[Recorded by Electronic Apparatus]
.1004 
Thursday, December 14, 1995
[English]
The Chairman: Good morning, ladies and gentlemen. Welcome to the Standing Committee on Government Operations.
As colleagues know, we have been pursuing a study involving government contracting: the process, procedures, and systems, including the open bidding system. We have been especially interested in the area related to small and medium-sized businesses.
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This morning I'm pleased to welcome again, from the Department of Public Works and Government Services, the deputy minister Mr. Ran Quail; Mr. Alan Williams; and Mr. Barry Lipsett, who've obviously been before us before.
We're happy to have you here and thank you for appearing.
I understand, Mr. Quail, you may have an opening statement and you've already circulated it. If you wish to have some opening comments, that would be fine. Otherwise we could go to questions after that. Please proceed.
Mr. Ranald Quail (Deputy Minister, Department of Public Works and Government Services): Thank you, Mr. Chairman. As you've pointed out, this is our second occasion here. It's a pleasure for me to join my colleagues this morning. Both Alan and Barry were here on a previous occasion. We appreciate this opportunity to come back and explain the things we do to you and your committee members, to see if we can move the system along and come up with some improvements.
As you've pointed out, I've circulated my comments. In those comments we've attempted to respond to some of the points that have been raised on a previous occasion and to highlight a few of the issues we have under way in terms of what we think are improvements.
With those few comments, I'd be more than pleased to turn it back to you and go from there.
The Chairman: We're not used to our witnesses being so brief, but we're certainly happy to have more time for questioning.
Mr. Gilmour, we'll start with you.
Mr. Gilmour (Comox - Alberni): Some of the concerns about the OBS, the open bidding system, have been that it's somewhat of an exclusive club; it's not really open. There are a number of prerequisites and the subscribers are paying $1,200 to $1,800 a year in subscriber's fees. Would you comment on those points, please?
Mr. Quail: I am not sure about the suggestions Mr. Gilmour has raised about the cost. Certainly our view is that the open bidding service is open to all. It's an on-line system. It was put in and has been running and we have been making improvements. I think it was in September that it went on Internet.
We've seen some of the provinces join: Alberta, Saskatchewan, Manitoba, Ontario, Quebec, and New Brunswick, I believe. They don't have all their bidding services there, but they do put on their goods and services. We'll see, I believe, that as we move towards full implementation of the internal trade agreement in Canada we will be in a position of working with the provinces.
Indeed, we are working with the provinces now. We're one of the partners...whereby there's a federal-provincial team working on how we're going to go to a request for proposals for the next iteration. That team is being led by some of our colleagues in Alberta. We would find ourselves in a position where we would be going out with RFPs in 1996, I think, with a view to having the successor system to the current OBS system on line at some time in 1997, when the current contract comes to an end.
About cost of an OBS subscriber, an on-line subscription is $130 a year. Bid request lines are $37 per year. A bid matching service, which includes the bid request line, is $395. Bid matching, including the on-line subscription, is $480 a year.
As you move and use the system, there is a cost. The cost is $40 a minute or $24 an hour.
I'm sorry, it's 40¢ a minute. That's a real Freudian slip. It would drive the cost way up.
Our estimate of the annual cost to a small business for using the OBS on-line service is about $340, plus tax, including the annual subscription fee and assuming an average weekly session time of eight minutes and an average annual of six documents ordered. For a firm in the construction industry, let's say, the cost would be in the neighbourhood of $450 plus tax.
Obviously if you use it more it costs more. But that's where we are now.
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In the current contract we have with the supplier, which is ISM, we exercised the option to extend it for two years, until 1997. We did that this spring, and we had a 5% reduction in the costs at that time as part of that extension of the contract.
So it is not free; that's correct. But we think the costs, while not insignificant, are manageable. That's where we sit.
Mr. Gilmour: Okay.
On another point, one of the concerns of private industry is there's not a level playing field, because in many cases government is also bidding on a number of contracts. What is your policy regarding private firms and government contracts going into the same arena? Is it a Treasury Board policy or your policy in these areas?
Mr. Quail: I'm not sure I fully.... Could we try it again?
Mr. Gilmour: Private industry feels government should govern; they shouldn't be in the face of private business. My question is, are there areas where government-subsidized firms or government departments are actually bidding on and getting contracts for government work?
Mr. Quail: I can't speak for all of government. I don't think I could give you an answer I would be comfortable with.
Mr. Gilmour: Just in contracts Public Works deals with.
Mr. Quail: In terms of our own position, we have had discussions about the issue of competition between some of our business lines and the private sector.
The most notable one was in the area of the Canada Communication Group. We did carry out a review. We did have independent advice to the minister, and we took action on it. I think we have resolved the issue of concern about contracting and competition relative to the Canada Communication Group and the print industry.
In addition, in the last budget the government announced they would be looking at commercializing and selling the Canada Communication Group, and we're actively pursuing that at this particular time.
In other areas such as architectural engineering, we've also had discussions with the association on that particular matter. We don't do any construction. All of the construction done either for ourselves or for other government departments in an architectural and engineering sense - building a building, a wharf or something of that nature - is contracted out.
Internally we do approximately 50% in-house engineering and we contract out 50% of engineering. That's where we stand on those. So we're quite careful.
In the area of translation, we're also careful with respect to our contracting in and our contracting out procedures so that it's clear and open what we are doing.
Do people sometimes have concerns? Yes. When we get those concerns, we deal with them openly and respond to them in the best way we can. That's where we're at.
The Chairman: Thank you very much.
Dr. Duhamel.
Mr. Duhamel (St. Boniface): Good morning to you, Mr. Quail, and to your colleagues.
I have three questions.
The first one is a follow-up on the last one. As I understand it - and I'm going to be terribly embarrassed if I'm wrong in this assumption, but I stand to be corrected - there are two kinds of activities being undertaken in your department.
You are one of the major departments that ensures contracting out is carried out according to certain rules. I'd like to get a feel for how much of it you do. What percentage is it, roughly?
The other dimension is I take it you need to purchase certain services and goods for your own department and a number of sectors within your department. Correct my assumption if it's wrong, but I'm assuming those departments or sectors within the ministry are in fact following the rules that are laid out. Are there discrepancies we need to know about?
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That's one of my questions. I have two others.
You've no doubt heard that OBS, while it has some positive attributes, needs to be changed. I'd like your views on that. What needs to be changed, and what's the significance of OBS on Internet? Is there an interface there? Does OBS theoretically become obsolete as the Internet and other systems come on line?
Finally, you've been a senior civil servant for a number of years. You're not without knowing that there appears to be a malaise, a discomfort, a feeling that rules and policies are not always being followed as they should be. My own view is that's probably true to some degree, in a number of sectors. I don't think it's nearly as large as some people would like to suggest, but it's still a problem. What has to be done to resolve that problem, to remove that malaise, that discomfort, that feeling that rules are being bent, stretched, distorted, and what have you? Any advice you might give the committee would be most appreciated.
Mr. Quail: First, about public sector procurement spending - I think that's what you're asking me about in the first question - there was about $57 billion worth of public sector procurement in 1994, according to the statistics we have, and 55% of that was done by provinces or territories. Local governments would do about $11.8 billion. Hospitals would do about $4.8 billion. The federal government's share of the $57 billion is in the neighbourhood of $14 billion. Of the $14 billion of contracting we're talking about in the federal government, in 1994 our department would be responsible for doing about $8.6 billion worth.
Mr. Duhamel: Just a bit more than half, then.
Mr. Quail: I guess so. I don't have my figures that way, but yes, a bit more; about 60% of the $14 billion. The answer is yes.
Even within that portion of the $8.6 billion, for instance, a fairly significant portion would be for other government departments. Our big customer would be the Department of National Defence, for instance. A certain portion would be for our own department.
Mr. Duhamel: I want to make sure I have this. Is it appropriate to conclude, then, Mr. Quail, that just a bit more than half of that would be processed through - perhaps that's not the best way of putting it - your department? In other words, you deal with a bit more than half the federal government activity?
Mr. Quail: Yes. We deal with $8.6 billion of the federal government procurement. However, we don't deal with crown corporations. They're outside of the $14 billion. Some that is outside the Treasury Board departmental framework goes into the $14 billion.
