EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, November 29, 1995

.1730

[Translation]

The Chairman: Good evening and welcome everyone. We are going to proceed as usual. At the start of the meeting, we will hear opening statements and then move on to a question period. Before starting, I'll give the floor to Mr. Williams, who has a motion to put respecting the committee's future work.

[English]

Mr. Williams.

Mr. Williams (St. Albert): Thank you, Mr. Chairman. I move that the committee hold a meeting with the Governor of the Bank of Canada and a meeting with the Minister of Finance, hopefully before the Christmas recess, in relation to chapter 9 of the October 1995 report of the Auditor General dealing with information for Parliament's deficits and debts, understanding the choices.

The Chairman: Is there any comment on that? Mr. Telegdi.

Mr. Telegdi (Waterloo): I second that motion Mr. Chairman.

.1735

[Translation]

The motion is agreed to.

[English]

The Chairman: Pursuant to Standing Order 108(3)(d), consideration of matters relating to household goods removal services, Public Accounts of Canada, 1994,

[Translation]

today we are going to hear three witnesses.

[English]

They are from Corporate Moving, Waterloo, Ontario, Mr. Baird; from Walker's Capital Group of Moving & Storage Companies, Kingston, Mr. Warner; and from United Van Lines, Mr. Martin.

We will start the meeting with Mr. Baird.

Mr. Telegdi: Mr. Chairman, I understand there are a fair number of people here from the east coast. I have had some communications from Hoyt's Group of Companies, which is affiliated with United Van Lines. We have representation coming from United Van Lines. If I'm correct in my assumption, there are folks here from eastern Canada who are in the business. I understand there was a request for more delegations to appear, so I wonder if it would be possible to hear somebody who represents eastern Canada in a ten-minute presentation.

The Chairman: Mr. Hopkins.

Mr. Hopkins (Renfrew - Nipissing - Pembroke): I've never felt so popular in my life. I've had about one foot of mail in the last week, I think, but I've had lots from Atlantic Canada. If representatives are here, I think they should be heard.

The Chairman: Mr. Vanclief.

Mr. Vanclief (Prince Edward - Hastings): I would support that very much, Mr. Chairman. I think if they have come that far and are that interested, we should give them an opportunity to make a presentation to the committee.

The Chairman: Does everybody agree with that proposal?

Mr. Williams: Are we talking about one submission on behalf of the representatives from Atlantic Canada, Mr. Chairman?

The Chairman: That's it. They will have ten minutes like the other three groups.

Mr. Telegdi.

Mr. Telegdi: I think it would also be useful to outline the parameters of the Standing Committee on Public Accounts. I'm not sure whether people are under the impression this committee makes decisions on how the business is conducted by the IDC. I get the feeling from some of the communications I've received today that might be the impression.

Just so people here understand our role, it's basically to examine the function of government and to see if services are delivered in the most economic fashion. In terms of history before this committee, we had an appearance by the Bureau of Competition Policy as well as the IDC. They informed the committee what their proposals were going to be. But this committee does not decide how the rules are set and how the moves are conducted. I think it's important for people who are here to understand that.

The Chairman: Merci, Mr. Telegdi.

Mr. Hopkins.

Mr. Hopkins: Mr. Chairman, as you will recall, when this conversation started I was concerned about the quality of moves if we had gone sole-source contract. I was making my pitch on behalf of all those DND families out there and the other public servants who are being moved.

We have heard from the Bureau of Competition Policy and we have heard from the IDC. It is only proper in our parliamentary system and in our committee system that if we're going to hear from one group, we should be hearing from the other groups who are affected, to make sure that they can deliver the service. I don't think it would be fair at all to consider going with the Bureau of Competition and the IDC and then stopping there, because we have to know whether these new rules are acceptable to the industry. We have to make sure the service is there for the people, because it is their life that is being questioned when we question the procedures. That's the reason why I was very strong in my comments that if we're going to hear two groups, then we have to hear the third one.

