EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, December 5, 1995

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[English]

The Chairman: Order.

Again, we are delighted to have witnesses with us. I'm particularly pleased to welcome Stephen Van Houten, whose most important characteristic is that he is a resident of Don Valley West in Toronto. I do my best, as always, to misrepresent him. As well, he's with Jayson Myers, who is the chief economist from the Canadian Manufacturers' Association.

I don't think I need to tell this committee and its members that the Canadian Manufacturers' Association have been amongst the most vigorous critics of internal trade barriers in Canada. In fact, I'm not certain they were the first to try to put a figure to it - you can refresh my memory on that - but I think they are the organization most associated with attempting to tabulate the cost of those barriers.

With that introduction, I welcome you both and invite you to make some opening remarks.

Mr. Stephen Van Houten (President, Canadian Manufacturers' Association): Thank you very much, Mr. Chairman.

At the outset, I would like to introduce another one of our associates from CMA who is with us today. That's Goldie Shea from our office here in Ottawa. She assisted with some of the analytical work that has gone into our submission to you.

I would like to make one other introductory point. Inasmuch as I am a constituent of the chairman of the committee, I'm not sure whether that means I'm in a conflict of interest position or he is. You can take whatever either of us says with the appropriate dose of salt, I'm sure.

Mr. Chairman, you're quite correct. CMA was, I think, the first national business organization to endeavour to quantify the costs associated with the web of barriers to trade among and between Canadian provinces.

I will introduce our organization very briefly. We consider ourselves to be Canada's leading business network. We're the largest industrial association in Canada and in fact the oldest association of our kind. We were formed in 1871, and we operate by the terms of a special act of Parliament.

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Our members represent manufacturing in every sector, in every province, of every size and description. Our people are involved in everything from resource processing to secondary fabrication and assembly, to software development, to advanced manufacturing technologies of every kind. Our member companies account for some 80% of all of the manufacturing output of this country.

Many people have the sense Canada is still a resource-based economy moving toward becoming a service-based economy. The facts are different from this. In many very real ways, Canada is indeed a manufacturing country. We have some 30,000 manufacturing establishments in Canada, which produce somewhere in the neighbourhood of $380 billion worth of goods that will be shipped by the end of 1995 on an annual basis. More than half of this output is exported.

Indeed, by the end of this year, we think it will be true to say the largest single market for Canadian manufactured goods is not Canada but the United States. Canada is indeed our second-largest market. I think this is an important factor to bear in mind when considering the importance we attach to making the Canadian market a single market. Dividing up the second largest of our markets for Canadian-made goods into 10 or 12 smaller fragments just doesn't make any sense to us.

As the chairman of the committee indicated, we do strongly support, and have for many years, the liberalization of our internal market in Canada for goods, services, labour and capital.

For some 35 years, in fact, CMA has argued barriers to interprovincial trade and commerce make little sense in a country becoming more and more dependent on international business activity. And they make no sense at all today in the aftermath of, first, the Canada-U.S. Free Trade Agreement and, laterally, NAFTA. It's often easier for Canadian companies to do business outside this country than inside this country from province to province.

It makes no sense to maintain an environment in which foreign companies sometimes have better access to the Canadian market, from their supply sources outside Canada, than Canadian firms have themselves. It makes no sense when people find their technical and professional qualifications are more readily recognized outside this country than in the various parts of Canada.

In a world where Canada must compete daily and internationally to attract and retain capital, it makes no sense to limit our growth potential by restricting the market for internal trade and investment.

In the current climate of fiscal restraint, the overlap, duplication, contradiction and inconsistency in regulations among and across federal and provincial governments, municipalities, colleges, universities and other agencies make no sense at all.

A few years ago, in fact, we estimated the cost of barriers to interprovincial trade exceeded $6 billion. It was in fact about $6.5 billion on an annual basis. This was divided up in the following ways. Loss of efficiency in government procurement of goods, federal and provincial, was about $2.5 billion. Loss of efficiency in the procurement of services was another $2.5 billion. Inefficiencies associated with the agricultural sector was about $1 billion. Trade barriers affecting the beer and wine industry in particular cost about $500 million.

That's $6.5 billion, without counting the losses associated with the lack of free movement of labour between provinces. It also does not count the dynamic gains due to more productive businesses we were forgoing, the losses of improvement in trade and exports, the gains of having a more unified country flowing from having a single market. So $6.5 billion, in our assessment, is a conservative assessment. And many other commentators have agreed it is a conservative assessment.

In the past few years since we made this first assessment, our members have restructured in very, very fundamental ways in order to survive the recession that took place earlier this decade and in order to grow.

It has become apparent our estimate significantly underestimates the cost of restrictions on interprovincial trade. It doesn't account for the costs of lost economies of scale and inefficiencies in businesses whose access is restricted to provincial markets. Nor does it account for the opportunities that have been lost in terms of innovation, new technology, new product development, better quality, better training and skills development, improved productivity, and flexibility on the part of companies unable to expand their businesses across Canada as a result of restrictions that continue to exist on marketing, distribution and investment activity.

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The result of all of these inefficiencies has been lost sales, lost investment and lost jobs. Today manufacturers, our members, in all sectors and regions of Canada, compete on the basis of specialization, innovation and ideas. That's what value-added is all about.

They need access to large markets in order to grow. The Canadian economy alone isn't big enough. It just isn't big enough to support the manufacturing industry we depend on for our national wealth. As I mentioned, the Canadian market isn't even our single largest market; the United States market now is, and more than half of what we make we export to other countries around the world.

The American market and, indeed, the markets of many countries around the world are often more attractive to Canadian companies than individual provincial markets in this country. We're losing industrial investment to the United States, Europe, Asia, Mexico and to other countries because Canadian manufacturers often just don't have the scale they require to innovate successfully and to produce at competitive cost.

Interprovincial barriers to trade are a significant impediment to industrial investment and growth in Canada. All procurement and regulatory restrictions on the movement of goods, services, people and capital across provincial boundaries within the Canadian market lead to costs industry can do without. And we believe they must be eliminated, not just stepped down in their ferocity and their pervasiveness.

In this regard I would like to comment on the Agreement on Internal Trade signed in 1994. We believe it is a positive first step toward reducing and eventually eliminating barriers to interprovincial commerce. But in our judgment it's only a first step, and a hesitant one at that.

The agreement itself doesn't go as far as we would like in eliminating barriers to interprovincial trade, particularly on the part of crown corporations, municipalities, other academic institutions, hospital administrations and other government agencies.

Moreover, we're concerned that qualifications and restrictions contained in the agreement are likely to lead to time-consuming disputes over interpretation and application.

The agreement contains few measures to encourage parties to resolve outstanding disputes. There just isn't a hammer there. In our view, the Agreement on Internal Trade does not go far enough in obliging parties to harmonize conflicting regulation and technical standards, environmental regulations or consumer-related measures and standards. And it certainly lacks an effective mechanism for enforcement in resolution of disputes. There's no binding enforcement of panel determinations.

The success of any trade agreement depends on the effectiveness of its dispute settlement processes and procedures. In our assessment, the dispute resolution mechanism in the existing agreement is highly bureaucratic and likely to be extremely costly, with little chance of a successful outcome for aggrieved businesses and no award of damages for these aggrieved businesses.

The dispute settlement procedure in the agreement pales in comparison with those we find in either NAFTA or the World Trade Organization. There's no private right of action without the consent of the Attorney General of Canada. Decisions by the Attorney General to withhold consent need not be explained; nor are they reviewable.

There's also a problem of accountability on the part of all governments if a report filed annually by the internal trade committee on the function of the agreement and the effectiveness of its dispute resolution process does not have to be tabled before Parliament or the provincial legislatures. We think this needs to be corrected.

Further progress is needed now in liberalizing Canada's internal market. And it's needed very quickly indeed. We have a few specific suggestions we would like to make.

We urge all governments party to the agreement to extend the provisions of the agreement to crown corporations, municipalities, universities, colleges, school boards, hospital administrations and other government agencies across the board.

We urge them to harmonize regulations or adopt mutual recognition of standards in order to reduce regulatory overlap and duplication, inconsistency and contradiction between jurisdictions. And we urge them to strengthen the dispute settlement procedure in the agreement to allow for the cost-effective resolution of disputes.

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Specifically, all governments should agree to private rights of action to force parties to fulfil their obligations under the agreement, and we also recommend that the agreement provide for awards of damages, as well as costs, for individual businesses that are harmed by restrictions on interprovincial trade.

These actions obviously will require further negotiation among the federal and provincial governments. However, there are some actions that the federal government - which you ladies and gentlemen represent - can and should undertake on its own initiative.

We recommend that the Government of Canada undertake the following actions: enact Bill C-88 implementing the internal trade agreement, with an amendment that would require the internal trade committee to table its annual report before Parliament; extend the principles of the internal trade agreement to all crown corporations and government agencies and institutions under federal jurisdiction or in receipt of federal funding, and proceed expeditiously with the further elimination of restrictions on interprovincial trade and commerce.

That, ladies and gentlemen, is our written submission. I'd appreciate, invite and welcome your comments and questions, which I or Dr. Myers or Ms Shea will be pleased to respond to as best we're able.

Thank you very much.

The Chairman: Thank you, Mr. Van Houten.

