, I am talking about partnership --
Mr. Franche: It could be a government department.
Senator Kelly: Government engineers, architects, and so on?
Mr. Franche: Yes.
Senator Kelly: And the private sector. Just as long as that is understood.
Mr. Franche: Yes.
Mr. Hyde: If I may just comment on that, people in the private sector -- and this is probably my interpretation of public-private partnership -- are, more and more, calling on public-sector expertise to assist them in projects. Is that what you are referring to?
Senator Kelly: I was not aware that the private sector initiates that suggestion.
Mr. Hyde: Certainly in my own firm and in proposals that are being submitted, internationally particularly, we are almost always carrying some component of some expertise from the public sector. It is my view that we will always, and perhaps more and more, want to do that in the future, but that initiative should come from the private sector.
Senator Nolin: I do not want to confuse the debate, but it is partnership versus secondment. So you are asking the public servant or the department to second some people to your project, or to your proposal; if you win, you will have access to those people?
Mr. Hyde: Yes, but we have also submitted proposals for carrying a government department like NRC, for instance, as a direct partner.
Senator Kelly: I would like to dwell on this for a moment, if I may, because this relates to the next question I was going to ask you. In a partnership that is sought by the private sector in international business, is it because the public sector has certain skills that you lack, or is it simply to assist you in getting a contract where government plays a major role in deciding who is going to get it?
Mr. Hyde: No. I would say it is where the government professionals have expertise that we lack. In many of our proposals there is an institutional aspect of the proposal that our client internationally wants, and the private sector really has not had much experience in running government departments, so we need government advisors on how, for instance, the Department of Public Works in this country is set up to show how a developing country should structure its organizations. That is certainly one area where we have called on public people, the public sector.
Senator Kelly: I am declaring my interest; I am on your side, so I really do not want you to lead yourself down an alley, because if I extend what you are saying, there could be a circumstance where the public sector in fact had greater capacity than you and could actually win the contract that you might feel you could do adequately but they could do better.
I think you have to be careful, if that is how you feel, that there are cases where they are No. 1 in terms of the capacity to carry out a given contract. In those circumstances, I gather you therefore would not object if they competed with you and won the contract.
Mr. Hyde: I would say yes to the first part of the question, but no to the second, because that is where we feel our private-sector firms have to expand their areas of expertise to compete internationally, and we can do it if we bring in the public-sector expertise.
Senator Kelly: That is a good answer.
Mr. Hyde: But I certainly would be opposed to the concept of the government, as a competing entity, going after those projects. They should be supporting us and not competing with us. They can help us; there is no question about that in my mind.
Mr. Franche: Two little, quick points. Even in a memorandum of understanding, whatever happens in this case, one of the objectives should be that the public sector should enhance the capacity of the private sector and ensure that they can develop it and carry it on better for foreign work, and so forth. That is fundamental.
Senator Kelly: In eastern Europe today that would be very important. That is excellent. Thank you; I like that.
In the examples that you described where government had competed with the private sector, did I understand there were certain situations where only one submission was made from the private sector, and the public sector then came forward with a submission and won the contract. Or did I misunderstand?
Mr. Franche: On the first example I gave you, sir, which is GIS Implementation, Davis Inlet Relocation Project, there was a sole-source proposal by a consulting engineering firm, and then after that there was a competition, or by some way Public Works did the work.
Senator Kelly: Was there more than one submission from the private sector?
Mr. Franche: In this case, the information that I have tells me there was only a sole-source proposal. I do not have all the details.
Senator Kelly: Then you have to agree that, in fairness, Public Works would, appropriately, at least evaluate that proposal and consider offering an alternative.
Mr. Franche: I do not think Public Works should compete with the private sector. To me that is very fundamental, as long as the capacity is there; and I think there was capacity, because there was a sole-source proposal. With respect to the Davis Inlet Relocation Project, I am not sure that was done. I don't know who was the main client of that, but in my opinion it should have been put out for proposal in that case, if they wanted it, instead of having a sole source. But obviously there was a client who said, "Yes, I am interested in a sole source," and then it changed.
Senator Kelly: I have one more question I want to ask you just for clarification, and then I would like to come back later, if I may, Mr. Chairman. On page 4 of your submission you make a rather surprising statement in the top paragraph, where you say:
... persons employed by the government in architectural and engineering capacities are not required to meet the rigorous professional standards of competence...
Would those engineers and architects not be licensed even though they work for the government?
Mr. Franche: There are some. I was talking about this with the RAIC again last night. There are some engineers who do not pay, who are not registered with their professional associations in their province. I cannot use the title "engineer" without paying my dues.
Senator Kelly: But they cannot either, can they?
Mr. Franche: Well, I think some of them do and they do professional work. That is what I suggest. You can maybe go into that question with the department a little bit more, but that is my perception. I was discussing this at one stage with the president of the Canadian Council of Professional Engineers and he said, "Yes, Franche, because they are responsible for the professional side of the individual." He said, "Yes, that is a fact." And I think it is the same thing with the architects.
Senator De Bané: Yesterday we heard the minister and the deputy say that they would like to establish an atmosphere of trust with the various professional organizations in Canada, and hoped even to reach a memorandum of understanding with them. We heard that the departments more and more are given the freedom and the discretion either to contract with those government professional people or to go outside if the price quoted to them by the Department of Government Services is not competitive with the private sector.
We have also heard them telling us that they, themselves, would like to go abroad to try to get contracts, where, because they are a government entity, they have some chance of getting the contract, like in NATO or with other foreign governments. Also, they would like to establish partnerships, partnering with Canadian private firms.
Do you not think that this kind of philosophy of allowing departments either to contract with Government Services or to go outside, and for Government Services to try to secure contracts abroad from public entities or international entities like the United Nations, and then to invite you to join with them as partners, is the way that we should be going if we want to have the government as an efficient economic agent using taxpayers' money? Do you not think this is the way we should go?
Mr. Franche: Yes, we want an efficient economic government, and that is the very reason we are here, because we have concerns about the situation that develops when you have surplus capacity. However, the MOU with us is one means. As I said, it is not legally binding, people change, and so forth. So it is a way of re-establishing the trust. I still say the first step, however, is this bill; the second step is the MOU.
With regard to giving discretion to departments, to pick up your point, senator, yes, they have discretion up to a certain amount. I would not be able to explain to you all the intricacies, but I think they do have to pass through Public Works, however, before they go outside. There is a procedure, a special system, and so forth.
On going abroad to get contracts, I suggest to you two ways of doing that. It should be through the private sector, or you can use the Canadian Commercial Corporation to do that. The Canadian Commercial Corporation, more and more, now picks up contracts and goes back to the private sector to get them executed. In fact, in a discussion we had with the deputy minister on November 2, 1995, -- and at that time it was his responsibility -- we raised the issue of the Canadian Commercial Corporation and how it could help the service industry and the small firms more in supporting that. We have no problem with that. I think that is part of it.
The partnership aspect I think we have explained. We should be the lead and we can bring in some expertise. Often that is in areas that are not in the engineering field. In the engineering field generally there is almost always the competence to do it.
Mr. Craig: I would like to add a couple of words to that. The idea of government personnel travelling abroad to seek contracts for the government in which they may or may not involve the private sector, but having the freedom to do so under the legislation, is not something that we want to support or see happen; the very fact that they would have the power to do that would mean that sooner or later the probability would be that they would exercise it.