Mr. Duhamel: Why is it, then, that you don't necessarily deal with crown corporations...although that's a question we may want to raise at some future time. Why is the other activity not within your department? Because of the exemptions and what have you?
Mr. Quail: Do you mean the difference between $8.6 billion and $14 billion?
Mr. Duhamel: Yes.
Mr. Quail: A lot of that's on the service side. These are both goods and services. On the service side there is delegation to departments to do that themselves. They have that authority, accountability, and responsibility.
Mr. Duhamel: Are we quite certain that for that portion we're getting as good a ``deal'', as big a bang for our buck, as we might? They have the option...I suppose theoretically they could go through your department, couldn't they?
Mr. Quail: That's true. But for the remainder, it would be up to individual departments to make that determination.
My own sense would be that what they consider to be on the easier side of procurement...let me call it less complex, if they were to undertake it. I would think on the more complex cases they would look to come over and deal with our department, where we have people who are more used to the complex issues.
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Mr. Duhamel: What about goods and services within the department itself, sir? Is everyone following the guidelines? Are they the epitome of appropriate behaviour?
Mr. Quail: We do about $1 billion for ourselves in the department, I believe. That will vary depending on what it is we're acquiring in any particular year. Some years we spend more than others.
Certainly our contract principles would be integrity, competition, and openness and transparency. That's the way in which we go at it in the areas of the supply operations division. Without integrity we're really not anything. If we can't sell integrity we're dead in the water. We spend time talking about it. We take complaints seriously. We follow up on complaints seriously. If we find there are issues that have not been dealt with properly, we try to figure out how we can fix that. If there has been a wilful breaking of the law, then we would take appropriate action.
Mr. Duhamel: Let's look at something like Canada Communication, for example. Do they have the authority to go through you or to operate independently in terms of purchases of goods and services?
Mr. Quail: There are two kinds of purchasing or procurement that they do. One is procurement they need for themselves to run. In that sense they have the same delegated authority; we have authorities that are delegated within the department and those authorities are given to the heads of each one of those groups. For instance, Mr. Williams and Mr. Lipsett would have authority to undertake certain responsibilities. Other ADMs, such as the head of the Canada Communication Group, would have delegated authority. She would have to live under those delegated authorities and carry out her responsibilities.
I'm not sure I'm answering your question.
Mr. Duhamel: I guess what I'm trying to get at is that you're the lead department that's involved in basically very complex purchases and procurement. If there are sectors within that department that are not living by example, does that contradict somewhat what it is you're trying to do? It may be something that's worth looking at; I don't know. I'm not saying it is. I would hope that is so.
It's a little bit like the father who advocates that his children should not smoke and pulls out a cigarette and does so. There's a contradiction in the message. I would hope there's no contradiction in your department's message.
Mr. Quail: I agree with that.
Mr. Duhamel: Perhaps smoking wasn't the best example to use.
Mr. Quail: My reaction to that is that if we do find problems we'll look into them. The method we have to look into them depends on what issues are raised with it. In the case of Canada Communication Group there was a concern. We put together an advisory committee. The advisory committee provided some responses. The minister responded to the responses and decisions were made and we got on with it.
Mr. Duhamel: We talked about Canada Communication, and it's not necessarily that I want to go department by department, but are there other examples where this needs to be looked at?
Mr. Quail: I'm not aware of any. We do have a group put together to look at architectural and engineering issues. That group is ongoing. It's chaired by a person from the department. It has representatives from the Consulting Engineers of Ontario, the architects, technologists, the unions, etc.
Mr. Duhamel: So you're reasonably comfortable then that it's going all right?
Mr. Quail: Yes.
Mr. Duhamel: There are always glitches but you've responded.
Mr. Quail: We respond to them. As you know, we're a combined department. We put the departments together ourselves in terms of Public Works and Government Services, DSS, Canada Communication Group, Government Telecommunications Agency, and Translation Bureau. We're working our way through that integration. That's still ongoing. We have an active program to make sure we have a harmonization of all our policies and procedures for contracting. That's on ongoing issue and we're not there yet.
Mr. Duhamel: We could spend a lot of time on that, but I don't want to run out of time.
I'm very interested in your response to the OBS in terms of the corrections that may be required and the significance of the interface with the Internet. Perhaps you could give just a brief response there.
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Secondly, I want to try to tap into your own expertise with regard to what needs to be done to counteract some of the malaise and discomfort and other attitudes that I sense are prevalent.
Mr. Quail: In the area of OBS, from my point of view, I'd like to categorize it as a good system that we're working on to make better. I think there's evidence of that. I listed some of those in my opening remarks. For example, we have gone to a Windows approach, which makes it easier, certainly from my point of view.
We do have a survey out in the street now and we'll find the results of the survey when it comes back in. We're willing to share that with the committee.
The Chairman: When will that be ready?
Mr. Barry Lipsett (Director General, Supply Program Management Sector, Department of Public Works and Government Services): It will be ready in two weeks' time. The survey is being conducted as we speak.
Mr. Quail: We are looking at testing early in the new year how we can transmit some documents electronically, to take the cost down a bit. As I mentioned earlier, we're looking at how we'd work with the provinces.
I have to be careful on the subject of the Internet. I don't want to portray that I'm an expert on Internet. Having said that, from my point of view, the Internet is a different way to access OBS.
The Chairman: I'm going to interrupt. The clerk advises me there's a technical glitch with translation. We'll have to suspend for two or three minutes to see if we can resolve it. I apologize.
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The Chairman: Order. Colleagues, we're resuming our discussions with the Department of Public Works.
Mr. Duhamel, we interrupted an intervention. I have to tell you you were very close to your last minute anyway, so if you wouldn't mind wrapping up with a question....
Mr. Duhamel: I believe Mr. Quail was in the process of indicating that Internet may be useful but right now we still have some exploring to do. I guess it was the final question. What do we do to get rid of this malaise, this discomfort, this feeling that things are not what they ought to be? I indicated I'm not sure they're nearly as bad as people would suggest, but what has to be done?
Mr. Quail: First of all, procurement in supply operations is our business line. That's the business we deal with every day. That's our focus when we go in to work. People in this part of the department worry about procurement. If you were in the Department of Fisheries you would worry about something else, not necessarily procurement. So first of all, it's our line of business.
About how to deal with it, there may be three or four points. First, you have to continue to talk about it...that it's important that you have integrity.
Second, in looking at your business or what you're doing, you do have to have regular sampling types of audits and evaluations. That has to be done. Then you have to deal with any shortcomings. You want to make sure you have appropriate policies and procedures from the senior people laid out for the people who have to do the work; heightened awareness of what's going and what you expect. As people change, you have to make sure you have appropriate training and those kinds of things in place.
So an accountability framework and some audit evaluations to check the accountability framework.
One of the hard parts is improving on statistics. I know that is an issue people, even the committee, are working with. That is not an easy issue to deal with...but statistics so you know where you are.
In our case we have proper appeal processes in place...and have them transparent.
The Chairman: Mr. Marchand.
[Translation]
Mr. Marchand (Québec-Est): Thank you, Mr. Quail. I have a few very short questions.
I understand that, out of 12,000 contracts, your department awards about 8,000 without tender, for a total value of $371 million. Is that correct?
Mr. Quail: I have a bit of a problem with numbers in French.
[English]
We contract about $3.8 billion a year worth of contracts on a sole-source basis.
[Translation]
Mr. Marchand: You are telling me that you sole-source $3.8 billion worth of contracts annually. Would it be possible, Mr. Quail, to get the list of sole-source contractors who get contracts from the government?
[English]
Mr. Quail: One thing easy to provide you with is the breakdown of the reasons and under what category we've awarded those contracts. That we can do quite quickly and quite easily.
To provide a list of the contracts would be.... Well, there would be a lot of contracts.
Let me give you some examples. We undertake about $300 million worth of contracts for the Canadian Commercial Corporation. That's a corporation that deals exclusively with contracting outside Canada.
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If Thailand wants to buy helicopters, and it wants to contract government to government and to sole-source it to some degree, it will sole-source it only with a government. So we'll enter into a contract with the Government of Thailand - some department - to provide helicopters. We don't make helicopters, as you know. We would then have a back-to-back contract with Bell Helicopter, north of Montreal. We would award that contract and we would monitor it, but it's essentially Canadian Commercial Corporation, a government department in Thailand, and Bell Helicopter.
