THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Wednesday, October 4, 2023
The Standing Senate Committee on National Finance met this day at 6:45 p.m. [ET] to continue their study on the Main Estimates for the fiscal year ending March 31, 2024.
Senator Percy Mockler (Chair) in the chair.
The Chair: I wish to welcome all of the senators, as well as the viewers across the country, who are watching us on SenCanada.ca.
[Translation]
I am Percy Mockler, a senator from New Brunswick and chair of the Standing Senate Committee on National Finance.
I would now like to ask my fellow senators to introduce themselves.
Senator Forest: Welcome, everyone. I am Éric Forest from the Gulf senatorial division in Quebec.
Senator Gignac: Good evening. My name is Clément Gignac, and I am a senator from Quebec.
[English]
Senator MacAdam: Jane MacAdam, Prince Edward Island.
[Translation]
Senator Loffreda: Good evening and welcome. Senator Tony Loffreda from Montreal, Quebec.
[English]
Senator Pate: Hi. Kim Pate. I live here on the unceded, unsurrendered territory of the Algonquin Anishinaabe people.
Senator Smith: Larry Smith, Quebec.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
[Translation]
Senator Dagenais: Jean-Guy Dagenais from the senatorial division of Victoria in Montreal.
[English]
The Chair: Today we will continue our study on the Main Estimates for the fiscal year ending March 31, 2024, which was referred to this committee by order of reference on March 7, 2023, by the Senate of Canada.
Honourable senators, from Public Services and Procurement Canada, we have Wojciech — or Wojo — Zielonka, Chief Financial Officer, Finance and Administration Branch. We have Alain Lagacé, Director General, Budget, Cost and Investment Management, Public Services and Procurement Canada. Also appearing, from Treasury Board of Canada Secretariat, Jean-François Fleury, Senior Assistant Deputy Minister, Strategic Directions and Digital Solutions, OCHRO; and also accompanying Mr. Fleury is Rod Greenough, Executive Director, Expenditure Strategies and Estimates, Treasury Board of Canada Secretariat.
Welcome to our witnesses. Thank you for accepting our invitation to answer questions from the Standing Senate Committee on National Finance, Senate of Canada.
I understand that Mr. Zielonka from Public Services and Procurement Canada will have comments to share with us. We will then proceed to questions for both Treasury Board and Public Services and Procurement Canada.
[Translation]
Mr. Zielonka, the floor is yours.
Wojciech (Wojo) Zielonka, Chief Financial Officer, Finance and Administration Branch, Public Services and Procurement Canada: Good evening, everyone.
I very much appreciate the opportunity to appear before you once again to discuss the Main Estimates for fiscal year 2023-24 for Public Services and Procurement Canada, or PSPC.
Honourable senators, as this committee well knows, PSPC has a wide-ranging mandate. We steer government procurements, manage government buildings, administer pay and pension for the public service, and more.
In order to support these activities, PSPC requested a net amount of $4.3 billion in the Main Estimates.
This is a net decrease of $304 million from the previous year’s Main Estimates. The key reason for the decrease was the sunsetting of funding for pay administration. Additional funding was later received in the 2023-24 Supplementary Estimates (A).
When we appeared before your committee in the spring, I went through the various items within the Mains Estimates such as $3.4 billion allocated to PSPC’s property and infrastructure activities, including the rehabilitation of the Parliamentary Precinct. Of that amount, half is allocated to capital expenditures to maintain federal infrastructure such as buildings and bridges.
I also mentioned that $318.7 million was allocated to payments and accounting initiatives, which included pay administration operations, as well as $156.5 million allocated to government-wide support programs, which include funding the Translation Bureau.
The Main Estimates also included $165.9 million for the purchase of goods and services, and allocated $4.2 million of funding to the Procurement Ombudsman as well as $279.7 million for PSPC’s internal services. PSPC also sought $130 million in statutory authorities for contributions to the employee benefit plans.
The Supplementary Estimates (A) included statutory authorities as well as $391.2 million of funding for the government’s pay system, as announced in Budget 2023, which brought the available authorities from $4.3 billion to $4.8 billion net of revenues.
[English]
Since today’s committee hearing is focused on housing, I wish to emphasize PSPC’s role in contributions to the real estate market. PSPC manages one of the largest and most diverse portfolios of real estate in Canada, and is a designated custodian of office space and engineering assets. As a custodian of approximately 25% of the Government of Canada’s real property, PSPC ensures that assets are planned, acquired, used and disposed of in a manner that is cost-effective and supports the delivery of programs and services to Canadians.
Of those different stages in the life cycle of our assets, disposal is the one that I’d like to emphasize today. PSPC continuously assesses its portfolio for functionality, condition, environmental impact, use and financial performance, and identifies properties that may no longer be needed. The disposal process for federal properties includes a number of steps and due diligence activities, as well as soliciting expressions of public purpose interest from federal departments, agent Crown corporations, provinces, municipalities and Indigenous groups.
Disposal of properties provides opportunities to generate socio-economic benefits such as affordable housing, redesigned communities, or commercial space. It also creates meaningful opportunities for Indigenous participation and reconciliation.
Since the creation of the Federal Lands Initiative in 2018, PSPC has contributed five of its excess lands to the Federal Lands Initiative in Ontario and in the Northwest Territories. Two of these properties resulted in partnerships with local First Nations.
PSPC has currently identified 10 buildings in the National Capital Region for disposal. Some are listed as vacant, and others are currently occupied. It’s still early in the process, and no purchases or transfers have been made at this time. PSPC will continue to assess and optimize the performance of its office portfolio as its clients’ long-term office plans evolve. While the current list only identifies buildings in the National Capital Region, buildings in other regions may be added in the future.
Throughout this process, PSPC will remain focused on finding innovative, data-driven solutions to Canada’s housing needs.
I look forward to your questions, thank you.
The Chair: Thank you, Mr. Zielonka. I understand, Mr. Fleury, you will be the lead person from the Treasury Board of Canada as the Senior Assistant Deputy Minister.
[Translation]
Jean-François Fleury, Senior Assistant Deputy Minister, Strategic Directions and Digital Solutions, Office of the Chief Human Resources Officer (OCHRO), Treasury Board of Canada Secretariat: Yes, for the questions related to the hybrid model.
[English]
The Chair: We’ll move immediately to questions.
Senator Marshall: I’m going to start off with procurement. On the Phoenix pay system, I was looking at the dashboard on your website, and there are 228,000 transactions that are marked as beyond the normal workload. What does that mean? What criteria do you have to meet to be considered beyond a normal workload? What is it? It has increased from July, so can you explain to us what that is about?
Mr. Zielonka: I can try to give you an explanation. I think it would be good to have my colleagues from pay to give a more detailed explanation, but in essence, there’s a certain workload that’s expected to be processed in a certain time frame.
Senator Marshall: Can you tell us the time frame?
Mr. Zielonka: I don’t have that handy right now. We can look it up.
In essence, if we have a volume of transactions that exceeds our ability to process those transactions, we do see that backlog increasing, so we strive to deal with transactions as they come in, but that’s not always possible. Over the last few years, we’ve seen a significant increase in transactions coming into the pay centre, so that has been a challenge for us.
Senator Marshall: How old would they be? Do you age them? Can you tell whether some of them are four years old?
Mr. Zielonka: There is aging. We have a backlog that we’re working from, which essentially arose when the original Phoenix pay system was put in place and we have been working on that backlog, as time permits, to try and get rid of the old transactions. But we also have the current volume, and we’re trying to keep that current volume from going into what we call the older backlog because that causes us additional workload to try and deal with that.
Senator Marshall: Do you have that time frame there?
Mr. Lagacé: I don’t have the specific time frame, but when we use the term “backlog,” it usually refers to transactions that are a year old and older.
Senator Marshall: Could you send to the clerk, since you don’t have the information there, an aging of that 228,000? Would there be any there from four years ago? Is it possible?
Mr. Zielonka: I don’t know for sure. We can double-check that and absolutely come back with that information.