.1740

[Translation]

The Chairman: We are now going to hear Mr. Hoyt's presentation after the first three, as you requested.

[English]

We'll start with Mr. Baird.

Mr. Pat Baird (President, Corporate Moving Services): Thank you, Mr. Chairman. I would first like to thank you and the committee for this opportunity to speak to you this afternoon. In particular, I would like to thank...[Inaudible - Editor]

Recently there has been a great deal of misinformation and misstatements regarding our position with respect to the issue of household moving. Therefore, I am going to provide the committee with some background information and what I believe still needs to be accomplished.

In 1990 the IDC requested that my company, Corporate Moving Services, make a presentation to them outlining where savings could be made regarding the movement of household effects. Our review of the over $240 million DND budget for household moving and related costs revealed savings of at least $35 million, especially in light of the fact that this did not include CRS or the RCN budgets at that time.

The areas of savings fell into several major categories: real estate, legal, move management, and the moving tariff. The government has achieved a great deal of savings in all of these areas except move management, which is the most important area of all if the program is to function properly.

Mr. Chairman, it is quite possible that under the existing management structure, with its rules and regulations, no additional savings are possible from the outside contractors. However, this is not to say that considerable savings are no longer possible, as millions of dollars can still be saved.

I will now provide a brief overview of these savings.

Out-sourcing of the move management. Numerous studies have been done that support the out-sourcing of the management of the household moves. Although the IDC still disputes that, this will be cost-effective. It is clear that the private sector can perform this function at a lower cost. At least 100 soldiers could be redeployed or eliminated at a savings of $7.5 million per year net after private sector management cost. The IDC is currently planning on spending $3 million to computerize their operation, and this expense could also be eliminated. Lack of documentation and less than 10% audit frequency leads to a virtually non-existent audit system. Although these savings are significant, they do not address the ongoing program management deficiencies that follow.

Storage and transit. Although the IDC has managed to have the moving industry bear a greater portion of the cost of this problem, the problem itself has not been addressed. Government employees should not be allowed to go on vacation during their household move. Some 50% of the moves are subject to storage, compared to approximately 5% in the private sector.

.1745

Interim live-in and meal expenses. This area generates over $21 million in expense per annum in DND alone. Elimination of storage and transit and a proper transit time guide should reduce these costs by at least 50%.

Storage and transit. The current transit time guide and the rules that govern it do not provide for proper shipment times and, additionally, provide no onus on the shipper or the mover to come to mutually agreed upon delivery dates. In fact, even if the shipper wants their goods delivered early, the government would not allow the mover to do so.

Shipment distribution. The current method of distributing shipments leads to situations such as the following. Three 8,000-pound shipments are going from Ottawa to Halifax. Instead of filling one truck, the shipments are given to three different bidders, causing all three to be inefficient.

Posting season. This is a DND problem that leads to the bulk of DND moves taking place during a very short period in the summer months. This could easily be changed to the benefit of all parties.

In summary, the problem with the government moving program lies within the management as the administrative procedures cause undue cost to the industry performing the work and to the taxpayer.

Finally, I'd like to comment on the changes made to this year's tendering process. These changes are welcome; however, they should only be a first step down the road of reducing the number of bidders and raising the winning bidder's share of the business.

For 27 years the government regulated the moving industry through its tendering system. We have clearly shown the government how this has cost, and continues to cost, the moving industry and the taxpayer considerable amounts of money.

Now the tender will be open to competition from any bidder. The government should be applauded for correcting this contracting aberration that has existed for so long. What if anything will or can happen to the price is clearly unknown, as the government is now once again receiving the best price in Canada. However, this is not the issue. The issue is that the tendering process will now have fair and open competition that no one can complain about.

Thank you, Mr. Chairman. If there are any questions, I'd be only too happy to answer them at this time or later on. Thank you.

The Chairman: Thank you, Mr. Baird. We will now hear Mr. Warner.