We'll move right along to Mr. Schmidt.

Mr. Schmidt (Okanagan Centre): Thank you, Mr. Chairman.

I didn't get all the notes down, and I noticed you reading from another piece of paper, with regard to the actual $6.5 billion breakdown.

Mr. Van Houten: Yes.

Mr. Schmidt: What exactly was the first $2.5 billion?

Mr. Van Houten: The first $2.5 billion represents losses in efficiency in terms of government procurement of goods. The second $2.5 billion is the same thing with respect to government procurement of services.

Mr. Schmidt: Right.

Mr. Van Houten: Excessive costs paid, in effect.

Mr. Schmidt: Thank you very much. Does the figure of $6.5 billion represent a straight $6.5 billion in cost, or does that have the multiplication factor built into it? What other business would that $6.5 billion generate if, in fact...? It could be about three or four, or maybe eight times that.

Mr. Van Houten: I understand you. In fact, it's only the first layer of cost.

Mr. Schmidt: So this is the first layer only.

Mr. Van Houten: It doesn't account for the spin-off or multiplier effect. Additional to that is the loss of dynamism in the economy, the losses associated with suboptimal use of facilities, and weaker innovation and weaker research and development than might otherwise occur if in fact we had a single and unified market for the movement of goods and services in this country.

Mr. Schmidt: Would it be correct to -

Mr. Van Houten: That's why people have indicated and felt that, if anything, our estimate is on the conservative side, on the low side.

Mr. Schmidt: Well, yes, if that's only the first layer, I can well see that.

The impact, then, on the GDP would be rather significant. It would be more in the tune of probably $20 billion, or between $20 billion and $30 billion, then. Is that fair?

Mr. Van Houten: Jayson, would you like to comment?

Mr. Jayson Myers (Chief Economist, Canadian Manufacturers' Association): If you're looking at a multiplier effect on that, the $6.5 billion is somewhere around 1% of GDP as it is. You could sort of extend the multiplier effect across and probably could get up to $15 billion or $20 billion.

One of the areas that hasn't been studied in this area is the problem of regulation, the problem of the inefficiencies, the overlap, the contradiction there. A Treasury Board study we participated in underestimates, I think, the cost of some of the regulatory compliance costs in this country, but comes out with a figure of $30 billion to $50 billion, and a very large part of that is also the problem of interprovincial regulatory management.

Mr. Schmidt: I really want to thank you, gentlemen, and...sorry, I've forgotten your name.

Mr. Van Houten: Goldie Shea.

Mr. Schmidt: - and Goldie Shea, for your presentation here this morning. I think it's probably one of the most concise pieces of representation we've had for some time, and it includes many of the big concerns that I have. In fact, I looked at this and I said, well, they must have been at my desk here last night to look at the concerns I have with regard to the interprovincial trade agreement.

My question also comes to the point of why can't we move faster? You're encouraging the government to move faster, and I couldn't agree more. Could you speculate at least momentarily on why this has to go so slowly?

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Mr. Van Houten: Speculate is about the only thing I can do, because we've asked ourselves the very same question, Mr. Schmidt, for about 35 years now, in fact.

Thank you for commenting on the brevity of our presentation. That was intentional. We're also the folks who, along with indicating the assessment of costs conservatively at $6.5 billion, indicated as well our estimate that there were at least 500 barriers to transprovincial trade in this country.

This is our analysis of those 500. They're all real, actual, existing barriers. A number of these, of course, have indeed been eliminated or are on the way to being eliminated as a result of last year's internal trade agreement, but many many more remain.

Why do they remain? All I can really think of is something that has to do, I suppose, with parochial, local or regional self-interest. The provincial government in the province of British Columbia, for example, is not much interested in the dismantling of these barriers, as far as we know, as far as we've been able to determine over the years. I think this is the case regardless of the political stripe of the B.C. government of the day.

It seems that there's a stronger interest in trying to reward and give incentive to local businesses and local production than there is toward achieving the larger goal of a more efficiently functioning national economy. That's regrettable, but it seems as though that's life in this country.

To conclude, I should add that of course as we make representations at the federal level about our views on this subject, we do the same thing at the provincial level, with varying degrees of success, as you might imagine.

Mr. Schmidt: I appreciate some of those. That's a very clear situation, and I'm well aware of that. What bothers me in that connection is, why are the dispute resolution mechanisms so weak in this agreement?

It's one thing to have taken, as you indicate, a small tiny little step forward, and it is that, and that we support. But even with that tiny little step, the dispute resolution mechanism is virtually useless because it will take years and years to resolve a dispute if one exists, and then when it's all over, you can revert back to the original pre-internal trade agreement you began with. So you're in a worse position after the dispute resolution has run its course, back where you were before the blasted thing started.

What kind of agreement is it that allows that kind of development to take place?

Mr. Van Houten: I think the weaknesses in the dispute settlement provisions of the agreement are there for the same reasons that it's taken so long to develop an agreement, and that is that some governments don't feel it's in their interests to have an agreement or to have an effective agreement or to have one that results in effective and binding - and that's important - settlement of disputes. It's all part of the same parochial view of the way the economy functions, I'm afraid.

Mr. Schmidt: Mr. Chairman, I now have to ask the question this answer begs. The British North America Act, sections 121 and 91, to be specific, provides that there shall be a free flow of goods and services across provincial boundaries, and that the federal government has the responsibility to enforce that kind of provision within the act. It extends that free flow to commerce of any type.

I ask you, then, why does the federal government voluntarily, it seems to me, restrict its enforcement of the existing provisions that are in the British North America Act, our Constitution?

Mr. Van Houten: I can't answer the question, Mr. Schmidt, as to why the federal government makes choices it makes. We're aware of the trade and commerce provisions of the Canadian Constitution as well. Of course, in the run-up to the negotiation of the 1994 agreement we certainly urged the federal government to consider more aggressive use of its powers under the Constitution in that regard.

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I suspect that their assessment of the situation is that voluntarily concluded agreements among governments are preferable to solutions imposed as a result of judicial action. I agree with that. But the extent to which it's preferable is - I think that's where you are coming from - dependent on the utility of the outcome.

In our sense, we only have a small first step. I don't think it's time yet to give up on the agreement or the process of voluntary negotiation that it represents. So I wouldn't suggest that we toss it out and start over with a judicial-driven or litigious kind of approach. But if we can't make significant additional progress soon then we should still be open to considering that alternative.

Mr. Schmidt: That's really interesting. May I ask one follow-up question on that?

The other comment you made now triggers implications for Canadian unity. If it's true, as you indicate in your brief, that it's easier for some firms to do business with other countries internationally than it is to trade between provinces, then I can see that might be a very real stumbling block to creating unity in Canada. Why would we not then turn our faces to whatever country we can do business with rather to our compatriots within our own nation?

Mr. Van Houten: I agree. I made the point that it's something we haven't quantified and don't feel capable of quantifying, but we certainly would suggest that it's a consideration we must bear in mind.

Mr. Schmidt: I think it's very, very serious. When we put this into context of, let's say, $20 billion less to our GDP, that affects our revenue picture, that affects our whole -

Mr. Van Houten: You got that right. Absolutely. Jayson talked earlier about the costs associated with regulations as something approaching $50 billion a year. That's the cost borne by business, as a matter of fact.

In another stream of activity with government in this city altogether, but nevertheless relevant to your concerns, we would like to see a target set, and then met, of reducing that cost by 10% a year. This $5 billion a year doesn't seem to be too much. It would be awfully important and awfully good for the economy.

Mr. Schmidt: Let's do that. I like that.

The Chairman: We may wish to do that at the end of the meeting, but in the meantime, I see Ms Bethel and Mr. Discepola on my list.

I'll start with Ms Bethel.

Ms Bethel (Edmonton East): Thank you, Mr. Chairman.

Mr. Van Houten, I agree with you wholeheartedly that the $6 billion significantly underestimates the cost of restrictions on interprovincial trade. I appreciate not just the brevity, but also the clarity of your presentation.

When we see here the opportunities that have been lost and the absolute importance of competing on the basis of specialization, innovation and ideas, and the need for access to large markets, we know we have a lot to work on here.

I wonder if you would define for me your idea of the ideal dispute resolution. I need you to assess for me the support by the provinces. I also need you to clarify for me who your allies are and what we are going to do about the ongoing changes that this is going to require.

Mr. Van Houten: Okay, fair enough.

First, with respect to the dispute settlement provision, I might start this way. It comes back to something I was thinking of in relation to one of Mr. Schmidt's questions.

In a sense, you know, it seems repugnant to us that we need to have a NAFTA, a treaty, about trade within this country. We never have asked for that. We never recommended that there be an internal trade agreement. We just recommend that there be the elimination of trade barriers. That can happen either by dint of an agreement, a treaty or a domestic NAFTA, or it can just happen by intelligent action on the part of governments at all levels. Frankly, the latter would be the most preferable.

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It seems repugnant to us that there has to be a dispute settlement system with respect to trade inside the country. Nevertheless, there we are. If we have to have an agreement about it and we have to have a dispute settlement procedure in that agreement, then our main points would be these: that procedure should be binding, and it should allow for private rights of action, because the people who bear most of the costs associated with the barriers are businesses - and, by the way, their customers in Canada and around the world. So consumers have a stake in this as well.