We are spending a lot of our own money to pursue the same contracts in some cases and trying to establish relationships, and we believe that the private sector should be the lead there. Believe me, private industry will identify opportunities where other governments have needs. They will publish the opportunities. Our contacts will uncover these opportunities, and we will be very quick to go back to the government where there is a role for government-to-government credibility or for expertise that we do not have in the private sector.
However, if, under the legislation, you give the government the opportunity to compete, and effectively take the lead role in searching out contracts, we will not have any control over how they account for their costs; we will have no way of understanding how our own tax funds will be used to subsidize these international activities or other activities, government-to-government, within the country. That is the concern.
I believe that as an industry we would be quite willing, if they are not provided with the legislative ability to do it without any control, to sit down and try to establish a memorandum of understanding whereby acceptable procedures are identified; in other words, if people in Public Works identified an opportunity, we would sit down and say, "Good, this is something that is not provided by the private sector; go ahead and do it and wherever possible bring us to the table."
Senator Kelly: In connection with what you have just said, sir, I think we should all be reminded that in seeking a project overseas, you run head to head with international engineering and architectural organizations from all over the world, and the danger is, if the public sector moves first across there, they may well lose the contract for all of us because they cannot meet head to head with people who are all the time in the business you are in.
Mr. Craig: Exactly.
Senator Kelly: Yet there could be circumstances where you could collaborate and say, "Look, in this particular instance, Government, it would be helpful if you went first."
Mr. Craig: That is correct.
Senator De Bané: Your approach reminds me of the attitude of the big banks, when the government of Canada decided to create the Federal Business Bank to help small businesses; those huge chartered banks came here and managed to put into the law that this new, small bank to help small businesses cannot entertain any loan application unless the small business has already been rejected twice -- twice -- by two different chartered banks. They said, "Oh, they are going to compete with us." Finally, recently, we deleted that foolish clause that was there for years.
So I am sceptical of the idea that they would be competing unfairly with you, and on this attitude of yours that a memorandum of understanding with them is not legally binding, I am a lawyer myself and I know that no contract, no understanding can protect the parties if they do not have faith in each other. So, when you start with that kind of attitude, that a memorandum of understanding is not legally binding and people can change, et cetera, I have to say that we live in a democracy here where everything has to be sanctioned by public opinion. You know very well that they cannot bully you or bully anybody else; they are there as the servants of the people. I think if we accepted your amendment, what you would really be doing is cutting their wings and making them a department which would be utterly passive and incapable of having any dynamism or proactive attitude.
I was at one point Minister of Supply and Services, and I can tell you that several foreign governments always wanted to deal with a government entity because they did not want the matters they wanted us to look into to be handled by the private sector. I am sure you know that, and know that when dealing with state corporations of members of NATO -- say corporations that belong either to the U.K. government or to the German government, or whatever -- the only way to compete on a level playing field with them is to have our own government entity holding the flag and competing with them, and then bringing the Canadian private sector with them after they have won the contract. What is wrong with that? But if you say, "No, no, no; you will not be allowed to buy a ticket to go to Brussels unless you first have the permission of the association and we have canvassed everybody in our association to see if they are interested in taking the lead, and only after that can you accompany them to Brussels," then I disagree.
You know, this is really a distrust that I do not think is warranted, with their new approach, their new philosophy. I know that years ago they were very arrogant and said, "We are the government and we are going to decide." That is no longer the philosophy today, and I beg you to be more open-minded.
Mr. Craig: I do not disagree that cooperation is a desirable mode of operation. I think the difficulty is that we are being presented with legislation that changes the powers of Public Works from what has been in place for about 120 years. The consultation with us was not done in advance. We were presented with, effectively, a fait accompli and asked, or told, to accept it.
The difficulty is that without advance consultation in a change of legislation, we do automatically get a litle concerned about the potential for abuse of the power. I think had there been a memorandum of understanding in advance, had there been some consultation extensively in advance and we had set up a means to determine what is fair and what is not, there might not have been the same reaction from us as people in private industry.
But when you are presented with what is effectively a fait accompli, then you do get concerned; and we are not the only association than deals internationally that is concerned about this. So I think that is the reason. Had we been given the opportunity to sit down and work it out before the legislation was introduced, it would not have resulted in the same situation.
Senator Stratton: I guess there are two ways to approach this. The first way, of course, is to try for an amendment. We would send it back from this committee to the Senate and amend it and then send it back here, and, hopefully, the House would accept that. The fact of the matter is, however, that what is more likely to happen than that is that it will pass, just by sheer numbers, in the Senate and you will be faced with the reality of this act.
My concern is that Public Works, historically, has always done work in-house. Senator De Bané pointed out that, in order to attract competent people, you must give them the opportunity to work on decent projects, which I vehemently disagree with. I simply say that Public Works is a management arm for the government of Canada. They are not there to design projects; they are there to manage the project on behalf of the government of Canada. That is their function; that is what they do; that is what they are supposed to do.
So, here am I, sitting and knowing, because of my background, the history of what you are relating to, and they continually go in and do design work on the justification that it is far more expedient for them to do it than go to the private sector, which to me is absolute nonsense, because they have equals, they are architects and engineers, after all, themselves, and they want to do the design. But that is not the purpose of Public Works. The worry I have with this act is that the status quo will just simply continue; they will decide what they want to do, to continue this process.
If this act passes, and I think this is what you have to credibly look at, the minister and the deputy quite clearly stated they were not going to compete directly with the private sector. They are on record as saying that yesterday. Having got that commitment from both the minister and the deputy minister, in the development of the memorandum of understanding, that would have to be put in that memorandum. They stated it publicly here.
My question to you is this: With that memorandum of understanding, do you honestly believe that you can get that qualification in there, that they will not compete directly, that they will act as managers on behalf of the government of Canada and not as architects and engineers, per se, in designing, and that there will be a complaint mechanism whereby, if your association or others discovered that they were indeed doing work in direct competition, then they would cease and desist? How do you see that evolving?
Mr. Franche: You are quite right. I know that in the memorandum of understanding that we hope for there are certain things we want to have in there. It will be dependent, first of all, on what happens to this act. If there are no changes, we will have to find ways around; and engineers are generally rather practical people; we do find ways around problems. But they will not have the force of law, and, as I said, people will change.
We will have to have a more structured mechanism. One of the things may be that, if they go for an order in council to do that, we will want to know in advance so that we can go again and object. But we will become an objecting body all the time and that will not build trust between the parties. That will hinder it. It is, I think, a lot better if we can say there is something that we agree on, and from there we build.
For those reasons we would prefer to see the bill amended, and then build the bridges of cooperation. Otherwise, we will have a situation in which we will be complaining all the time, and somebody will have his or her nose out of joint in our client department.
The Chairman: Senators, there is a lot of interest on some of these matters and I am going to suggest something that I hope we will all agree to. I just talked to the Canadian Environment Industry Association. Their arguments are philosophically the same as those of the group here now. I do not want to have the same questions repeated, and we have so much expertise here, it seems a shame to leave one group on the sideline. What I would like to do, with your permission, is have them make their 10-minute presentation, and have the engineers stay and take a chair. Then we can ask questions of any one of them. Would that be all right? I will keep the same speakers' list. We will be more efficient that way.