Senator Marshall: I’d like to see the aging of that.
For Treasury Board, can you give us some more information on the $15 billion in cuts that’s in the media? I know there’s $7 billion in the budget, another $7 billion on top of that for government departments and $1.3 billion for the Crown corporations. How is that going to be implemented? The budget amount is over five years. Is the 3% across departments also over five years, and how is it allocated? Is it by department or by main object?
Can you fill in a few of those details for us?
Rod Greenough, Executive Director, Expenditure Strategies and Estimates, Treasury Board of Canada Secretariat: Thank you for the question. I’ll provide an overview, and we can follow up any specific questions.
Senator Marshall: Don’t take up too much time with the overview. I only have seven minutes.
Mr. Greenough: Very straightforward. There are three streams. One was focused on professional services and travel, $7.1 billion over five years, and $1.7 billion ongoing; a second stream, the 3%, was focused on operating and transfer payments, and that phases in gradually over a four-year period, nothing this year and ramps up over the three following years; and then you notice the Crown piece.
The way it’s being handled is the departments are required to submit proposals. Those proposals are due this week. The proposals will be reviewed by the Treasury Board and by the president at the committee of ministers, and then final decisions will be taken. It’s expected the reductions for this year, which are only professional services and travel, will be in Supplementary Estimates (B), which is coming up later this fall. The reductions for 2024-25 and future years will be in the Main Estimates and noted in Departmental Plans, which will come on or before March 1.
Senator Marshall: Will those cuts, the 3% across departments, affect the Main Estimates? The Main Estimates are out, and they’re approved, so is the 3% going to be applied against that?
Mr. Greenough: The 3% only starts next year, so it will be in effect for the Main Estimates that will be tabled on or before March 1. There will be $500 million in reductions this year related to professional services and travel.
Senator Marshall: Yes, that’s in the budget.
Mr. Greenough: That will be a frozen amount that will be shown in the Supplementary Estimates (B). We never reduce what departments have in the Main Estimates, but the amounts will be frozen and published in an annex so that you’ll be aware of what amounts are no longer available.
Senator Marshall: It’s not specific? You didn’t say to the departments that it has to be a certain main object, or it has to be travel, or it has to be salaries or anything?
Mr. Greenough: Departments have the flexibility between professional services and travel to allocate as they need. It won’t touch salaries or transfers this year because it’s just targeting those two. It will be in other operating budgets. Their non-salary budget will be where the amounts are frozen for most departments.
Senator Marshall: How will we see whether the savings have been achieved? You have the Main Estimates and Supplementary Estimates (A), (B) and (C), and somewhere netted in there you get increases periodically through the year with the supplementary estimates. How do you recognize the savings of $7 billion across all government departments?
Mr. Greenough: Thanks for the question. It is a good one. In effect, this is a review of existing spending. It doesn’t preclude future new initiatives. It’s looking at the existing stock of spending that was in Main Estimates 2023-24 and a review to find efficiencies there and a refocusing exercise to create room for future —
Senator Marshall: You can cut money that’s there already, but then you can compensate for it by giving them more money in Supplementary Estimates (C). That’s not the intent?
Mr. Greenough: The intent is to focus priorities on other priorities so they can seek reductions in current funding for new priorities, not for the same ones.
Senator Marshall: What about the Crowns? I know the departments had to have their submissions in by October 2, but what about the Crowns? What are you doing with them?
Mr. Greenough: Crowns are receiving an appropriation through the Main Estimates in the same process as departments. They’re preparing proposals and they are coming in this week.
Enterprise Crown corporations don’t have an appropriation, so Minister Freeland and the Department of Finance are leading the exercise to review the spending of enterprise Crown corporations for the remaining $1.3 billion that was in the budget.
Senator Marshall: Would CMHC have a cut? They get appropriations.
Mr. Greenough: CMHC will put forward proposals. No decisions have been taken on where the reductions will take place because the proposals are just being developed and submitted, but CMHC will submit proposals, and they will be reviewed like other —
Senator Marshall: But for us looking at the Main Estimates, the supplementary estimates, the budgets and everything that comes after, will we be able to see where the cuts were made?
Mr. Greenough: Yes.
Senator Marshall: We will? I know we will be able to see with the consultants the $20 billion that they spend, but it will be discernible, will it?
Mr. Greenough: We will show in the Main Estimates the reductions by department for all the future years, and departments will report in their departmental plans about what the reductions are and what they are doing to achieve that and provide additional information on how they’re being implemented.
[Translation]
Senator Forest: Thank you to our guests for being here with us. My first question is for Mr. Zielonka.
In April 2023, we were pleased to learn, as part of the national marine procurement strategy, that a grave injustice had been righted and that Davie Shipyard had been accepted as a partner in the national strategy. At that time, an $840-million envelope was announced to modernize the facilities. Investments came from the Quebec government, to the tune of around $520 million, and from Davie, to the tune of just under $320 million. At the time, the spokesman for Public Services and Procurement Canada said that all partners in the national procurement strategy had to finance their modernization themselves.
How do you explain that, on August 9, the minister announced $463 million for Irving Shipbuilding to modernize its facilities, when it had been clearly indicated that the partners had to finance their own modernization? I just don’t get it. There’s a double standard here. How can we explain that we refused to invest in modernizing Davie Shipyard and are now injecting $463 million into Irving Shipbuilding to modernize its facilities?
Mr. Zielonka: Thank you for your question. I think it will be more appropriate for my colleague who works in military procurement, because I don’t know the details. We can certainly get an answer to that question and pass the information on to the committee.
Senator Forest: This isn’t a trick question, but I’d like a written answer to explain how we can have a double standard under the same strategy. One subsidizes plant modernization, while the other, for the same partner, does not. Is it possible to have a written response to this effect?
Mr. Zielonka: Certainly.
Senator Forest: Thank you. Mr. Fleury, I believe that the significant reduction of $15 billion proposed for all departments is quite an exercise. Did I understand correctly, to follow up on Senator Marshall’s questions, that the departments and Crown corporations don’t have specific targets, but that they submit a reduction plan to you? Does Treasury Board take into account priorities and the fact that some government functions may be higher priorities than others? Are there any guidelines that have been given in this regard?
[English]
Mr. Greenough: Thank you for the question. I’ll take that question as well.
Departments have been provided with a target or an amount to find savings against, but they’ve been asked to submit proposals so that the impacts of those savings and the value to the government can be evaluated. They have been provided with targets. They’ve been asked to submit proposals, but no decision has been taken on which proposals the governments will accept or not accept. That’s currently the state right now.
[Translation]
Senator Forest: Given that this is information that is in the public domain, certain departmental functions are experiencing enormous difficulties. I’m thinking in particular of passports, immigration, employment insurance, and so on. When we set these targets, did we take into account the importance of the service and its current organizational state? Do they have enough employees? Have we balanced the effort we’re asking for against the departments in each case?
[English]
Mr. Greenough: There are two parts to that in response. First, when the exercise was launched subsequent to the budget, departments were asked to identify areas of funding that were non-discretionary, that could not be reduced. Examples include funding for legal settlements or environmental remediation, where there is no discretion for the department to reduce these amounts to get a base of what the budget called “eligible spending,” spending that could possibly be reduced. The first step was to adjust for spending that couldn’t be touched.
The budget also indicated there would be no reductions to transfers to provinces, transfers to individuals, and that departments should maintain service levels, avoid service reduction. Departments, at the outset, had adjustments to funding those out of scope, so their targets would not include that. And even in finding their savings, they’ve been directed through the budget to not impact services to Canadians, to find proposals that touch on internal efficiencies, reduce travel by civil servants, and other aspects to avoid that. But this is the reason for the review when the proposals come in; it is to have Treasury Board officials and the president and our colleagues review them to ensure there aren’t impacts on services to Canadians and other items that are out of scope of the review.
[Translation]
Senator Forest: Are you optimistic about reaching the $15-billion reduction target?