We do $300 million business in that kind of category alone.
That's one example. Another example -
[Translation]
Mr. Marchand: I do not want to go as far as Thailand, but it is obvious that some fairly big contracts are awarded to companies. It seems perfectly appropriate to me to ask for the list of sole-source contractors and the value of sole-source contracts, say for 1993-94. That should not be a mystery or an impossible feat. Are you telling us you cannot do that?
[English]
Mr. Quail: No, we're simply saying we think there are about 47,000 of them, so it would take some time to put it together.
The Chairman: We're suggesting to you, colleague, you might want a sampling instead of a whole list. I don't want to interfere with.... I'm just looking to find out exactly what would be helpful.
[Translation]
Mr. Marchand: What about a random sample? For example, you could give only the list of sole-source contractors in Quebec.
[English]
Mr. Quail: That'll be more difficult. The problem with that is that, for instance, it will not give you some of the places where the work could be done in Quebec but the head office is somewhere else and they bill us from somewhere else.
[Translation]
Mr. Marchand: There are 47,000. It should not be impossible.
Mr. Quail: It is not. If you want to get 47,000 documents, we can start -
Mr. Marchand: I just want the list of suppliers complete with the value of their contracts.
Mr. Quail: We will see what can be done.
Mr. Marchand: Fine. Thank you.
Mr. Quail: If it turns out to be very difficult, we may talk it over.
[English]
The Chairman: As I understand it, you're looking not for the 47,000 but for sole-source ones. Is that correct?
[Translation]
Mr. Marchand: Yes. I just want sole-source suppliers who did not have to go through the tendering process and face competition.
[English]
The Chairman: What would that number be?
Mr. Quail: It would be 47,000.
The Chairman: Oh. I'm sorry.
Mr. Bryden.
Mr. Bryden (Hamilton - Wentworth): To follow up on Mr. Marchand's suggestion, what we have consistently been asking various departments for is the top fifty sole-source contracts, in dollar value, examined over three years. That's been asked for consistently at this committee by just about everyone. I wonder if that would be suitable for what you're asking for.
[Translation]
Mr. Marchand: I personally would like to get the whole list.
[English]
Mrs. Chamberlain (Guelph - Wellington): I have a real problem with that, I have to tell you. I think 47,000 contractors are not...I don't think it's appropriate to ask staff to do that. We're in a time of restraint, for crying out loud. To me it seems there is really.... I guess I don't understand the intent in asking for such a workload of our staff -
[Translation]
Mr. Marchand: Mrs. Chamberlain may have her own opinion, but I did not ask my question to her, but to the Deputy Minister of Public Works. If he could provide that list, I would appreciate it very much.
[English]
The Chairman: Colleagues, I'm in your hands.
Mr. Duhamel.
Mr. Duhamel: Mr. Quail has given us the solution. He says he's going to see what he can do. He didn't say ``I'll do it'', because he doesn't know for sure, but he's going to look at it responsibly.
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The Chairman: Is that acceptable to you, Mr. Marchand?
Mr. Marchand: Absolument.
The Chairman: Fine. Whatever you can work out you'll work out with the chair on behalf of the committee. Is that acceptable?
Mr. Duhamel: The point is well taken that it could mean a lot of work and a lot of stuff.
The Chairman: Yes. We'll try to be reasonable. I think Mrs. Chamberlain's point is valid as well.
Mr. Marchand, are you finished?
Mr. Marchand: Yes.
The Chairman: Mrs. Chamberlain, you're next.
Mrs. Chamberlain: Thank you.
I have several questions. I'm really happy you're here with us just before the Christmas season.
First of all, I want to explore a little bit more Mr. Marchand's point about sole-sourcing. When you do sole-source a contract, what role does Public Works play?
Mr. Quail: The role would vary. It would depend a bit on whether or not the sole-source is for us in the department or for another government department.
Mrs. Chamberlain: So there isn't a certain process that kicks in?
Mr. Quail: Certainly in our own department, I would like to think.... I have to be careful.
Mrs. Chamberlain: Then speak of your department.
Mr. Quail: I'd like to think that as we look at contracting, we start off with the principle of whether we can go out and bid it. If we can't, for whatever reasons - perhaps there's only one supplier or there's a unique supplier or whatever - then we'll proceed and sole-source it.
If in the other case we have to do it for another government department, we would do it on the basis of looking at their specifications and what is unique about their specifications. We would not challenge, though, in an area for which they are the technical authority. So if the Department of National Defence wants wheeled vehicles, they determine what they need, not us.
Mrs. Chamberlain: Would they provide, for instance, a written justification of the sole-sourcing? Would you get any sort of justification, or does a minister simply say, ``I want to sole-source this and that's it''? That's the process I'm wondering about.
Mr. Quail: No, we would look at them providing justification for why they have to have and want it sole-sourced.
Mrs. Chamberlain: Does it happen consistently that you get justification, or do you just pick it out of the blue every so often?
Mr. Quail: No. Our people would look at the issue of sole-sourcing.
I should take this occasion to point out there are others where we do have stated procurement policies set out by the Government of Canada, for instance on munitions. We buy munitions in one place, full stop. We buy munitions from SNC, east of Montreal. If we have to buy wheat for CIDA or somebody, we buy it from the Wheat Board. I already explained the Canadian Commercial Corporation. We sole-source their work because that's just the way it works internationally.
So in a number of areas we actually don't challenge. They need munitions and we know where to go to pick up munitions. So for those sorts of things there would be no review.
If you have a particular piece of software and you want to upgrade it and you aren't going to change it, then there's only one supplier you can go to, so we would go.
Those are the exceptions.
Mrs. Chamberlain: That does make sense.
I now want to go more specifically into contracts below the $25,000. Are they openly competed for on the OBS system?
Mr. Quail: We do some in our own department, but I would have to say not to our knowledge are the ones below $25,000 on OBS. There's no requirement.
Mrs. Chamberlain: They are on there?
Mr. Quail: They are not.
Mrs. Chamberlain: Oh, they are not on there?
Mr. Quail: Some of ours would be. A large portion of ours would be open for competition. We'd look at putting them on if we could. We're not the owner, in the legal sense, of OBS, but we are the department that did a lot of work to get it up and running, so we like to think we make maximum use of OBS.
Mrs. Chamberlain: Do you have any sense of how many contracts under $25,000 would be on the OBS?
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Mr. Lipsett: It's our policy, for example, to issue all-services contracts on the OBS under $25,000 simply because it was felt by the commodity specialists in that group that the OBS works very well.
Mrs. Chamberlain: What is the number?
Mr. Lipsett: I don't have that number offhand. For most goods and services, though, the threshold is $25,000, and it would be quite rare that you would find goods advertised on the OBS with a value under $25,000.
The Chairman: Could we get that number?
Mr. Lipsett: We may be able to get it out of the system.
Mr. Alan Williams (Assistant Deputy Minister, Supply Operations Services Branch, Department of Public Works and Government Services): I can indicate some percentages, though.
We compete above $30,000 or below - or $25,000 or below - roughly the same percentages. About 60% of the business is competitively bid. That is whether it's above or below...again, to reinforce the point that we try to compete where we can. The threshold, while it may be important to others, to us is less of a key factor in determining sole-sourcing.
Mrs. Chamberlain: How much does your department spend on monitoring the activities of Parliament, and are these contracts let out in a competitive manner?
Mr. Quail: I don't know. Barry says we don't do any contracting for the House.
Mrs. Chamberlain: You don't?
Mr. Quail: No, not to speak of.
The Chairman: What do you mean by ``monitoring'', colleague?
Mrs. Chamberlain: Some committees are monitored. You don't have any role in that at all?
Mr. Quail: No.
Mrs. Chamberlain: If a contract is below the $25,000 and you have to renew it, I'm wondering about the renewal process. For instance, are they renewed on the same terms and conditions? The reason for that question is that it would or could form a basis for contract splitting, just to roll contracts over. Can you comment on that?
Mr. Quail: I'm not quite sure how to respond to the question. I can think of three ways in which we would amend contracts. First, there's an increase in price, and it would vary between goods and services. Second, there could be a decrease in price. That does occasionally happen. It's not inconsequential. Third, we would have situations where we amend contracts that have no price effect but have other reasons: there's no price impact but it's going to take longer to deliver, or other reasons. So we do have those three areas where we amend contracts.