I just want to place on the record that the committee has received two letters, the first from the St. John's Board of Trade outlining their objections to Bill C-7. I believe you already have copies of that. The second letter is from Mets Marine Associates from Whitehorse, Yukon, which I believe was referred to us by Senator Lucier, and the clerk is distributing copies of that now.
Senator Stratton: The only question I have is one for the engineers to answer. There has to be a mechanism to resolve questions of dispute. There has to be a dispute mechanism in the memorandum of understanding. I wanted to hear them respond to that.
The Chairman: All right. We will hear the answer to that in a minute, but first let me introduce Steve Hart, President of the Canadian Environment Industry Association, and Rebecca Last, Director of Programs and Policy for that association.
Mr. Hart, if you could keep it to 10 minutes or under, that would allow us more time to ask questions.
Mr. G. Steve Hart, President, Canadian Environment Industry Association: Mr. Chairman, honourable senators, it is a pleasure and honour for us to be here today to make this presentation to you. The Canadian Environment Industry Association, or CEIA as we call it, is a national federation of nine provincial associations. It is an umbrella group representing provincial associations in one of the fastest growing and most strategic sectors of the Canadian economy. CEIA is comprised of Canadian companies, associations and organizations dedicated to environmentally sustainable economic development through the provision of state-of-the-art products, technologies and services. The Canadian environment industry sector employs employs approximately 150,000 people, has annual revenues of about $11 billion and annual exports in the order of $1 billion. Actually, those figures are from 1990, 1992 and 1993, but they will give you a good overview just the same.
We believe that the dynamism and potential of the Canadian environment industry as an economic engine of growth has been recognized by the federal government. Three examples of such programs will suffice. First, Canada's International Business Strategy identifies the environment industry as a priority sector for developing Canada's exports. In the last federal budget, the Honourable John Manley announced "Technology Partnerships Canada" -- "A Team Canada Approach to Job & Wealth Creation Through Technology Development." That is a program specifically to assist small and medium-sized enterprises in targeted sectors, including the environment industry sector. A new arrangement between Western Economic Diversification Canada, known as WD, Environment Canada and the Toronto Dominion Bank makes $40 million available through an investment loan program which provides patient debt financing to small and medium-sized environmental companies in the four western provinces.
It is, therefore, all the more incomprehensible to discover that our industry may soon find itself in head-to-head competition with the very government that has been so supportive of our growth and development. In its present form, Bill C-7 gives the new Department of Public Works and Government Services, hereafter referred to as Public Works -- we had a bit of a job getting our mouth around the whole title -- the right to compete directly with the very firms the government has stated it will aggressively promote.
We agree with the overall thrust of Bill C-7. It reflects the stated objective of the government to undertake a positive and proactive initiative at cost cutting and cost recovery, while streamlining departmental operations. However, for the past year or more, CEIA has vigorously opposed two sections in this bill which strike at the heart, in our opinion, of fair competition in the private sector. CEIA is not alone in voicing its apprehension about the implications of these sections of the proposed legislation; we have been joined in our concern by several other groups, which are listed in our brief.
Sections 10(2)(c) and 16(b), respectively, state:
10. (2) The Minister may incur expenditures or perform, or have performed, services or work in relation to
(c) any real or immovable property, any work or any other property not belonging to Her Majesty in right of Canada, with the consent of its owner.
And section 16(b):
16. The Minister may do any thing for or on behalf of
(b) ...any government, body or person
-- that is an important word --
in Canada or elsewhere
-- that is also important, because that opens up the international aspects --
that requests the minister to do that thing.
In his letter to CEIA dated December 21, 1994, the Honourable David Dingwall reported that there is no change in the authorities currently contained in the Public Works Act. Section 10(2)(c) of Bill C-7 restates sections 9(3) and 9(4) of the Public Works Act. The authority contained in section 16 of the new bill is similar to that of section 13 of the current Department of Supply and Services Act.
That was a letter written to us by the Honourable Mr. Dingwall. However, speaking in support of Bill C-7 in the House of Commons on October 4, 1994, the Honourable Nick Discepula, from Vaudreuil, said:
...it will allow Public Works and Government Services, when requested by other levels of government to offer realty, architectural and engineering services to provinces as well as municipalities, something that was not possible before this legislation.
And I would emphasize those last words: "...something that was not possible before this legislation."
That was in defence of the bill in the House on October 4, 1994. So, very clearly, the authority to provide services to other levels of government is new; it is not a repetition of what was in the old bill. Similarly, the words "or elsewhere" in section 16(b) would permit Public Works to expand its overseas operation, a prospect that is of grave concern to our members.
In the same letter, Mr. Dingwall stated that the objective of Bill C-7 is to integrate:
...into one department virtually all common service agencies (Supply and Services Canada, Public Works Canada, the Translation Bureau and the Government Telecommunications Agency). The net result of this amalgamation is increased savings, efficiency and improvements in services for the Canadian taxpayer.
Yet Bill C-7, by way of sections 10(2)(c) and 16(b), would allow opportunities for the government to expand its role through direct competition with the private sector in both domestic and international markets. This represents, in our opinion, a complete reversal of the publicly stated intent to downsize and streamline the public service, while providing more opportunities to the public sector.
Evidence from several regions of Canada suggests that Public Works has already begun to compete with the private sector. For example, where formerly it was a practice of each individual government department to define, manage and tender contracts, Public Works has become the common intermediary. Government contracts which used to be tendered publicly are increasingly assumed automatically by Public Works.
At a meeting in 1994 with the then Deputy Minister of Public Works, the chairman of our sister organization, ACEC, and the president and others were informed that only about 50 per cent of the in-house work relating to engineering and architectural consulting services was open to public tender by Public Works. The percentage has not changed, to our knowledge, since then. Our information indicates that for certain types of work, such as environmental clean-ups involving such things as PCBs, the proportion of work opened to public tender is even lower than 50 per cent.
Public Works' normal practice, on assuming management of a project, is to charge a management fee based on person-hours involved in supervising the project, and in some cases based on the time and cost entailed in undertaking the work. However, many of Public Works' client departments have developed their own expertise in project management, a reality that Public Works acknowledges openly in its Real Property Services Plan. Thus, Public Works' management fee is a duplication and the cost to the taxpayer is inflated.
Let me deal with the issue of public-private partnerships. In his letter to the Canadian Environment Industry Association, again dated December 21, 1994, minister Dingwall claimed that:
Section 16 is also important in that it will offer the private sector the opportunity to enter into "partnership" with PWGSC to take advantage of business opportunities inside and of outside Canada. Using its standing as a government organization and its expertise, the department will be able to assist Canadian businesses, particularly small- and medium-sized businesses, to expand into new markets and create jobs -- private sector jobs.
If sections 10(2)(c) and 16(b) are passed without modification, the minister's claims may very well be proved. These two sections extend Public Works authority to working with both provincial and municipal governments. Private-sector companies may, in fact will most probably, find themselves forced into public-private partnerships, if Public Works is allowed to intervene in markets that have hitherto been the exclusive purview of the private sector. The advantages to the private sector of such partnerships are questionable at best. Public- private partnerships should come at the request of the private sector and should be formulated in response to the needs of all Canadians, not in the interests of extending the authority of one government department, in our opinion.
CEIA welcomes opportunities to partner with the public sector under circumstances that are mutually beneficial. For example, we are currently engaged in discussions with another department to develop a process by which they may selectively second to the private sector, but at the request of the private sector. However, nothing in the wording of sections 10(2)(c) or 16(b) indicates how Bill C-7 would encourage mutually beneficial partnerships between Public Works and the private sector.