Mr. Glenn Warner (President and General Manager, Walker's Capital Group of Moving & Storage Companies): Thank you, Mr. Chairman, vice-chairmen, members of the committee, and ladies and gentlemen. I come here on behalf of myself and the scores of other owners of private, independent, small, medium and large moving companies who service the federal government's moving business every year pursuant to its existing conditions for moving household goods. Almost all of these businesses are family owned, some third-generation, and employ thousands of people all across Canada. I've come here to express our concerns and make recommendations regarding the IDC's recently announced proposed changes to the government's existing system of procuring moving services.

Typical of many of my peers across the country, and regardless of the van lines each of us represents, I currently occupy thousands of square feet of owned and leased warehouse space, far in excess of what I would otherwise require were I not servicing government moves. Clearly, such moves are an integral part of my total business and its very survival.

The current occupancy expense of this space can no longer be justified, but, worse than that, it cannot be jettisoned from my fiscal responsibilities nearly as quickly or as casually as our corresponding revenues have been, are and will continue to be by the actions of the IDC. Not only are those premises surplus to our needs otherwise, but the required sustained standard of maintenance and condition pursuant to the government conditions is more ideal than practical.

Further, we own and/or lease vehicles and other equipment in quantities and for durations based in part on the existing government system for procuring its moving business.

Finally, we have employed and trained staff to provide the moving services to the highest performance standards currently required by the existing government conditions and received by its relocating members.

All of this was undertaken to meet the needs of the government in our respective local market areas pursuant to the existing system of equalization of the government's available business. These needs dramatically peak annually in June and July. The capacity in place is there to meet a very short-term requirement.

Equalization is an important term. Equalization was designed and implemented to allocate the government's moving business to all carriers in a local area that met the government's defined criteria and were willing to accept a system-wide negotiated price. I'll address the subject of price later. The concept recognized that no carrier could handle all of the government's needs during an extremely protracted period.

Because independent moving companies chose to align themselves with one van line or another for support services, common goals, acceptable rules, etc., outsiders have wrongly come to the conclusion that the van line controls the business. The van line only manages the moves its members or agents provide it with.

.1750

The van line is an organization whose primary purpose is to organize the traffic of moves provided to it by its independent agents to maximize the utilization of available resources.

We, not the van lines that any of us represent by our own free choice, are the ones who secure the government business currently received by our respective companies. If any one of us representing ABC Van Line decide, for whatever reason, to leave and join XYZ Van Line, we take with us whatever business we have been able to secure because of our investment and our presence in our local market. This applies to government business, corporate business and private or COD business.

Despite the IDC's decision to allocate their move business through the van lines for ease of administration, it is we who have the investment in the buildings, the vehicles, the equipment, and the trained staff, which are all needed to provide the services to the required and contracted standards of the government. It's not the van line we voluntarily represent that has these required assets.

As for the issue of pricing, it is indicative of the importance of government business to rationalize why carriers have accepted lower and lower revenues. The government's standards of one price and equalization provided the encouragement for carriers to invest and to establish operations in areas where the government was the major or only customer.

Today, these companies see their investments disappearing day by day. They have accepted the lower prices because they have little choice. They could cease doing business, but what would they do with their investments? Who would buy them and at what price?

The prevailing attitude has become ``better to wait it out and hope for a better day'' rather than losing all of their investment and their future now. As I said earlier, the majority of these companies are small and medium-sized family businesses. Their business is their future and their life.

The IDC, with the strong recommendation of Consumer and Corporate Affairs, seems to want to change their rules immediately and without consideration of the long-term build-up of infrastructure and the commitment of individuals to the previous demands and qualifications established by the same people.

Whose best interests are to be served by the obvious and predictable devastating financial consequences of such irresponsible actions? Clearly, the government-endorsed proposed new 40%, 25%, 20%, 15% procurement system will be the perpetrator and the culprit.