[English]
Mr. Greenough: The $15 billion was a budget announcement like any other budget announcement. It’s being implemented with the same enthusiasm as any other budget announcement and the same process.
I think it’s too early to comment on the expected results, but at a minimum, proposals are being evaluated that would lead to that savings amount. Whether they will all be accepted in the end, it is premature to say, but the process has been built to allow the government to evaluate and to have the opportunity, and I think we now need to work through it and evaluate what has been received.
[Translation]
Senator Forest: So, are we to understand that there was more enthusiasm at the start line than at the finish line?
[English]
Mr. Greenough: Sorry, I did not mean to give that impression. It’s being pursued, the same as implementing any other government proposal. It’s being worked through, and the goal is to achieve the savings and to present ministers with options that will achieve the savings.
[Translation]
Senator Gignac: Welcome to our witnesses. I would like to continue in the same vein as Senator Marshall and Senator Forest.
I understand that budget restrictions are parametric, meaning that each department must make an effort. This isn’t the first or last time the government has asked for a rationalization effort during the fiscal year.
My question is this: Has any exercise ever been attempted to ensure that restrictions are not parametric, i.e. that they are differentiated according to departmental results, from what are called departmental results reports?
[English]
If you manage well, you are fine. If you have poor efficiency, because each department has a scorecard, you know what? They will be in the penalty box. This is something that we can call innovation, if you like, the way that you manage public money. What is your reaction regarding that?
Mr. Greenough: Thank you for the suggestion. For the reductions this year, the in-year amounts, there are no proposals so other in-year reductions where departments are assigned a target for the end year, it is a relatively small amount, $500 million this year versus $4 billion in the end.
Going forward and evaluating proposals, program effectiveness is definitely one of the criteria to look at to ensure that departments are not proposing to reduce highly effective programs, that their reductions are targeting programs that aren’t performing. It is one of the lenses going forward in the evaluation of proposals from departments.
[Translation]
Senator Gignac: My next question is for representatives of Public Services and Procurement Canada. We’re always happy to hear from departments whose budgets will be lower than last year’s. It’s always nice to ask the question, especially in these difficult times.
I’d like some statistics. You mentioned the occupancy rate of office buildings, and the assistant deputy minister said that the federal government was targeting a reduction of 15% to 20%. What is the current occupancy rate of federal government offices? Is it in your plans to think about converting office buildings into affordable housing here in Ottawa?
There are currently 800,000 international students in Canada, including 400,000 in Ontario and many in Ottawa. This puts pressure on housing costs. Some government buildings could easily be converted. I think McGill University is planning to do the same in Montreal.
What’s your department’s game plan on this front?
Mr. Zielonka: This is an excellent question and I can tell you that the subject is complex.
[English]
Pre-pandemic, we often talked about the occupancy rate that was never 100%. There were always people who were on vacation. There were people in training. There were people at off-site meetings, travel status, et cetera. We have some numbers that believe that pre-pandemic, that occupancy rate was probably at any point in time 60%, 70%, something like that. It was never 100%.
The pandemic changed everything.
[Translation]
The change has been profound and we are now entering this process of change that I believe will last for several years.
[English]
We have come back. My colleagues, I am sure, will be able to talk more about it, but it is two to three days per week is the directive, depending, and it is for each department to put in place. We’re only a few months into that process. We are seeing the effects of that.
A lot of the office space was designed for 100% or essentially dedicated occupancy. There wasn’t a concept of unassigned seating. As you move to the hybrid workplace, you will see that the space isn’t necessarily suitable. There has to be a conversion of that space into space that is more friendly to allow collaboration, which is what people are supposed to come into the office for, collaboration, innovation and so on. You have to change the way you work and the way the space works. That is going to be a longer-term process.
We are working on plans to shrink the portfolio. What that final number is going to be is still to be determined. We think that there is an opportunity to go probably less than the 60% of what was the occupancy before. It also depends upon patterns. It is not the same across the country. There are a lot of variables in that.
That is in terms of what will happen. Let’s say we now come up with pick your number. There is going to be a certain portion of the portfolio that is going to no longer be needed.
Senator Gignac: Is it 15-20% that your colleague mentioned publicly?
Mr. Zielonka: We are saying that potentially we can reduce the portfolio, pick a number, 40% or something.
Senator Gignac: Okay.
Mr. Zielonka: With the portfolio we have, some of it is leased, some of it is owned. We have varying conditions of assets. There is a process also to establish, as you decide how much you need, what parts of the portfolio are you going to reduce. You are going to cut some leases. Are you also going to look at selling buildings? The process of selling buildings takes a long time. There is a duty to consult.
[Translation]
This is not an easy process. We know from experience that the process can take 5 to 10 years. It’s a very time-consuming process. That is the other problem we face in converting office buildings.
[English]
For affordable housing or any type of housing, a lot of these buildings are not suitable. We are in the process of looking at our portfolio, what could be converted.
There is a portion that could be converted from an engineering standpoint. There is also this issue of whether it is economical to convert. That will be something for the private sector. I saw a recent article last week in The Globe and Mail, it is a small percentage. It is going to take some time. We are working on it. We have a lot of initiatives.
[Translation]
This really isn’t something that’s simple to achieve.
Senator Gignac: Thank you very much. I apologize for going over my time.
[English]
Senator Smith: To follow on Senator Gignac’s questions, you manage about 7 million square metres of property. You have mentioned that for some properties, you have to reduce your holdings. You are looking at housing. You are looking at various projects in terms of how you manage to get the numbers down so that you can be more effective, if I understand correctly.
You mentioned that you had sold 5 properties in the North, 10 properties in the Ottawa area?
Mr. Zielonka: It is five properties in total. Two —
Alain Lagacé, Director General, Budget, Cost and Investment Management, Public Services and Procurement Canada: It is 5, but the 10 in NCR have been listed as future potential, but they are not sold yet.
Senator Smith: You set an objective. Is it dollars or is it in buildings with different uses?
That leads me into my other question. Is the department consulting with relevant stakeholders, municipalities, non-profit organizations? Have you opened it up with a business plan and focused it on specific areas and specific partners?
Mr. Zielonka: For the properties we’ve listed or have announced that we are going to be looking to dispose of — 10 in the NCR — that process is just starting. There is a duty to consult as a part of that, so it’s going to take a long time. Yes, of course. There is a duty to consult. It is not something that you can do in one year. There is no prediction of how long it is going to take.
Senator Smith: Is it a five-year horizon?
Mr. Zielonka: It can vary, we’re trying to do it as quickly as possible and looking at how to shorten it in terms of doing things in parallel. Historically, it has taken as long as 10 years. It has been a challenge.
Senator Smith: Have you set up some of these relationships with various municipal governments and third-party players at this particular point in time?
Mr. Zielonka: We have been working with a number of organizations. Canada Lands Company, CLC, is one that is a partner, and we have done some dispositions through them. They are specialized in, essentially, looking at redeveloping those properties, including for housing. We are also working with CMHC to see what can be done through the Federal Lands Initiative, where there is a potential of transferring property to them and then they work with various stakeholders to look at redeveloping those properties. There are a number of things going on on that front.
Senator Smith: Is that high on your priority list amongst the other priorities that you have?
Mr. Zielonka: It is, actually. Personally, I am spending time on that. My colleagues are. We know that the housing crisis in this country is significant. We are all trying to pitch in to see what can be done to address that.
Senator Smith: Defence procurement continues to be a key risk identified by your organization in your 2023-24 departmental plan. Can you explain the different variables that make this type of procurement difficult? How will the federal government’s proposed $1 billion cut to the National Defence budget impact your department’s defence procurement policies?
Mr. Zielonka: Thank you for the question. I can’t answer for the Department of National Defence. That question probably is better —
Senator Smith: But you are their agent, right?
Mr. Zielonka: We are the agent for doing procurement. To what extent and what priorities they set and so on is going to be absolutely dependent upon them. If they were to reduce their procurement, absolutely, there would be an impact on us, and we would have to right-size our organization to serve them based on the volumes that they have. But that has been something that we, as an organization, have always done, because there are ebbs and flows in procurement. We try to staff up and staff down and move people around as necessary.