But just leaving it at the level of businesses for the moment, since we're the folks who bear the costs we're the folks who have a stake in seeing the agreement work well, and we think it's important that those businesses have a useful private right of action. So it should be binding, it should allow for private right of action, and it should be as simple and as swift to trigger and to complete as possible.

What we have right now with the system of establishing panels and reviews is that there are qualifications and constraints on what they can do anyway, and then all of this leads to recommendations that are for the most part not binding. It is far from the optimum.

You asked about -

Ms Bethel: So which provinces are revisiting that type of approach, and who are your allies and what can we do about it?

Mr. Van Houten: Notably British Columbia. There was some concern at the time the agreement was being negotiated a year ago about Saskatchewan's commitment. There was also some concern expressed about Ontario's commitment, although I think that last one in particular was a little misplaced; it wasn't really fair to Ontario in that respect. The Atlantic provinces by and large, and particularly New Brunswick, I'd like to say have been extremely supportive.

In terms of allies outside government, we have lots of those. They are notably in the business community and also among consumer groups, but not, I regret, for the most part among labour groups. In fact, I've even had senior labour officials say to me, in principle free trade is a bad thing, and therefore if it's a bad thing at the international level it must be a bad thing at the domestic level, so we don't want it.

Ms Bethel: So who are your allies and what are you doing? You must have some kind of strategy to work with B.C., Saskatchewan, Ontario and also the labour groups in terms of developing some understanding.

Mr. Van Houten: We don't have much of a strategy with labour groups. They're just not supportive. There isn't a lot of percentage or future in beating our heads against a wall.

With respect to British Columbia, we have a very active division or chapter of the CMA in British Columbia, which pursues our point of view with the provincial government there actively and consistently. We haven't been successful so far in changing their minds. But the strategy of high-level contact early and often, if you will, continues. I know the leadership in B.C. will be changing soon and perhaps that presents a fresh window of opportunity for us.

The Chairman: Perhaps more than the leadership.

Mr. Myers: Mr. Chairman, if I could just add a couple of points to what Mr. Van Houten said, when we first started looking at this issue five years ago in terms of trying to quantify the cost, much of that focus was placed on actual restrictions and particularly on government procurement and procurement by the MUSH sector.

One of the biggest problems we face right now in doing business across the country is in the differences, contradictions, and the overlap and duplication on the regulatory side. This is an area where I think the internal trade agreement probably doesn't go in itself far enough and where we should be building on that agreement. The only way of doing that is hopefully by bringing provinces and the federal government together in terms of identifying where the problems are and, very easily or in a low-cost, effective way, dealing with the problems and coming up with a better formula for harmonization. The problems are everything from electricity, wiring in Saskatchewan that's thirty years out of date, highway codes in Ontario, and everything else.

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Ms Bethel: So how are you going to involve labour and those who are resistant to liberalizing trade?

Mr. Myers: The big part at least in getting the provinces on board here, which is really the priority, is to show that there is a common interest here in some form of mutual recognition of more effective standards. That's really where we're aiming a lot of our attention, particularly at the regulatory level right now. That's probably the most effective way of doing it right now.

Ms Bethel: I do have more. I hope we get a chance to come back.

The Chairman: I hope so, but we have about 20 minutes.

Mr. Discepola.

Mr. Discepola (Vaudreuil): Thank you, Mr. Chairman. I'm astonished, to tell you the honest truth, because I feel that we're at loggerheads here. We don't seem to have the cooperation of our provincial counterparts. I know personally, for example, that there are regional governments, municipalities and health boards that have restrictions in their tender documents that really prevent Canadian companies themselves from bidding on an awful lot of these services.

We had an example of this in our finance hearings across Canada where, because of some health board restrictions, there is no company in Canada that can provide it so you have to buy it from the United States. However, if through economies of scale you could get all ten provincial health boards together, you'd be able to have a sustainable Canadian home-grown economy around it.

I am shocked. I don't know what the government can do, to tell you the honest truth, because it seems that every time we try to negotiate with the provinces these days, we take two steps forward and probably sometimes three steps back.

Has your association done any negative impact studies to find out what would be the impact on all the provinces if we were to eliminate certain interprovincial barriers? There must be some common elements where it's positive for most provinces, and therefore if you could show the premiers of these provinces that by eliminating certain barriers everybody benefits.... Those are the ones we should attack first.

I realize it's taken almost seven or eight years to get where we are today. I'm not very optimistic about the outcome, but it seems to me, damn it all, that we have to get together. If we're looking at ways of cutting back expenditures, this is a way to improve our GDP by almost 1% or 2%. Why isn't everybody jumping on board and working together? What can we do as a federal government to get the ball rolling?

Mr. Van Houten: With respect to the negative impact studies, if you will, I'm not sure we've done that. You might be able to clarify.

Something occurs to me, though, about why some provincial governments are not in favour. I travel across the country and meet our members. It's a funny thing that in every province I visit there's a small, not-very-efficient, certainly not world-standard or world-scale, wiring plant owned by Northern Telecom. There's one in St. John's, Newfoundland. There's one in Charlottetown, P.E.I. Those plants don't belong there. They don't make any sense.

They produce a high-cost and, it's probably fair to say, less than their best-quality product. However, it's there for a reason. The reason is that it was part of the price of obtaining admission to become a supplier to the provincial government on some other piece of business. But that plant, with its 12- or 20-member workforce, is a local employer. There's a nice nationally and internationally known logo on the side of the building. What mayor of a city in Newfoundland or P.E.I. or wherever doesn't like to see one of those? They do.

Mr. Discepola: But isn't there a threat today that this logo is going down to Mexico?

Mr. Van Houten: But the short-term cost, I suppose, is that you lose that plant and you lose those few jobs.

The trouble in any of these things, politically speaking, is that - and you folks are politicians and I'm not, so you know more about it than I do - it seems to me it's often the case that the cost or the downside of the equation is visible and immediate. That little plant closes and the logo disappears along with the dozen jobs.

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On the plus side of the equation, the more competitive company, Northern Telecom, which maybe has two or three plants in Canada that are international in scale and competitive in potential - those are less visible and the gains are not necessarily immediate. It takes time for them to reorient their total cost profile and use cost savings to become more competitive; for example, on the export side.

So I suspect that is the rationale. What can you do about it at the federal level? We mentioned some things.

You can certainly extend the provisions of the agreement, without exception, to federally regulated or federally funded agencies. That hasn't been done. It could be done. You can ensure that the annual report of the committee is tabled before Parliament, where it can be debated and people can have an opportunity to feed the momentum for further progress. Those are a couple of things that we think can and ought to be done.

Mr. Myers: If I could just add a couple of examples of where provinces and the federal government have come together and where there has been an assessment of the impact of the negative implications of some of these restrictions, the area in pulp and paper especially, moving toward administrative agreements under the Canadian Environmental Protection Act, in New Brunswick significant efforts have been made to harmonize the regulatory requirements so that companies come under one regulatory umbrella, and a cost assessment has been done with the business impact test, and it has been led by Industry Canada. To my knowledge, this has worked very well. The companies and the provinces are on board, but the problem is that somehow you have to....

We're aware of this problem ourselves. If you talk about regulation, about compliance, everybody's eyes glaze over. It's a high-cost area. It's not a particularly sexy area for governments to get involved in, but there are examples of this working.

Maybe one thing it takes is a champion, which could be an intergovernmental body championing this, bringing best practices to the table, showing the negative implications of some of these restrictions but also the positive results from restructuring.

There are a lot of inefficient plants. I'm not sure a lot of them would close. Perhaps getting rid of some of these restrictions now might give some of these facilities the opportunity to restructure themselves and to specialize their products and to use the domestic market as a base for future growth. I don't think you would see the closures that many of the opponents would be talking about.

Maybe there are two other areas, too, on which the federal government could take the lead - or maybe not the lead, but where there might be some movement.

A part of the restrictions that operate even at the local level - and there are a lot at the university level and so forth - is a reflection of the fact that these administrations have funds to spend. It's a luxury. That is going to be changing, and fairly rapidly, I hope, as institutions at the local level have to restructure in response to fiscal cuts being made by all levels of government. I hope that in doing that the local administrations will restructure to provide the best quality of service to the customer that they possibly can and to make sure that customer is a national one.

The second area, though, is by perhaps leading by example in other areas. Procurement is a big issue in interprovincial trade, and it has been argued that provinces and the federal government can use procurement to help the development of small businesses. Let me tell you this, aimed at provincial procurement as well as federal procurement: the best way of helping small businesses on the procurement side is to make the system work better, to cut the cost.

All governments in this country are notorious for complexity, inflexibility, changing the terms of contracts, paying late.... All of this is a part of government procurement. The best way to help businesses at the local level or at the federal level today through procurement is to make that process work a lot better. Working by example in that area, I think the federal government can take the lead and can show significant benefits to small businesses across the country.

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The Chairman: Mr. Bélanger.

Mr. Bélanger (Ottawa - Vanier): Mr. Chairman, my questions have been answered. Thank you.

The Chairman: We're moving right along. Mr. Collins.