I repeat, the misinformation heretofore was the perception that the existing van lines controlled the government business and, as a result, the hundreds of private, independently owned moving companies that were members of those van lines. You know now this is not currently nor has it been the situation. The private, independently owned moving company controls its own local market.

In order for the independently owned moving companies to provide continuity of service on moves to or from anywhere throughout Canada at the least possible cost to the public, like-minded moving companies formed affiliations or associations with their peers throughout the country. These organizations have become known as van lines. Some are owned in whole or in part by the individual companies they represent while others are not. In any case, the independently owned moving company is clearly the backbone of the van line.

All this will quickly change under the proposed new 40%, 25%, 20%, 15% procurement system. The four lowest bidders will now in fact control all of the available business at the expense of the private and independently owned moving companies, resulting in their greatly diminished worth.

The proposed change, if allowed to occur, will overnight create immediate real risk and potential for the demise of many existing, established, private, independent family-owned moving companies employing thousands of people all across Canada. There will be forced migration of carriers to the agencies controlling the government's available business. Small and medium-sized private, independent, family-owned companies that rely heavily on government business will be forced to work for brokers whom they would otherwise not find in their best interests to deal with. It will cause a realignment of resources, not necessarily a rationalization.

For what necessary, realistic or genuine purpose is this predictable financial genocide of these independently owned moving businesses being orchestrated? Who has been manipulating and continues to manipulate the facts and the decision-makers in this process, and why? Who will truly benefit from the proposed change in procurement procedure? We all know that it won't be the independently owned moving companies. They will have lost total and complete control of any portion of government business they ever had.

In the absence of any real or attainable benefit to the government or its relocating employees, and in consideration of the consequences of the concentrated control of all future available government business by so few, the answers to all but one of these questions are inescapably obvious: greed, ego and personal gain of but a few at the expense of hundreds of small independent moving businesses.

Until recently, the IDC and the established moving industry, through working groups, have been able to efficiently and expeditiously handle changes that benefit all parties.

If the IDC has in fact a truly practical reason to implement the proposed change to its existing procurement system of moving services, which will have such a dramatic impact on the established moving industry, I suggest that they proceed in a responsible manner.

.1755

Written notice to all carriers on the existing GLAC announcing the intentions of the IDC, accompanied by a succinct, thorough, comprehensive explanation, would be appropriate, as would an extended period of advance notice for the existing GLAC carriers in order for them to adjust to and prepare for planned structural change.

After all, was it not over the course of approximately thirty years that the existing GLAC infrastructure of private, independently owned moving companies was built? Coincidentally, all of the departments of the government are downsizing. The demand for relocation services will be reduced by attrition. Once the dust has settled, many more adjustments may be readily manageable and acceptable. The proposed changes now being implemented will destroy all of that overnight. In fact, it will be destroyed in less than two minutes.

The moving companies to be affected by the magnitude of such a dramatic change will then at the very least have the opportunity to adjust their affairs in preparation for, rather than futile reaction to, the proposed change of procurement procedures. In the meantime, and during the extended notice period, the available government moving business of whatever volume will continue to be procured pursuant to the existing established procedures and only from members on the GLAC.

Natural market forces rather than those fabricated by any non-vested interest or for selfish purposes only will be far more effective in sustaining the provision of best value and excellence of service for all future government moves.

A climate of voluntary and orderly consolidation and the winding up of any excess industry capacity will clearly be a far better legacy of the government of the day than the forced and unnecessary financial chaos, not to mention the predictable service debacles and failures that will surely follow the present and planned agenda of unnecessary and unjustifiable change.

On the other hand, the logical, practical and sensible answer to this whole and entire beleaguered subject of the government moving business, which has been protracted over a mind-numbing three years going on four, is to simply leave alone what fundamentally has been and continues to be working so well and efficiently for government, its relocating employees, the taxpayers and the moving industry.