Mrs. Chamberlain: But you also could renew a contract without any new terms to it simply by rolling it over, could you?
Mr. Quail: I don't know if I would argue we'd roll it over. It would depend, first of all, on the areas you want to talk about. If you get into construction and have trouble with construction - you find conditions you didn't expect; you open up the building and there's something else you didn't expect - well, then you'd have to amend the contract with that existing contractor and you'd work under the existing contract. In my terminology, with any contract in which you ``amend the contract'', you would amend it within the context of the existing contract.
Mrs. Chamberlain: But in your opinion, then, could that be a form of contract splitting, or no, you don't feel it would be...having to amend? Obviously if there were an overrun, for instance....
Mr. Quail: I find the issue of contract splitting is probably the most difficult one to grapple with, mainly because contract splitting may be only in the eye of the beholder. My own view is that most people who would get into contracts aren't in the business of trying to contract split. That's not what they're doing. They start off...they think the contract is going to be this over this period, and something happens: people change their mind, the contract gets bigger, or whatever. It's very difficult to get behind and into the mind of somebody...whether they intentionally went in and bought the contract at $28,000, knowing full well that it's going to rise; that they cannot do it for $28,000 and they can move it to $100,000 or $30,000 or $40,000 or whatever.
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It's very difficult to get at. Certainly amendments are an issue. You can track amendments as if they're going up or going down. It's true; that's one indication of what's happening on management of contracts.
Mrs. Chamberlain: With the first group that was here I had asked a series of questions about nepotism...in a particular article in the paper. I just want to ask you a little bit about that.
Do you feel you have a good handle on that sort of thing, that people are not getting contracts because of their brothers or sisters? We've already been through it in the committee that a brother or sister may get a contract because they're the best person to receive it, but obviously it should not be because they are related.
I'd like you to talk a little bit about that. Have you had abuses? How do you track them? Do you feel you have a good process in place to prevent that sort of thing?
Mr. Quail: My view is that we have a good system in place. This is not a lot different from what I was attempting to answer earlier. We remind people of their duties and responsibilities.
Things also change; what was acceptable previously is not acceptable today.
Mrs. Chamberlain: On that, I want to ask you something. When you say previously, are you referring to the last government? Is that what that comment means? What does that mean?
Mr. Quail: That means that if you step outside of government, for instance, it used to be that it was acceptable. The grandfather worked here, the father worked here and the son worked here, and that's the way it happened in lots of areas where we do things. You know, my grandfather worked at the paper mill, my father worked at the paper mill and I'm going to work at the paper mill. That's what I mean by that. By and large that was some of the past experience we had; my grandfather worked at Public Works and so on and so on. From my point of view, we've worked hard...and that's no longer acceptable; it's not the standard.
Mrs. Chamberlain: But it was the standard.
Mr. Quail: Yes, it was acceptable.
Mrs. Chamberlain: I understand.
Mr. Quail: From my point of view, if anything comes up now we have clear guidelines. We have reissued the guidelines. We have training on the issue of integrity, as we talk about in our training packages, and we'll continue to see how we can improve on that.
Do I think we won't have people who will stumble? The answer is I would hope not, but probably, and we'll have to deal with that at that time. I do believe we have the systems in place and if people want to bring something forward we'll have a look at it.
Mrs. Chamberlain: If something was brought forward, what is the mechanism there? Is there someone, a greater body, that looks at the particular contract?
Mr. Quail: The answer is that we have a number of steps in place. Up to the time of the awarding of the contract, if anybody wants to challenge it either domestically or internationally and if they are covered under trade agreements, the Canadian International Trade Tribunal, the CITT, is the body they can take it to. That was expanded this past summer when the internal trade agreement went into place, but it had been in place before for NAFTA and the FTA. That's one step.
We do have a contract review board, and if people would want to take challenges to the contract review board, that's done. That's an independent group, from our point of view. We do use our own internal audit if there are particular concerns we have. We do set up outside groups to come and have a look at it. Then of course there is the Auditor General, who does his own reviews of particular files, dossiers, or horizontal reviews.
The Chairman: Thank you.
Before I move to Mr. Bryden, I want to follow on Mrs. Chamberlain's intervention. When you're providing us with information, we'd like to know how many of the amendments that were made within your department on contracts were administered by DPW and how many were administered by other departments according to your statistics. How many required Treasury Board approval on the non-competitive side? We're just looking for statistics.
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Mr. Quail: We'll provide you with whatever statistics we have, but if we didn't issue the contract, some of those questions we can't answer.
The Chairman: I understand that, but that's one of the problems Mrs. Chamberlain has, and I share her concern.
We're having a difficult time wrestling with the statistical data, and Treasury Board doesn't have it. You'll find that one of our suggestions is we have to have some standard throughout the government. I know the Auditor General is very concerned about it as well.
Mr. Bryden.
Mr. Bryden: With his request for 47,000 sole-sourced contracts, my colleague Mr. Marchand touched on something that never struck me before. Do you ever examine sole-sourced contracts by region? Is there something to be said for looking at those 47,000 and seeing whether there's a pattern where one region of the country as opposed to another gets more sole-sourced contracts? Have you ever done that kind of thing?
Mr. Quail: Not to my knowledge have we ever done that.
Our coming at this issue isn't a question of anything but making sure we have open access. The more we can get open access across the country - and we think that's one of the basic foundation points of OBS, that it's open and accessible to everybody - the more people can compete and live underneath that rubric.
Mr. Bryden: I wasn't thinking of OBS; I was thinking of sole-sourced contracts, on whichMr. Marchand raised the point. I realize you can't answer that, but I just wonder whether there's something to be said for examining that list of 47,000 in terms of what regions of the country may get the highest dollar value in sole-sourcing and the highest number of sole-sourced contracts.
I leave that thought with you. It gives a whole new dimension to Mr. Marchand's request that I find very interesting.
On that line, on page 6 of your presentation there are two paragraphs I don't understand with respect to small business and aboriginal firms. You say a requirement for bid or contract security can be a barrier to government procurement opportunities. I read that phrase in both English and French and I still don't understand it. What kind of barrier exists there?
Mr. Quail: I'll ask Mr. Lipsett to have a discussion and then I'll add on if necessary, mainly because he did a lot of the work on set-asides. In fact he did all of the work on set-asides for us in the department. He did all of the consultations and heard all of the comments relating to set-asides.
Barry.
Mr. Lipsett: During the course of our consultations on the strategic procurement initiative, which included, amongst others, a set-aside program, one of the things that small business, particularly in the construction area, and aboriginal business told us is that our requirements for bid and contract security - that is, to ensure the bidder actually follows through with his bid if he's successful and actually performs against the contract - can be quite onerous for small business, particularly when you're looking at small contracts, which of course are the kinds of contracts that small business would generally aim at.
I should mention that aboriginal businesses on reserve have a particular problem because of the difficulties they have in getting any kind of contract surety.
Both of those issues we have addressed. We've worked closely with the construction industry. We've worked closely with the CFIB in the context of the paper burden reduction exercise, which I think has been brought before this committee. We can expect some changes in that area that at the same time will continue to protect the Crown's interest, of course, in having the work performed and having bids honoured.
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Mr. Bryden: These set-asides are for aboriginal employers and they're also regional. There's a regional component in this. This is going back to Mr. Marchand's line of questions again. Are there set-asides by region?
Mr. Lipsett: No, there's never been any discussion of having set-asides on a regional basis.
Mr. Bryden: Okay.
Let me turn in another direction for a second.
Mr. Quail, you mentioned that Public Works does not challenge ministries in the area of technical authority when a procurement comes forward to them. We heard testimony from Defence, Health and CIDA to the effect that they do quite a bit of sole-sourcing based on the technical recommendations of project managers and so on. What emerged from that testimony was a sense that there isn't as much tendering in this area as there should be, because there's a certain amount of technical and scientific, shall we say, snobbery or narrowness.
This may actually be a significant problem among these ministries, but what do you do about it on your side? Am I to understand you correctly that if a department such as Defence, Health or CIDA comes and says, ``All right, this is a sole-source and there's only one supplier of this bit of technical expertise or management or service, and that is such-and-such scientist at such-and-such university, or such-and-such firm producing this particular component'', you simply accept that? Or do you have any mechanism to challenge or question that?
