Proceedings of the Standing Senate Committee on
National Finance
Issue 37 - Evidence - April 24, 2013
OTTAWA, Wednesday, April 24, 2013
The Standing Senate Committee on National Finance met this day at 6:45 p.m. to study the expenditures set out in the Main Estimates for the fiscal year ending March 31, 2014.
Senator Joseph A. Day (Chair) in the chair.
[Translation]
The Chair: This evening, we are continuing our study of the 2013-14 Main Estimates.
[English]
For the first panel this evening, which will go for one hour, we are pleased to welcome officials from Industry Canada. Appearing before us this evening are Iain Stewart, Assistant Deputy Minister, Strategic Policy Sector; Susan Bincoletto, Chief Financial Officer; and Johanne Bernard, Director General, Resource Planning and Investments Branch.
I understand Ms. Bincoletto has some brief opening remarks and following that we will get into a discussion. You have the floor.
Susan Bincoletto, Chief Financial Officer, Industry Canada: Thank you very much. You have introduced my colleagues so I will go directly to the crux of the matter.
[Translation]
I will limit myself this evening to two points: Industry Canada's structure and funding in the 2013-14 Main Estimates, and how we use this funding to deliver on our mandate and priorities, as presented in the Report on Plans and Priorities.
[English]
Industry Canada's mandate is to help Canadian industry become more productive and competitive in the global economy. It is a broad mandate and the department is part of a larger industry portfolio, a group of 11 departments, agencies and councils. Each of these has its own management team and reports directly to Parliament through their associated ministers.
Since two thirds of Industry Canada's budget is in grants and contributions, there is always a certain amount of year to year fluctuation in our Main Estimates. For instance, funding for each of our programs is usually multi-year, and each year within that period can be funded at different levels.
When you have about a dozen programs running one at a time and often simultaneously, all with varying levels of funding, the year-to-year tally can change quite a bit.
[Translation]
In addition, future program spending can sometimes be understated, due to timing of approvals. Until we have completed the formal approval processes for renewals or new funding, we cannot reflect the spending in our documents.
This is the case for all Budget 2013 announcements, including the $250 million in renewed funding for the Automotive Innovation Fund, and the $35 million for MITACS, and $500 million for the Canada Foundation for Innovation.
[English]
For this year, the impact of all these ups and downs is a decrease in our Main Estimates of $145 million out of a budget of $1.2 billion. Some of the specific changes include the following: For CFI, we see a reduction of $82 million from Budget 2007 because the funding ends. Additional funding from Budget 2012 will therefore only be reflected in future documents, so it is not really a cut; it will continue later. We can go into detail if you would like.
We also show a decrease of $18 million due to the end of the current funding for the Canadian Youth Business Foundation and Computers for Schools. Both of these programs have been renewed through Budget 2013 and will appear in future documents.
The Main Estimates also show an increase of $49.2 million from Budget 2012 for CANARIE, Genome Canada and the Canadian Institute for Advanced Research, as well as $14.7 million reflecting this year's funding requirement for the Perimeter Institute and for the Broadband Canada initiative.
[Translation]
Finally, as with all departments, we have reductions from Strategic Review, as well as from the Deficit Reduction Action Plan.
The department has taken a targeted approach to these reductions by ensuring programs focus on their core mandate and by enhancing the efficiency of internal services.
So, what does this translate into in terms of our specific activities? This brings me to my second point. Let me speak briefly to some of our key priorities, as outlined in the most recent Report on Plans and Priorities, which groups our activities under three strategic objectives.
Our first strategic objective is ensuring that the Canadian marketplace is efficient and competitive. This means having the basic marketplace conditions to promote economic growth, help our businesses respond to market changes, and maintain consumer confidence.
Funding under this objective is focused on salaries, and is relatively stable from year to year.
This year, 2013-14, we will be focusing mainly on two points: preparing for the upcoming auction of the 700 MHz spectrum in November this year; and continuing to develop the foreign investment review process.
[English]
Our second objective is to see that advancements in science and technology, knowledge and innovation strengthen the Canadian economy. Here you will see more of those fluctuations that I spoke about earlier. Past year funding under this strategic objective was unusually high because of the influx of the Budget 2009 stimulus funding, mainly the $2 billion in the Knowledge Infrastructure Program, which ended in 2012-13. That is why you have a high level and a sharp decrease.
Future years are somewhat understated, so it is the opposite for program renewals and recent announcements, because they will probably be added in subsequent estimate documents if approvals have not been provided in time.
As you may know, Budget 2013 reconfirmed the commitment to the Strategic Aerospace and Defence Initiative, called SADI, as well as a new aerospace technology demonstration program. Our focus, therefore, in the coming year will be to implement this new program and to deliver the existing ones in the most effective way possible.
The third and final objective is to ensure that Canadian businesses and communities are competitive. Here, our programs focus on supporting industrial sectors, from manufacturing to tourism, and encouraging the entrepreneurship and strong communities that support dynamic economies.
Our priorities in this specific area include supporting small business with increased access to government services and to financing. The most important one here is the Canada Small Business Financing Program, as well as services provided through the Canada Business Network and BizPal. We also work in collaboration with BDC.
We will also be continuing to implement initiatives to attract and retain business manufacturing mandates in Canada and, of course, ensuring effective management of FedNor to support communities in northern Ontario.
[Translation]
This concludes my remarks. Thank you for your attention. I would be pleased to take any questions you may have.
[English]
The Chair: Thank you very much. Before we go to senators who have indicated an interest in participating, could you explain to us all the process you go through? We see government policy statement in the budget; and then we, as parliamentarians, will see, in either the Main Estimates or the supplementary estimates, the request that comes from the department. However, you say we have not seen those in the estimates yet because we have not received the expenditure approval. Can you explain that process between the budget and when we see it in the estimates?
Ms. Bincoletto: Yes, I will, and then I will ask my colleague to supplement, if required.
When the budget states that a program is either renewed or a new program is put in place, we usually work with the Department of Finance and Treasury Board Secretariat to determine the best means to provide policy authority to effect those programs. If a memorandum to cabinet is necessary to provide the policy authority, then we have to prepare the memorandum to cabinet, go to cabinet, and it is therefore approved. If it is a program that requires terms and conditions, then a Treasury Board submission is prepared and it goes to a different cabinet committee of Treasury Board ministers, who then endorse the terms of the new program.
Once that cycle is completed, we are in a position to start expending those monies and enter into either a contribution agreement or whatever other agreements we have with the recipients of those programs.
In this case, since the budget was fairly late, we have started the process, but we have not completed it. Therefore, it cannot be included in the mains of this year. Some of them will be included in Supplementary Estimates (A) and some may even have to wait until Supplementary Estimates (B), depending on the timing.
Senator L. Smith: As I go through the document and listen to your presentation, I see shifts in funding. For, example, for the Canadian Foundation for Innovation, you said, ``we see a reduction of $82 million from Budget 2007, and additional funding from Budget 2012 will only be reflected in future documents.''
You have a three-point strategy. In terms of these shifts, innovation is one of the top priorities of our government. This program ends, but it will go forward. I am not sure if I see the continuity. How do you pick and choose how you change funding targets or the money that you give to these particular groups? In business you look at continuity because the next question will be: What results have you achieved on your major target areas? Before we get to that one, how do you determine that funding? There seem to be wide shifts here in terms of your funding strategy.
Ms. Bincoletto: I will start, and then really this time I will give the floor to my colleague.
With regard to the Canada Foundation for Innovation, for example, a number of budget announcements provided some funding to the foundation. It started way back in 2008 or 2009, and then in other budgets, subsequent budgets, overlapped that money. In some cases they were grants; in some cases they were contributions. It is the sum of all that that shifts the profile as well.
Senator L. Smith: How much would you have spent over that five- to six-year period through innovation, and what results would you have had? For us, it is great to understand the numbers, but it is also important to understand what results you have achieved.
Johanne Bernard, Director General, Resource Planning and Investments Branch, Industry Canada: I can speak to the numbers.