Mr. Collins (Souris - Moose Mountain): Gentlemen, I must say I appreciate your presentation. But coming from small-town Saskatchewan, I wouldn't want to be the PY you were going to close down. I hope you'll be the mayor when they shut the place down, because you won't go over that big with the local folks.

Mr. Van Houten: That's true.

Mr. Collins: There is a multiplier effect. When the twelve go -

Mr. Van Houten: I know.

Mr. Collins: - and we were just talking about the multipliers - there are four or five backed up behind them, so the twelve become fifty. So everybody has that little inner sanctum they are protecting.

I noticed that when you wanted to propose.... Much as you don't like legislation, within the brief you're saying, we want to have this group here, we're going to have another layer here and another layer here. Do you know what we're going to have? We're going to have another bureaucratic jungle we have to go through to resolve the issue you have before you, which is the free trade of goods and services; and I support that wholeheartedly.

What happens with procurement? I was on a large hospital procurement...as the chairman. We attempted to...and we did work collectively, through four provinces.

I commend you wholeheartedly. It's unfortunate we couldn't get the other ten to say, look, how do we do this?

But there are some spin-offs back to the local guy who is saying, gee, I'm here and I'm not getting a piece of the action. All the procurement ends up in Toronto; and this doesn't go over big in Saskatchewan. So as we work through this thing, they're asking, what's my share of this filter-down process? I don't know how you do that. But I know you have a tremendous struggle.

Let me go to the negative impact Mr. Schmidt has proposed, that if we go and reinforce the inward-looking thinking that I'm an island unto myself, then I'll drop south and I'll do my dealings in the south, before long we'll all be going south - south of this corner and south of that corner - and we'll be in a whirl. That's why we have this problem.

Mr. Van Houten: Absolutely. That's right.

Mr. Collins: We have provinces that think they're better off to leave than to stay.

So it's easy to say to government, straighten out our problems. But government is saying to you, as players, come ahead with us and tell us how we get over it.

I commend you, because it's not only B.C. I know my province suffers from tunnel vision. It has to take the blinders off and wake up.

I commend this committee, Mr. Chairman. I wish to hell I had come to your committee more times, because I find it exciting. We have to do those things.

How do we get the paperwork off everybody's table? Every morning when we come in, gee, it's back up here again.

Mr. Bélanger: Use the recycling bin.

A witness: We understand exactly what you're saying.

Mr. Collins: In summary, I'm just saying, for God's sake, we need your help. We look forward to your direction. Where we can assist, we will. But we have to have both sides of the table saying it. It's not just B.C. We have to do our homework. I don't know how you're going to bring those provincial people....

You watch what's happening in Quebec. Now everybody wants a little island for himself: give me a veto; give me this. Why not get off...and get some of these things solved? We'll get to that.

The Chairman: What's your answer to all of that?

Mr. Van Houten: I'm not sure what the question was.

Some hon. members: Yes or no?

Mr. Van Houten: No. We're against it, whatever it is.

I appreciate your point very much. It is a struggle and you've illustrated why. If you're from a small town in Saskatchewan, of course your mayor is concerned about what goes on in town.

The thing is, though, if the twelve-person plant I talked about closes in your town in Saskatchewan, absolutely, that has a negative impact on the local economy. But if the result of that is that the national and indeed international company that owns that plant and subsidizes that plant and subsidizes a lot of other plants that are really too small to make it on their own becomes less profitable and less competitive, then that company maybe will decide, jeepers, I'd better take the whole kit and caboodle and move it to Mexico or some other attractive climate. Then your town loses and so does mine - mine happens to be Toronto. Everybody hates Toronto.

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The Chairman: Do you like Toronto? So does John. Nobody else likes Toronto, right?

Mr. Van Houten: It isn't a game that works out. The problem for us - and the reason it's a struggle - is that it's a little longer term, a little more diffuse, and a little further away from all of those immediate concerns that impact people at the local level.

I think what's really important for us - and I would hope for this committee - is that we not be complacent about what was done a year ago. There was an agreement negotiated after a lot of really hard work. It's a lot less than perfect, as every agreement is, I suppose - this one particularly - but it was a start. Indeed, there's a commitment in that agreement to continue negotiating, to continue progress. But that doesn't happen by and of itself. That only happens as a result of people paying attention and continuing to press.

We will continue to press. Perhaps there will be another occasion when we'll have the opportunity to return and appear before you to talk in more detail about some of the negative impacts that were suggested and so on. We certainly intend to do this at the provincial level as well across the country. I hope this committee will adopt the same kind of approach and attitude. It takes constant pressure.

The Chairman: The last question is from Ms Bethel.

Ms Bethel: Thank you, Mr. Chairman.

Mr. Van Houten, Mr. Myers, you've said in your statement that the agreement contains few measures to encourage parties to resolve outstanding disputes. What measures do you envision to encourage that?

Mr. Van Houten: There are the ones we mentioned earlier.

Ms Bethel: Other than the dispute resolution, are there other measures that can be taken?

Mr. Myers: I think it's important now to strengthen the institutions of this trade agreement to make sure businesses and other parties become very involved in the process not just of settling disputes, but of raising problems and identifying solutions to some of these problems. I think that could be strengthened, as Mr. Van Houten has said, by making sure the report of the internal trade committee is tabled before Parliament and becomes a very public report.

I think it could be strengthened by making sure there is a very easy and low-cost way of bringing business problems and solutions before a trade panel or the internal trade committee. If I'm a steel company in Saskatchewan and I'm wiring my facility according to thirty- or forty-year-old wiring standards and I can bring a better wiring standard to the table, the provincial government should agree, in principle, to that type of an improvement as a principle that can be applied right across the country.

I think that type of institutional development is important. I don't think you can write rules to do that, but you have to strengthen the role of the provinces - the people involved in this - and bring businesses to the table to get them involved.

This issue has been going on and on. In the last five years some really fundamental changes have been made in business. During this time companies have really specialized in what they're producing. They have expanded, and it has not always been in Canada.

Talking about trade disputes or dispute settlement, what business would bring a case before the committee and go through that? Granted, if it won the case - if - it would be granted costs, but most businesses would just say it's not worth their time.

Mr. Van Houten: They'll just put the plant somewhere else.

Mr. Myers: Yes, and we've seen too many of those.

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There's a company in Oshawa that started selling to provincial governments in the non-residential construction area. Today it exports 97% of what it produces. It has five plants outside of this country, all in the United States. It started in the government procurement market, and if it had been able to sell across this country we would probably have seen that company expand here in Canada.

Today it sells to any market at all. It doesn't necessarily have to be a government market, but the fact of the matter is that the American market is more important today and that's where the main focus is. The plant is still operating in Oshawa because the owner lives in Oshawa and likes to do business there. That's really the only reason why it remains there when most of its business is outside.

Somehow you have to get companies like that and all of the innovative companies - the biotechnology companies in Saskatchewan - involved in bringing not just problems or disputes to the table, but solutions as well. There must be a willingness by government to respond to those solutions in very positive ways of mutual recognition, with protocols for regulation and procurement across the country, and so forth.

I don't think you can do it without business and other interested parties at the table. You also need a commitment and a realization by everybody in the provincial governments and the federal government that this is very important. So it's a part of regulatory reform as well.

Ms Bethel: Do you see the role of the secretariat being of value here -

Mr. Myers: I think you need it.

Ms Bethel: - as a driver in the process of business?

Mr. Myers: Yes. You really need a central process like that.

Ms Bethel: Thank you.

The Chairman: Thank you very much. I must say a few thoughts have occurred to me. One is that I hope you've detected from all of us - at least from the two political persuasions represented - a total unanimity of view with you.

I hope there's no sense of federal foot-dragging. I guess the only question is that if you see us not wishing to impose our will - by really the honourable spirit of wishing to negotiate with the provinces - it's clearly not in the interests of the government of Canada to promote any interprovincial trade barriers. So we're on side with you, and we obviously want to work with you now and in the future to ensure all of this.

We clearly need a conspiracy with our allies of all stripes and persuasions across the country to work on some of the holdouts. It's certainly challenging to try to get people to think beyond their villages, and I hope with your help we can do that.

It is a paradox that in the health sector, for instance, we have the worst record of any country in the OECD in terms of supplying our own market because we have been so chopped up into little pieces that we can't find one Canadian champion to do the job. This is clearly self-defeating.

I guess my final remark is really a question. You noted that there's no room for a private corporation to become involved in dispute settlement or to challenge it. Is it possible, or has it been done in your knowledge, that under the provisions of the Constitution concerning trade and commerce - which seem to lay out pretty clearly that these barriers are not appropriate - corporations or individuals could to mount a court challenge and say, your trade barrier is simply against the Constitution of Canada? Has it been done?

Mr. Van Houten: Not to my knowledge -

The Chairman: Why not?

Mr. Van Houten: - and I don't have knowledge.

The Chairman: Could you find that out?

Mr. Van Houten: Yes. Sure.

The Chairman: It seems like an obvious question. If it's unconstitutional -

Mr. Van Houten: I guess there are two aspects to that. First, is it possible; and second, is there somebody who is willing to undergo the expense and effort required -

The Chairman: With the help of a friendly support organization?

Mr. Van Houten: Exactly.

The Chairman: Perhaps you could get back to us on that.

Mr. Van Houten: Indeed I will, with pleasure.