Rather than stressing external changes, focus on internal changes, and automate and streamline. Don't destroy an industry and its hundreds of businesses for no apparent, good, valid reason. Let anyone who wants to participate in the available government business do so on the same qualifying basis as the rest of us on the government list of approved carriers. If you don't have the resources, the fortitude or the inclination to do so, stop bleating and manipulating and go away until you do. The moving industry already has more than enough parasites leeching its diminishing revenues and margins.

We do not expect nor do we ask for any favours or charity from our government bodies and elected advocates on this issue. However, we do expect responsible and accountable management based on truth, fact and ethical practices from our government and its bureaucrats rather than knee-jerk reactions to unfounded assertions, all of which is no more or less than we expect and receive from our own respective van lines and peer groups. We condone nothing less.

Thank you.

The Chairman: Thank you, Mr. Warner.

Mr. Martin.

Mr. Chuck Martin (Executive Vice-President, United Van Lines (Canada) Ltd.): Thank you, Mr. Chairman, vice-chairmen, committee members, ladies and gentlemen.

If I may, Mr. Chairman, I'd like to ad lib a little before I begin my speech. I've become aware of three or four items that you people have discussed at another meeting and I'd like to touch on those.

First, I belong to the van line with the largest share of the government business and we've never won a tender. I'm not apologizing for it because we've tried to win tenders every time there was a tender.

There were also some comments about dealing with the IDC and their education and training. We have dealt with them for years. We in the moving industry may not have that education or that training. As a matter of fact, most people in our industry have their positions because of what I would call, if the ladies will forgive me, an accident of sperm.

As for the discussion of collusion about hiring IDC members, I have never seen anybody get a move from hiring an IDC member. As a matter of fact, I am guilty of hiring an IDC member. I hired him because of his education, because he had a master's in business administration, because he knew everybody in the industry and because I didn't have to train him. We are currently, because of him, within two months of having our ISO 9000 designation.

I only wish that some of you had gone to a van line and taken a look at what goes on in a van line. I want to tell you now it's not the truck, it's not the container, it's not the railroad. It's packing, preparing, and the infrastructure that makes it work. It is the van line infrastructure that makes this work. Some day somebody is going to try to handle 200 or 300 orders per day across this country and put it all together and have it work with 8 a.m. loadings and 5 p.m. deliveries and all of the networking it has to do to get the invoicing out, pay people, and settle the claims. It is truly an infrastructure that you need.

.1800

I have two problems with what I have to say. Ten minutes is not long enough to undo the lack of public relations of which the moving industry has been guilty over the past thirty years. Secondly, I am speaking on behalf of the industry. This is an unfamiliar role for me, and I apologize to my colleagues for any transgression.

I represent people who hire over 6,000 part-time people per year and over 7,000 full-time people. Income taxes they withhold and pay to the government are in the area of $53 million; the GST collected, for free, is in the area of $54 million; and the regular purchases of materials and services locally amount to almost $350 million.

I believe my time with you would best be spent in addressing the matters that seem to be of greatest importance to our industry as they have been discussed, printed, and lobbied for as a cause by Consumer and Corporate Affairs.

Your knowledge of our industry lies entirely around any move you might have experienced and, more specifically and more recently, around the federal government's moving system. A lot has been said and printed about this industry's relations with the government system.

The four van lines that, according to the media, suppress, rule, and ride over some 800 small moving companies in Canada are not masters but servants to the moving companies. Whether they are American owned, Canadian owned or British owned - what country was your car built in? - they are subject to having a membership of almost all small and medium-sized Canadian moving companies, with very few large ones. Whether small or large, they dictate to the van lines, not the other way around.

The backbone of the industry is the family-owned moving companies who rely on their van line for national representation, dispatch at origin, return tonnage at destination, processing, financing, claim settlement, computer software, training, and marketing support. They all take pride in their individual van line affiliation.

Each van line is only as strong as its member representation. The glib comment that all government moves went to only four van lines is wrong. The moves went to more than 800 independently owned moving companies. The van lines provided the infrastructure to get the moves serviced. Hundreds of Canadian families who own and work for those some 800 companies depend on government business as part of their market mix.