One of the important things here is that most of our grants and contributions are not to support the operations of an organization, which would be stable from year to year. We support things like research and development programs or competitions to these foundations, and then give out the money to other recipients. They run a competition. These are multi-year programs. R & D is not exactly a flatline type of expenditure. One of the issues in all our programs is that the funding you see is not us deciding when it goes up and when it goes down; it is the recipients that tell us that this year they can do this much and the next year not so much because of some other reason. There will usually be a bump in a particular year when they have achieved a certain competition, for example.
CFI, in particular, in 2012 and 2013 was the highest year in terms of spending because there was an overlap, as Ms. Bincoletto mentioned, of Budget 2007 money that was ending, and then new funding that starts. For CFI, every time money is given for something, it is not the same old thing every time; it is a specific purpose, say a competition for colleges and universities. Mr. Stewart may want to say more on that.
Senator L. Smith: Do you have any way of measuring? These are large amounts of money, when you take the various activities you are supporting. How do you track people's efficiency and results so that you know you have made the right investment?
Iain Stewart, Assistant Deputy Minister, Strategic Policy Sector, Industry Canada: For each program, at the individual program level, there are results indicators and there is a performance evaluation framework around them. You could look at a very specific entity like the Canada Foundation for Innovation, and it actually has several programs that do different things, and those specific programs will have results indicators. At the program level you will see whether it is achieving the results they have identified. Then you roll those up, in this case, against CFI as an organization, and it has its annual reporting.
In this instance, CFI is an arm's-length agency. The reason the funding is lumpy like this is because the government does funding agreements with CFI, usually five years in duration. I do not mean to tell you things you already know. Do you know about the Canada Foundation for Innovation? Is that an entity you have ever had experience with? I can tell you more about them, if that is helpful.
Senator L. Smith: Not directly. I am all ears.
Mr. Stewart: It was set up some time ago because there was a perception that Canada's research infrastructure was rusting out and that there was a deficit of backlog in the university and college system at the professor level concerning the equipment and tools they needed. This was meant to be an arm's-length entity that would use peer review to pick the best infrastructure projects in which to invest.
The government started out with relatively large awards over five years. They run an arm's-length, blue ribbon, world expert review process to pick which projects they will invest in. That project cycle takes 12 to 18 months from start to finish, because these are research infrastructure projects going through this peer review process. They spend in a kind of lumpy pattern as each of these competitions work their way through.
Those are some of the different profiles. The government has reinvested in them time and again. They have become Canada's university and college research infrastructure entity, like you would see with NSERC to fund engineering and so on.
Senator L. Smith: There seems to be continuous pressure in terms of feedback from the media about where Canada is ranked in the world with regard to innovation. That is why I asked the question about your implication in the measurement system. Have you seen an improvement in performance through the grants that you give, be it through universities or companies that require funding through BDC or any of the venture capital people? Are we seeing movement up the scale? We are not regarded as being as innovative as we should be.
Mr. Stewart: That is true. On Canada's innovation performance, the Conference Board of Canada report gives us a C or a D, depending on the year. That does not instill a sense of forward movement. However, if you unbundle how we are doing on innovation, it is a rich story. For the university sector, which is what CFI is funding, Canada is world class. We do world-class research. We are world leaders in many domains. For the size of the country, we perform more research than we would expect, and it is of higher quality if you look at the performance evaluation indicators around quality of research.
The Council of Canadian Academies, a body that brings together the royal societies, engineers and the peak medical associations of most senior academics, just finished an assessment of the state of our science base, chaired by Eliot Phillipson. They found that we do very well and we should be very proud of our research capacity.
The private sector does about 55 per cent of all research in Canada, and there the story is mixed. For instance, you can see on the graph the impact of the insolvency of Nortel. There you are into market operations, and it gets quite complicated about which companies are investing in research and which are holding back because of the downturn. The government has tended to use more indirect tools like the SR&ED tax credit, which is outside of our mandate, to influence and encourage investment in R & D.
When you look at the macro picture, the challenge is in the private sector. It is more difficult to interface with the market and change investment behaviour when you are talking about many actors competing to make their businesses succeed.
With regard to your question about CFI, it has a performance evaluation framework. We are doing well in Canada on university-based research. The challenge continues to be translating that strength and basic research and getting it out to influence market outcomes. I could talk more about some of the initiatives we have undertaken in that regard, but that is probably enough.
Senator De Bané: You have read to us your three strategic objectives. Mr. Stewart has just said that research is not a problem, that we do first-rate research in Canada, but on the business side, the operations of the company, there can be underperformance. As you said, the jewel in high tech in Canada was Nortel, and it went down. Research In Motion was the world leader, and you know what happened there.
Two weeks ago we heard from senior representatives of the National Research Council who said that this is really the weakness while in other countries the deficiencies are on the business side of high tech. Do you agree with that, Mr. Stewart?
Mr. Stewart: Yes, I very much believe the challenge is in the private sector.
Senator De Bané: Your document says that you are going to generate sustained prosperity by helping Canadian businesses to be at the forefront of global innovation. However, if they are not good businessmen, this is beyond what you can do.
I read the three objectives and I find them beautiful, but I wonder if they have any resemblance to reality because they are beyond your reach. Research In Motion had a market value superior to that of the Royal Bank of Canada, and then Samsung, Apple, et cetera, bypassed them. You cannot be there to correct that.
Mr. Stewart: If you look at the three things that my colleague has introduced, Industry Canada provides, foremost, marketplace framework legislation. We know as economists that competition is what drives innovation in the long run. One key thing that the department seeks to do in our work around marketplace frameworks is to have competitive intensity. We encourage having a market that is open and competitive.
The other work, such as funding universities, is down that chain. A competitive and growing company needs young, bright minds to help them develop the products of tomorrow. We fund university research through CFI in order that companies like RIM in Waterloo will have the supply of talented people it needs for its growth strategy.
However, at the end of the day, RIM needs to compete on the basis of the quality of its innovations, and a competitive market will drive that. That is a key part of our role which is quite often spoken of less than specific programs.
Ms. Bincoletto: The first pillar of intervention in Industry Canada is marketplace laws and regulations. We are responsible for the incorporation of companies and the intellectual property. We are responsible for how we deal with foreign investment and how we treat foreign investment, and we are responsible for the bankruptcy side, that is, the life cycle. How we tweak these rules and regulations will have an impact on how attractive Canada is to companies.
The same applies to how we tackle productivity. We know that we are not doing as well on, for example, adoption of technology in companies. Many small companies have a hard time growing, so the government has put in place some targeted programs.
Last week you heard that the NRC has a technology development program. IRAP also helps in changing the culture of companies to become better entrepreneurs. Of course, we are not substituting ourselves for them, but we still try to help.
Venture capital is also a challenge, and we are working a lot with the BDC. With the SR&ED changes that came to be, the savings that were realized from the SR&ED changes were reinvested in a $400 million venture capital fund. That is a lever to help change the business innovation angle. That is the role we see ourselves playing.
Senator De Bané: On the first point, to have a competitive environment, am I right in saying that we have not managed to do that very well in the cellular phone sector? Ours is one of the countries in the Western world where the price of cellular phones is higher than in other countries?
Second, the message that I got by talking with the two senior officials of NRC — I sent them an article by Richard Florida that impressed me very much. They told me they will answer in writing to the committee about that article. They said they have realized that NRC must help businesses not only to do their R & D but also on the business side of their operations. We have been weak on that and we have seen that countries like Israel are funding and helping them on the commercial side. That explains why, despite our first-rate research, to which you have rightly alluded, they say this is our weakness. This is what I understood they want to do now, focus more on the business side.
About cellular phones, am I right in saying they are costlier in our country?
Mr. Stewart: It is lower cost than in the United States. Since 2008, when the government opened up the auction for AWS spectrum, prices have come down 18 per cent.
However, as you were saying, at the end of the day, individual entrepreneurs and their companies are the ones who are competing in that market. We welcome and want to encourage that competition, and demanding consumers play an important role in competition. We are watching as this market unfolds, as these people compete and how it will proceed.