I don’t want to speculate what DND does and what the results of the exercise are going to be. We will see. Hopefully, we will have a better view of that in the coming months.
Senator Smith: Do you have a process in place right now? You said, “We have something planned,” but is there a plan? Has it been initiated now, or have you set a time frame to try to get some actual results?
Mr. Zielonka: These cuts will potentially have impacts across the government. Obviously, if a department does reduce some of its activities, it does have a direct and indirect impact on procurement. We are putting in place processes to monitor and having early warning systems where we see those, including talking to our counterparts at those departments. We are at a pivot point where they are finalizing their plans. They are working with Treasury Board and Department of Finance on those plans.
Senator Smith: Right.
Mr. Zielonka: Until we know concretely what those plans look like, it is difficult to be preventive. We are very conscious there are going to be impacts, so we are very much seized with the potential impact it is going to have on us. We’re trying to make sure that we can manage that appropriately.
Senator Smith: With Ukraine on people’s list of support — and, of course, Canada has played a very important role in supporting Ukraine in its efforts — what do these cuts mean towards supporting Ukraine? And what happens with our army and our defence program, especially when you look at the North? We had a group that went up to the North eight months ago to check it out, and, really, we’re not prepared at all to defend ourselves in the North. I wondered what your thoughts were in terms of budget cuts and how that affects military here and supporting a country like Ukraine.
Mr. Zielonka: That would be an excellent question for my colleagues at DND. I am not a military expert.
Senator Smith: You are the agents. I would love for you to answer those questions.
Mr. Zielonka: We do the procurement on their behalf when directed and we do it based on what they ask us to do, but we’re not there to second-guess, to speculate or to assume on —
Senator Smith: You know what? I think that you could be a hockey player.
Senator MacAdam: Thank you to the witnesses.
The Office of the Auditor General was requested by Parliament to do an audit on the use of contracts for professional services. Is Public Services and Procurement Canada responsible for procuring professional services contracts for the various departments?
Mr. Zielonka: Yes and no. Departments have delegated limits up to which they can procure on their own. Beyond those procurement limits — and they are fairly low — it depends upon the department. We essentially act as an agent for them in terms of putting in place those procurement contracts. We will work with them in terms of their requirements and putting in place the solicitation and actually executing on the contracts.
Senator MacAdam: Can you give me background on what prompted the request from Parliament to do this work?
Mr. Zielonka: I believe this was originally from the McKinsey contract, I think that you are referring to.
Senator MacAdam: Do you know if it will be broader than the McKinsey contracts, or is it going to cover other contracts? All contracts?
Mr. Zielonka: If I’m not mistaken, the work that was done was very specific to McKinsey. I don’t think it extended beyond that.
Senator MacAdam: I have another question for Treasury Board. I am assuming that there are policies that Treasury Board has on procuring services; is that correct?
Mr. Fleury: Yes. The Comptroller General is the policy lead for procurement.
Senator MacAdam: Is there regular monitoring on compliance with the policies?
Mr. Fleury: I wish that I could answer that question. I would have to bring it back to my colleague in the Comptroller General to be able to answer precisely your questions and with the right authority and knowledge. I am not knowledgeable enough on that file.
Senator MacAdam: Thank you.
[Translation]
Senator Dagenais: My first question is for Mr. Zielonka. Can you isolate, in your maintenance budget for federal buildings, the portion that goes to the Prime Minister’s residence, which is unoccupied? I’d like to know how much it has cost us to keep the residence at 24 Sussex Drive unoccupied for the past eight years. Could you explain what is preventing a decision from being made on the future of this residence? Is it a political blockage? Is it an administrative block? How much money will be needed, year after year, if nothing is done? So far, the residence is costing us a fortune, and it’s falling apart.
Mr. Zielonka: That’s an excellent question, but it’s out of our jurisdiction, as the Prime Minister’s residence is the responsibility of the National Capital Commission.
Senator Dagenais: I hope they don’t get their budget cut. As a second question, for the management and eventual disposal of certain buildings, is Public Services and Procurement Canada making all these changes with its in-house staff, or are there outside players or consultants helping you out? Secondly, what is the budget spent on services if you use outside consultants, and in what areas? I’ve heard the name Mackenzie; I hope they’re not the ones helping you.
[English]
Mr. Zielonka: One of the big portfolios that we manage as a department is around real property. That includes renovations and the building of new properties. It’s engineering assets, dams, bridges and so on. In a lot of those areas, you need specialized resources. You need professional engineers. You need architects. We also hire construction firms to build assets. So, in many cases, that is the nature of our activities. Those are all professional services. When you look at what is called the standard object around professional services, it’s something that is available in open data, and you actually look at the detail of what is in professional services. You’ll actually see a lot of the names of those companies that provide those particular services.
In terms of things like management consulting, we’re not a big user of management consulting per se. When we use consultants or external services, it tends to be for very specific things where we’re looking for them to provide a very specific service or build something, whether it’s a system or a physical asset or something like that. That would be the normal type of activity we would be doing.
[Translation]
Senator Dagenais: My third question is for Mr. Greenough. If I summarize your answers on the $15 billion in cuts that have been requested and what might happen, am I wrong in saying that this is more of a political announcement than an administrative order, and that you don’t really feel the pressure to do what the minister has asked? In other words, you make an announcement like this, it sounds good, but in fact, you feel no pressure to achieve your goals.
[English]
Mr. Greenough: Thank you for the question. I apologize if I gave that impression. I think it’s quite the opposite. The announcement has been made, it has been taken seriously across the public service and proposals have been developed to meet the targets. They’ve been submitted and are at the review stage to be looked at for reasonableness and to make sure they will deliver the savings without the adverse impacts we discussed earlier. It is very much a review of the existing base of government spending. As noted earlier, it doesn’t preclude new policy announcements or new directions of the government, but it’s very much how things are being done now, what savings can be found and how they can be done more efficiently to allow the government — as I said — to refocus the spending elsewhere on new priorities or new challenges that arise.
I would like to note that, yes, it has been taken seriously and the effort has been put forth across the government.
[Translation]
Senator Dagenais: Do you have any examples of cuts or savings you’re going to make?
[English]
Mr. Greenough: I apologize, but it’s too early at this stage. The proposals are only due this week. It’s a little early to comment. As I say, the reductions for this year will be in Supplementary Estimates (B), which will be out in the fall, targeting just travel and professional services. Then the reductions for future years will be in the Main Estimates. In the departmental plans, departments will explain exactly how they have gone about achieving those savings.
Senator Pate: Thank you to all our witnesses for being here.
My first question is for Public Services and Procurement Canada. As you know, in 2021, the department launched a new policy for social procurement, which seeks to incorporate social considerations into the procurement process. The stated objectives were to reduce barriers and enhance economic and social opportunities for equity deserving groups, such as Black and racialized peoples, women, 2SLGBTQ+ folks and persons with disabilities, et cetera. I’m curious to know if, since the implementation in May 2021, you’ve got disaggregated data. If so, can you provide it to the committee in terms of the proportion of government procurement funds that have been allocated to each of the equity seeking groups?
The committee also heard earlier from Infrastructure Canada about the specific barriers those released from prison face — who are, of course, a subset of many of those groups — and, particularly, the role that criminal records play in being a barrier to finding employment, housing or even volunteer work. Some of the systemic factors mean that many of the equity deserving groups you have identified in your procurement policy are overrepresented among those who have criminal records. The result is additional discrimination and marginalization. I’m curious as to what the department has done to overcome those barriers. What is your particular policy or your recommendation to other government departments around criminal record checks associated with access to procurement opportunities? If you do have those policies, can you provide them? What other measures are being taken to address those issues and the barriers that are faced, particularly by those with criminal records?
Mr. Zielonka: Thank you for the questions. I can definitely take them back to my colleagues. What I do know is that we have a specific area that has been very much working around outreach and working with different groups to try to increase their participation in federal procurements, and that’s been an ongoing effort. It’s had its challenges, but it has definitely been a big focus.