The bidding process has received a lot of press, as well as attention from Corporate and Consumer Affairs. The 41.6% discount enjoyed by government in 1991 was ignored and treated as relatively stable pricing. Negotiations gave way to tendering in the 1991-92 fiscal year. With tendering, the discount went to 64.8% in 1994-95. No one in the federal government was satisfied or said that this was a great discount.

No discount seems to be high enough. Providing a $13 million discount but having no one appreciate it hurts.

The sole carrier concept of tendering delights all the opponents of the current system. This delight indicates a lack of knowledge about the industry. Anyone who believes some magical third party, transportation broker, or coalition could join the current tender list and be able to save the government additional tens of millions of dollars and provide a quality service at the same time does not understand the infrastructure required to perform these moves or how the current tendering process has already produced savings and will continue to do so at a price to be borne by those who own trucks, warehouses, and equipment and employ the thousands of personnel required to do the job.

Believe me, no such knight exists. I doubt if one exists for the 40% tender, let alone the 100% daydream.

Elimination of the government list of approved players is a very interesting concept, especially to Consumer and Corporate Affairs. That a mover can work for more than one bidder will test agent-van line contracts and the court order. It's like saying that you can belong to the Liberal and Conservative Parties at the same time and have all the benefits but not abide by the policies of either.

Of course, elimination of the GLAC is necessary if there is to be any hope of CMS or some other broker tendering for the business. It assumes that the movers will work for less, take a chance on being paid by the broker, accept high claim charge-back policies over which they have no control, and accept other penalties as responsibilities assigned to the broker. Hopefully, some will survive to the next tender.

.1805

It is unfortunate that time does not permit me to outline the complexities of administering any movers' peak season. Suffice it to say that 70% to 80% of government moves take place during the three summer months. It is an infrastructure that exists for three peak months.

The Canadian moving industry has endured deregulation, the economic turndown of 1981-82, the combine charges and the resulting court order, the more serious and continuing economic problems of the world, plus some bad habits from the American industry. Americans taught the Canadian mover how to discount, not Consumer and Corporate Affairs.

What brings me here today started in 1990, when a member of the IDC invited CMS to show them where all the savings were in moving. CMS hired Mr. Legett. They had success in getting the interest of CCA and sent messages to the public with the help of The Ottawa Citizen. The change in the government from Conservative to Liberal added an MP's voice to the cause.

Throughout all this, the industry did not form an association, had no central voice, did no public relations, and sought no advice from professionals. It is clear there are individuals who wanted to hurt the van lines and the moving companies. They found a political ally and the media took it up as a cause to the public.

Last night the media told another moving story. It is the story of a disgruntled employee, a weak manager, and constructed weigh scale tickets, not intended to cheat the public but to support a weak salesperson who not only discounted but gave away a portion of a move for free through low weight estimates. I was on television in defence of the industry, I hope, not just United Van Lines. My experience with the media confirmed my beliefs; my interview was taken apart and centred around other comments to suit the producer's theme. What timing that was.

In conclusion, the Canadian government has always worked to protect the jobs of Canadians in order to maintain a standard of living commensurate with G-7 countries. The sole supplier concept as well as the punitive percentages in the 1996 tender will break the back of the Canadian moving industry. It will destroy jobs and make a dangerous example of our small industry. It has never been the way the Canadian government does business. Thank you.

The Chairman: Thank you, Mr. Martin.

Now for the last opening statement today, we'll hear Mr. Hoyt.

Mr. Randy Hoyt (Vice-President, Sales and Marketing, Hoyt's Moving and Storage Ltd.): Thank you.

Mr. Chairman, committee members, ladies and gentlemen, my name is Randy Hoyt. I'm a vice-president of the Hoyt's Group of Companies from Atlantic Canada, and I carry with me the proxies of 76 Atlantic moving companies from New Brunswick through Labrador. I'm proud to be a third-generation member working in this company founded by my grandfather and the fourth generation of the Hoyt family involved in transportation in the Atlantic region.