So far the benefit has been a reduction in prices. As a consumer, we would all like to see those prices continue to go down.
Senator Buth: I have questions in a couple of different areas. The first is the Canada Youth Business Foundation. Can you describe what that is, what it does, the impact it is having, and then maybe talk about how you intend to spend the new funding? I was looking for it in the estimates and I could not find a line item.
Ms. Bincoletto: I will answer the last question first. It is because it ended and the budget then renewed it for two more years. We were out of time when the RPP and the Main Estimates were finalized.
Senator Buth: To clarify, were there no expenditures in 2011-12 or Main Estimates 2012-13?
Ms. Bernard: There were.
Senator Buth: The estimates are now in a three-year block, and I could not find it anywhere.
Ms. Bernard: It is on page 189. You do not see it individually, but it is part of the line that is called ``Small Business Research, Advocacy and Services.'' It is rolled up in here, but I can tell you that the CYBF has been $10 million a year. That is one of the few programs that we fund operations. It has been $10 million a year and has now been renewed for two years at $9 million a year, so a little bit of a decrease.
Ms. Bincoletto: The purpose of the CYBF is to financially assist and mentor young Canadians who want to become entrepreneurs. We have some statistics. Since its creation in 1996, over 5,600 young Canadians were assisted and mentored. The program has helped create 22,000 jobs since 2002.
The program has been audited and evaluated over the years, and we have consistently found that the foundation work is relevant and the programs are cost effective and efficient, if that is sufficient. How the money will be spent will really be up to the foundation.
Senator Buth: Who does the audit? You said it was found to be efficient and effective.
Ms. Bernard: It is our internal evaluation.
Senator Buth: It is internal?
Ms. Bincoletto: Yes, Industry Canada has an audit and evaluation branch, and they have a work plan. They audit the programs on a regular basis, and this one was audited.
Senator Buth: There has been quite a bit of media attention paid to a very important part of investment in Canada, and that is our foreign investment policy. Can you tell me what developments there are relating to foreign investment policy?
Mr. Stewart: Do you mean in general, or do you mean with respect to the recent budget?
Senator Buth: Both.
Mr. Stewart: On December 7 the Prime Minister made an announcement. It was a combination of the government's decision around the Nexus and the PETRONAS deals. At the same time, the Prime Minister also talked about state- owned enterprises and how the government would treat those enterprises. In effect, the Prime Minister was communicating that these investments for state-owned enterprises would not ordinarily be approved going forward with respect to the oil sands. In addition, if I remember, he also indicated that state-owned enterprise investments in other sectors of the economy would be monitored going forward. That was the main gist of that announcement.
There are some smaller things around housekeeping measures of the nature of the time spent on doing aspects of reviews and so on, but the main import was around state-owned enterprises.
Senator Buth: Since then, is there anything in Budget 2013?
Mr. Stewart: There absolutely is. I guess I drifted into that. It would switch back to the housekeeping. There were changes around the timing for national security reviews. There will be a definition of state-owned enterprises reflecting the Prime Minister's emphasis on it, and I think the terms around the definition of control in an investment to be reviewed. There were several aspects that flowed from the Prime Minister's policy statement of December 7, 2012.
[Translation]
Senator Chaput: I just have one question, and it has to do with the broadband Canada, connecting rural Canadians program. I am pleased to see that you are doubling the $5 million you had in 2012-13 to $10 million for 2013-14.
Do you have an idea of how many rural communities are already connected across Canada, how many still need to be and what you can do with that amount?
Ms. Bincoletto: That is a good question because I was responsible for the program when it was implemented. The program was developed as part of the government stimulus program in 2009 to try and connect as many remote and rural regions to the Internet as possible, with an average speed of 1.5 megabits per second.
We had $225 million at the outset that had been set aside for the program.
Senator Chaput: How much?
Ms. Bincoletto: We had $225 million, but the full amount was not used. We spent the first year assessing the needs. We made an inventory of the needs in rural and remote area. Then, we established a methodology. That methodology was meant to ensure that the interested recipients, who were mainly small telecommunication companies scattered pretty much everywhere outside of urban areas, had a business framework that could support their operations for at least five years, profitably, and provide the level of services desired.
Once we identified these recipients, we began a contribution agreement process. From that point, the following year, that is, money began to be spent.
The program ended in 2011-12 because it was a two- or three-year program. However, payments to those companies continued. That is what you can see now for the following year. These are not additional contribution agreements. They are agreements that were already signed and that require payments. What currently remains in the profile for the coming years are satellite recipients, who are mainly in the Far North, who need support and who come under the contribution agreements. That support is used to buy the satellite capacity. That is what the $10 million represents, and it is intended only for that. As for the rest, the program is over.
Senator Chaput: Are you telling us that our rural and remote communities in Canada are all connected?
Ms. Bincoletto: The program facilitated broadband connection in about 99 per cent of homes in Canada.
Senator Chaput: We are talking about broadband.
Ms. Bincoletto: At 1.5 megabits per second, the Internet is available in 99 per cent of homes in Canada.
Senator Chaput: Could you please send us a list of all the communities that are connected and those that are not yet?
Ms. Bincoletto: I do not know if we have the list of those that are not connected, but we certainly have a list of those that we have supported through the broadband program. We have that list, and we can share it with you. I think it is even available on our website.
Senator Chaput: Small companies and small entrepreneurial businesses in rural regions, such as Notre-Dame-de- Lourdes ou Saint-Malo, if I take Manitoba, have access to broadband Internet for their businesses and communications. Are you telling me that this is the case pretty much everywhere?
Ms. Bincoletto: Ninety-nine per cent of them are. There are still valleys that are difficult to connect. There may be interested recipients who did not have a business framework that made it profitable to set up a tower, for example. Otherwise, the figure is 99 per cent.
Senator Chaput: For example, I live in a municipality in a rural area of Manitoba. People in the village have broadband access. However, in the municipality, no entrepreneur has been able to set up a company that can offer the service, since there are not enough people. So, we do not have access.
When you talk about 99 per cent, that might not be the case, depending on the situation.
Ms. Bincoletto: One per cent still does not have access, basically. For one reason or another, there may not be any satellite service, which is generally the universal service. It may also be that no small entrepreneur has managed, alone or with funding from our program, to show that he had the technological and financial capacity.
Senator Chaput: If the small enterprise was not able to demonstrate its viability, the service cannot be offered.
Ms. Bincoletto: Basically.
[English]
The Chair: Supplementary question?
Senator McInnis: It is. The provinces have a role here. When you say 99 per cent, that is dangerously close to 100.
Ms. Bincoletto: Yes, but not 100.
Senator McInnis: No, but what you are saying is that it is available through satellite. You are not saying that the entrepreneurs that put the towers up have spread 99 per cent through the country. That is not what you are saying, is it?
Ms. Bincoletto: No, I am not. I am saying that 99 per cent of households in Canada can have access to 1.5 megabits per second broadband if they choose to.
Senator McInnis: No, it is not if they choose to because they cannot afford to put a tower up. The companies simply have not come in. In Nova Scotia, the government said, ``There will be coverage throughout the province of Nova Scotia.'' It is still not there yet. That was about five years ago, but that is what you are saying. You are saying that it is up there to be tapped, not necessarily that it has been tapped. In Senator Chaput's case, and in many other cases in the country, it is not there. That is where I think the confusion is.
The Chair: Does that make it any clearer? Do you agree with that?
Senator McInnis: That is what it is. It is not the federal government's responsibility. You put the satellites in the air.
Ms. Bincoletto: No, we do not.
Senator McInnis: No. I presume that you have it all done because, back in 2011-12, it was 60 million, and it is down to 10. I am presuming that what you had to do is just about complete.
Ms. Bincoletto: I would say 99 per cent is a good grade.
Senator McInnis: It is not 99 per cent for Canadians. That is the thing. The consumer, the person out there to get it, cannot. It is not 99 per cent through the country. If the entrepreneurs on the ground, within the provinces, are prepared to put the towers up, yes.
Senator Chaput: Then they need to make money to ensure —
Senator McInnis: Exactly.