According to Mr. Quail's testimony, you just accept it. Is that correct?
Mr. Quail: We have to be careful about the issue. As a technical authority, we would not challenge on a technical requirement that would say they want an eleven-wheeled vehicle. If they wanted an eleven-wheeled vehicle for whatever reason, we would not challenge that it should be nine or twelve. They make up their minds, for whatever reason, within that department, based on their professional and safety capabilities and their responsibilities. To meet their operational requirements, that's what they need.
We would get into the fray, if you wish, or into the discussion with the department if in actual fact they said, ``You can only buy it here''. We would then enter into that dialogue and say, ``Well, according to our knowledge, there are also other suppliers on this''. We would get into having a challenge in that area.
A voice: I'll say.
Mr. Quail: That is the way in which we would have a challenge process.
In addition, there is the requirement that we put it onto the OBS and use ACANs to notify that we were going to go out on a sole-source. Depending on the amount of the procurement, we'll also start to plug in the various levels dealing with the internal trade and the international trade agreements. That will also start to play unless it's exempted from trade agreements.
Mr. Bryden: Earlier witnesses suggested there's a different regime for tendering or sole-sourcing to non-profit organizations as opposed to for-profit organizations. Do you treat both types of organizations exactly the same when you are tendering for contracts or procuring goods and services?
Mr. Quail: Yes, as far as I know.
Mr. Bryden: Do you have a sense that at any level in your department your procurement officers are subject to political interference? Is this a problem or a perceived problem in any sense in the department?
Mr. Quail: I don't consider it a problem.
Mr. Bryden: Okay. That's your answer, but is it a problem in the department? I'm looking down. The direction of my question is one of morale. It's very important that civil servants feel they are not subject to improper pressures. You don't need to go into details. I only want to know if this is a perceptual problem that exists in the department, say at the middle management level.
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Mr. Quail: My own reaction is that the people in supply operations take pride in the job they're doing, first of all.
Second, it will vary by individual. People are entitled to ask a question. I'm entitled to ask a question. Alan's entitled to ask a question. You're entitled to ask a question. I don't consider that interference.
Depending on the individual, they might consider that interference: ``Why are you asking me that question? I'm doing my job.'' I don't consider it interference.
Having said that, I think they take pride in their job, and I'm quite comfortable with the comments I made previously.
Mr. Bryden: Okay.
I have just one other question. I'm not sure what I'm getting at here, but when you have a requirement for new buildings and that type of capital asset, do you have a mechanism that assesses your current assets and their state of depreciation? In other words, is there a reasonable mechanism to make sure you are not purchasing or building new buildings when you have old buildings that are perfectly suitable? In other words, do you manage your existing assets in the context of your new requirements? How do you do that?
Mr. Quail: We do it nationally and regionally. We do have asset plans for all of the facilities for which we have responsibility across the country. At this point we're aggressively working....
Personally I'd like to think we are going to have to build some buildings. I don't really think that's the business I'm in at the moment. We're in the business of consolidating, bringing leases together, optimizing the space we have by putting more people in the same space, and making sure the buildings we own are adequate and being fully utilized.
Coming back to your larger question, in a global sense we have an asset management plan, and we do it nationally by our own regions. We have the regions of the country as we run them, and that's how we manage our buildings in terms of operations, maintenance, capital upgrades, repairs and disposal.
Mr. Bryden: Thank you.
The Chairman: Thank you, John.
Mr. Bélair, please.
Mr. Bélair (Cochrane - Superior): Thank you, Mr. Chairman.
I am pleased that this morning we are not attending a figure skating exercise. It is refreshing to see these gentlemen from Public Works being transparent and cooperative.
I do have a series of questions on the open bidding system. From what we have heard over the last month to six weeks, three words do come back. It's three ``c''s actually: costs, complexity and competitiveness.
In your opening statement, Mr. Quail, you informed the committee of what it costs for a small business to participate in or have access to OBS. A quick count gives us approximately $1,000.
When contractors from the private sector were witnesses before the committee, they made it very clear that it is costly for them. We have to remember that many firms that do use the OBS system are very small, and the cost to have access is high on top of the costs associated with the preparation of a tender to be submitted to Public Works or any other department, for that matter.
Was it the object of the open bidding system to be revenue-neutral, and if not, how much of the costs are being recuperated? Would you have an idea?
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Mr. Quail: All the costs are borne by the users. We don't pay anything to ISM. When we went into it, it was to improve access, but it was also an arrangement whereby the people who would potentially benefit from the service were going to pay for the service.
Mr. Bélair: Do you differentiate between firms or businesses that have fifty or fewer employees, which by an accepted standard is the average, and firms that have more than50 employees, and for that matter the larger corporations? Is the cost the same for everybody?
Mr. Quail: It's the same for everybody. There's one cost. It's 40¢ a minute.
Mr. Bélair: For the record, Mr. Chairman, maybe in one of our recommendations we should consider having different levels of cost participation in the OBS system.
My second ``c'' is complexity. Again, it is an issue between the larger corporations and the smaller businesses. It's the complexity of the tenders on OBS.
Some small firms have said here very explicitly that they do not have the expertise to answer all the questions. They need outside help. This is an extra cost to them, and they feel somewhat discouraged from using the OBS system, which in the first place was there to help small businesses have access to government contracts. Would you have a comment on that?
Mr. Quail: Yes, I have a couple of comments.
Number one, we should all look at OBS as a system that's going to continuously improve. That should be and is one of our targets. As I mentioned earlier, working with the provinces, we jointly think that's the way it should go. So you will see it improve.
You've seen improvements with respect to the Windows environment. We are going to look at an electronic system for providing documents. That's an improvement.
Are there other improvements that could be made? Probably. Will we see improvements over a period of time? Well, early in 1996 we're going to go back out with requests for proposals for the successor system and ask the industries that have expressed interest. We have been out for an expression of interest, and 24 firms or groups have come back and given us their thoughts. We're looking at that now, and in concert with our partners and the provinces, we will be going out for a request for proposals, so there will be that opportunity.
Mr. Bélair: Would there be or do you foresee a problem in simplifying the tenders to make them more accessible to the small firms that do not necessarily have the expertise to be able to submit a tender, and qualify for that matter?
Mr. Quail: I'll ask Barry to respond to that, Mr. Bélair, if you don't mind.
I've now taken this out of the OBS category and put it into the preparation of documents. Am I correct in the question?
Mr. Bélair: Yes.
Mr. Lipsett: The complexity that small business faces in preparing bids to the federal government is not really a function of the OBS. The OBS is just an advertising medium.
But you're right; it is complex. It's probably a good deal more complex than the private sector. That's really a function of the kinds of expectations the government has of its procurement system, which are quite different from the private sector's. There's a demand for openness and transparency, and there's a demand for the federal government to respect things such as equal employment, using procurement as an economic development lever and those kinds of things. All of this, yes, does add to complexity in the kind of documentation we demand of suppliers.
That being said, we are attempting particularly to simplify the kind of documentation required for low dollar-value procurement. That is procurement, in our view, below the OBS threshold of $25,000.
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Our target would be to have a one-page contract. We do think contracts of a dozen or thirty pages for a low dollar-value contract are just silly and we have to cut through that, and that's what we're doing.
Obviously for higher-value contracts there are more government policies in play. You're dealing with more complex projects. It's going to be more difficult to deal with that.
Mr. Bélair: This morning we've touched quite a bit on sole-sourcing. You've also indicated to us that some 47,000 contracts were sole-sourced in 1993-94. Statistics indicate the sole-sourced contracts are very seldom challenged with the advanced contract award notice. This is a good indication the OBS system is working, which is somewhat in contradiction to testimony we have heard before. So Mr. Quail, or any one of your colleagues, could you give us Public Works' perspective on why those sole-source contracts are not being challenged so much, or if they are, tell us why the sole-source is still awarded?
Mr. Quail: On the ACANs, we take seriously any sole-source challenges we get. We put about 40% of the sole-sourcing up on ACANs. If you look at that, it pretty well compares with the areas where we sole-source and it is not one of the exclusive areas that say these are the reasons we sole-source.