I know also that there have been some real challenges around the data, so I’ll inquire to see what we have in terms of disaggregated data. I know it has been an ongoing process because, essentially, we have to put in the systems and measurements and so on. That has been ongoing. We recently launched a new procurement back end that will help a lot with that data. I’m not sure we’ll actually have it at some of the levels you mentioned, but I’ll definitely inquire, and we’ll see what we can actually provide the committee in terms of what we actually have. I’ll do the same with your other question around whether there are any specific policies or initiatives to target or help people who were former prisoners and help them in finding the opportunities.
Senator Pate: If possible, could that include some of the disaggregated data? Because 1 in 10 Canadians has a criminal record, but it’s far higher in some of those groups.
Mr. Zielonka: Yes, absolutely. I’ve never actually heard us talking about that specific data, so I don’t want to set expectations too high. We may not have that data. I’ll definitely inquire, and if we have it, we’ll absolutely look to providing something.
The Chair: If you can’t provide that data, who could provide it?
Mr. Zielonka: That’s a very good question. I don’t know if Statistics Canada tracks something like that. I have no idea. I’ll inquire to see what we have. I think there are certain metrics that they track, but the other problem is the question of what level. You deal with an organization, and what bucket does that organization fit into? It gets fairly complex, so it just may be something that doesn’t exist.
Senator Pate: If it may be of assistance, Infrastructure Canada specifically spoke about this and talked about it as part of the homelessness initiative. That’s why I’m raising it in this context. They may have some idea of where the data is. I’ve also asked them for data.
Mr. Zielonka: Depending on the initiative and what data is tracked from a procurement perspective, one of the challenges from a procurement perspective is, for example, if you’re looking at dealing with what bucket a business fits into. It can fit multiple buckets. The degree to which it fits is something they always struggle with. A lot of work is being done to try to come up with those metrics. Even the most obvious ones have been a real challenge, so on some of the more specific ones — just in the specific domain of procurement — it may not be something that we have.
However, we’ll definitely look. We’ll talk to our colleagues at Infrastructure Canada and see if they’ve got any bright ideas in terms of that.
Senator Pate: The Treasury Board of Canada Secretariat officials who appeared last October talked about some of the recommendations the Auditor General had made to other departments and encouraged you to also provide some oversight functions. I’m interested in knowing, with respect to the gender results framework, where poverty reduction, health and well-being were two of the particular areas that were encouraged to be examined, whether you’ve looked at some of those areas. What concrete guidance did the Treasury Board provide to departments regarding reporting on and monitoring the intersection between gender and poverty as well as some of the plus components of the GBA Plus analyses to encourage poverty reduction?
If there are examples of best practices you’ve seen within departments, perhaps those are ones that you could provide to us. Finally, what steps are you taking to incorporate — given today is what today is — accountability for the implementation of the Missing and Murdered Indigenous Women and Girls Calls for Justice, including the implementation of a national guaranteed livable basic income as part of the GBA Plus reporting? Sorry, there are a lot of questions, I know.
Mr. Fleury: Those are very good questions and I’m going to have to go back to those who were here in October to get those answers, because those are really important answers and important questions and I don’t have them here with me. I’m not sure which sector of TBS deals with the GBA.
Mr. Greenough: It is the expenditure management sector. I’m not part of that, but we will be back for Supplementary Estimates (B) later in the fall, so we can bring the right people for an appearance to answer those questions.
Senator Galvez: As the chair mentioned, the committee is particularly interested in housing and homelessness and solving this issue.
I’m sorry I arrived late, but I caught the questions and, in general, I feel that not many questions have been answered. I want to state that the National Housing Strategy dates from 2017. That’s seven years ago. Then the Auditor General put together a report in 2022 and stressed that there’s a lack of coordination with all the partners, that they should work together in order to solve this crisis. They saw this crisis coming because immigrants were coming and then COVID was here. Mr. Zielonka, when my colleagues asked why is it not progressing, why are you not selling, why are these buildings empty, you said it’s complicated. That’s what you said; it’s complicated.
But in Quebec City, there was a federal building that was a prison for women. One day they decided that it was going to be something else and they sold it. In less than one year, it became an office for lawyers. And then in Quebec City, there was also the fire of the Manège Militaire. In two years, it was constructed. So I’m trying to understand what is missing and why are we not answering to this conversion, because I have the impression of déjà vu that all these buildings are around and that all these buildings can be recycled for housing, but they’re not. So what is the problem? Is it the coordination between the offices? Is it the lack of expertise? You said you need engineers, so that’s one question.
My other question is that we’ve been talking about green procurement, and I would like to know where we are with green procurement, especially for the renovation and construction of adequate, suitable, and affordable homes for the homeless people that are increasing in number.
Mr. Zielonka: Thank you for your questions. I can’t comment around the specific buildings in Quebec City that you mentioned because I’m not familiar with them.
What I can comment on are the laws and limitations we currently have. There’s a process we have to go through.
Senator Galvez: How can we help you overcome these limitations that you have?
Mr. Zielonka: These are legal limitations, so I’m not sure how. The duty to consult was something that I believe and I’m not a legal expert, so I’m not the right person to respond to it. There are certain things that are required by legislation; however, the process absolutely took too long, and there are opportunities to essentially look for efficiencies in that process, and that process doesn’t have to last 10 years. There are ways of making that process shorter, and we’re working on those. We think there are things that can be done in parallel. There are ways of planning better, having more foresight, and trying to do things that would bring these buildings to market, or to repurpose, much quicker. What that time frame is going to be, you know, it’s not going to be 10 years, but I don’t think it’s going to come out to be 1 year either. But there’s definitely a huge amount of opportunity between 1 and 10 years in terms of shrinking it, and being much more efficient on that.
It is something we’re working on, but I want to be clear that we’re a very small portion. While we own, as someone mentioned, close to 7 million square metres of property, the actual amount that’s going to be surplus will be a fraction of that. The amount that’s going to be suitable for housing is going to be an even smaller portion. Most office buildings and so on are absolutely not suitable for housing, and then the conversion costs of those make it very uneconomical. The private sector or others may not be interested; that’s been a challenge. It’s not only to have a willing seller, you have to also have a willing buyer. That’s also a bit of a challenge in terms of that property.
But are we actively looking at what can be done? Absolutely. Are there opportunities? Absolutely. Are we going to try and do things faster? Absolutely.
Senator Galvez: Thank you.
Senator Loffreda: Thank you to our witnesses for being here.
You mentioned that Public Services and Procurement Canada is requesting a total of $4.3 billion, but I would like to continue to focus on cost savings and cost cuts and the housing issue. I’m glad to see progress is being made to reduce the government’s space and footprint in Ottawa, Gatineau and across the country. We’ve been discussing these issues in this committee. I raised this issue with Ministers Duclos and Fortier way back in 2020 and 2021. I’m happy to see there is some follow-through, so that’s positive. As the deputy minister mentioned, he suggested the federal government is looking to divest 15 to 20% of its space nationwide.
Have any projections been made with respect to cost savings on these reductions? My question was — and Senator Galvez raised it — why 10 years? It seems like it’s a long time. In 10 years, the world will change over 10 times. Especially in today’s day and age where everything is so dynamic and not static. Maybe you can further elaborate on trying to improve that 10-year process. I think that is very lengthy.
I assume that given these goals, you don’t forecast occupancy rates returning to pre-pandemic levels. I do believe in virtual work, and our office is an example; we’re virtually productive and efficient. Do you have any targets how productive the employees are, working virtually? And my last question, is the excess or low occupancy rate strictly due to hybrid work arrangements or some pre-pandemic inefficiencies that we can learn from going forward?
Mr. Fleury: I can start on the hybrid perspective, so the current position is two to three days, and 40% to 60%. We’re not seeing any immediate need to change that position. We’re seeing organizations that are transferring to the hybrid model in an effective way.