There's an old expression: ``If it's not broke, don't fix it''. Ladies and gentlemen, the present system our government uses to purchase moving services for its employees is not broke and does not need any major fixing. The system guarantees a high quality of service to protect the prized possessions of the government families being moved.

You've often heard movers advertise that we move families, not just furniture. Until an employee is transferred and must relocate his family and all of his possessions, the government has no requirement for the services of movers. When an employee is transferred and must uproot his household, then a very highly specialized and personal moving service is required. It is far different from the daily shipping of pallet loads of general freight around this country.

The largest transportation companies in the country, namely the railroads, the airlines, and even highway freight giants like CN, Day & Ross, and the Irving group of companies, all use the services of the moving industry and their professionals in relocating their employees.

What makes the moving industry different and unique is the hands-on personal service provided by the hundreds of independently-owned or family-owned moving companies in Canada like our own. These are the GLAC carriers, GLAC meaning government list of approved carriers. We are the companies that own the warehouses. We own the moving vans. The employees and the trained staffs work for us and with us.

This GLAC requirement isn't something that fell on us; it's something we paid and invested dearly for. Within the last five years, these GLAC-approved warehouses were increased in size to meet requirements placed on us by the federal government, and we're still running mortgages to increase the size of buildings at locations where we really didn't need buildings as big as we had previously to begin with. Now there won't be a GLAC. That's interesting.

.1810

These are the companies that provide the moving services collectively with their counterparts across the country and make up Canada's van lines. Working together under a common van line banner, they're very much like Canada itself: Together we are better. We do believe that.

Traditionally, the volume of government business available to each of our GLAC carriers or movers has varied according to its proven track record of quality service. More business was awarded to the best movers and less to those providing poorer quality. For continuous poor quality, movers can be removed from the GLAC or suspended.

This system has ensured that government employees receive the best quality of service. The tendering system has ensured that all government moving business has been performed at the lowest possible price. Ladies and gentlemen, you did have a 14% decrease last year. We know that because our bottom line is currently reflecting it.

This has been good for the taxpayer and for the government employees. It has also been a good system for the independent movers. They have had some assurance of a share of the business if their prices are competitive and their quality is good.

Based on this assurance of a share of the volume, movers have invested in facilities and trained staff at locations across Canada where service would otherwise not be available.

This is especially true in the Atlantic region. There are a lot of little towns and villages where we have operations. Those in the general public can get competitive quotes when they move because GLAC carriers are there. They can get quotes from two or three different companies.

The new proposal is now going to destroy all of these benefits for everybody. A national or international contractor or broker cannot provide the residential services required at every origin and destination address in Canada. It will not work.

When the present GLAC movers lose their assurance of a share of the business in many areas of Canada, they will not be able to justify a continuance in business. The national contractor may or may not offer them some business. The national contractor may or may not offer them prices they can live with for any business offered.

I would point out that removing our GLAC is very much like removing a lobster licence from a fisherman who has invested in and paid for the ability to be a lobster fisherman, through time, effort and family. It's like removing the quota from the dairy farmer. Removing our GLAC, which we bought and paid for in time and investment is the same thing.

The local independent mover will no longer control any of the business; therefore, we have no assurance at all of a share of the available business. How will we justify making investments in facilities, vans or staff? More importantly, how can we continue to pay for existing facilities, equipment and staff?

With no guarantee of business and no control over any of the orders, many of these independent family-owned movers are going to see their lifelong investments wiped out. The value of their businesses will be destroyed.

Who will gain by all of this? That's a question I would seriously ask. It certainly won't be the government employees whose families' possessions are being relocated. They will be at the mercy of those national contractors with no recourse to a quality control system or the existing penalty system.

If movers are forced to close their doors and go into bankruptcy, jobs will disappear and UIC costs will increase. With these alternatives gone, government will be at the mercy of a few large contractors who will dictate both service conditions and pricing.