I'm just trying to look here to see if I have statistics for how many challenges we've had on ACANs. Certainly under the CITT complaints - CITT is the Canadian International Trade Tribunal - in 1994, on contracts valued at $2.96 billion, there were 6,500 contracts and we had 24 complaints. Of the 24 complaints, 25% were tied into sole-sourcing. Of the 25% of the cases we ``lost'', if you wish, or 9, 8 of those were on ACANs.
Is that right, Barry, or was it the other way around?
Mr. Lipsett: The indicator we use to verify whether ACANs are working or not.... I should mention that the CITT is there as an independent third-party complaint mechanism for suppliers.
Shortly after the establishment of the CITT, we got a lot of complaints about what was felt by suppliers to be unjustified sole-sourcing, where after investigation by the CITT it was established that we could have found another source and hence competed the contract. As a consequence of those investigations by the CITT, we implemented the ACAN process, so we would advertise that opportunity.
Mr. Quail mentioned we have lost nine cases on the basis of unjustified sole-sourcing. Eight of those cases were before the 1992 introduction of ACANs. Since that time there's been only one complaint, and we've lost on the basis of the complaint.
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As you can see, if one takes as a measure the complaints we get and the cases we've lost on unjustified sole-source, it's almost disappeared off the radar screen.
Mr. Bélair: With the indulgence of the chair and my colleagues, a short question on the set-aside program. We've touched on it. Statistics indicate 32% of the contracts issued by Public Works went to firms of fifty employees or less. However, when the contractors were here a couple of weeks ago some of them wished we would go back to the old system, in which a specific amount of dollars was set aside for those small firms. However, the Canadian Federation of Independent Business, with 87,000 members, when they were here, were very clear in saying no, we can't compete, and it should be left this way.
Could I have just a comment from the Public Works officials on whether we should revert to the set-aside program. Are there any statistics within the department that indicate it's not necessary?
Mr. Quail: I'll answer for Barry, because Barry went around and talked to a lot of firms. I think we've actually tabled them with the committee.
We got a pretty resounding ``no thank you''. We would like to think we don't have to be hit on the head. That was the answer we got. So we aren't looking at moving on set-asides in this area.
However, our minister is talking with his colleague, the Minister of Indian and Northern Affairs, on the issue of an aboriginal set-aside program. That's a different issue.
Mr. Bélair: There's always an exception to the rule, yes.
The Chairman: Thank you, colleagues. Some very good interventions this morning.
Mr. Bellemare, please.
Mr. Bellemare (Carleton - Gloucester): Mr. Chair, I would like to commend Mr. Quail. He's always been extremely open and very informative in helping and assisting.
You started with a statement, and I would like to make a statement in the beginning. It's more a concern I want to share with you, the largest provider of contracts in Canada. The concern is one I have as an MP. It begs an answer, but I think the answer could be very long and philosophical. Then I'll switch to the OBS; the very nitty-gritty, immediate problem.
The concern I have when you get into contracting is the question of economy of scale. It's in the goods section I'm worried about it. You get what I call the ``Wal-Mart syndrome'', where if we always purchase at the lowest price, we'll end up by purchasing great amounts of goods and the goods could be purchased in such a fashion that we're killing local economies in northern Canada, western, eastern, central Canada - wherever.
Mr. Duhamel: Manitoba.
Mr. Bellemare: Including Manitoba, as my colleague would say.
That concerns me a great deal. We could end up with just one Wal-Mart type of company supplying everything we want in goods. We might end up by purchasing everything from the U.S.A., perhaps. What is that doing to our economy? There would be no more taxpayers to pay the taxes so we could buy the products. So the killing of local economies is very important.
The second major item I've been discovering is that we are fast developing a phantom public service in the service industry. That concerns me a great deal, because now you have the public service culture versus the private sector culture, the private sector culture being the bottom line, the public service culture being the servicing of the communities and the people of Canada. If we go for the private sector more and more and we have just as huge a phantom public service as we have a real public service, we could end up with the NAFTA problem again, where our services are provided by the U.S. of A, and that creates a problem.
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Perhaps at a later date you could comment on this, privately, publicly, in writing, or orally. That for me, in the big picture, is something that should really be addressed by the government, and ministries such as yours.
About the OBS, I was very impressed by the presentation you made some time ago. But to me it was like a sales pitch. I wanted to buy something that interested me and I had one organization show me the product, and obviously that was the only product available to buy, so I'd buy it.
So what I've done is I've gone to see a very huge firm in the area and I asked, can I go through your exercise, whenever you do that? They said yes, every Monday morning is when we do it. I said, I want to spend the whole day with you, going through the computer and searching, and then finding out what the costs are.
This is something neither the government nor public service would worry about, because that is not their problem. But they showed me how a big company operates and how a small company would have difficulties. They were not a small company, but they were very concerned about small firms, of one or two engineers or architects, for example, and how they would cope.
First there was the cost of the subscription. The search...when you say it's only 40¢ a minute - I will come back to this. There is the request for information on proposals, and then there is the obvious proposal cost they would have to prepare, and of course all this complexity that goes on until the very end.
They ran through one example of a contract that was worth $35,000. They could have been interested in it. They said, we wouldn't be interested in that. I asked why. They put down all the figures for me on a blackboard: getting on the program, going through the computer, the time involved, the cost of the document, the cost for evaluation. There was a pro rata rate of fees for engineers. Then they gave me those figures and said, by the way, probably fifty firms will apply for this anyway. It would be horrendous if you calculated all the costs, collectively.
Then they said assessing the RFP, the request for proposal, would be at least $1,200 to $1,500. The proposal itself would be a minimum of $1,000. They talked about $2,500 plus cost to bid on an item that will, at the very end, be worth only $35,000. So they said, we won't bid on that; that's a waste of time and money.
At the end, they saw a contract worth $200,000 and they explained what their costs would be. It was rather interesting. They said so many firms will be looking at this and there should be more matching.
When I was going through the different pages of the computer - you know what I mean by ``pages'' - at 40¢ a minute, it took nearly one minute per page. What I found scandalous was that on two-thirds to three-quarters of the pages - each page - there was a little asterisk next to the contracts to be bid on. I asked, what are the asterisks for? They said, these are already let out. I said, what? These contracts are already let out. Oh, I said; that will be another question for another day.
It took a total of forty seconds to get to the next page, because there was absolutely nothing.... The persons who were with me had their arms crossed, and I knew what the hourly cost was for these engineers.
We went on and on like this. Then they'd say, here are some open ones we're interested in, but we have only 48 hours to respond. It was written: 48 hours. They said, this is too short a period. It must be something such that someone has already got the contract, or the specs are already made up, because no one can respond that fast; no one.
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At the end of the day, my personal conclusion is that the company running this system of OBS, this private company - it's ISM or something like that; it doesn't really matter - is making big bucks. Do you know why? All the down time and the waste of time.
This company knew about the Americans - how they operate their system - and they are also plugged in. They say our system is already antiquated. If you think of computer systems, two years, three years - that's antiquated. You have to keep on changing it all the time. That begs the question that when you give out a contract to a firm like this, maybe the number of years it was let out was much too long, because then the system degenerates and it doesn't upgrade fast enough.
Now something that has nothing to do with this exercise I went through, which I could go on about for quite a while. I would ask about a personal point from constituents who have pointed it out to me. How many contracts or specs were prepared during the February-March 1995 period?
Where I'm leading here is that at the end of the year, March 30...before you get to that point, every department and section runs like crazy to spend its budget. I'm wondering how many contracts are not necessarily let out...but the specs are hurriedly done, poorly done, so they can meet that March deadline. You can even have some abusers where a contract could be let out and paid for and the contract hasn't even been completed or produced. That's a problem I have, in perception.
May I ask if you do sole-sourcing with CCG, the Canada Communication Group, and why?
Mr. Quail: Do you want me to respond?
The Chairman: You'd probably prefer to provide that material in writing.
Mr. Quail: I might respond to a couple of them. Do I have time?
The Chairman: Yes, go ahead.
Mr. Quail: On the question of year-end spending, which I think is the question about the February 1995 issue, guidelines were issued previously by the President of the Treasury Board. I believe most departments, if not all, did do an audit at the end of last year. We certainly did one in our own department. We were quite careful about the question of year-end spending.
That having been said, though, it's also legitimate that if I have a budget and I'm not quite sure how the year is going to unfold, I may keep that money in my bank till close to the end of the year. It's a very legitimate and prudent thing to do. Then I see, well, I'm not going to have to use it for there and I can use it over here. To me, that's a legitimate undertaking. You will always see some of that, and I would argue that some of it is legitimate.