The Chair: Ms. Bincoletto, your testimony is being challenged here somewhat.
Ms. Bincoletto: That is fine. I enjoy this.
The Chair: I will give you an opportunity to sort this out for us.
An Hon. Senator: Do you have any data?
Ms. Bincoletto: I will come back, but I think that the data I saw the last time was 99 per cent of households.
The program is one of many interventions. The provinces have. Newfoundland has. Quebec is looking at doing the same for 100 per cent of its population. The sum of all that and the availability from the private sector, even the big carriers who have deployed in rural areas — the inventory that we have done — shows that the Internet is available in 99 per cent of households.
Senator McInnis: If.
The Chair: Senator McInnis, you are persevering here.
Senator McInnis: Sorry, I am not being provocative. The entrepreneurs have not, throughout the country, taken up the option of putting the towers up and doing a business of attempting to make money. There are vacant areas in this country that do not have that in rural Canada. I cannot guarantee anything, but I can suggest to you that it is not 99 per cent.
Senator Chaput: Do you have a map of Canada with little pins, or whatever, that shows where it is available?
Ms. Bincoletto: Yes, we do.
Senator Chaput: I sure would love to see that, if you could send it to the committee.
Ms. Bincoletto: I do not know if the website is still live. We had a website, while we were doing the broadband program, where you put in your postal code and you could have the list of all the carriers available to provide you with the Internet.
The Chair: We have spent quite a bit of time on this issue. It is very important for the public, so we would appreciate anything you can do to help clarify that.
Senator Chaput, you did have the floor but I think Senator McInnis used up all of your time.
Senator Chaput: You still have your time, senator.
[Translation]
Senator Bellemare: My first question has to do with the Industry Canada agencies. There are a number of agencies in the broad sector of industry, and I was looking more particularly at the Federal Economic Development Agency for Southern Ontario, which has expected spending of $223 million, with $195 million of that is for grants and contributions. There is also the Atlantic Canada Opportunities Agency with an expected budget of $300 million.
Is there something equivalent for Quebec? In the context of all these industry development agencies, are underdeveloped regions in Quebec being targeted?
Ms. Bincoletto: Yes, there is a regional agency called Développement Québec, but it is not in our portfolio. These are regional agencies that are completely separate and that operate along the same lines, but that are separate, with a separate minister.
Senator Bellemare: Do the funds come from the federal government?
Ms. Bincoletto: Yes.
Senator Bellemare: In your strategic plan, with respect to the first strategic outcome, which is the marketplace frameworks and regulations, a framework that may or may not be conducive to innovation, you have expected results and performance indicators. One of the performance indicators you have is Canada's rank among G7 nations in effectiveness of marketplace frameworks and regulations for starting a business, the impact of the regulations on foreign investment, and intellectual property. That is your performance indicator. Your target for Canada is third position.
How will you know that you are third, and how will you reach that objective, especially in a confederation like Canada, where Industry Canada works with the provinces? That brings me to a sub-question: what is this synergy that you are building with the provinces to attain these strategic objectives, that are relevant in themselves, but that are in a specific political context?
Ms. Bernard: Could you say what page that is on?
Senator Bellemare: There are no page numbers in my copy. It is in the first target tables, after internal services and analysis of strategic outcomes.
[English]
Mr. Stewart: I think when it comes to something like foreign direct investment, there are statistics for that. We are able to track our performance relative to other G7 countries about how we are performing and attracting new investment into the country. With intellectual —
[Translation]
Senator Bellemare: Now, we were talking about the regulatory framework primarily.
Mr. Stewart: Yes, but it is a group of things. In these market frameworks, there are investments, intellectual property, and there will be a range of figures to identify our position compared with other G7 countries. And normally there will be something else under that figure.
[English]
What is our position in patenting for intellectual property as a proxy to measure? For investment, how much foreign investment has come into the country? Normally it is statistics-based. We can come back and unbundle this and show the calculation, but a known set of statistics is used in a situation like this.
[Translation]
You are asking about the relationship with the provinces. It is really interesting because of the way powers are divided between the two levels of government. With programs and grants to encourage research and development, we have a role to play with the universities, as we have already discussed; but, at the same time, the provinces have their activities. Normally, we have to focus on industrial groupings or on innovation. A dialogue is going on with other levels of government, but if we look at the strategies, we have a clear role to play in encouraging university research.
[English]
The provinces tend to focus more on the industrial research clusters. Think about Quebec and work like Aéro Montréal, the pharmaceutical industry, the range of players the Government of Quebec has been funding over time to encourage those clusters and those regions. Now, they can also sometimes fund university programs. However, they focus on different areas because the federal granting councils, the CFI, have very well-established roles now and they leverage benefit from that. They will target needs in their research community and focus on that.
As a civil servant, I have found the relationship on the innovation file has always been very positive for the most part because there is a shared sense of the importance and a long-standing relationship on who is doing what. It is usually a very positive and synergistic relationship.
[Translation]
Senator Bellemare: I am happy to hear that. Thank you very much. It is important for there to be a synergy.
[English]
Senator Callbeck: My first question concerns the youth programs that are sunsetting. You mentioned the Canadian Youth Business Foundation. There will be renewed funding for two years, even though it will be less money per year. It says here that there is new money for the employment strategy. Is this being reduced or is it the same amount as other years?
Ms. Bincoletto: Are you referring to the Youth Employment Strategy?
Senator Callbeck: Yes.
Ms. Bincoletto: It has been renewed in Budget 2013.
Senator Callbeck: Is it in the same amount or is it reduced?
Ms. Bernard: We have it in three different programs, so I have to look at a couple of places. Here I see it is the same amount. For Industry Canada as a whole, it is the same amount.
Ms. Bincoletto: That is a national program, so we get our portion. For us it stays the same.
Senator Callbeck: Is the Computers for Schools program sunsetting?
Ms. Bincoletto: It has.
Senator Callbeck: Is there any new funding for that?
Ms. Bincoletto: It has been renewed.
Senator Callbeck: For the same amount of money?
Ms. Bincoletto: Yes.
Senator Callbeck: For two years?
Ms. Bincoletto: We have a mandate to continue it for a year, during which we will review it.
Senator Callbeck: My next question is on small business. I notice on page II-189 that there is a reduction. I am surprised at that because we all know that small business drives the economy and creates jobs. It says for small business research and services there is $31 million less. I read somewhere where the amount of loans under the Canada Small Business Financing Act will be reduced. I think it is $17 million. Would you have comment on both of those and the reasons why?
Ms. Bernard: First of all, this loans program is statutory. What you see here is not a request for funding to be approved. It is our estimate of how much we think there will be a draw against the program.
This particular program hit a high in 2009-10 in that it is the most we have ever paid under it. Because of the recession, many of the loans defaulted. This is a program, by the way, where we encourage banks to loan to small businesses, and if there is a failure, such as default on the loan, we cover part of the loss with the bank. We cover 85 per cent of the loss.
This is strictly a forecast of how likely we think there is going to be a draw. If it is more likely, we will pay more. It is a statutory program, so whatever amount of claims meet the criteria, we will pay for it.
Ms. Bincoletto: When it is negative it is a good thing because there is less. It is the opposite. It is confusing because if there are fewer losses, then it is a good thing. It means the economy is actually doing well. Usually the institutions lend about a billion dollars.
Senator Callbeck: The other question I had was on ``Small Business Research and Services.'' Are programs being cut there? Is there less money?
Ms. Bernard: Most of the reduction in money is because of that loan program.
Senator Callbeck: Is that covered in there?
Ms. Bincoletto: Yes, it is.
Senator Callbeck: The next thing I want to ask you about is right below it, ``Community Economic Development.'' The expenditures last year were $153 million and in the Main Estimates this year they are $65 million.
Ms. Bernard: The high amount in 2011-12 is exactly the broadband program we were just talking about. It had a high number and was ending the year after that. That is the reason for the decrease.
Senator Callbeck: The Automotive Innovation Fund appears to be dropping from $108 million to $45 million, but you mentioned in your opening comments about a new fund of $250 million. Is that in here?