We monitor enterprise data to see exactly how that is playing out. One thing that will tie into Mr. Zielonka is that one of the keys to their successes to occupancy and hybrid is moving to a form of unassigned seating instead of having office space booked to each person that comes in only two days a week. We’ve only been at it for six months. In the short term, that is proving to be a change management challenge, but it’s evolving in the right direction. From a hybrid perspective, we don’t see that as having a negative impact in PSPC’s plan. In terms of the targets they had pre- or post-COVID, I can let you come into those, but I don’t foresee a situation where the hybrid model would hinder PSPC’s objectives in terms of reducing the footprint.
Senator Loffreda: You don’t see occupancy going back to pre-pandemic levels. Do you see the two to three days being permanent in a sense?
Mr. Fleury: I think it’s premature —
Senator Loffreda: Or is it because of inefficiencies? We can learn from it. There’s no sense going back, but, going forward, how can we learn from those inefficiencies?
Mr. Fleury: With two or three days, it’s hard to make the call that it’s going to be permanent. We’re six months into a hybrid model. Right now, we’re not seeing any indications that it would lead us to a drastic change. Some organizations have gone to three days. Some deputy heads look at their executives, their managers, versus their employees. There’s also the nature of work and where that work is taking place in the buildings.
As it stands now, six months into it, the hybrid model and the current position towards the hybrid model is the direction that we’re taking. But we still need to learn. Like anyone in the world right now who is implementing hybrid, there’s a lot of learning to do.
Senator Loffreda: A lot of learning to do.
Mr. Zielonka: On your first question around why it is going to take so long, I’m not sure how long it’s going to take —
Senator Loffreda: And the cost savings. Have you projected some of those cost savings? I’m not letting you off the hook on that.
Mr. Zielonka: We’re working on that. I think it’s a bit premature to put numbers on the table. You have to separate what you have in Ottawa versus what you have in the regions because they are very different challenges. Here, in Ottawa, we also have a lot of leased spaces. There are leases that you’re locked into. You can’t just get out of a lease quickly, as you probably know. That is always a challenge. You also have space that is not suitable —
Senator Loffreda: You could also sublease, though.
Mr. Zielonka: To whom? We’ve got vacancy rates across this country in commercial property that are at record highs in the last few years. I’m not sure there’s a sublease market that you could be looking at.
We are going to have to look at some of these leases running off. We are going to have to look at some spaces where it’s not suitable to consolidate people. You have to look at spaces in terms of what we’re calling quick modernization; that is, making it suitable for hybrid, unassigned seating so people can come together to collaborate. We also have to remember that one of the reasons that the government put in this mandate to bring people back in was to collaborate. We don’t want to have people coming back into the office in a dispersed fashion because that defeats the purpose. We have to make sure that the space is suitable for that collaboration. That becomes, as an example, a bit of a challenge. In the regions, it’s a bigger challenge. We may have buildings there that are dispersed, so you have to look at where employees are and where the clients are, depending on the nature of the facilities that we have. That consolidation or reduction of space then becomes a bit more complex because you may have to find a third location that’s more suitable for that.
We’re looking at a significant number of properties — and I’m trying to see if I have some data in terms of the number of buildings — about 1,782 buildings, that’s only 4.6% of the total buildings that the Government of Canada owns.
Senator Loffreda: The sublease could be for different purposes. It doesn’t have to be for commercial use. I know vacancies are high, but there will always be needs. Obviously, negotiations with landlords have to take place on that.
Mr. Zielonka: Yes, and it depends on the term of the lease, the costs around sublease and build outs. It’s a very complex process.
Senator Loffreda: A complicated process, yes. And 10 years is a long time.
Mr. Zielonka: No one is saying that it’s going to take 10 years. It’s a ramp-down. You’re going to see that impact could start happening fairly quickly. We’re already doing some of that. A lot of it has happened in the last six months to a year. Nothing happens for 10 years and then you have a cliff. It will be something that you will see happen fairly aggressively over a 10-year period. As my colleague here said, there will be constant re-evaluation. I think everyone is looking at how the hybrid model —
Senator Loffreda: And cost savings, no idea at this point how much we’d be saving?
Mr. Zielonka: Well, it depends. We spend about $2 billion a year on our properties, so a portion of that will be —
Senator Loffreda: About 15 to 20%?
Mr. Zielonka: It depends how much we reduce.
Senator Loffreda: That’s the magic number.
The Chair: Honourable senators, we’ll now move immediately to second round.
Senator Marshall: I have a quick question for Treasury Board.
Is the funding for the incremental cost of the PSAC strike, the agreement, in the budget? It’s not in the Main Estimates, is it? Because the Main Estimates came out too early.
Mr. Greenough: We’re talking about the incremental salary increases?
Senator Marshall: Yes.
Mr. Greenough: They would not have been in Main Estimates, they would be in future estimates.
Senator Marshall: It’s not in the budget, is it? There’s no estimate in the budget, is there?
Mr. Greenough: I’m not clear. That would be a question for Finance on what is or is not in the budget.
Senator Marshall: We would expect it in Supplementary Estimates (B), then?
Mr. Greenough: Definitely in a future supplementary estimates. I don’t know if I can commit to (B), but definitely in Supplementary Estimates (B) or (C); it would be there.
Senator Marshall: I’ll move on to Public Services and Procurement Canada. In your departmental plan, the term they use is “procurement modernization initiatives.” That’s also in the minister’s mandate letter. What would that be? Give me an example. What is your biggest initiative?
Mr. Zielonka: The biggest initiative is the implementation of what we call the electronic procurement solution, EPS, which is a cloud-based platform. That has been implemented. It’s up and running. We’re using it, but it takes a lot of legacy systems that didn’t talk to each other. They didn’t have a lot of data collection abilities, but this has brought those together. It gives us a platform where we can streamline. It used to be a manual process, where people would write the contractual terms and conditions. Sometimes they’d all be slightly different. There are now standardized templates that people can pick and choose. It makes for a much more efficient process —
Senator Marshall: And that’s your department as opposed to Shared Services?
Mr. Zielonka: That’s correct.
Senator Marshall: Is anything happening with regard to military procurement? This committee looked at it about five years ago. We recognized that military procurement was complex. I think Senator Forest referenced some military procurement earlier this evening. Are you doing anything there?
Mr. Zielonka: Yes, there is. My colleague Simon Page would be the better person to specify. Again, the electronic procurement solution is also being used for some military —
Senator Marshall: For military?
Mr. Zielonka: Not all military procurement, depending on the nature and the security —
Senator Marshall: And the size? I’m thinking about the surface combatants now, acquisitions of that size. No?
Mr. Zielonka: I think the question would have to go up, in nature of —
Senator Marshall: Okay. What is the Independent Review Panel for Defence Acquisition? Does that rest in your department?
Mr. Zielonka: I am not familiar with that. I’ll have to check with my colleague. I’m not familiar with it. It could be our department but I’m not aware of it.
The Chair: You will verify and come back to us in writing through the clerk?
Mr. Zielonka: Absolutely.
Senator Marshall: Thank you.
[Translation]
Senator Forest: Thank you again for being here.
The challenge of wanting to free up... If I’ve understood correctly, we have around 7 million square metres of office space and the objective is to free up 20% of it, i.e. 1.4 million square feet, which makes 15 million square feet that we have to integrate into a market that is already... Indeed, we have free space in government buildings, but we also have a lot of free space in the private sector.
My colleague gave me a statistic earlier: in Montreal, 18% of office buildings are not occupied. So we’ll need a whole strategy.
In your planning, have you evaluated the cost of redeveloping these spaces to house people in 80% of the available space? I was looking close to home, where a federal government building has been completely renovated to make it more energy efficient — and it’s been renovated inside too. Has there been any assessment of the redevelopment costs and the potential for housing that could develop, given this massive Canadian operation to free up surplus space?
Mr. Zielonka: That’s an excellent question.
Firstly, I can say yes, but there are a few key points. I’d like to say that the target is over 20%. Our reduction target is not 20%; it’s much higher. I don’t think 20% is right. We want to reduce it much more.