But we did do an audit and we'll keep a close eye on it for our department for this year. Other departments I can't answer for.
On the questions about the OBS, I don't disagree it's complex. But we've improved it. Windows has made it easier.
I have two comments about the demonstration you mention. One is the asterisk you mention. My understanding of that asterisk is it means that is a new addition today. If you want to go through the program quickly and look at it and you just want to know what went on today, look for the ones with the asterisk, and those are the day's additions, as opposed to anything else.
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About the one who says, well, I have only 48 hours to bid, that's fair enough. But the person may not have been able to pick that up earlier. The standard on OBS is fifteen days. When we put something on OBS, it's there for fifteen days. If you only come in and see it on day fourteen, you're pretty well out of luck if it's complex; I would agree with that.
On the matter of complexity, Mr. Lipsett did talk about it a little earlier. We're trying to look at low dollar-value contracts to see if we can make it easier. I don't think we're going to make it easier for big dollar-value contracts. Those are complex.
On the issue of contracting out and the phantom public service, certainly inside the department, we would want to look at that on a business-case basis. If it makes some sense to contract it out, we would look at contracting out. But we don't necessarily start with the precondition that we're going to contract out. That's our own internal look at the thing. Our basic principle here would be one where we would try to consolidate it ourselves and then get as many savings as we can out of that consolidation. Then we would look at it and ask, is there a better way we can do it? It's a balancing act.
On economies of scale, there are economies of scale. Yes, there are. But alternatively, people do also look at other ways to buy: just-in-time delivery.... We're trying to work within those kinds of atmospheres.
Mr. Bellemare: On a point of clarification, when I talked of ``asterisks'' and ``stars'', I may have made a mistake there, but the people did point out to me that these are new contracts of the day and there was an indication.... I used ``stars'' and ``asterisks''.
The other one was that two-thirds of the pages were contracts that had already been let out. There was another designation for that.
The Chairman: Mr. Marchand.
[Translation]
Mr. Marchand: On a brief remark, I would like to thank Mr. Quail for his participation today.Mr. Quail, when people think about the government, they tend to see a huge organization which is inefficient and has a hard time improving.
The comparison that always comes to mind is that of a huge dinosaur with a small brain, not too clever, and with its tongue always sticking out. When you prode it at one end, it reacts two years later by turning its head. But you have given me a different picture today, that of an eleven-wheel vehicle, and I will probably use it in my own speeches. It is excellent. It may have eleven wheels, but I would say it also has five or six flat tires. I want to thank you for that comparison. By the way, I also want to wish you a Merry Christmas.
Mr. Quail: I am not sure my colleagues at National Defence will appreciate my remarks today.
Mr. Marchand: I was not passing judgement on you or your department, but rather on the government generally.
Mr. Bellemare: On the federal or the provincial government?
Mr. Marchand: Basically on the federal government, Mr. Bellemare. The two should not be mixed up.
Mr. Duhamel: The government is sometimes attacked because we do not take the time to understand how big and complex it is. That should never be forgotten.
[English]
The Chairman: Mr. Bryden.
Mr. Bryden: I want to be a bit more serious than Mr. Marchand was. I want to go back to page 6. We were talking about contract security for small businesses and aboriginal firms. In that context, what's a small business, in your mind? How big is a ``small business''?
Mr. Quail: That's a great question. The one we're talking about here, as I recall.... This is on the construction side, is it not?
Mr. Bryden: Yes, construction side.
Mr. Quail: I'm not sure - maybe Barry has the exact definition - whether it's fifty or a hundred people. We're working with the Canadian Construction Association on this side of the game.
Mr. Lipsett: What constitutes a ``small business'' was a matter of enormous debate when we were talking about set-asides a year ago. The definition used by Industry Canada is 100 employees for manufacturing and 50 employees for services.
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About construction, just because of the nature of the industry, almost all construction companies in this country can be considered small business, because that's just the way they are.
Mr. Bryden: And you say you fully expect to have a new approach in place early in the new year. Am I to understand you're going to implement something in the new year? You have a plan of action?
Mr. Lipsett: It has been looked at in the context of the paper burden reduction exercise. I believe a report will be issued on that shortly and the Minister of the Treasury Board will respond for the government.
Mr. Bryden: If I understand this correctly, what we're really talking about is that you're going to loosen the rules for small business and aboriginal firms; loosen the performance requirements. Is that right? You're going to make it easier?
Mr. Lipsett: We won't do business with any companies that don't have a good financial record. In other words, if we're not confident a company can perform against the contract, no, we will not, regardless of -
Mr. Bryden: I would like to see, in detail, what this is all about. You've presented something here, an initiative that's going to go to the ministers, but there are no details here that explain to me what we're doing. What I'd like to see is what were the contract requirements before and what are the proposals that are going into this plan now.
Quite frankly, I think it is in this committee's interest to make sure you don't by misadventure loosen the rules in such a way that what we create is shoddy building or shoddy workmanship out there. I'm not suggesting you would, but it is exactly the role of this committee to examine this type of material.
The Chairman: Colleagues, I apologize that we're running a little late because of the technical problems we were having.
I want to thank Public Works very much for their presentation. As you know, the committee has decided to release a document that shows the general direction of some findings and our direction in terms of where we're going as a committee and where we've been, to give the public, and as importantly the officials within departments such as Public Works, and especially Public Works and Treasury Board, a sense of where the committee is headed. It obviously doesn't preclude some of the work and some of the very good information you've brought forward today, because we're going to be continuing to solicit views over the course of the next months and certainly we'll be looking particularly with a focus on the small and medium-sized business sector. So I want to thank you for coming.
Colleagues, on your behalf, I will be releasing these interim findings and briefing...called Small Business Is Our Business, which is a summary of our preliminary findings on government contracting. There are six headings. One is ``The Strengthening of Treasury Board Policies''. The second involves ``Contracts Canada''. The third is ``Sole Sourcing''. The fourth is ``Open Bidding''.
Mr. Bélair: I have a point of order. I think before you indulge in releasing the report you should release the witnesses.
The Chairman: I'm sorry.
I apologize. You're excused.
The fifth is the ``Improved Reporting Framework''. The sixth is an issue dealing with amendments.
Because we're being recorded, for the purposes of releasing this information I'll read what we have circulated. Then if any member wishes to make some further comments...feel free to do so.
I believe all the members of our Standing Committee on Government Operations have agreed on this urgent need for Treasury Board to strengthen its guidelines or principles on the granting of contracts. These guidelines should be enforced using tough sanctions against any departments, agencies, or crown corporations that violate them.
The following are some preliminary findings: first, that contracts are to be paid not later than30 days after billing; that the cut-off for non-competitive contracts should be reduced from this $30,000 level to the $25,000 level, and it should be mandatory that all such contracts, over this $25,000 level, be open to competitive bidding on the open bidding system, subject, of course, to the exceptions that are already outlined in the Treasury Board policy; that the exceptions must be reviewed with an aim to reducing the number of times they're used to bypass the competitive process; that strong sanctions be imposed to prohibit contract splitting; that departmental heads throughout the government ensure all departmental managers and appropriate staff have the necessary training in contract administration and product knowledge to become knowledge-based managers; that the drafting of contract requirements avoid contract tailoring; that a sanction be established against the practice of unique commodity purchases.
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Also, our committee would recommend that Treasury Board and Public Works collaborate on the drafting of a code of conduct or a code of best practices for contract procurement, or contracting.
Under ``Contracts Canada'', we're recommending that an initiative be commenced called Contracts Canada, to be created within the Department of Public Works. It would heighten awareness and access for small and medium-sized businesses. It would also act as a director for inquiries for small and medium-sized businesses. We're recommending that a public awareness campaign be launched to inform SMEs on how to get involved in government contracting; that the rotation system be advertised to inform small and medium-sized businesses how they can get on these source lists...find ways to simplify or decrease contract paper work - and we heard some good information on that this morning - and also assist Industry Canada with establishing a definition for ``small business''.