The Chairman: Thank you very much.

Mr. Van Houten: Thank you.

The Chairman: We'll take a two-minute break while we bring in our next witnesses. Obviously we will have more to say to each other in the future.

Mr. Van Houten: I look forward to it, John.

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The Chairman: We'd like to welcome our next witnesses, who come from the the MUSH sector. When I first heard of the MUSH sector, I thought this was interprovincial trade in dog teams, but we know it isn't. We know you represent a very important sector of our society and our economy, the educational sector. We have representatives from the Association of Canadian Community Colleges and from the Canadian School Boards Association.

What I would like to do is have opening remarks delivered one after the other. We'll then move into questions, which will allow members to contrast and compare your presentations, as we used to say in school. I gather they move in the same direction, so why don't we begin with the Association of Canadian Community Colleges.

Mr. Pierre Killeen (Government Relations Officer, National Services, Association of Canadian Community Colleges): Thank you very much, Mr. Chair.

Good afternoon, everyone. My name is Pierre Killeen. I'm the government relations officer for the Association of Canadian Community Colleges. With me is Ms Sandy Lawrence, the director of purchasing and telecommunications at Sir Sandford Fleming in Peterborough. Ms Lawrence has direct knowledge of the implications and the challenges posed by extending the Agreement on Internal Trade to what is commonly referred to as the MUSH sector, although I think it's recently been referred to as the MASH sector. Nonetheless, municipalities, community -

An hon. member: The mishmash sector.

Mr. Killeen: The mishmash sector.

The Chairman: With the ``a'', it then becomes ``academic'' instead of ``universities''. Or is it just ``and''?

Mr. Killeen: I think it's in order do to justice to community colleges, which never get their just dues in public forums.

The Chairman: You can't get no respect, right?

Mr. Killeen: Thank you, Mr. Chair.

At the ACCC, we represent 175 community colleges, technical institutes and CEGEPs in the ten provinces and two territories in Canada, ranging from La Cité collégiale here in the national capital region to Okanagan University College in British Columbia to John Abbott College just outside of Montreal.

As I stated previously, we're here today to draw the attention of the committee to the consequences of extending the procurement provisions of the Agreement on Internal Trade to community colleges specifically. I will be here to just give a general overview of what our position is and what we're looking for. Ms Lawrence is here to fill the committee members in on the specific details, or the nuts and bolts, of the consequences of the extension of the Agreement on Internal Trade to our membership.

Our general message is that extending the obligations as written in chapter five of the Agreement on Internal Trade - the chapter that covers procurement - will impose additional financial obligations, costs, personnel and time upon our institutions at a time when our institutions are increasingly being asked to do more with fewer public dollars. The position of our membership is that we would be willing to subscribe to a principles-based approach to procurement as opposed to a rules-based approach to procurement.

If I could draw the distinction, a rules-based approach to procurement would be what you would find in the existing Agreement on Internal Trade as written. A principles-based approach would impose an obligation upon the community colleges, technical institutes and CEGEPs to abide by a certain set of principles found within the procurement chapter.

I'll now turn the microphone over to Sandy Lawrence, who will give you a more firsthand account of the costs and the problems with the existing procurement provisions. She will do a better job than I did at explaining the distinction between a principles-based approach and a rules-based approach to procurement.

Ms Sandy Lawrence (Association of Canadian Community Colleges): Thank you.

In a principles-based approach - we certainly would encourage that - we see that we would have open access. All suppliers and vendors would have the ability to quote or bid on anything we are going to be purchasing, with no dollar limit put on it. It would be a little looser in the way the rules are applied, so we could still leave out the low-value items that don't give a lot of bang for the buck when we're trying to purchase them.

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The way the rules base is set right now, the limits are too low. There are certainly aspects for our college. I've done some pricing. When you do things by tender, you have to prepare a very tight document. It has to have some very precise specifications in order for you to be able to compare an apple with an apple. It also means that you have to be very aware of laws in court in order to be assured that when you send it out you're actually offering a contract to those people who bid.

You have to have spent a lot more time on preparing your paperwork. So if you're going to do that, you want to make sure you're spending that kind of time on a very high-value item.

We did a bit of a study at Sir Sandford Fleming. We're a mid-sized college. We did a study on what we feel would be a modest amount of time needed to prepare a tender. We came up with amount of of twelve hours and we used a $20-an-hour salary range as an average. We came up with a cost of $4,080 to prepare a tender. That's a lot of money.

It's fine to spend that kind of money when there's a very large issue at stake, but for other areas we would like to be able to say publicly, we're going to be buying this today and here are some general rules around what we're going to buy. We'd like to be able to allow that access without having to get into that tender structure.

For now I'll leave it at that, and if you have more specific questions later, I'll be happy to answer them. Thank you.

The Chairman: Thank you.

We'll move along to the Canadian School Board Association and welcome Ms Pierce.

Ms Marie Pierce (Executive Director, Canadian School Boards Association): Thank you. My name is Marie Pierce and I'm the executive director of the Canadian School Boards Association. I must express regrets on behalf of Bill Wells from Saskatchewan, who was going to attend with me. Unfortunately, you can't control the weather, and with the blizzard in Saskatchewan yesterday he wasn't able to make his flight.

The Chairman: It's too bad Mr. Collins isn't here to be blamed.

Ms Pierce: True.

Mr. Discepola: He's been blamed for everything else.

Ms Pierce: The Canadian School Boards Association is the national voice of school boards and school trustees. As such, we represent the local level of government. CSBA comprises the ten provincial school board associations representing over 500 school boards serving more than three million elementary and secondary school students.

Our association concurs with the objectives of the parties to the internal trade agreement but we have concerns with regard to the level of involvement of the MASH sector in the negotiations, and with regard to the general direction of the discussions.

A number of provinces have consulted closely with the MASH sector as their policy positions with regard to internal trade have been developed. Unfortunately, other provinces have not consulted. We urge the Government of Canada to encourage all provincial governments to undertake consultations with the MASH sector as they proceed with the negotiations.

It is our view that the role of the provinces, the territories and Canada in this matter should be to establish broad expectations for school boards and other MASH sector entities and to encourage administrative efficiency and flexibility of response.

We believe that a principles-based approach to the agreement would achieve these goals. The imposition of administrative regulations and entrenched procedures through a rules-based agreement would be a much less successful and certainly more expensive means of achieving the objectives of the parties.

A principles-based approach would establish commonly recognized principles of procurement for the MASH sector. These would focus on such things as non-discrimination, transparency, supplier access and competition.

However, we find that each year school boards purchase millions of dollars worth of goods and services, everything from chalk brushes to buses to school buildings.

A rules-based approach would place significant additional administrative burdens on school boards in the development of tender specifications, procurement procedures and dispute resolution. The increasingly limited administrative capacity of school boards cannot cope with such requirements unless there is sufficient flexibility to introduce innovative procurement practices designed to achieve the general objectives of the agreement, but not designed to ensure that school boards have additional costs. In these times of fiscal restraints, school boards are finding they have less and less money for administration, and if there are a lot of costs involved with the very rigid rules-based agreement, that money is going to have to come out of classroom dollars.

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In the unfortunate event that Canada, the provinces and the territories determine to establish a rules-based approach in compliance with the agreement, we strongly recommend that the thresholds be established at a level sufficiently high to set most MASH sector entities outside the agreement. The annual level for procurement of supplies should be established at $1 million and construction at $5 million. Service contracts, such as transportation, should be no lower than $5 million.

In summary, it is the view of the Canadian School Boards Association that the MASH sector entities must be fully involved in the process to develop and implement the Agreement on Internal Trade. We believe that the implementation of the agreement would best be served by a principles-based approach. Failing this, as I've already indicated, the thresholds have to be changed. As well, we feel the provinces and territories should not be required to implement a complicated and burdensome monitoring process that will only add to the costs of service delivery and thereby reduce the resources available to purchase the necessary goods and services. Thank you.

The Chairman: Thank you very much. In some ways I wish our friends from the Canadian Manufacturers' Association were still here.

I'm going to begin with Mr. Schmidt.

Mr. Schmidt: Thank you, Mr. Chairman.

I'd like to ask you to really get into this principles versus regulation in much more detail than you've given us. It seems to me that on the surface it sounds much better to go principle than rules. I think on a theoretical basis I would have to agree with that. Until I understand exactly what you mean, though, I have to withhold my support for that.

I think that you in particular, Pierre, mentioned you felt the agreement is written in such a way that really principles are not the underlying concern here. I think you read the agreement as being only regulation- or rules-based and not at all principle-based. That's your interpretation of the agreement. Now, why do you use that interpretation?

I'd like all three of you, because I think you're all involved in exactly the same issues, to really get into this clear distinction between principles and regulation.

The follow-up question, of course, is how do you enforce application of principles?

Mr. Killeen: Thank you for the question. I can touch on two brief points, and then I'll maybe turn the second question over to Ms Lawrence.

I think a clear illustration would be the tendering thresholds where under the AIT as it's written, the rules-based approach, any contracts in excess of $25,000 for goods would have to be tendered and any construction contracts in excess of $100,000 would have to be tendered.