Public Works has acknowledged that the two offensive clauses allow them the right -- and they have told us this on several occasions -- to compete with the private sector, both in Canada and internationally. However, they have consistently stated that they have no intention of doing so. CEIA, in turn, has asked, if the department does not intend to use these powers, why are they so insistent on retaining the two clauses? We have never to this date received a satisfactory answer to this question.
Again, in his letter of December 21 Minister Dingwall wrote:
I believe that no purpose would be served by allowing the department to compete with the private sector. In fact, when there has been actual or perceived competition with the private sector, this government has moved swiftly to immediately rectify the situation.
Unfortunately, Public Works, public education materials tell quite a different story. Public Works and Government Services Canada has produced brochures and fact sheets, one of which, a fact sheet entitled "Facts & Figures," printed in January 1996, described Public Works' translation branch as one that:
Provides, on an optional and fee-for-service basis, translation and other linguistic services to federal department agencies and other clients.
That would seem to indicate outside the government.
Landscape architects in Halifax recently found themselves competing with Public Works when the Architectural and Engineering Services branch began distributing a brochure offering:
...full services in all areas of site analysis and design including interior and exterior landscaping. This includes planning, design, construction monitoring, management and maintenance.
That would seem to be fairly explicit.
Another marketing booklet from the same branch of Public Works is:
...dedicated to you, our clients. You represent a broad cross-section of Canadian federal government departments and agencies, public institutions and foreign governments.
A similar publication from the Environmental Services branch claims:
So when it comes to meeting the objectives of a new environmental agenda, remember no one does it better than Public Works Canada.
One wonders why a department that intends only to service the federal government should be making such claims and expending money to publish them in glossy booklets and brochures. Having seen how Public Works describes its services, let us turn our attention to a recent instance of their practices.
In the spring of 1994, Environmental Design Consultants, EDC, a Newfoundland-based company, was invited by the Newfoundland and Labrador Housing Corporation, NLHC, to submit a proposal for environmental site assessment of property in the Gander Industrial Park that NLHC planned to purchase from Transport Canada.
Public Works had previously carried out environmental site assessments on behalf of Transport Canada. The private consultants, EDC, were asked to comment on the Public Works site assessments and submit a proposal for the next phase of the project. After reviewing proposals from Public Works, EDC and several other private sector firms, the Newfoundland and Labrador Housing Corporation awarded the contract to Public Works. The bid from Public Works was under $20,000, compared to the next lowest bid of $30,000 from the private sector.
The dramatic difference in the price of these bids and other instances can be attributed, in our opinion -- and we have this fairly well backed up -- to the nature of government accounting practices and operation. Public Works simply does not make a full and proper allocation of costs towards specific projects, and is therefore able to compete at a significant and unfair advantage in comparison to private sector companies. The fact, also, that the government is self-insured further adds to the competitive advantage by removing the necessity of factoring in the cost of liability insurance, which I think we all know is a very expensive item these days.
If the evidence of unfair competition in the area of pricing is not compelling, consider the sheer size of the department. Public Works and Government Services Canada is the largest property management agency in Canada. Speaking of Bill C-7, then Bill C-52, in the House on September 30, 1994, the Honourable Dianne Brushett, Cumberland-Colchester, said:
The potential impact of the resources we are talking about is nothing short of tremendous. The department created by this bill manages an annual cash flow of $1.4 trillion. It buys $10 billion worth of products and services a year. It lets out 175,000 contracts for approximately 17,000 different categories of goods and services every year...In the business world, that is called clout.
That is a direct quote from the honourable member. It is, indeed, clout. Is it any wonder the private sector is reacting with more than a little trepidation to the prospect of competition with this giant?
CEIA reiterates its concern with the wording of sections 10(2)(c) and 16(b). We respectfully request the Senate to instruct the Department of Public Works and Government Services to modify the wording in these two sections before permitting the legislation to progress into law. CEIA is willing -- and we have indicated this on several occasions -- and available to work with the department and with other industry representatives to develop wording that will be acceptable to the Canadian private sector. We ask only that you allow us the opportunity to do so -- an opportunity which we have been prevented from having so far.
Once again, thank you for the opportunity of presenting the views of our association with respect to the proposed Bill C-7.
[Translation]
Senator Nolin: I would like to get back to what Mr. Lefebvre said. We heard theoretical wishes expressed about the expansion of consulting engineering abroad, but you are a major artisan of expansion. For the benefit of our colleagues who are not familiar with this field, Quebeckers are, I believe, the most active of all in the field of consulting-engineering abroad and Mr. Lefebvre's opinion will be of tremendous assistance to us.
My colleague Senator De Bané spoke theoretically about the government's ability to help consulting engineering firms in the private sector. Mr. Lefebvre will be able to tell us if he has often had someone from the federal government call him to ask him to come on board and benefit from an opportunity. Has this ever happened to you?
Mr. Lefebvre: As I recall, that has never happened. I cannot even give you examples involving other firms. It is true that Quebeckers export their services abroad a great deal. I would qualify our firm as average in size and highly specialized in the mechanical and electrical fields.
For the past two to three years, because of the limited availability of work in Canada as a direct result of the troubled state of the economy, we have felt the need to export our services in order to maintain our capacity. We feel obliged to export our services abroad.
To promote our services abroad, we must our firm's own money.
If Bills C-7 and C-52 are adopted as is, I am concerned that there will be some negative fallout as a result of the government putting itself in a position where it can compete.
I know for a fact that at the present time, these people probably have no intention whatsoever of competing with us. However, since the legislation would allow them to do so in the future, we have to be concerned about the fallout. Governments change, people change. Eventually, someone will think about competing. We know that the provincial and municipal governments are watching developments elsewhere and that they often imitate and adapt their environment to a provincial or federal government initiative.
I would like to recall something that occurred in the early 1980s when the Quebec government made regulations to administer the selection of goods and services suppliers in Quebec.
Eventually, this became the SPEC system found throughout the federal government. However, when the federal government implemented and approved the SPEC, a sound initiative, some negative aspects were noted, in particular the price component.
In order to be selected, firms were required to compete on the basis of price. The idea has since snowballed and taken hold throughout the provinces and municipalities.
Today, selection based on skill is increasingly rare and is slowly disappearing at the expense not only of the consulting engineering industry but also, in the longer term, at the expense of the party retaining the firm's services. Quality does not come cheaply. If people compete solely on the basis of price, because of the current state of the economy, eventually we will end up with a weak industry and dissatisfied clients. We will no longer be able to export our expertise.
It is the long term prospect that is very questionable.
[English]
Senator Nolin: My next question is to Mr. Hart. You have said that the basic problem for the private sector in bidding a proposal is that they have to factor in some element that the public sector does not have to. Or even if they wish to, they are not able to because they are not faced with those problems. Could you expand on that?
Mr. Hart: I think one of the key points is the whole question of liability insurance, which everybody has to buy personally or buy for the business. We have to buy it for our office, and it is a very expensive proposition these days. The government does not have to deal with that. The government is self-insured.
Senator Nolin: On a personal basis, what would that be?