Secondly, in our building evaluation process, there are a lot of criteria that are part of the analysis. We want to evaluate alternative solutions to the locations of these buildings.
[English]
But also, is it economical to renew that asset? Does that asset make sense? Is there a better alternative financially for the government, for Canadian citizens? What is the best use of the limited resources that we have?
That is part of the process when we look at an asset. Some assets, you look at it, does it make sense? The answer is no. Those very quickly get shortlisted to the disposal list. They may be repurposed for something else. They may need to be knocked down.
Sometimes the costs of renovating a building isn’t only the financial costs of that building. You also look at the embedded carbon in that building. Take a building and you say you know what? It is six and a half-dozen between knocking it down and building a new building and renovating it. But when you take the embedded carbon that is in that concrete, suddenly that whole equation becomes very different.
Those are all parts of the analysis that we look at before we go down the path of deciding what to do with an asset. It is something that we take very seriously.
[Translation]
This is public money. It’s not something that... We have an obligation to look at the different solutions and choose the best option that will have the best value for the public.
Senator Forest: When you tell us that the objective is much more than 20%, 20% is already 15 million square feet to be absorbed into the market. How high is the target, 30% or 35%?
Mr. Zielonka: We’re in the process of setting this target, but it’s much more than 20%.
Senator Forest: “Much more,” in my mind, that’s upwards of 30%. Eventually, will these targets be known?
Mr. Zielonka: I can say that it depends on the evolution of the hybrid model, the evolution of the transformation of the way we work and the opportunities. The hybrid model is an opportunity for us to really change the model to one that’s perhaps more efficient and less expensive for us. We have an idea of what we could potentially do. We’re working on that possibility.
Senator Forest: I have one last question, if I may. Given the challenge of getting the market to gobble up such a large surface area, for buildings that have the potential to be converted into affordable housing, I imagine you’ll be giving preference to cities, municipalities and non-profits working in this sector? Certainly, yes?
Mr. Zielonka: It depends on the type of building. We work with Canada Lands Company for building dispositions. Canada Lands is a Canadian company. They have expertise in this area and they work with municipalities and cities to look at different possibilities. They have that expertise. We don’t have that expertise in our department. For this reason, I wanted to confirm that Canada Lands is the place to ask this question.
Senator Forest: This is important, because it’s public property. These are public buildings paid for with Canadian funds. We must be extremely careful to ensure that all of this goes back into public organizations so that the population can benefit, and not into the pockets of real estate developers.
Senator Gignac: Senator Forest’s line of discussion is so fascinating I almost feel guilty changing the subject.
Nevertheless, I do want to ask you about something else, procurement policy. You work with the other departments to improve the procurement process and related practices.
The world has changed, as a result of not only the pandemic, but also geopolitical developments. I saw that Washington is working on a strategy to make sure that public telecommunications infrastructure is not vulnerable in case of a military conflict — which, hopefully, will never happen. Supply disruptions are possible, as we saw during the pandemic, but supply disruptions can occur for other reasons.
Have you spoken with your counterparts in Washington? Do you carry out stress simulations or testing, at a strategic level, for each department? I’m thinking, in particular, about the Department of National Defence, or DND, and semiconductor equipment.
Say serious geopolitical tensions arose and our suppliers were based in a hostile country. We can’t have our public infrastructure suddenly crippled, whether it’s telecommunications or public transit systems. Do you do what Washington is doing? Can you talk a bit about that?
Mr. Zielonka: That’s not an easy question.
Senator Gignac: I’d like to know what’s on your radar, at least. Canada is a pacifist country, but it is part of NORAD. If the U.S. were in a conflict with another country, we would probably be involved.
Mr. Zielonka: I would say two important things on that. First, procurement policy falls within the purview of Treasury Board, which is responsible for policy. Our organization is responsible for procurement. Second, when it comes to the vulnerability of certain supply chains, I know that… I know that’s within the realm of Innovation, Science and Economic Development Canada. The department does a lot of work in that area. We can reach out to our colleagues there, or get back to you as part of a future presentation.
Senator Gignac: Here are some editorial comments. This is an issue I have questions about. Everyone passes the buck. Treasury Board is involved, you’re involved, other departments are involved. I encourage you to form a special committee modelled on the work Washington is doing. I was in Brussels, visiting NATO headquarters in the spring, and there is a big push for countries to conduct simulations and stress testing because of geopolitical developments.
The world has changed a lot in the past few years. We have to think about how accessible our suppliers are, and we can’t leave ourselves vulnerable. A Canadian company might have a supplier in a country where hostage-taking is a real possibility. All of a sudden, this technology or that infrastructure system is no longer operational. I’ve been asking these questions for a few months now. DND tells me someone else is responsible, and they tell me that it’s…
It seems to me that you should all sit down and create an interdepartmental committee on this issue. Hopefully, everything will be fine, but no one saw the pandemic coming. Look what happened with vaccines — Canada didn’t produce any, so we were in a bind. We have to make sure our public infrastructure systems aren’t vulnerable if something were to happen.
Mr. Zielonka: This is a good opportunity to ask our counterparts at Global Affairs Canada that question because international trade is their domain. I do know that interdepartmental working groups exist to deal with specific issues, but I don’t know the details when it comes to this particular one.
[English]
Senator Smith: I have a question for Treasury Board. In June of this year, The Professional Institute of the Public Service of Canada presented the results from a survey of their members across government. They found that 70% of respondents were unhappy with the return-to-work policies; 61% felt that productivity had decreased.
Between both of your groups, I am sure the subject is similar. Could you talk about the design of the return-to-office policy? Is there an actual program that the government has set up? Does your department help other departments to develop that? How do you balance the needs of the employees and the employer? We are in a new world, right? You said it has only been six months since this has started. Could you comment?
Mr. Fleury: Thank you for your question. We were provided that survey from the bargaining agent. Of course, it is one part of the many surveys that are informing decisions. If you recall, at that time, there was no guidance in place. Most people were trying to figure out where we were going. Therefore, we tried to create a clarity of expectation by setting a direction.
Through the collective agreement process — I believe I was here for a debriefing a while ago — there was a memorandum of understanding, an MOU, reached outside of the collective bargaining process to work with bargaining agents on two particular areas.
First, we would review the telework directive, to ensure that it is suitable and proactive and is being thought through. Will it be the best possible directive going forward? It was written at a different time.
The second area was to create panels with bargaining agents in management in each organization to hear views from employees as they go through the process of their telework agreements. Through that process, definitely, employees will have a place to voice their concerns. Both the bargaining agents and the employer will be there to hear them and to try to work through solutions.
Senator Smith: Is this program up and running? Is it a formal program, or is just more department by department?
Mr. Fleury: This was an MOU that was signed through the collective agreement process, which means departments are setting up those panels as we speak. During the summer, we were more in the process of conceptualizing the best way to go, but they are being set up. The meetings with the actual bargaining agents on the review of the telework directive are about to start as well in the coming weeks.
Senator Smith: Do you see metrics near to being established to measure what will take place, so you can fine-tune it as you move forward?
Mr. Fleury: Yes, one of the objectives is to create a space where we can gather data. It’s been difficult to foreshadow the best possible strategy because it’s all new, without much historical data to compare. One of the objectives of these panels is to generate data, information, evidence to make it better as we grow into the model.
Senator Smith: We can all agree that summertime can be — I will not say it’s a leisure time for employees — a slower time. As you get re-established, will it gear up with more energy and focus in the fall?
Mr. Fleury: Absolutely. I mentioned earlier that Shared Services Canada is our only data point for horizontal across-the-board data. They’ve been measuring the on-site connections versus the off-site connections, pre-direction to now. We see a definite shift in pattern at the enterprise level. For example, the direction was issued in December to be implemented in March. The pre-December numbers were about 20% on-site connections; the latest number is now up to 50%.
Senator Smith: What are 20% to 50% on-site connections?
Mr. Fleury: That means, simply put, that folks are starting to come in two to three days per week.