Our understanding of a principles-based approach to this would be that MASH sector organizations, community colleges, technical institutes, CEGEPs, would tender nationally but would not have to tender, say, for goods in excess of $25,000. If a community college saw that it was in its economic interests to tender a contract nationally, then a community college would abide by the principles in the procurement provisions and would choose to tender for that particular amount of dollars.

A rules-based approach would say that for any contract for goods in excess of $25,000, you'd have to tender.

A principles-based approach would say that contracts for goods have to be tendered according to these specific rules, and it would be up to our individual institutions to decide that given the dollar amounts, it would make economic sense to tender these particular contracts nationally.

Another good illustration of the problems posed by a rules-based approach would be that community colleges, CEGEPs, and institutes are really getting into new kinds of buying relationships with suppliers. The agreement as it is structured would seem to pose a real barrier to these new kinds of relationships.

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A good illustration of how these relationships work - and we've touched upon this in the fifth point under 3.0 in our brief - would be how the automotive industry works, how automobile manufacturing companies have very tight agreements with specific suppliers. Ford Motor has dealings with, I believe, Magna that are very extensive in terms of its supplier relationship. Ford doesn't tender every time it wants to buy windows or a particular car appliance. It will go to its supplier, and because it has a special relationship that allows both entities to think in the long term and to plan in the long term, it seems to me to be what is mutually advantageous in the private sector.

We should start carrying those principles over a bit more into the purchasing and tendering relationships that our community colleges are trying to establish with their particular suppliers.

Mr. Schmidt: It seems to me that you in your own organizations, whatever they are, a given school board, hospital board, municipality, or whatever, set your own thresholds. Within the very comment you made, you indicated that above a certain dollar figure it begins to make sense to tender and below a certain dollar figure it doesn't.

So it seems to me that it makes a difference where you do this, whether you do it nationally, provincially, or locally. But you do tender. So in part the question is, are the internal trade barriers that exist between provinces not part of the problem that makes tendering itself so very complicated and so very expensive? If the trade barriers were not there, would the tendering really be as difficult as you say it is?

Ms Lawrence: Yes, they would still be as difficult. The intergovernmental trade barriers really don't impact on the tender preparation. The things that impact on a tender are the rules to do with....

I'll give you an example, a cleaning contract for the college. I certainly have to have the specifications very tight, very understandable, so that each person who quotes on that is quoting on the same thing. So it has to have hours and it has to say specifically ``I'm going to dust this ledge and we're going to wipe this light'' so that I'm assured that I'm getting the right price.

In a tender, to do that, I'd spend, certainly the first time I prepare it, probably 15 or 20 hours on that. Also, you also have to keep in mind: if those suppliers complain, have I covered off all the points so that a court of law would say that legally they prepared those documents right and they used the proper criteria in doing that evaluation?

If you're into a proposal, if I use the same example of a cleaning contract.... Bear in mind that in both instances I'm allowing all suppliers access to those documents. What happens in a proposal is I say to them, ``I have this many square feet to clean; I don't care how many people you use, but there has to be a certain standard of cleanliness when you get done''. They submit a price, and then you pick one or two of those that look as if they are reasonably within what you want and what they're saying they're going to do, and you sit down and negotiate. That's a different story from a tender, where you've got to take that bottom price and stay with it. You can't deviate from that.

So that's the idea behind why tenders take a lot more time to work on.

Mr. Schmidt: So is the problem the word ``tender'' in here?

Ms Lawrence: Absolutely, and on the -

Mr. Schmidt: If that word was changed to another word, would that take care of your problem?

Ms Lawrence: It would take care of part of it.

The other part is the thresholds that you're talking about using, because just as you said, each place kind of decides what its threshold will be, dependent upon the amount of money it has to spend.

So for Sir Sandford Fleming College, our board of governors sits down.... I do the preparation and the study on what I think is a good level where we would start to think about buying on a tender basis. We use $50,000 for goods; we use $200,000 for contracts. A large college such as Humber uses $100,000 for goods. So it has a lot to do with where you are and what kind of a dollar volume you have. A small municipality might have a threshold of $5,000, depending on what its buying power is.

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That's why having it imposed in there causes hardships for the people up here, who have a lot of buying power, and the ones who have a little here; whereas if you allow it to be based on what they do in that community and what they feel is fair for that community but it still allows access to all those other types of things we do - co-op buying, proposals, quotes, and negotiation-type environments, then that would solve the problems in both ways, because then what we're talking about is really principles.

Ms Pierce: What we really want to say, I think, is we want to have flexibility. When you have a rigid rules-based approach, which says the thresholds are x amount no matter where you live in the country, then you have to go through this kind of specification requirement and you have to go through these kinds of dispute resolution mechanisms. That doesn't provide the flexibility and the recognition that there are large school boards and there are small school boards, there are rural ones and there are urban ones. We are trying to argue that if you have principles everyone adheres to, within those principles we can have the flexibility to meet local circumstances.

For example, a lot of our school boards in a number of provinces like to tender locally and have a local preference for businesses because of the fact that in many provinces the local taxpayer and the local businesses pay for the education taxes. The provincial share of the education dollar may be very small. It may be 40¢ on the dollar, and the local tax base may be 60¢. There should be a threshold that provides for a preference for local businesses and communities if that seems to be the best process, and that also supports local business in that community. If you have a very rigid approach, then you don't provide for that flexibility which recognizes the differences between provinces and between boards.

Mr. Schmidt: That's precisely the point, Mr. Chairman. That's exactly the issue I thought we were getting to. It's now here. That's precisely the problem, Mr. Chairman; and it seems to me that's exactly what this agreement is trying to get to.

Now you're telling me very clearly that these are the barriers. That's precisely what we're trying to get rid of.

Ms Lawrence: As far as community colleges are concerned - and I can speak only for Ontario; I happen to be the chair for the Ontario group this year - we do not support a local preference policy. I personally have never supported one. I believe local people should have to compete on the same level as everyone else. Whatever it is you're quoting on, if you have the capabilities and the wherewithal to be able to supply that product, whether you're local or you're in B.C., you should have access to that. Where I have a problem is with putting thresholds on what those dollars are.

Mr. Schmidt: If I understand you correctly, then, it's a certain flexibility with a threshold. You don't really object to the thresholds being there. You just want them not to be standard right across Canada, such as $25,000. Maybe it should be a little less than that, maybe it should be a little more than that.

Ms Lawrence: For example, if there were something in there that said each sector had to ensure there was some kind of threshold that suits their organization and then you leave it at that and you don't put a dollar number on it, then I could support that.

The Chairman: Mr. Bélanger.

Mr. Bélanger: I might as well start with stating that I disagree wholeheartedly with the suggestions from both groups.

I would like to know if you have had a chance to look at the principles of this agreement, and whether you disagree with any of those.

Ms Lawrence: No.

Mr. Bélanger: No. Everybody is in agreement? How do you propose, then, to put those principles into effect other than by having rules to do so?

Ms Lawrence: I do have a document in front of me that we prepared in this province as a proposal to take to the table on how we would put some mutually agreed principles in place, and then some sectors.... This is not a document that has been approved by all sectors in our province. The universities and colleges did it.

Mr. Bélanger: Nor did the provincial government approve it, obviously, because they are signatory to this agreement.

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Ms Lawrence: I don't want to get into talking on behalf of the province. We've certainly met with them several times and have some general concepts.

Mr. Bélanger: Would you agree that they've signed this document?

Mr. Killeen: They are signatory to the agreement but they've also agreed that they will extend the provisions in chapter five to the -

A Voice: This is not finished.

Mr. Killeen: Exactly, it's not finished. The municipalities, the MASH sector, will sign on I believe on June 30, 1996. The provinces are now negotiating amongst themselves with respect to extending this particular agreement to the mesh sector. So even though the provinces themselves are signatories to the agreement, they are not all in agreement as to how this is going to work out for our particular sector. This is still very much up in the air.

Ms Lawrence: Maybe what I could do at some point is supply you with a copy of this, so that it would give you an idea.

Mr. Bélanger: By the way, if you're going to compare apples to apples, as you suggested we should, might I suggest that you should compare public sector institutions with public sector institutions and not with the car industry.

You stated that it takes 12 hours or so at $20 an hour to prepare a tender. Then you said it costs $4,800. Could you spell the rest of that out, please?

Ms Lawrence: Yes. I'm sorry; when I quoted that number I forgot to add to that what I based that on. At our college if the threshold were lowered to $25,000 and to $100,000, it would mean that, based on last year's purchases, I would have to do 17 additional tenders. Those 17 additional tenders would take that many hours at that many dollars.

The Chairman: I have a question. What is the cost of preparing a proposal? We would have to deduct that.

Ms Lawrence: I wouldn't do a proposal for those documents either.

The Chairman: You wouldn't do a proposal?

Ms Lawrence: No.

The Chairman: What would be the cost of doing whatever it is you do? What is it you do?

Ms Lawrence: On those we would do what we call a quote. A quote is a lot more informal. It doesn't have a lot of specifications behind it. It would probably take me or one of my buyers about half an hour to prepare a quote and send it out and maybe another half an hour to an hour to evaluate it when it came back in.

Mr. Bélanger: So you're saying 17 of them would cost $4,800.

Ms Lawrence: That's correct.

Mr. Bélanger: How often would you have to do that?