Mr. Hart: I am afraid I do not have a specific response to that question. The other thing which we think is even more important is that general overheads, such as office space and all the other things that the private sector is faced with -- I used to work in the government -- are not factored in when actual costs are being developed. So this, again, puts the government agencies at an enormous advantage if they are bidding head to head with the private sector. Those are the two items that we consider to be very important.
Mr. Hyde: The cost of liability insurance for the consulting engineering industry varies according to discipline and also to market conditions. I can tell you that when liability insurance premiums were very high in the '84-85 period, we were paying anywhere between 5 and 7 per cent of our revenue for liability insurance. It was appallingly high, but we had to deal with it. Now, I would say, an average firm probably pays one to one-and-a-quarter or one-and-a-half per cent of revenue. So that would have to be factored in when you are bidding a proposal.
Senator Nolin: What are the key elements that you have to factor in and take into consideration when you are making your proposal? Maybe I should direct that to Mr. Lefebvre on the international aspect, because we have focused since yesterday on the international. With other witnesses we may get into the more national competition, but let us stick to the international scene.
Mr. Lefebvre: It is a simple factor: Profit. We, as the private sector, have to show profit. We must have profit to be able to carry development.
Senator Nolin: To stay alive.
Mr. Lefebvre: To stay alive, to carry development, to educate our people, and so on. So we have to carry a percentage of profit in order not only to stay alive but to expand to eventually be capable of retaining good people in our organization.
Mr. Hart: There are some things which the public sector does not have to deal with in developing projects. One is the cost of capital. The fact is that if you are going to develop a market in a place like Indonesia, Southeast Asia, where a lot of the markets are developing very rapidly, Taiwan, Korea, there is just the sheer cost of getting there and the fact that you do not get off an airplane and do business overnight. You have to go back probably two, three, four, or five times over a two- or three-year period. You could have sunk, before even getting to the point of actually making a submission, several hundred thousand dollars. The government does that; that is not factored into the cost of any submissions.
This is something that has to be borne on the offchance that you might get a job three, four, five years from now. So this is a very important factor, we think, in the international field.
Mr. Lefebvre: I agree. We are a small firm, 100 people, and over the last two years we spent half a million dollars in doing that to be able to sign the first contract.
Senator Nolin: On the international?
Senator Bolduc: I would like to come back to the Canadian scene, the national scene. I have always understood that the Department of Public Works was there for planning and devising some projects, but let us talk about engineering and architecture for government buildings and public properties. There is a competition or a choice of somebody to execute the engineering work or the architectural work, and then the engineers of the department and the architects who had devised or designed the project, done the planning, et cetera, are there to supervise the quality of the design and the construction. They supervise the whole project. Their job is planning and supervision, mostly, of the professionals and all the others.
How can they do that, in your opinion, if they compete, themselves, on some projects? Are they not in conflict of interest?
Mr. Hart: The short answer is yes.
Senator De Bané: I am really distressed to see how you are unable to adopt a more positive attitude. You know, as the government has said, that the merger of these two departments will reduce the personnel of the new department by 4,000 people. A reduction of 4,000 out of a total of 18,000 means that they are going to contract out to your firms a lot more than they have been doing up until now. I am referring to the letter of Mr. Dingwall to Dr. Laliberté.
As you also know, according to the legal advice that we have received and according to the letter the minister wrote to Dr. Laliberté, there are no new authorities. The minister says on page 1 of his letter that "...it should be clear that the legislation does not propose new authorities." So there are no new authorities there.
Then with regard to section 10, the minister says, "This section does not allow the department to compete with the private sector." As for section 16, he says in the same letter:
...the authority contained in this section to provide services outside the federal government is not new; it is contained in section 13 of the current Department of Supply and Services Act. Section 16 does not enable the department to compete with the private sector, nor to respond to Requests for Proposals from other levels of government or the private sector. It does, however, enable the department, upon request, to work cooperatively with other levels of government to ensure the most efficient and cost-effective delivery of services...
On page 3 of the letter he says:
Section 16 is also important in that it will offer the private sector the opportunity to enter into "partnership" with PWGSC to take advantage of business opportunities inside and outside of Canada...the department will be able to assist Canadian businesses, particularly small- and medium-sized businesses, to expand into new markets and create jobs -- private sector jobs.
Of course, PWGSC will only partner where there is an express need...at the request of the private sector.
Here he adds this:
This is consistent with requests for private-public partnerships that we have received from, for example, some Canadian engineering firms.
Let us not forget that in order to take care of your concerns, section 16 goes to a higher level of authority than the minister of this new department. It will have to be the Governor in Council. So the whole cabinet, the whole government will have to approve those new initiatives. Finally, the minister does say, and I quote him here on page 4 of his letter:
I believe that no purpose would be served by allowing the department to compete with the private sector.
As you know, recently when private businesses in the courier business complained that Canada Post was giving them unfair competition, a commission of inquiry was put in place to hear their complaints, and that is now in operation. When the printing industry complained that the communication group was competing unfairly with them, because of all those factors you have mentioned which were not fully costed in their bidding, et cetera, immediately the department put an end to that.
So I beg you, gentlemen, madam, to adopt a positive attitude. We all know that the source of wealth is the private sector. This is the philosophy of the government, of all governments of Canada. I would also remind you that there is nothing here that is new. Moreover, the minister is on record, as Senator Stratton has said, that they do not want to compete with the private sector, but just to respond to requests and to work with you.
Mr. Hart: I would just like to respond to a few of the points made by Senator De Bané. First of all, I think in our statement we say that we agree with the bill in almost its entirety. We agree with it. It is an excellent piece of work, except for two clauses which we find -- and this is a tough word -- to be obnoxious.
Secondly, we understand that yesterday, on the questioning, the minister corrected the 4,000 to 2,000. There were 4,000 positions but only 2,000 bodies. I was not here, but I understand that that correction was made. So I just wanted to make a correction which I believe is fact; and that was from the minister herself yesterday.
We agree with you that in effect there are no new powers, but the powers have in effect been extended to several different branches within the department. So, in effect, although the words might not be new, the powers have been extended way beyond where they were before. I think we dealt with that in our testimony. So that is a fact.
What we are concerned about we feel we have made very clear in our discussions with the department, but in no way are we questioning anybody's honesty, integrity, good intentions or whatever. You tell me the government does not intend to do this, and we would agree with that.
However, both human nature and, I suggest to you, the political system as we know it tend to evolve over time, and if there are words written on paper, in legislation, which allow the government to do something, then, even with the best of intentions to the contrary, it may eventually do it. We all die, we all disappear, we all retire, or whatever happens, and somebody else can come along five, 10, 15, 20 years from now and take those words and interpret them and, I would say, quite rightly say, "We can do this."
So our request is very simple. We want to cooperate with the government. We believe that the government has a real role to help us in developing international activities. That is not in question. The only thing that is in question is that these two obnoxious clauses could very easily be changed without destroying in any way the content of the bill. We think that is a very simple request. That is all.
I agree with almost 100 per cent of what you say. That is our intention. We want to work in partnership with the government. We want to work in a mutually supportive way. But this legislation opens the door to doing something which negates that very wish.
Mr. Hyde: I would add one thing on that. What we are really concerned about down the road is what is going on right now in Western Canada, where our colleagues in our industry, who have depended on working with small municipalities over the years, are now facing competition from the PFRA people, who are doing engineering services for our former clients for free.