Ms. Bincoletto: No, it is not because it was announced and we have not received the approvals yet.
Ms. Bernard: I could say a few words on that one. The Automotive Innovation Fund was approved for $250 million, but there is no fixed amount per year. It depends on when companies would be ready to claim. Again, it is R & D, so it is very lumpy in terms of expenditures.
In the first couple of years of the program — it started in 2008-09 — we spent between $10 million and $15 million per year for the first three years. It really started ramping up in 2011-12; we spent $67 million. In 2012-13 it will be $108 million, and we are now hitting the tail end of that curve. It will decrease to $45 million in 2013-14 and to $16 million the year after that, but then the new $250 million will replenish that.
Senator Callbeck: Last year in the Main Estimates, contributions under the Technology Partnership Canada Program were $40 million and this year we are looking at $5 million. What is the reason for that reduction?
Ms. Bernard: Technology Partnership Canada is a program that ended in 2006. We have not made any new contributions under that program. SADI actually replaced it. Those are long-term agreements; they go over 25 years.
Of the 300 or so projects that were receiving money, we are now down to only 12 that we have not yet finished paying; these are the last 12. The last payments will be made the next fiscal year, and they will be for that program. Then it goes to a repayment phase following that, where it will start funding back.
The Chair: I will put two questions on the record and you could provide us with answers to these if you cannot answer them quickly now. One is about the contributions under ``Non-profit Consumer and Voluntary Organizations.'' Could you direct us to where we could find what is involved there?
The next page, page 191, deals with a contribution to the University of Western Ontario for the Ivey Centre. Is that an extraordinary thing? It looks like it is ongoing for a number of years, but I do not see anything for all of the other universities that we are all involved with in trying to raise funds. How did the University of Western Ontario get in there?
Ms. Bernard: I will start with the Ivey Centre. That was also under the stimulus package of Budget 2009. It was for the construction of the Ivey International Centre for Health Innovation, which is located next to the Richard Ivey School of Business. It was a limited duration program. It is just for the construction of it. Once it is all built, there will be no further funding.
The Chair: Those infrastructure programs received an extension and you are forecasting into this year, but they are long since over now.
Ms. Bernard: This one was actually a five-year program as opposed to the others that were mostly two and three years.
The Chair: Good for Richard Ivey. Could you quickly give us an answer with respect to the Program for Non-profit Consumer and Voluntary Organizations? We are out of time and Senator McInnis wants to ask a supplementary question.
Ms. Bernard: That program in particular is to support research and analysis for consumer protection issues that are national in scope and to encourage the financial self-sufficiency of consumer and voluntary organizations.
[Translation]
There are consumer protection groups such as Option consommateurs, among others.
[English]
They apply, we weigh the different proposals, and we fund the ones that are judged to be of most benefit.
The Chair: It is good to know about these programs. Some of our listeners and watchers would be interested in knowing about these programs. They write to you and you assess their application?
Ms. Bernard: Yes.
Senator McInnis: I just wanted to say, I did not want my earlier interjection to be misunderstood; I really appreciate what Industry Canada does. You do great work.
I have a quick question, and if you can give me an answer now, that is fine. I presume the $44 million for ``Competition Law Enforcement,'' which is the Competition Bureau of Canada, is 100 per cent Competition Bureau?
Ms. Bernard: Yes.
Senator McInnis: They are not a quasi-judicial board or an intervener with boards and commissions. You do not have to provide an answer tonight, but I would like to know about their successes. This is important, particularly in regions where there is an example of a refinery shutting down, with one refinery left, and of course there is absolutely no competition. In regions like that, it is very important. I would like to know what successes they have had and exactly how they operate.
The Chair: If you may, provide that information to our clerk and we will circulate it to all members of the committee.
Ms. Bincoletto: Yes.
The Chair: On behalf of the Standing Senate Committee on National Finance, I would like to thank Industry Canada representatives for being here and for the work that they are doing in serving Canada.
Senators, we are pleased to welcome officials from Shared Services Canada. In the last year a lot of money was transferred to Shared Services Canada from the supplementary estimates of various departments that had appropriated funds. This is the first year that you are up and running and have your own appropriation. Perhaps you could tell us later if you anticipate that other departments will be joining your group, for which we will see some funds being transferred.
We are pleased to welcome Gina Rallis, Senior Assistant Deputy Minister and Chief Financial Officer, Corporate Services; and Benoît Long, Senior Assistant Deputy Minister, Transformation, Service Strategy and Design.
Gina Rallis, Senior Assistant Deputy Minister and Chief Financial Officer, Corporate Services, Shared Services Canada: Thank you, Mr. Chair, and members of the committee. It is an honour to be here before you once again. I am joined today by my colleague Benoît Long, Senior Assistant Deputy Minister for Transformation, Service Strategy and Design. We are pleased to be here to discuss the Main Estimates for Shared Services Canada for 2013-14 and the department's Report on Plans and Priorities.
[Translation]
By way of background, the government created our department in August 2011 to operate and modernize its common information technology infrastructure services and operations. In particular, we were mandated to consolidate, standardize and streamline the federal government's email services, its data centers and telecommunications networks. This focused responsibility for the delivery of core information technology infrastructure services in a single organization reflects the best practices of other governments in Canada and the United States, as well as many leading corporations.
Over the past 20 months, we have put the framework in place to deliver on that mandate. Thousands of employees who were spread across our 43 partner departments and agencies were transferred to Shared Services Canada. We built management and reporting structures to complement the full financial authorities that we were granted as of April 1, 2012. With the entry into force of the Shared Services Canada Act in June 2012, Shared Services Canada also obtained the procurement authority that enables it to negotiate and manage contracts for products and services.
[English]
Through it all, Shared Services Canada operated the existing IT infrastructure on which our partner departments and agencies depend for approximately 2,100 mission critical systems. By bringing a government-wide perspective to existing operations, SSC made progress in eliminating duplication, improving efficiency and reducing costs. We also began the process to transform the government's IT infrastructure in order to improve service while managing costs even more strategically. That work continues during this fiscal year.
The 2013-14 Main Estimates for Shared Services Canada are $1.398 billion. This represents a decrease of $121 million over the 2012-13 estimates to date. Most of this decrease is attributed to Economic Action Plan savings and to further net adjustments required from various partnering departments in support of SSC's mandate. Those resources are enabling us to maintain and improve ongoing delivery of the core IT infrastructure services that our partner departments and agencies use to support their own programs, services and internal operations. As our Report on Plans and Priorities points out, we are matching our emphasis on continuous service improvements and efficiency with enhanced focus on IT security.
Those resources will also fund our progress in renewing the government's IT infrastructure. Our email transformation initiative is the most advanced of the three renewal strategies. During the past year and a half, we carried out substantial planning, analysis and consultation with the technology sector and within government. We are now in the final stage of a procurement process for a single government-wide email system that will be phased in over the next two years to replace today's roughly 100 email systems.
[Translation]
Similarly, we are finalizing plans to consolidate and streamline the services that are now scattered among more than 300 data centers and 4,000 telecommunication networks across the government. After a thorough analysis of current operations, projected future needs and the best practices of other organizations, Shared Services Canada sees substantial opportunities for improved efficiency, greater security and other benefits. We will implement these plans at a pace that will ensure that we and our partner departments can manage change and ensure maximum operational stability, while achieving the financial and performance results the government expects.
[English]
In conclusion, SSC continues to refine the internal services that support the achievement of its results for Canadians. For example, we are implementing a work force management strategy and strengthening the performance management system that is helping us build the necessary internal management rigour to achieve success while mitigating risk.
We would be very pleased to answer your questions.
The Chair: How many personnel are in Shared Services Canada?
Ms. Rallis: We were created with a transfer of approximately 1,200 employees from Public Works and Government Services Canada on August 4, 2011. On November 15, when the second OIC was passed, about 5,000 employees were transferred from the 42 partner departments. April 1, 2012 was our first full year of operations.