Ms Lawrence: In this instance it would have been 17 times more last year that I would have had to do that.

Mr. Bélanger: For a total amount of spending of how much, on those 17 occasions that you'd have to do it?

Ms Lawrence: They would have been the ones that were between $25,000 and $50,000, so some of them might have sat at $25,000, some might have sat at $30,000, some might have sat at $40,000.

Mr. Bélanger: Can you give me a ballpark figure?

Ms Lawrence: Oh, sure. I'll pick the middle of the road, $30,000 times 17.

Mr. Bélanger: You're looking at about $500,000, so less than 1% is the cost. Do you have any estimate of the savings that might be generated by going wider on the competition basis?

Ms Lawrence: I don't have those numbers in front of me. I do have them in the office. I'm sorry, I could have brought them with me.

Mr. Bélanger: I would argue, rightly or wrongly, that the savings would far offset the additional costs.

Ms Lawrence: But don't forget, I'm doing quotes. It's just that I'm not having to advertise nationally and I'm not having to prepare those extra hours, as when it's more tender-based. A tender really is very -

Mr. Bélanger: But advertising nationally may not be all that expensive. It depends how you do it. You can do it on an Internet system, for instance. I presume at the college you're probably linked up to that.

Ms Lawrence: Yes, but there are very few businesses, especially small businesses, that are.

Mr. Bélanger: That's their problem.

Ms Lawrence: No, but we're talking about making this more accessible, and that is a problem if they're not accessible.

Mr. Bélanger: They can go to the library. The schools throughout the country will all be linked to the Internet pretty soon. There are ways, with using a little imagination, of making access to these tender calls rather easy and at a very modest cost. So I don't accept that argument for wanting to resist the tender call process.

Ms Lawrence: Well, I'm sorry. I'm not sure how I can answer that other than to tell you that it does take a lot more preparation time. Also, if you're going to do this on a national basis, then it means that I'm presumably going to end up with a lot more people who are going to submit a bid, which means I'm going to have to do a lot more evaluation on it. That, too, takes up time.

Mr. Bélanger: We should try it before we knock it.

Thank you, Mr. Chairman.

Ms Pierce: I do know what you're trying to argue for, and I want to get back to the point of flexibility. We have very small school boards and we have very large boards. We have differing abilities to be involved in a national tendering process.

What we're trying to say is that our association very strongly supports the principles in the internal trade agreement, but we want to have flexibility within that instead of having rigid, across-the-board, no-matter-what rules in terms of how to approach it. I think you can't underestimate the amount of time and knowledge that's required in developing very specific aspects of the specifications when you're doing a tender.

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I know a number of our school boards are looking at and have established consortia, where we try to tender provincially or in large groups. One of our concerns is whether, if we're looking at very small thresholds, a lot of those consortia may say, okay, individual school boards do it now because it will save us on the administration costs. So we're trying to balance out the need to have some sort of cross-Canada principles we support and, at the same time, provide for the flexibility.

Mr. Bélanger: I have no problems with that, but I still don't see how a tender-based system removes any of that flexibility if you do it in a way that is fair and open.

The local contractors that you say your association prefers to deal with are, surely to God, not prohibited from bidding, and they have an edge from being local in the first place. You probably won't get someone from Newfoundland bidding on a school contract or a bussing contract somewhere in Ontario - I don't think you would - because they don't have the edge of the local contractor.

But for supplies, lo and behold, you may have a manufacturer in Newfoundland that could produce a saving to your taxpayers. Fine, the local contractor won't get the contract for that supply, but the taxpayers are asking for efficiency also. Let's not forget that - all the taxpayers.

Ms Pierce: True. School boards have always had a fairly open tender process. We're not saying we want to have something different. What we're saying is on certain items it may make good sense to buy locally, but we would still have an open process of people tendering on it.

Mr. Bélanger: The series of witnesses we had ahead of you - and you were listening to them - certainly seemed to disagree. They're encouraging that we...particularly to go to this sector initially, because that's the one that's most protectionist. And believe me, I've lived in this area for a while and I've seen how it is protectionist, between Ontario and Quebec, in this very capital region. It's incredibly protectionist, and the taxpayers are the ones getting to pay for that. You are almost suggesting that we carry on with this system, and that's not what we want.

The Chairman: I think we have to move along to Mr. Discepola.

Mr. Discepola: On the question of tender documents and preparing specifications, I come from a municipal background. I administered a small municipality with $28 million, and we also had a regional body that had $1 billion budget.

It's quite easy to prepare a tender document. I agree that it's laborious. It's about this thick, and it certainly scares off the small business people from tendering, because of the sheer fright of the volume of it. But it's all computerized...word processing. You do it once, and then next year your buying requirements tend to be traditionally the same, so you can just adapt it to the next contract. So I don't buy the argument that it costs an awful lot.

The main fact also is that when I was mayor, I never heard my administrators tell me that if we save this we'll be able to save x hours and, by your inference, $4,000, and therefore I'd go to them and say show me the manpower savings, then. There never was any. So your people are going to do something else. They might have to analyse it.

On the question of rigidity, I have seen some very ingenious ways of going to tender, and I refer to splitting the bids. Even though we'd say you have to go $25,000, I've seen purchasing agency department heads split a tender bid into four different sub-bids. The most ingenious had to be at the Montreal Urban Community, where they went to a weighted criteria. The number of years of service was weighted so much; the amount of experience in the field was weighted so much. So from ingenuity and flexibility, it gives you tremendous flexibility, and I'm sure you're more than able to do it.

My question -

The Chairman: I think he'd make a great member of the opposition, wouldn't he? We'd have preambles -

Mr. Discepola: My question is on the issue of rules-based versus principles, because I do not believe if we go to principles-based you will be able to show impartiality, openness, fairness, and most importantly, transparency. We are, after all, administrators of public funds, and if you allow the discretion of either a purchasing agent who can obviously favour the local person, or even favour any one individual in particular, you will not be able to answer the questions that I've just.... So how do you overcome that if we go to principles-based?

Ms Lawrence: I would suggest that suppliers are your watchdog in those areas. They are now.

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Say, for example, I'm purchasing something in the community and I haven't made all the people aware that I'm doing that. I'll sure get a phone call in which the person will say they heard that I did something last week but they didn't hear about it. So I think the watchdog is there, whether it's rules-based or principles-based.

How do I answer this?

Mr. Discepola: Let me ask you directly. If the federal government went to principles-based purchasing on everything it did, how long would we last in the eyes of the taxpayers across Canada?

Ms Lawrence: But a part of the problem is that it's awfully rigid when it's rules-based all across the -

Mr. Discepola: But it's rigid to protect the taxpayer.

Ms Lawrence: But you hear suppliers complain about that rigidity, too.

Mr. Discepola: But as a public administrator, I always had an answer. I asked whether the tender documents were fair. If they said they weren't fair, I asked them to tell me how they discriminated against their firm. I would correct them for the next year.

But if they're not fair, we then have a problem.

Ms Lawrence: But if you're in a rules-based environment and your thresholds are too low, you're tendering on things that take up a tremendous amount of time.

I argue with you about that manpower factor. Maybe it wasn't an issue a few years ago, but it sure is now. At our college, we have ended up using a small-dollar purchase order form that we didn't use before. We now use Visa cards. We raised our limits on capital and on our tender processes just for that reason. I couldn't get more staff. In fact, I'm told that in the next year I'm probably going to have to lay off half a person. I don't know how I'm going to lay off half a person.

So the manpower issue is an issue out there today. Maybe it wasn't five years ago, but with the way budgets are today, it's an issue, and we're looking for new and different ways of being able to do those purchases that we didn't do before. That comes in under the rules-based approach.

Mr. Discepola: But I don't think you can assure fairness, openness, and transparency.

Ms Lawrence: But you can still have a committee that's looking after that side of things. Maybe as a part of the principles approach, part of that could be like this. Rather than it being a dollar limit for tender, maybe what we should say is that we'll put something in the paper that says ``Sir Sandford Fleming College, over the next six months, will be buying these things. If you are interested, please submit your name.'' So it doesn't have to be a rigid tender, but those people are going to be aware that I'm going to be buying that stuff, and they have the access. They'll be sure to send in those quotes.

Mr. Discepola: But you give too much discretionary power to the person making the ultimate decision.

Ms Lawrence: But I'm answerable to a board of governors. I'll tell you, that's not too discretionary. I have to be really careful about what I do in the community. If someone is not happy, they go to one of those board members and then I'm up on the table.

Mr. Discepola: And if one on the board of governors tells you that his friend has a firm?

Ms Lawrence: Yes, that's right. I've been there.

Mr. Discepola: Okay, I reserve all future judgments, Mr. Chairman.

The Chairman: I heard Ms Bethel say ``exactly''. Ms Bethel, carry on.

Ms Bethel: I read in your brief that you're concerned the agreement disturbs a system that has worked well across Canada and to everyone's benefit. I guess I would have to ask how you know that. How can you determine that in fact your school boards and community colleges have received their best value?

Ms Lawrence: That was in our brief?

A voice: It's in Marie's brief.

A voice: It's a school board issue.

Ms Bethel: I'm just making a wild assumption here that all three of you can answer all the questions.