That is the kind of thing that we can envisage down the road. So when you ask why we have some fear of this legislation, that is probably the best example we can give you, because we have seen this happen and this is what we are fighting. It is that business that has been the mainstay of some of our smaller western firms. They just cannot stand that kind of competition -- none of you could, if you were in the private sector.
Mr. Franche: Mr. Chairman, I think the letter that the honourable senator referred to from Mr. Dingwall is the type of letter that does instill fear in us because, yes, there are new powers in there.
Let me quote from the existing Act of Supply and Services, under section 13:
13. Nothing in this Act precludes the Minister from providing, with the prior approval of the Governor in Council, any services that are within the ambit of the powers, duties and functions of the Minister under this Act, to or on behalf of such agencies of the Government of Canada, such Crown corporations and such governments and organizations in Canada as request any such services...
It does not say "or elsewhere." Nowhere in the two pieces of legislation do you have anything, first of all, that says "or elsewhere."
Secondly, the powers of the Minister of Supply and Services, under section 12, are to provide a range of services. It says:
12. The Minister shall provide...any or all of the following services:
(a) management consulting services;
(b) data processing services;
(c) accounting services;
(d) auditing services;
(e) financial services: and
(f) such other services of any kind as are within the powers, duties and functions of the Minister under this Act.
I humbly submit to you that the powers of this minister do not apply to engineering and architecture because they apply to the Minister of Public Works. But now we are extending everything. Those are just two little points. There are many other points we quarrel with. We never had a meeting with Minister Dingwall.
Mr. Hart: Just as a supplementary I can show you the types of cooperation that can work. With another department of this government we have an agreement signed, a contract with them called IEMI, International Environment Management Initiative. I believe it was Senator De Bané who made some reference to government-to-government arrangements, asking are we not in favour of that.
Under this agreement we maintain a large database; I think it comprises 300 to 400 Canadian companies who have indicated an interest in working in the international field. What our database has is the kind of pedigree of the company, where they work, their track record. I will use some examples. Mexico comes to the government of Canada requesting help in writing their environmental regulations. Just as a matter of interest, 24 of the 25 environmental regulations written by the Mexican government were done by Canadian companies.
So the government of Mexico comes to the government of Canada -- this was done before this agreement, but this is how it works -- and says, "We would like your help." So the government of Canada comes to our department and says, "Could you tell us which companies have indicated an interest in working in Mexico and what their track record is." We go into the database, we pull the data on companies and turn them over. So the work is being done by the private sector under the umbrella of government-to-government, and we are all in favour of that.
Now, that is working very well at the present time, and that is the type of arrangement we would like to see and we would be very happy to work on in that way with the department. But that is not at the request of the government. It is, rather, the private sector indicating an interest to do this. I think that is the key to the issue.
Mr. Franche: Do you legislate what you do not need to use? I am often told by lawyers...
[Translation]
Senator Rizzuto: Regarding the explanation that was just given, when the Mexican or some other foreign government contacts our government or Public Works to negotiate a contract, it often happens that the private sector firm does business with the government in order to receive its support. Competition is fairly keen abroad, as we all know.
I fail to understand the concerns and the distrust of the Department, that is the fear that it will try to grab contracts for itself. The private sector looks to the Department for assistance. When questioned if the government intended to seek out contracts abroad, the minister clearly responded yesterday in the negative. However, if it receives any calls, it will take them. I even asked the following question: If calls were received, would the Department nevertheless contact the private sector, find associates and transfer them to the private sector firm? The minister responded in the affirmative.
As such, I think it is a positive thing that the government can take these calls, transfer them immediately to private sector companies and lend its support to them when it comes to competing with other foreign companies. We know that this is not an easy task.
Mexico can call the government and it can recommend a firm with expertise in a particular area. It can contact the engineering associations and inquire as to which firm is qualified to take on the contract in question. I think this type of assistance helps foreign governments to have confidence in us.
When they see the Canadian government getting involved, foreign governments are more inclined to do business with our firms. Correct me if I am wrong, but I would not look favourably on the government or the Department of Public Works telling Mexico or any other country that its hands are tied. It may recommend names or contact private sector firms that are qualified to do the work.
What is wrong with the government taking these calls and forwarding them to the private sector? In the process, it can assess the importance of the project and open doors or even associate itself with the project, if that is necessary.
Mr. Hart: I agree 100 per cent with what you have said. If I understood you correctly, the government has offered to support private sector firms when they bid on these contracts. We agree completely with that.
When we do business in Latin American or South Asian countries, the presence of the government is an asset. I agree completely with what you said.
However, that is not the issue on the table today. The problem is that when the government bids directly on a contract, it is in direct competition with the private sector.
Mr. Franche: Mr. Chairman, I would like to respond to Senator Rizzuto's comments. As we heard earlier, our companies have invested a great deal in marketing their products abroad. My colleague, Mr. Lefebvre, runs a small business which spent half a million dollars. I think there is no desire to see the federal government, acting through Public Works, getting into the market and competing directly with private sector firms.
The government often talks to us about "Team Canada". Why would it take the opposite approach? These markets were developed by our companies. I know of one very large consulting engineering firm -- there are only two or three such firms in Canada -- which spent $11 million on a project and was never awarded the contract. Incredible sums of money are being invested.
This initiative must not upset international markets. That is one of the reasons why so many companies have expressed their opposition to the proposal. The same holds true for our domestic markets.
Mr. Hart quoted the Hansard of the other place. Mention was made of the fact that the government would be able to compete with 80 per cent of our people on the domestic market by offering services to municipalities, school boards and hospitals. That is the flip side of the issue.
If the government has no intention of competing with private sector firms, then this provision should be removed from the bill.
[English]
You do not legislate what you do not need to use, or do not intend to use.
[Translation]
Mr. Hart: That is the crux of the problem.
Mr. Franche: I did make a suggestion with respect to clause 5. Yesterday evening, I asked how we were going to break out of this impasse. My amendments are not very popular. I also made another suggestion, namely that the government should adopt the principle of not competing with the private sector.
[English]
Senator Cools: I thank you for an extremely clear and, I would say, a very thoughtful presentation. At page 9 -- just for a bit of levity -- you say to us, to the committee, that you "respectfully request that we instruct the Department of Public Works and Government Services to modify the wording in these two sections before permitting the legislation to progress into law."
We wish we could "instruct" government departments. We wish we could "instruct" many ministers. However --
Mr. Hart: Excuse our ignorance on the fine points.
Senator Cools: Oh, we don't worry about that. Actually, we do have a certain amount of influence with many of the ministers.
I have listened to you very carefully. I am sympathetic to your philosophical position and I think you have successfully impressed upon me your own concerns. I can say that most of us have received this information.
I would also like to say to you that I understand your anxiety, and it seems to be very high. I also understand your apprehension. You are basically saying two things. You want to see fairness in the marketplace and fairness in competition, which is reasonable and just, I think, and the next position you move to is that basically you have to protect your own need, or protect your own position. Basically, you are saying to us, as a Senate committee, that you have to protect your own position. I understand that, too. My concern on the proposed amendments is that the proposals that you are putting forth, and essentially the proposals that the previous presenters were putting forth, were simply too fettering for the government. I think we must be mindful not to fetter the government. We must not fetter the minister, and we must not fetter the ministry. As it is, the minister is going down some very new ground.