We also received, through SSC legislation, enhanced procurement authorities with respect to our mandate, which meant that approximately another 60 employees were transferred from the acquisition branch of Public Works and Government Services.
In terms of overall planned staffing, we are about 6,400 in total.
The Chair: Of that 6,400 number, how many are working remotely from your principal office?
Ms. Rallis: The majority of our employees are in the National Capital Region. However, approximately 1,000 employees of SSC are dispersed across the country. We have employees in over 300 different locations.
The Chair: Did you say 300 different locations?
Ms. Rallis: That is correct.
Senator De Bané: If I understand well with respect to Shared Services, the employees that were in every department are still there, but now they report to you and they are no longer part of that department. The same employees, who are in such and such department, since the creation of your department remain where they are and they are under your authority. Is this it?
Ms. Rallis: That is absolutely true. These are not new employees. The government announced the creation of Shared Services Canada. Through a series of OICs on August 4, 2011, and again on November 15, 2011, there was a repointing of those employees in the 43 partner departments that were doing email, data centre and networks. They were doing it in their ``vertical'' per department. Those employees were then assigned as part of the new organization, SSC. They are absolutely, as you mentioned, existing employees that were transferred, including the financial resources to cover their salaries from the 43 partner departments.
The Chair: Thank you for that clarification.
Senator L. Smith: To follow up on the first two questions, now that you are together, what is your strategic plan? What are your objectives? I am not sure how far off you plan. Do you plan off a fiscal year? Do you have a two-year or three-year program?
If you had to overview your organization, how much will you do in-house, how much will you go into the service bureaus like CGI, et cetera, the big providers, so that you can have efficiencies? Do you have an efficiency plan to put all this together?
You have a huge challenge in front of you, at least it appears to be, unless you have it all done already. The numbers can follow from your strategy. The numbers will unfold so we can get a better understanding of where your priorities are, where you will spend your money and what systems you need to update and bring into the 21st century as opposed to some of the problems you have with disjointed systems and software that do not talk to each other. I imagine you probably have a little bit of that, too.
Ms. Rallis: Thank you very much for those numerous questions. I am smiling because clearly you have a profound appreciation of the complexity of ``on-boarding'' over 100 different email systems, 300 data centres and 4,000 networks.
Let me begin by saying that our priorities were reflected in our very first Report on Plans and Priorities of last year, which is our commitment to parliamentarians in terms of four main focuses.
I summarized those priorities. What we have this year in our Report on Plans and Priorities is an evolution of those four priorities that were identified last year. They are focused on, first, maintaining and improving critical IT operations. We are extremely conscious that with respect to our IT infrastructure, data centres and networks, our partner departments rely on those networks and data centres in terms of running mission-critical applications, everything from policing to pensions. Those applications are in the departments, but they rely on our servers, our software and our data centres, so that is a core priority for us and a focal point in terms of maintaining operations and improving service.
The second one, and this is where my colleague Mr. Long can speak, is about beginning the transformation and the renewal and ensuring that the Government of Canada's infrastructure is modern, resilient and secure. Email is the first of those transformation initiatives.
The third priority for us is around governance and ensuring that we have solid partnerships with the 43 departments because they are dependent on our IT infrastructure, but also with the information technology sector, and our bargaining agents. That is critical for us.
As a new department, the fourth priority is around continuing to be rigorous in setting up the appropriate systems and business processes so the department can run.
In terms of efficiencies, we, like every department, provided and made commitments to the government in terms of where efficiencies can be found. Our efficiency targets and what we made as commitments were focused on contract consolidation because by putting 43 departments all into one we felt there would be efficiencies in terms of consolidating those contracts. It was important to do that because it was important for us to be able to then make sure that we have intact the ability to do the thoughtful planning for the longer term in transformation, so we have been very measured about that.
With respect to our longer term plan, that is a seven-year transformation program. What you have in the Report on Plans and Priorities is basically our initial commitments.
I am wondering if Mr. Long would like to talk a little bit on the longer term to answer your precise question.
Benoît Long, Senior Assistant Deputy Minister, Transformation, Service Strategy and Design, Shared Services Canada: I would be happy to, thank you.
I think you seized the essential elements of why Shared Services Canada was created and the benefits we can bring immediately as well as in the long term on securing and making more efficient and effective the infrastructure services that we provide.
We support every government program in the Government of Canada because all of those programs are housed in data centres or on servers and computers that ultimately need to be renewed.
A number of years ago, the Auditor General identified a clear need for the government to move towards a renewal of that infrastructure. Departments had built individual systems separately, which meant that to renew them and make them more secure would cost a lot more money and, more importantly, would be quite challenging from a security perspective. Our creation has given us the ability to recommend to the government a series of strategies that will make it possible to renew and modernize the infrastructure as well as to make it more efficient.
Ms. Rallis mentioned earlier that our initial foray — and we started immediately, as soon as we were created — was to plan and to outline how to approach the consolidation of email services. Email was one of the initial early opportunities from an efficiency and security perspective. It is the number one threat factor to the Government of Canada's systems. You may be quite familiar with some of the threats that are regularly reported in the media around how email is used as a way to carry malware and all sorts of threats into enterprises and governments.
Email was our first foray, and we have been able to launch very quickly to engage the private sector rapidly and to move forward with recommendations, ultimately, to the government about how to proceed.
The data centre and network elements are much more complex. As Ms. Rallis mentioned, we have a little over 485 data centres, and they vary in size and distribution. Some of them are located in office buildings and some are in dedicated buildings. A real complex web of facilities has grown over the last 40 years, in different quality and different capacities. It now gives us a chance to standardize and to find those economies of scale but perhaps, just as importantly, to improve the services that the Government of Canada can obtain from those facilities as well as the programs and their ability to be agile and serve Canadians very well.
The networks are another complex fabric. Ms. Rallis mentioned how many we had. They connect every building. We support 3,500 in 80 buildings, in about 1,400 cities in the country. They are dispersed geographically across every area of Canada. Every one of those buildings is connected somehow to a data centre, which could be in one building or in different parts of the country, and all of it grew organically — I will use that word — over years.
It will take us time to change, modify and consolidate all those pieces together, but we are not the first ones to do that. Many governments and, perhaps just as importantly, many private sector organizations have accomplished the same journey and have done it successfully. We are using proven methods and approaches as well as technologies to make our plans.
As my colleague suggested, this is not a one-year effort: This will take many years. It is complex for many reasons. We have a little over 24,000 servers. Every one of them must be modified and migrated to the new environments and systems. All the networks have to be redone and redesigned to be much safer and to actually re-wire, if you wish, the entire government. That is complex, it is logistically difficult, but it is also well understood how to get it done.
Senator Buth: Thank you for being here today. The first time we heard about you, of course, was last year, so we were waiting with anticipation to have you here today. You have a huge task ahead of you.
I want to ask about the email system. Can you tell me where you are in terms of the whole process? Can you also tell me if you have had any consultation with groups outside of government in terms of what kind of system you run and whether or not it will be consistent with typical business practices?
Of course, the government communicates a lot with different businesses. Will there be any issues in terms of the ability to communicate by email?
Ms. Rallis: I will initiate the response and then ask Mr. Long to elaborate, since he is intimately involved.
As we mentioned earlier, email was the first one that we really started focusing on. We undertook what is called a collaborative procurement process, inviting industry to provide us with advice on how we would be able to approach this consolidation and renewal exercise. We also established a round table that includes the industry and telecommunications sector as a means of garnering best practices, also making sure that we are mindful of other jurisdictions that have gone ahead.
With respect to your specific question in terms of the status, I will let Mr. Long follow up.
Mr. Long: Email is software that you are probably all familiar with as consumers. It has been around for quite some time. In the Government of Canada we have three basic systems. The vast majority of the departments use a system from Microsoft called Exchange, and you may interact with the software that allows you to use it, which is called Outlook.
A significant number of departments also use older systems. One is Group Wise that was originally brought to the Government of Canada in 1988, and Lotus Notes, which is an alternative system. The context here is simply to imagine a situation where we will bring every user under a single system. There are 377,000 users across the 44 departments, including Shared Services Canada. That will allow us, first of all, to concentrate our expenditures and our expertise on securing those systems. As I mentioned, it is a significant threat to the government, and ensuring that it is a safe system going forward is fundamental to us.