Ms Pierce: This is what we've been trying to do. A lot of school boards have established fairly specific procedures in terms of trying to tender for projects, services, construction sites, or whatever. School boards are elected, so people are definitely accountable to the local taxpayer.

One of the things we have found is that - it gets back to the same argument that I've made more than once now - by having a flexible approach, school boards are able to develop the procedures and the -

Ms Bethel: I understand about the procedures, but how do you know that the way you're doing it gives you best value? I'm assuming that what you're aiming for is the best value for the taxpayer.

Ms Pierce: It's also to get the sort of services and products that best meet the needs. Some of these may be different from locality to locality.

I guess it would be just in terms of our school board's satisfaction with the kind of process they have been involved in. As I say, there's already a very open process when they are doing tendering.

Ms Bethel: But you have no measurement or way of measuring?

Ms Pierce: No.

Mr. Killeen: Maybe I could jump in here. I guess I didn't really gauge this very well, but we probably appear to you as a couple of interest groups that are saying that the Agreement on Internal Trade is fine, but once it comes to our backyard, then that's clearly not the case. It seems to me there's a perception that we are not accountable for the dollars we spend.

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Ms Bethel: No, Mr. Killeen, I don't mean to leave that with you. I just needed to get some assurance.

Mr. Killeen: I'm not singling out any one of the members of the committee here, but -

Mr. Bélanger: Feel free.

Mr. Killeen: Thank you.

Community colleges are accountable to a board of directors. There are some community colleges in Canada that generate upward of 50% of their revenue from non-government sources. They are actively competing in private training markets. They are competing against private training institutions. They are competing for students very actively.

To think that they would be in a position in this day and age to spend their dollars with largesse is really not the case. Our institutions are increasingly having to do with less, and any decisions made with respect to purchasing are really scrutinized. We have a number of financial administrators in community colleges. These are big institutions, so they are very concerned with getting the absolute best value for every dollar they spend.

Ms Bethel: Thank you. I wanted to follow up a little bit on some of the trends we're seeing, certainly in education these days. The consolidation of school districts is happening throughout Canada. Do you see any value in terms of purchasing to having that kind of clout on a larger basis?

Ms Lawrence: I'll answer for community colleges. In certain instances, we're involved in larger consolidations. Take the province of Ontario, which is what I'm most familiar with. First, in my own region, I'm in what we call the Kawartha Cooperative Buying Group. It's made up of the two school boards, the city, Trent University, our PUC, which is the utilities, and a couple of the counties. We meet four or five times a year. We have a very set constitution and by-laws, and we do a lot of -

Mr. Bélanger: Rules? You have rules?

Ms Lawrence: Yes, but no dollars are put on it; it's more principles-based.

Mr. Bélanger: A rules-based organization.

Ms Lawrence: As a group, the members all have to say at the front end whether they're going to opt in or out of a purchase, but we do it for things that we feel are of a large enough dollar value that there's a good saving for all of us administratively to do that.

We also, as a community college group, work in regions. We will do some purchases on a regional basis, and we also do some things in the province.

We're slowly getting into it more and more. We do tap into the ministry's standing agreements in this province and purchase quite a few things through that, which certainly gets into a more consolidated type of buying.

Does that answer your question?

Ms Bethel: Yes. I guess it goes to show some of the higher limits with group buying and other kinds of methods. Thank you.

Ms Pierce: School boards, as well, are looking at a possible wide range of cooperative measures in terms of whether they're purchasing transportation services, health care benefits, or whatever, for a lot of the boards, given the large number of employees we have, as well as the large number of products that we do purchase, both within the province and between boards.

So we have been finding that more and more consortia are developing. When you have that kind of situation in which there are a large number of boards together, then you can deal with the administrative requirements in terms of doing the tendering process and everything. So when we're looking at individual, rural or small boards, it then does become very onerous.

A lot of boards have one administrative officer, who is the CEO, who does everything. So requiring them to tender nationally is onerous.

Ms Bethel: However, that is changing as we evolve.

The Chairman: I should warn you. You've obviously gathered that some of the bench strength we have on this committee is based on the fact that they've played in the municipal field for such a long time. I think it's four for four so far.

Ms Brown.

Ms Brown (Oakville - Milton): I think I should say at the outset that I have some sympathy with what you're saying from the point of view that it probably seems to you that this agreement is going to raise some standards for you, require more documentation and more hours of work at the very time when particularly community colleges are suffering severe reductions in staff to do the work.

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So it does seem unfair to me if one government at one level - well, actually two levels are involved with this agreement; Ontario has signed it - is saying you have to do something in a more refined way than you've ever done it before, and by the way, we're not giving you enough money, so cut your staff in half.

So I understand where you're coming from on that, but had you considered the possibility that the AIT might actually lessen the work burden?

You said something that was interesting to me. You said at Sir Sanford Fleming you tender at the $50,000 mark and at Humber they begin to tender at the $100,000 mark. Well, if the $100,000 mark is good enough for Humber, I don't know why you're tendering at $50,000. Do you see what I mean?

If in fact there is some number that across Canada suggests it's a sufficiently large expenditure of the taxpayers' money that it requires tendering, then maybe it's $150,000. Therefore you and Humber would be alleviated of the burden of everything from $149,000 and down.

So what the rules end up saying is more important than the principle in that sense. You could be constrained further by rules that are too tight, but you also could be freed, and my guess is that smaller institutions and smaller school boards will be freed.

When you move to the consortia idea of purchasing, it is true you would probably then get above whatever level is established for tendering. On the other hand, surely one board could fill out the tender and relieve that burden from the other eight boards that are cooperating. So you still save money in the long run and you still save hours of work doing those things.

So there's a possibility everybody can win if the standards for tendering, etc., are not too low - if the absolute numbers are not too low. I think you're taking a pessimistic view of something that is not yet decided. I would suggest the agreement is not about to be amended, but as the rules are developed, you go in there and fight for those higher numbers.

I disagree with one thing you said. Verbally Ms Pierce said she agrees with the principles of the AIT, but the paragraph on page 2 on labour mobility is in direct contravention to the ideas of the agreement. You're claiming there that the province-specific education training and governance of teachers essentially limits them. An Alberta-governed and -trained teacher can only teach in Alberta, and so on right across the country.

The whole idea of this new Agreement on Internal Trade is to free up the mobility of persons to take their certification with them and go to another province and be recognized. So I would suggest that as this is coming in, when you meet with your board of directors, which comes from across the country, this whole idea has to be examined, because it goes against something all the provincial governments, which in turn fund education to a large degree, have signed.

Your organization has to begin to figure out how you can make your professionals, i.e., teachers, more mobile. It may be by establishing some standard that is fairly high at the beginning, such as any teacher who has a masters degree in education and five years' experience in his or her home province should be able to get a mobility certificate or something.

But there has to be the beginning of mobility among these professionals across the country, and if your organization is putting this in a brief, it suggests there's not even the beginning of thought about that, because you're defending the status quo.

Ms Pierce: On the whole issue of teacher mobility and the issue of teacher certification and provincial certification of teachers, the Council of Ministers of Education has been charged with the task of looking at the mobility issue. They're going to be forming a working group, on which we'll be represented, to try to deal with the issue of mobility and at the same time ensure that teachers meet the provincial standards set as well as provide for some level of flexibility.

So we are very much going to be involved in the discussions related to that in trying to find the levels we feel should be required for certification. But each province has individual qualifications, standards and colleges of teachers or whatever, so we have to make sure we balance out the desire for mobility with the desire for having teachers who will meet the standards in each province.

The other reality is education is a provincial responsibility, not a national responsibility.

Ms Brown: Well, obviously a teacher would have to meet a provincial standard before any chance of getting a national certificate of some sort.

Ms Pierce: Yes, that's right.

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Ms Brown: But what I'm saying is the wording of this paragraph suggests that the philosophy of your organization is the opposite to that.

Has your organization developed its position to put forward to these provincial ministers, saying what you would like to see happen?

Ms Pierce: We're in the process of doing that. Of course, given the fact that each province is relatively autonomous in establishing what the qualifications are, we're looking at trying to identify what might be the common concern or the common level of qualification.

Ms Brown: Thank you, Mr. Chairman.

The Chairman: Thank you very much.

I must say with a powerhouse like that, with a municipal background, I can hardly add anything to it.

Ms Lawrence: I would like to make one comment to Ms Brown about the thresholds and raising them to a standard.

Yes, it certainly would help, if it's at a high enough standard. But there are some other issues around what we call a tender. Perhaps that word could be changed to something else, such as ``procurement value'' or something. I'll give you some instances of where....

It's said you take a tender as it comes to you. So the bottom line on that sheet and what's put there on paper by that supplier is what you accept. You're not to get into negotiations and those sorts of things, because someone else might complain and say there wasn't a fair deal.

Whereas when you call it a proposal.... There are instances where we have to use proposals. I think about cafeteria services, where we get into negotiating what kinds of investment dollars those companies are going to put into our facility in order to have that contract. You need to be able to sit at a table and negotiate.

So if we can change the wording maybe to say it's not just a tender, that there some other ways of doing it but it's still advertised publicly or on a national level, then I could accept that too.

The Chairman: Thank you very much for what's been a spirited hour. We look forward to hearing from you in the future.

Some witnesses: Thank you.

The Chairman: This meeting stands adjourned.