As I listen to you, it occurs to me that the solution that you really need is not a legislative solution. You are not really seeking an amendment to the bill. What you are basically seeking is, to my mind, some sort of arrival at certain agreements or consensus or trust, or whatever, with the minister and the ministries, and it seems to me that there are ways that we can facilitate and solve your problems other than by amending the bill.
The Chairman: I think they are seeking an amendment, senator.
Mr. Hart: Could I just clarify?
The Chairman: Just so that is clear, I think they are seeking an amendment.
Mr. Hart: Very definitely.
Senator Cools: He spoke of two clauses being obnoxious. I was listening to him quite carefully.
Mr. Hart: Well, those are the same two clauses, and we are very definitely seeking an amendment, because it comes down to, I think, a very simple question. I think I am repeating myself here, but if you have something written into legislation which is, after all, the law of the land, somewhere down the line somebody, with a perfectly good intention, not knowing the mental intention at the time, can use that in a completely different way.
I would just like to make one thing very clear, that we have worked very hard, not with just the associations here with us today, but with about eight others. I hate to admit that I am agreeing with engineers, but putting that professionalism aside, I would like you to know that we agree completely with the position they have taken and we have worked very hard, not with just these two associations but with six or eight others, to develop this position. I do not want you to think that there is a wedge between us on this issue at all.
Senator Cools: I was just thinking that perhaps my colleague here could respond to what he said, and perhaps some of the other senators. I mean, you have said some extraordinary things. You have said that you have never met with the minister.
It seems to me that there is a solution to their problem and there is a way that their concerns can be satisfied in a non-legislative and a non-statutory way. I think we on the committee could advance their interests to the minister.
Mr. Hart: I would just like to make it very clear. We want to cooperate with the government. We need the government's support, especially in the international field. There is absolutely no question about that. But the way this legislation is written, and this is where I differ with you, it allows the government to do things which the government says it has no intention of doing. We cannot understande why, in the name of heaven, you just do not take those two clauses out, or modify them to deal with this issue.
Senator Stratton: There is a history, over a long period of time, of Public Works competing directly with the private sector In other words, it has just simply taken work and done it in-house rather than putting it out to the private sector. So there is that huge history of distrust there that has not yet been overcome, obviously.
You can sense quite directly from what they are saying that, unless it is in the Act, they do not believe it is going to happen, regardless of what the government says it is going to do. I think that is quite clear and direct; there is no trust. They further believe that, if you reach a memorandum of understanding -- and it is almost like negotiating a free trade agreement, in that memorandum of understanding there would be, obviously, a dispute mechanism whereby you could resolve a dispute.
But even that would be after the fact. In other words, Public Works would go out and do it, then there would be a complaint and Public Works would say, "Well, I am sorry; you are right, but you are too late." They could go and do whatever they pleased; and they have done that in the past. They have done it in the past, believe me. They have acted in a very arrogant way, and I think that huge distrust is still there.
Senator Kelly: Just to go in the same direction as Senator Stratton has gone, I think it is clear, regardless of what has happened in the past, that the legislation has been revised and renewed. These organizations are not criticizing the spirit of what is there. Senator De Bané quite properly reminded all of us of the commitments and statements of Mr. Dingwall and Ms Marleau in connection with the commitment not to compete. So what is being asked is not really unreasonable, because the spirit of what we see in front of us today is properly described by the minister today. All anyone is saying is, why not make a slight change just to be sure that the spirit that has been described by the ministers is recorded in the legislation.
That is all that is being asked. It is not a major renovation or a disagreement with bringing the various agencies together at all. It is not an invention of the associations. It is a statement by the current minister. That is all we are saying. Why do we not record that in legislative form. That is all.
[Translation]
Senator Nolin: Many observations have been made. Senator De Bané has assessed the situation very well. We are faced with two opposing visions. We cannot ignore the almost solemn commitments that the minister has made. However, we have a piece of legislation which, for many reasons, delves into the history and relationship between the private sector and Public Works and Government Services Canada. We must remember that we have here suppliers of so-called construction services. However, many other service suppliers do not have a national organization. I am thinking about translators, among others, who often work out of their home and do not have the means to organize themselves nationally like the consulting engineers and environmental firms.
I do not think that we are dealing with opposing philosophies here. Construction industry professionals have told us that they support the bill, but that they had a problem with the way in which two specific clauses were drafted. A proposal was made to amend a third clause.
I raised a problem which has nothing to do with competition but rather with the minister's regulatory authority. I was going to suggest that we hear from witnesses who are experts in the regulatory field. We could also ask expert lawyers from the University of Ottawa to advise us on the specific ramifications of the provisions as they are now drafted.
While we hear from these expert witnesses, we could also ask professional organizations and employees of Public Works Government Services Canada to show some good faith and to draft a text which will be amenable to both parties before we move to adopt the bill.
This would be an excellent way of showing the good faith of the minister who, clearly, has established a principle. Given the experience of private sector firms, the concern being felt is certainly justified.
What everyone wants is for the legislation to be operational. All of the witnesses have agreed that overall, it is a very sound piece of legislation, albeit one that contains several irritants.
It is up to us to come up with a text that reflects both the government's intention and that of the witnesses. The government could sit down and resolve immediately the two clauses in dispute. Perhaps Mr. Franche's suggestion will be retained or perhaps another one will, but I am convinced that we will be able to come to some agreement.
[English]
Mr. Hart: What you have proposed, Senator Nolin, is exactly what we have been offering for the last year to the department. We would be delighted to have the opportunity to sit down with the department to try to work out the language. Maybe this is not very parliamentary, but I start on the basis that most people are fairly honourable and like to arrive at a reasonable solution.
I would be delighted if people on our side, who probably have the legal background that I do not have on this particular issue, could sit down with the department and try to work out language that is satisfactory to both parties. That is what we have been asking for for the last year, and we have not been able to get through the door, if I may put it that way.
The Chairman: Do you have any suggestions, Senator De Bané, on how this could be done?
Senator De Bané: Mr. Chairman, I think that this idea of overseeing, on a continuous basis, the situation makes a lot of sense. Our committee can, at the request of those national professional associations, call a meeting of our own committee any time in the next few months, or whenever the need is there, to hear their grievances, if there are any, and, as well, to summon the department to come before our committee.
I like very much the idea of having our committee listen to you in order to try to bridge the differences between you and the department. On the other hand, to say we are going to suspend the passing of the bill until all the negotiations are done, no, because, as we have emphasized, the two sections we are talking about, 10 and 16, are not new; they were there already. But as to the idea of meeting with you whenever you need to apprise us of any problem you have with the department, I think surely you are entitled to that.
The Chairman: You have tried to meet with the ministry and the departments on this matter. Is it a question that you have never spoken, or is it a question that you cannot find a common ground, or you cannot get a meeting with the minister, or what?
Mr. Franche: Mr. Chairman, we have spoken with the department several times. We even had a meeting on November 2 with my Chair here. We had the executive committee meet with the deputy minister and other officials of his department. We discussed a whole range of issues, trying to re-establish a good climate. The meeting went well, but on this issue we agreed to disagree. That was it.
Senator Kelly: But you did meet with Minister Marleau?
Mr. Franche: Yes. On April 15 we met for the first time with Minister Marleau, and again there was no agreement. The only thing ia that, at the very end of the meeting, the deputy minister and I discussed the possibility of a memorandum of understanding, which I had asked for in March '91, if I recall, and in June '95, when it was not possible, and now suddenly, yes, it is possible. So we want to resolve the problem, but it remains that we want to resolve it from another legislative base than what is in this bill.