We also work with departments to ensure that best practices are in place. Some of those include what we call team anchor days, meaning “don’t miss coming in to be there with your team.” Teams are working together to build charters to come in on fixed days to ensure that they can actually meet their colleagues. New employees can find onboarding and mentorship. That is all happening across the board, at mixed levels, as we are learning. We are seeing some positive results and also some areas where we need to work.
Senator Smith: I can hear my boss coughing in the background. That means I can’t ask you any more questions.
[Translation]
Senator Dagenais: Mr. Zielonka, I’m going to come back to you. In the process of providing assistance to Ukraine, we all understood that the Canadian Armed Forces had equipment that was sent to Ukraine, the idea being the equipment would be replaced. Since you just told us that you fulfill the orders DND places, can you give us an overview of which army equipment has been replaced or might be replaced? I hope the Armed Forces will actually benefit.
The army has received money, but hasn’t spent it yet. Canadian Armed Forces members in Latvia have used their own money to buy ammunition belts and helmets to attenuate sound, because the Armed Forces had not provided the funding to replace the equipment. In the procurement process, can you make sure that the equipment is replaced? It looks like the army didn’t spend a million or more dollars, and sometimes the equipment doesn’t get where it needs to go.
Mr. Lagacé: I want to make clear that PSPC is the department responsible for procurement, so it draws up the contracts with the departments when those contracts exceed a certain threshold in terms of complexity and dollar value. The requests, objectives and funding come from the paying department. In this case, DND would be telling us what equipment or service it needed, and we would be there solely as the contracting authority to support the procurement process.
Any questions having to do with the replenishment of equipment or supplies sent to Ukraine should go to DND. We are really the contracting authority. We deal with contracting and negotiations with bidders. We make sure the contract is duly drawn up, that the contract provisions are suitable and so forth. However, when it comes to equipment or service requirements, the paying department is the one that says, “This is what we need.” We take care of it, but our involvement ends there.
Mr. Zielonka: I want to add that we don’t have any information on DND’s inventory levels. That’s not information we have.
Senator Dagenais: Thank you for that answer. I want to follow up on your explanation about transforming the government’s surplus properties. I thought I heard you say that the process could take between 5 and 10 years. Obviously, those years have a price tag. The longer it takes, the more it costs — years of dithering on the procurement of certain military equipment, for instance, have taught us that. Could we end up having fewer buildings and less square footage while paying more annually for the next 10 or 15 years? I’m sure you know as well as I do that these kinds of delays would drive private sector developers into bankruptcy. The longer it takes, the more it costs.
Mr. Lagacé: I want to point out that we’ve been working on a portfolio reduction plan for months. We said we had 6.9 million square metres, 6.2 million of which is office space, and we are considering significantly reducing the number of square metres in our portfolio. We have about 330 buildings and 1,000-plus leases. We are reviewing the condition of those buildings and where service recipients in those areas live, and that will inform decision-making to significantly reduce our portfolio.
We spend approximately $2 billion annually on operating and maintenance costs across the portfolio, so rent, electricity, heating, municipal taxes and repairs. If we do the math, reducing our space footprint by a certain percentage is expected to bring down costs in the years ahead, by virtue of paying less rent and having less to do on the operations and maintenance side.
We’re working very hard on that and will be submitting a review plan to the government soon. No, I don’t see a scenario where operating costs go up. Yes, if interest rates and inflation continue to rise, we will see a certain increase in operating costs, but our 10-year plan shows that operating costs will decrease.
Senator Dagenais: Have you looked at the Guy-Favreau complex?
Mr. Lagacé: It’s part of our portfolio, but I don’t think it’s on the disposal list.
Senator Dagenais: You could put it on the list…
[English]
Senator Loffreda: My question is for Treasury Board once again.
We did mention defence issues. Cybersecurity and data privacy is also a concern. I was reviewing your 2021–22 Departmental Results Report earlier today. Under the section that deals with government service delivery and how it is digitally enabled and meets the needs of Canadians, I noted one of your performance indicators is to provide digital services to citizens securely. Your target is 100%.
Canadians expect their government to do everything they can to provide services securely on Government of Canada websites. Of course, we also expect that the government will protect whatever personal data we submit on these websites.
I’m encouraged by the upward trend. It was at 57% in 2019-20 and up to 69% the following year. The latest result for 2021-22 is 75%, so the department is three quarters of the way to its target.
How will you reach your target before the March 2024 deadline considering how much the digital landscape shifts so rapidly? How can you explain the 25% shortfall? Should Canadians be concerned about the 25% shortfall or is that a normal progression, the 100%? We all like the 100% number, especially in today’s context and environment where cybersecurity is a threat to many.
Mr. Fleury: Thank you for your question. It is a very good one. Unfortunately, I do not have a specific answer. I will have to bring that back to my colleagues in the OCIO. I believe they will have a clear answer for the committee to that very important question.
Senator Loffreda: Thank you.
Senator Pate: My question is for Public Services and Procurement Canada.
I commend you for the collaboration you have done with Indigenous Services as well as the Treasury Board Secretariat on establishing a 5% goal for contracting with Indigenous businesses. I know that last year, a reporting mechanism was committed to and introduced.
Given the levels of homelessness for Indigenous people, I am wondering how much of this has been linked to homelessness and also what the percentage of the value of the contracts that are currently being awarded to Indigenous businesses is. Is it at the 5%? Has it exceeded it? Do you have other targets? What kinds of data around the diversity of the types of businesses do you have? How many are women-run? How many are community-based, urban-based? Basically, whatever disaggregated data that you have about that would be extremely helpful.
Mr. Lagacé: Thank you for the question. I have a partial answer in terms of the numbers. I remember coming to the committee last year and talking about these numbers.
Yes, it is still a priority of our departments to reach that 5% goal. The last time we came to this committee, we only had a portion of the data for the 2022-23 fiscal year. We now have the full year.
For us at PSPC, 2.7% of the total value of our contracts has been awarded to Indigenous suppliers or enterprises. We are still a bit far from our goal, but we’re making a lot of progress and a lot strides to having more engagement with Indigenous suppliers. One note is that there are 60,000 Indigenous suppliers across Canada, but only 2,200 have signed off on the registry with Indigenous procurement services.
Engagement is the key to get more people aware and to help them through the machinery of procurement. Wojo alluded to it earlier. One of the goals is to make procurement easier for under-represented groups because it is a maze, and it is difficult. The electronic procurement solution will try to help that. It’s a like a cloud-based Amazon system. It will help the supplier to send their information. Engagement and getting through the labyrinth of procurement is one of the goals we’ve been working on hard in the last couple years.
Senator Pate: Are you able to provide some data around which regions and some of the demographics?
Mr. Lagacé: We can come back to the committee.
Mr. Zielonka: We definitely have some data, and I think we have some on women-run businesses. I think we have some data on Indigenous and how we’re doing on that. We’re starting to get the data, and there is some data on those that we can definitely dig up. But on Indigenous businesses, as Alain mentioned, we’re not there, and we are working hard to get there, because we all see the benefit of doing that. It has been a challenge, but we’re working on it.
Senator Pate: Thank you.
The Chair: To the officials of Public Services and Procurement Canada and the Treasury Board of Canada Secretariat, thank you very much. You’ve been very informative and enlightening. There’s no doubt that, as you’ve seen from the questions you received, we have a common denominator of transparency, accountability, predictability and reliability, in order to explain to Canadians the budget process and expenses.
Honourable senators, before adjourning, I would like to remind Mr. Zielonka and Mr. Fleury that written answers must be directed through the clerk of the committee before Wednesday, October 18, 2023.
Our next meeting is Tuesday, October 17, at 9 a.m., to begin our study on Bill S-233.
Before closing, on behalf of all senators, as the chair I would like to take the opportunity to thank the entire support team of this committee, those in the forefront, as well as those behind the scenes who are not visible. Thank you for all your hard work in permitting senators to do our jobs.
(The committee adjourned.)