More importantly, we will be able to bring in the system in a way that allows us to have a replica, a mirror of the system, so if it ever goes down in one area, it actually picks up immediately. That means it has the ability to be highly available and, for all intents and purposes, all of us have probably become quite dependent on the ability to communicate, whether it is through portable devices, phones or our computers. Having email always running is pretty fundamental. There have been quite varied levels of services over the years across email systems and across all departments.
Ms. Rallis mentioned there were 100 systems in the government. In the 44 departments that we support, there are actually 63, so some departments have multiple email systems. It is hard to fathom as to why we would do that in this day and age. That is why the ability for us to bring it together is fundamental.
We are very far into the process of the procurement. We will make recommendations to the government about the results of that procurement and establish the basis on which the government can make a decision on how to proceed. We are confident that the objectives for the program, whether increased and improved services or improved security and efficiencies, will all be achieved through this process.
We expect the process to end, from a decision perspective, towards the end of the spring, at which point we will then be able to proceed with the decision the government will have made as to how they want us to go forward.
Senator Buth: My second question is about security. Will it be more difficult to protect the entire public service? Will there be cost savings? I do not know the current security situation under each department. Can you talk a bit about the security system?
Mr. Long: Yes, I can. It is not enough to secure one part of a system. You have to secure all parts to feel and be satisfied that you have achieved the primary objective, which is literally, in the case of our world, the precious information that is important to all Canadians. We house all the data through our data centres to support all of the programs, from taxation to policing to pensions to benefits.
As you can imagine, there is a lot of inherent national value to that information. We want to make sure that it is constantly well protected and well designed from the beginning to ensure that a level of consistent security is available throughout, in every part.
IT systems are complex by nature because there are many dependencies. You depend on users having the right credentials, the right authorities and the proper rights to be able to safely access information and to do it through systems that have been secured. We require network connections that make it possible for a user to be connected to the data.
The data is housed in a facility, so the physical facility has to be protected. The access rights to the data and the systems have to be well articulated and capable of being audited to ensure that all practices and policies are absolutely being followed. Because of the variety of implementations over the years and decades, that is inconsistent across the Government of Canada. Every department does absolutely their very best, and we have inherited all of their different practices, all of their different investments and how they have approached everything.
As you can imagine, our first priority has been to inventory and assess our current state, where we are today. We know we can make significant improvements over the years because now we can actually look at how we would design it from the beginning and imagine a future and then go and implement that future. We can then migrate our current investments and systems into that new secure environment and systems. That will, as I mentioned, take some time.
We know a few things. First, we will be in a position to augment and increase the security of the perimeter of our government systems. Today every department is trying to protect their systems, and then as a whole we try to pull together the security of every individual department and then protect the government and all the systems from the outside.
Threat actors come at the government from every direction. They will come down usually not from the highest areas where there is a lot of security but where there is the highest level of possible vulnerability. Our idea of a fundamental perimeter around the government is pretty essential to information system security, and we will be able to establish that.
We will be collapsing and pulling together all of the connections and entry points into the government. Today there are literally thousands of means of getting into the Government of Canada. They are all supported and secure, but at different degrees. Some of them are Internet connections from a remote office and some of them are very large connections through the Internet. All of them require resources, and because they are all different and fragmented, it takes a lot of our resources just to keep them going.
When we bring them all together and reduce the number of places we have to concentrate our defences, we will get very good. We have enormous skills but also deep expertise that we can now deploy to fewer and fewer places, a bit like a castle: one bridge, not fifteen, because fifteen takes a lot more resources. However, even defending the castle or your own house, if you concentrate everything on the door but all the windows are open, it will not necessarily make for a very safe house. The Government of Canada is a bit like that. We want to close as many windows as we can and reduce it to one or two doors, and then make all of our protection possible at those few entry points. That is the beginning.
The Chair: Mr. Long, your enthusiasm for the work you are doing is wonderful and refreshing, but I am afraid several senators will not get a chance to ask any question at all here.
Mr. Long: Thank you, Mr. Chair.
The Chair: With your permission, I will move on now to Senator Callbeck. She is from Prince Edward Island. I would remind each senator to try to keep the question and the answer — although we cannot anticipate the length of the answer — to about five minutes per person.
Senator Callbeck: I have a couple of questions. One is regarding page 323. About a third of the way down the page, it reads:
an additional decrease of $89.6 million in funding for a total of $104.5 million — in accordance with Budget 2012 — in order to refocus government and programs, make it easier for Canadians and business to deal with their government, and modernize and reduce the back office.
Would you elaborate on that, please?
Ms. Rallis: I believe that statement is from the budget, and that is with respect to the commitment we have made towards the Deficit Reduction Action Plan. In terms of Shared Services Canada, we are an internal service to the Government of Canada. Therefore, the reductions are really around streamlining back office, if you will, which is the internal administrative systems and services.
More specifically in terms of our commitments to the Deficit Reduction Action Plan, we have a book saving of $104 million with respect to the previous comment that I made, which is primarily on the consolidation of contracts as they relate to our telephony services. That would be things like cheaper contracts that we have negotiated for cellular services because we support the government's cellular devices, or some of the services as they relates to wide area networks.
Senator Callbeck: What really struck me is that $104.5 million is a big decrease. You are saying it will make it easier for Canadians and businesses to deal with their government. How?
Ms. Rallis: This is related to some of the simplification we are doing in terms of networks and connectivity for Canadians and businesses to be able to access the information that is available in the various government departments we support. I will ask Mr. Long to provide you with a more detailed response.
The Chair: The simplification seems to be very complex to explain, though.
Mr. Long: I will be brief, which does not go well with my name, but I will do my best.
To give you an example, there is a new contract for HRSDC and Service Canada that allows the consolidation and replacement of existing network connections across the entire country, a little over 400 offices. A new network, what we call a converged network, will bring voice and data together. It will be streamlined and fully standardized across the country, meaning we can actually guarantee the level of service at every office equally.
Why is that important? Canadians access services online. They make calls. They actually show up in person, where they have to fill out electronic forms. They actually have kiosks. All of those are fundamentally connected to each other. They all rely on the network. A single contract, with a single provider across the country, has made it possible to standardize, harmonize and save money, ultimately, even though before it would have been more difficult across the departments to start imagining how to do that. Our goal, across departments, is to bring that kind of purchasing power.
To give you a couple of statistics, we have 610,000 phone lines in the Government of Canada. They are spread out across contracts in each department. Every department did their best to negotiate with some of our excellent telecommunication companies in Canada. However, when you bring them all together and negotiate with the telecommunication companies, as you can imagine, you get much better pricing, even if you are asking for the same service. In this case, we were able to bring better pricing and better service and enable programs to serve Canadians and Canadian businesses smarter.
[Translation]
Senator Bellemare: I have a quick question. You have significantly addressed my concerns and I feel that you are going to disprove the old adage that we must not put all our eggs in one basket. On another matter, I have looked at your strategic plan and at the whole question of risk management. In your case, risk management is very important indeed. And you mention training, a ``learn on the job'' program at Shared Services Canada. I feel that it is always extremely important to be up-to-date on the latest technologies. Can you give us some more details about that training program: how many hours; who it is for, and so on?
Ms. Rallis: Thank you very much for the question. One of our priorities is actually to make sure that we are rigorous in managing projects overall. As you can see, ITR really is our activity. One of the first priorities was not only to begin to develop a risk management framework but, at the same time, to begin to organize dashboards that are standard across the department so that we are all able to know the status of our projects, how much they are going to cost and what the criteria are. At the same time, we have organized information sessions for our employees who manage large projects.
We are also in the process of developing a learning plan for the other important areas we are looking at, and we are consulting with various universities, and with the Canadian School of Public Service, to find arrangements for specific training.