Mr. Hart: We have met, at the assistant deputy minister level, with the department. I spent the better part of one Saturday evening with Mr. Dingwall's political assistant. You have heard about ring-a-ring-o'-roses? Well, we managed to do that for about two hours, and I guess I just wore out at the end of it and we agreed to disagree.
The discussions have been very pleasant and we have supported the bill; but once it came to that, the shutters were down; there was no discussion. Period. That is the problem we have, and we do not think that has demonstrated good will.
Senator Stratton: This bill has been around a long time. How long has it been around?
Senator Nolin: Since 1994.
Mr. Franche: I would say over 18 months, and it is going to be close to two years. I spotted this article by accident in Hansard, and immediately we had a briefing and I had to come in. The committee of the other place was to meet on the Tuesday, and on Friday evening I registered my opposition to it in the name of the association. But that is almost two years ago.
Senator Stratton: My point is, if it has been around for two years, what the heck is the hurry? Why could we not deal with the bureaucracy and the associations and resolve this issue? If it has been around this long, there does not seem or appear to be any urgency to pass this legislation. Why could we not, as a group, help to manage this process so that both sides could come together, as Senator Nolin has said.
[Translation]
Senator Nolin: Mr. Chairman, we did not completely review the question of parliamentary authority yesterday. I would like to suggest that the committee hear from expert witnesses. I am not talking about a two-month postponement. We cannot agree not to hear from them. We have to come up with an answer. The pressure exerted by our committee would be very helpful in terms of resolving the issue.
[English]
The Chairman: What I do not understand is this: What the memorandum of understanding would say is that they will not compete in the private sector against Canadian firms in Canada. Right? Basically, that is what it would say. So, if the memorandum of understanding would say that, why do we not put it in the bill?
Mr. Hart: I guess that is exactly the position we take. It seems to us it is so simple that I guess it is complicated.
The Chairman: No, it is not.
Senator Stratton: It is really quite simple.
Mr. Hart: Correct me if I am wrong; I am not a parliamentarian and I do not fully understand the details of this, but I believe a memorandum of understanding between two groups cannot override legislation. So in effect it is worth nothing, the piece of paper, except good intentions and good --
[Translation]
...good wishes and so forth.
[English]
It is worth nothing because the legislation overrides it.
The Chairman: Like an international treaty.
[Translation]
Senator Nolin: The solution, Mr. Chairman, could be to draft a preamble which would be acceptable to both parties.
Senator Bolduc: Mr. Chairman, perhaps Mr. Franche could answer my question. In the past several years, the government, following the lead of other governments, has been busy privatizing a certain number of its operations.
As part of the privatization initiative, the government often assigns to its own employees activity sectors that it wants to see commercialized and awards them contracts of a sort for five years.
For example, to provide building maintenance services, it will create a private corporation and will train employees. These employees will be awarded an initial five-year contract to start up their company, the hope being that they will be able to make a little money and secure contracts elsewhere.
Once the five years are up, the employees no longer benefit from any preferential treatment, which means that they will have to compete with other outside groups. If they get the contract, so be it, but others will also be in the running. That is the way to proceed. Do you not think that in the case of professional services, this is what is behind the idea of handling someone's request. Could this possibly be the reason behind this plan? The government wants to get rid of a number of engineers and it is encouraging them to set up their own consulting engineering firms and to bid on contracts. If that is the crux of the dispute, then it can be resolved.
Mr. Franche: In response to Senator Bolduc's question, let me say that this business of awarding a five-year contract means that all those who have invested in marketing and so forth must contend with a disoriented market. Just look at the Hansard of the other place.
Senator Bolduc: I was not talking about consulting engineers, but rather about the other place. I am not that familiar with the sector, but I believe that is the way things are done.
Mr. Franche: We offered our full cooperation, as we did in 1991 to the assistant deputy minister at the time, to facilitate the transfer of Public Works' air navigation employees. Airports cannot be built any which way in Canada. We have to work together with the Canadian government to promote the export of our airport construction services. Our expertise is tremendous.
We have not yet reached this stage. We are now extending our offer a little further. We would be prepared to cooperate with them in so far as the curriculum vitaes and transfers are concerned and even to lend them out if necessary for a period of two years.
One of our current employees worked for the Canadian government for many years. Before reaching the retirement age of 55 years, he wanted to get out. We reached an agreement with Treasury Board and he came to work for us for 20 months. He reached the age of 55 and had 20 years of service when he was transferred over to our company. The process went very smoothly. There are ways of doing this. We refer to this approach as a secondment. It is quite easy to arrange. This is what we would like to see. We want to work with the government, but we do not want to compete with it.
The government even went one step further. At one point, it even suggested (and I rejected this idea immediately, thank you very much) that we form an association with Public Works. They suggested that we venture into international markets, find contracts and decide which consulting engineering firm would get the contract.
I told them that this idea was suicidal and was best forgotten. The whole thing was scrapped.
[English]
The Chairman: I agree with you. I know you want to avoid that contract situation at all costs, because we had Treasury Board in here and they were doing that, for example, in parks. They would find, let us say, three guys who cut lawns and they would say, "Well, what is going to happen is this: we're going to take these three guys who cut lawns and we are going to give them a contract for five years, guarantee that they can cut the lawns, and they are no longer going to be on the public payroll." And by the way, in their spare time, which all of a sudden they have a lot of, they can go and compete with the other guys who cut lawns. But all their overhead is covered and their salaries are covered. They can basically do the work for free and cut everybody else's lawns surrounding the park while the poor guy who is in business is stuck there looking in, wondering what is happening.
So with this convoluted privatization, when you interfere in one market, in all markets there are repercussions. It is very hard to get people to understand that.
Mr. Hart: A good example of that is privatization of the Parks Canada services. That involved hundreds of people; it was not just two or three. I would just like to make one comment. If I go back into one of my other incarnations as a public servant, one of the problems that is facing the government, I think overall, is the question of cost recovery. When you are forced to justify everything you do on the basis of cost recovery, it can actually cost you more. We were in a situation where it cost us more, because of the negotiations between departments, to recover the costs of another department. It was absolutely ridiculous. In fact, it was adding costs.
I think there are so many people under this hammer of cost recovery, if I can put like that, that I do not blame people for trying to justify their position. I think that is at the heart of a lot of what is going on here on this issue we are talking about. It needs to be re-thought. It needs to be cost-benefit analyzed. I think that is at the guts, really, of one of the major problems we are facing here.
The Chairman: I want to thank all of the witnesses for their time. This has been an interesting two hours. I know it has taken away from what you usually do, while we are here doing what we usually do, so our thanks are extended to you.
Honourable senators, we meet again next Wednesday, when we will have before us the Royal Architectural Institute of Canada and the Canadian Council of Technicians and Geomatics. That should finish up our witnesses on this bill.
Senator Nolin: I have that request that I had talked to you about.
The Chairman: I will refer that to the clerk, because there was a question yesterday that came up, I believe, when the deputy minister said, well, if we did that, we could not do anything. I did not quite understand it because it was a legal-technical question, but I did say I did not believe him.
Senator Nolin: Let us have an expert witness who will tell us exactly what it means.
The Chairman: The next meeting is Wednesday at 5:15. The meeting is adjourned.
The committee adjourned.