On the sole-sourcing issue, colleagues, I believe the committee unanimously agrees the testimony that's been given by the various departments and witnesses is demonstrating the need for a review of all sole-source contracts by departments and agencies. Some of the beginning suggestions we're going to be looking at for our report would include the pre-qualification of small businesses to accelerate processing time; reviewing the sole-source criteria that has been undertaken by Treasury Board and Public Works, particularly the attention that's being paid to exceptions; and finally, a review of the ACAN system to ensure competition, access, transparency, and fairness are being promoted.
Next, the open bidding system itself needs a review. I think all of us were happy to hear the Department of Public Works acknowledge that this morning. Although we agree OBS is a good beginning, as does the Department of Public Works, we need to improve access, competition, transparency, fairness...and improvements that need to be made in three areas. First, the information perhaps needs to be packaged in a more efficient way, to avoid the wasting of valuable time and resources, as our colleague Mr. Bellemare has found in his one-day adventure with his own constituent.
The testimony we've heard has certainly indicated that some businesses have been prevented from using OBS because of its cost. Certainly we heard that from the small business sector the day they came forward, as well as from the Canadian Federation of Independent Business. So a review of the OBS costs needs to be undertaken. Also, alternative electronic means for advertising government contracts, such as Internet, which came forward, should be continually upgraded. I was happy to hear the Department of Public Works acknowledge it is moving into the Internet system. But again, I think we as MPs need to become more familiar with that process.
Next, the improved reporting framework is something that's very vital to the work of this committee. The overall reporting framework for all contracting activity needs to be revised. Certainly that's one of the glaring difficulties this committee has already learned of. Many departments aren't reporting on the same basis. The statistical data, we're hearing across the board and through Treasury Board, is deficient. We're quite worried about that. Therefore the committee is recommending that the data be made available to Treasury Board on a semi-annual basis by all departments, government agencies, and crown corporations so that, as a committee, our work can continue on an annual basis, and a semi-annual basis, and we as a government operations committee are able to update that.
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Finally, colleagues, with your indulgence, the amendments are another area that's given us alarm; the alarming rise in amendments. As a preliminary finding, the committee is suggesting that each department should have a senior management committee review all amendments. The amendments need to be justified by the contractor to the department responsible for the contract.
The amendments should be broken down into subcategories - for example, cost overruns, legitimate contract add-ons - with the aim of reducing the unnecessary cost overruns. These amendment subcategories should have varying tolerances. One of the suggestions we've heard was perhaps a 10% guideline on the specific cost overruns.
Colleagues, I've put these suggestions forward under my letterhead. I would suggest that if you would like to re-release these on your own, it would be helpful to get the information out to your own local media, because as you know, we represent different areas of the country and the media have been a very helpful partner in trying to get our message out throughout the country. Particularly in some of the regions - Manitoba, southern Ontario, eastern Ontario, Quebec - we'd be very grateful for the work.
As your chairman, I want to thank you for your indulgence and your forbearance. I want to express my personal appreciation to both our clerk and our researcher. We're really beginning a new era in trying to develop a focus on where we're going. I look forward to your interventions.
Mr. Bryden: Just one small point for the record, Mr. Chairman. I regret the choice of a headline saying ``Small Business Is Our Business'', because it tends to suggest that our efforts have been directed principally towards small businesses. I would like to suggest to you, Mr. Chairman, and for the record, that the exercise we have been doing in the last few months is much larger than one category of business. We are in the process, and have been in the process, of examining the entire system. So perhaps in the future, if I may speak as a former journalist, we can do without the headlines and just provide the body copy.
The Chairman: Fair comment.
Mr. Marchand, please.
[Translation]
Mr. Marchand: Mr. Chairman, I would like to congratulate you on your excellent performance. Ever since you chair this committee, we have started to move ahead. With the former chairman, we had the feeling we were going aimlessly in circles.
First of all, I would like to underline this very important initiative. Generally, these recommendations seem positive and they reflect our findings and certainly our intentions as a committee, more particularly as concerns an easier access to government for small businesses and the improvement of many minor components in that big government machinery.
I have been sitting on this committee for more than a year, and I have realized that the problem is both serious and pervasive. There is a lot of waste. I do not question the intentions of anybody, but it seems to me that, in thr huge ship of the government, there are not only two or three small holes, but thousands of them. The government must be responsible for a lot of abuse.
These recommendations are good, but they are nothing compared to the existing problems. They are minor improvements. To me, it is just tinkering, minor improvements in restricted areas. If, as a committee, we really want to make recommendations that will deal with the real cause of the problem, we should make two recommendations.
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If other members of this committee really wanted to deal with the problem, they would see to it that all sole-source contracts without tenders are regularly tabled in the House so that members can examine them. If that were done each month, or every six months or every year, it would be an important first step towards openness.
To me, all that talk of the federal government to the effect that it would be impossible, costly, and a waste of money is balderdash. The Quebec government tables every month all the contracts that are let out. It can be done. It is practical, and it would promote openness in government.
We know the problem exists, because the government awards sole-source contracts without competition. Secondly, there is a problem inside the public service. Those who are really in a position to see the problems and point out instances of abuse and waste are the civil servants. They are a bit overlooked here. If the federal government really wanted to deal with the problem, it would pass a whistle-blowing legislation so that civil servants can freely expose abuses and be protected by legislation.
This would be a way to go to the bottom of things. Civil servants would welcome such a proposal because it would give them more power and a way to correct the shortcomings, abuses and waste in government. I do not pass judgement on anybody's intentions, but it would allow civil servants to get involved in putting some order in government finance while playing an interesting role.
I have the feeling that if Canada could have a whistle-blowing legislation... This is not new by any means. In the U.S., 20 or 30 States already have such a legislation. The U.S. federal government has one. It is not deceitful or mysterious, and it works.
If we really want to deal with this problem and show we can stand our ground, we should make these two recommendations to the governement. Thank you.
Merry Christmas to all, and to New Brunswickers too.
The Chairman: Thank you
[English]
We have two last interventions. Dr. Duhamel, please.
[Translation]
Mr. Duhamel: I would like to make a comment. Both chairmen, this one and the one before him, have their own talents and perhaps their own shortcomings, like all other members. I wanted to put that on the record.
I would also like to tell my colleague that I would rather examine his suggestions instead of approving them right away. He has made two worthwhile recommendations. I hope we are not expected to answer yes or no right away.
Mr. Chairman, I would like to deal with the report.
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[English]
Mr. Chairman, I just wanted to point out...and I don't think this is implied, but.... It says ``The following changes are recommended...''. It speaks of strengthening guidelines or principles for the granting of contracts. ``There may be some more recommendations at a future date.''
Then it says ``enforce...using tough sanctions''. We have not suggested what those sanctions might be, and that might require some discussion, because obviously they could range over a whole lot of possibilities.
There was one more point I wanted to raise. I take it that on the second page, f):
- f) Assist Industry Canada with establishing a clear and precise definition of ``Small Business''
which will act as a standard definition to be applied universally to all government departments,
agencies, and crown corporations.
The Chairman: Industry Canada would do that definition.
Mr. Duhamel: Okay.
A final point, on the last page, (5), it says the committee recommends that the data be made available by Treasury Board on a semi-annual basis. That's to Parliament, to committees...?
The Chairman: To the appropriate committee, I would suggest.
Mr. Duhamel: Thank you. This is useful.
Mr. Bryden: Can I make one point? I wanted to reply to Mr. Marchand, because I think his suggestions are very well taken. But I would like to point out to him and other members of the committee that transparency is not the cure-all for all the problems. One of the things we have been doing here is looking very carefully at procedures so we can advise the various ministries and Treasury Board where they can improve in their practices. So while I'm very sympathetic to certainly accountability and transparency and all these issues, I would like to stress, though, that we have made a lot of progress in getting from witnesses, and identifying, problems in the system. I think that is a very important part of what we're doing and what the report will come down to in the end.
The Chairman: Thank you, Mr. Bryden.
I want to conclude by saying I think we owe it to our constituents to act quickly. It's for that reason we wanted to come forward with some practical steps that will rectify the problems.
I share all your concerns. I don't think we want to be hanging around, waiting for some massive study. What we need to do is act quickly. The intention in presenting this was to give a framework for the kinds of things we should look at.
Mr. Marchand, your suggestions this morning are excellent and very valuable.
In conclusion, again I want to wish all of you the very best for the Christmas season and a happy new year. I look forward to seeing all of you working well as we build a stronger country.
We're adjourned.