But, given that we are the organization that specializes in information technology, we have also created our own centres of expertise. Last March, we trained more than 250 employees in handling and using the tools I mentioned, like the dashboards, as well as other electronic tools that we have in place.
Senator Bellemare: Are your trainers people from the inside or are they companies?
Ms. Rallis: We have both. One of our priorities is to learn from the experts, but also to develop the capacity ourselves. We have partnerships with experts, but a number of our people already have the certification in those areas that allows them to train our own employees.
Senator Bellemare: I imagine that your aim is for your 6,400 employees all eventually to be able to have access to the training on a regular basis.
Ms. Rallis: Clearly, it is not intended for all employees — the people who work in human resources, for example, or in communications. But, yes, the training really is for most of the people who work in our area.
Senator Chaput: I am speechless. I listen to you and I see the scope of the task you have undertaken. But you are comfortable with it and you are doing it with a smile. I am amazed.
I have two questions. Mr. Long, you mentioned that this initiative is based on a successful model that comes from somewhere. Is that what you said?
Mr. Long: Yes.
Senator Chaput: Is the model Canadian?
Mr. Long: Shared Services Canada is based on several models. Most provinces have created organizations similar to ours, in which they have brought together administrative services in the support of their government. They almost all started with information technology. That makes sense, because, if technological barriers prevent services from being consolidated, the consolidation will not get very far. Once the technological barriers are removed, governments can choose the services that provide economies of scale and meet other objectives. Several American states, and countries like Australia and England, have done it. But no other country has established an organization like Shared Services Canada that will consolidate all services for all departments.
Senator Chaput: When you talk about bringing all emails together, does that mean one server for all emails?
Let me explain why I am asking you that question. In the Senate, we have BlackBerries and we have iPads. On the BlackBerry, the message is in my office instantly. The iPad takes four minutes longer. The IT people have told me that the delay is because there are different servers. Will you have different servers as well?
Mr. Long: I was not expecting such a technical question, but it is very good one.
Senator Chaput: I really wanted to ask it because I have been in that situation.
Mr. Long: The most modern systems use a series of servers that have some redundancy in them, thereby providing the highest possible level of performance. Depending on the way in which the software is installed, who installed it and the servers that support your devices, telephones or tablets, there can be significant difference in service. That is what you are experiencing.
Our goal is to install a number of servers that will provide the highest possible level of performance. We are aiming for a performance level of 99.99 per cent. That means that the system will be down only for a few minutes each year. So that is a very high level of performance.
It is does not come without a cost, but, by putting everything together, we get economies of scale that will let us provide better services at less cost.
Senator Chaput: Thank you. I cannot wait to meet you again next year.
[English]
Senator De Bané: It is evident that one organization to take care of this should have been done long ago. The Government of Canada had centralized procurement services generations ago. Why is it that the Government of Canada has finally decided to do something that is so obvious? Larger organizations in the private sector or as large as the Government of Canada, such as GE and other companies around the world, all have one VP for IT. Provincial governments did that ahead of us. Why has it taken the Government of Canada years to realize that there should be one department in charge of that? Is it because there were bureaucratic wars between departments? Did each department want to control their IT because they did not want to delegate it to one authority? Is that the explanation? Is that why it has taken 40 years to do something that is self-evident? Be brutally frank.
The Chair: It is a policy matter, but is there a technical reason?
Ms. Rallis: I will start off by saying that the Government of Canada made the decision, as you mentioned. It is based on proven models and, as my colleague mentioned, provinces such as B.C. and Ontario have gone ahead. This is the first national government to do this. In order to do it, I believe we would need to be doing it in a carefully planned way.
Senator De Bané: Operations have to be real-time transactions, use many currencies and be multilingual. The Government of Canada, compared to the United States government, is a tiny fraction. I am sure that some companies in the private sector also have complex systems — multilingual, use many currencies and do thousands of transactions.
Canada Post has spent in the order of $0.5 billion to install their accounting system, Systems Applications and Products, SAP, which is German accounting software. Do you have anything to do with Crown corporations or are they not under your department?
Mr. Long: We do not support Crown corporations, per se, as part of our mandate, although Crown corporations can obtain optional services from us. We support them in that fashion. Shared Services Canada has become an operational security agency. We help all members of the federal government, including agencies and corporations, including Crowns, with understanding cybersecurity risks and threats, how to change the nature of the architectures and the systems we deploy, and how they can adopt best practices to continue to support a more secure environment for all government agencies.
The Chair: Do the optional services that you offer provide a revenue stream for you or do you anticipate that they will?
Ms. Rallis: We have a revenue stream of about $317 million. As Mr. Long indicated, it is from optional services for organizations outside the 43 departments, such as services related to email data centres and networks. We also offer optional services, for example desktop support services, for some of our partner departments.
The only clarification I would make is with respect to the question of the financial system of Canada Post, SAP. Shared Services Canada, even within the 43 partner departments of which Canada Post is not one, does not support their business applications. SAP is considered a business application. We are responsible for the IT infrastructure on which applications run. I wanted to make that clarification.
The Chair: I am looking at the French version. Is that the revenue stream? Are these funds from other than voted appropriations? Are they about $300 million in total?
Ms. Rallis: That is correct.
The Chair: We have $317 million at page 12 of your Report on Plans and Priorities.
Ms. Rallis: That is correct.
The Chair: That is it, is it?
Ms. Rallis: That is right.
The Chair: I was not sure what that term meant. That is helpful. Thank you.
We welcome, for the first time, to this committee, Senator Tannas, from High River, Alberta.
Senator Tannas: I think you have answered my first question, but I just want to check. You have no folks, or very few, in your 6,400 who would be around the applications that are running in the various departments, whether they are programmers, developers or analysts. That all stays within your 43, right?
Ms. Rallis: Absolutely correct. The departments retained responsibility for their business applications. Employment Insurance is an example. The Canada policing information system is an example. They retained those applications, including the employees who program or support those applications.
Senator Tannas: I am relieved to hear that. Coming from an organization that had shared services, that is one of the big complaints because priorities then fall to the central place, and you have one agency competing against the other agency to get their project done and to get the attention. None of that is present in the way that you are structured? Terrific.
Ms. Rallis: That is correct. We are only responsible for the back office of IT.
Senator Tannas: Anything new that one of your 43 departments wants to do that would require an expansion of the platform that you are doing would come out of their budget. Is that right?
Mr. Long: It will vary. I say that simply because our mandate, when we were created, included appropriations, which basically brought in all of the funding that existed in all those departments. This means that we are fundamentally accountable for organic growth, the normal course of increases, storage and computing needed over time. When you describe a new investment, a new program, something like the Beyond the Borders program, which has 38 very large scale projects and hundreds of millions of dollars, every one of them has an infrastructure component. We are accountable for that component, but that funding will be attached to the overall program that the government will have voted on.
Senator Tannas: No one in your department will be deciding which one of those projects is more important than the one in another 42.
Mr. Long: That is right.
Senator Tannas: Great; thank you.
The Chair: My recollection is that this piece of legislation that we have been discussing and your mandate was one of the items in the budget implementation bill of last year. Is that correct?
Ms. Rallis: Yes, you are absolutely right.
The Chair: Honourable senators have seen how complicated a piece of legislation this obviously is to create an entity that is dealing with the work that you are doing. We are very pleased to have had the opportunity to discuss your work with you. We wish you well, and undoubtedly, as Senator Chaput said, we will look forward to having you back and getting an update in a year or so.
Ms. Rallis: Thank you very much.
The Chair: We do not have witnesses lined up for next week yet, but we will let you know as soon as we can get some commitments. We will be continuing, probably for just for one more week, our study of these Main Estimates, and then we will leave it to our scribes to prepare a report for us as we move on to other matters.
The other matter coming up very quickly is this year's budget implementation that has begun its tortuous journey in the House of Commons through ways and means, which we do not deal with. As soon as there has been an airing through the ways and means process, then all the other non-tax items get attached to it, and that is what we call budget implementation. As soon as that comes along, we will be deeply into that, along with Supplementary Estimates (A), for the rest of this term leading up to the end of June.
(The committee adjourned.)