As I said at the start, the present system provides the best of all worlds, as it has been fine-tuned and developed over a quarter of a century. It gives the best prices to the taxpayer. It guarantees the quality to the government employees whose worldly possessions are on those trucks. It isn't government stores that are being moved. Again, it's families we're moving, and those families don't want to have other major concerns during the heat of the move.

There should be an assurance of participation in government business by those independent and family-owned businesses throughout Canada who can meet the qualifications, offer competitive pricing, and good quality.

We have a good system now. These proposed changes will create chaos and disaster, and the timing on implementations will make it even worse, while gaining nothing for the taxpayer.

.1815

Before I close, I want to look around this room and thank all of the members from Atlantic Canada who spent all the time this summer, who really did give their time, and have put up with all of the faxes that we've been sending and all of the faxes that we've been receiving from others that we've been forwarding. I also want to thank all the assistants to those members who are also here tonight and have taken the time out of their busy schedules to be here, especially with the issues before the House at this time. Thank you very much.

The Chairman: Thank you Mr. Hoyt. We'll now proceed with the question period.

[Translation]

Mr. Fillion, you have 10 minutes.

Mr. Fillion (Chicoutimi): First, I would like to thank Mr. Martin for sending us his brief in both official languages. I would have liked the other witnesses to do the same.

I will nevertheless try to make do as best I can with the interpretation I had a moment ago.

My first remarks are for Mr. Baird of Corporate Moving Services. In your statement, sir, you spoke of virtually all the difficulties that a moving company can encounter along the way and in the performance of a contract: checks that are never made, storage in transit that may be too long and so on.

However, I don't believe I heard you give your opinion on the change proposed by the department, that is splitting contracts among the lowest bidders in a category of four companies. I would like to know whether you agree with this proposal or whether you prefer the old system because the other speakers put forward very clear positions on this subject.

[English]

Mr. Baird: I believe after four years what the Bureau of Competition.... There was no competition; no one else was allowed into this business other than the four van lines and the GLAC list of carriers. After numerous complaints the system has been opened up.

This statement of everybody going out of business is ludicrous. The government business in Middleton, Nova Scotia this past June, in the last week of June, took sixty people to perform. If the same amount of business is required to be handled next year in Middleton, it will again take sixty people to do the work. They may not have 40% going to United Van Lines; 40% may go to a new bidder. But the work and the employment will still be there for people able to do the work.

I believe the new system is a start in the right direction. As I mentioned earlier, I do support the changes that have been made. Actually, I fought for them for four years. The present system is fine if you're a member of the club of the four van lines. It's actually fantastic; there's no competition other than the four van lines. It has opened up, and I think that's really what Canada is all about: competition.

[Translation]

Mr. Fillion: To understand your point of view relative to that of the other speakers, could you draw a distinction between your business and the other three whose representatives spoke today? What is the difference between the four units that I have before me?

[English]

Mr. Baird: The person next to me is an owner of a moving company. He has branches in three or four cities, so he has a moving company. The next gentleman, Mr. Martin, is the head of a van line; he runs a van line. The chap beside him is again a family member of a family business on the east coast. They just happen to all be United members. It's funny that United is complaining the most for the changes, because they've maintained the most business for the last number of years - around 40% - and no, they never want to tender. They never gave the best price.

.1820

I hope to be able to get into doing household moving along with another corporation in Canada called Canadian National Railway. We are hoping to open up the bidding this year. This allows us to join forces to bid on the government business. We hope to bring the cost to the government down on household moving.

[Translation]

Mr. Fillion: What steps can you take to lower these prices under the proposed new system?

[English]

Mr. Baird: We'll have to wait until the new bid comes out to see how we will compete in the marketplace as a new bidder. I don't think I will want to go into releasing what Canadian National Railway and our company intends to do in the next bidding process. This will be out shortly. I don't think it's fair to ask me for this.

[Translation]

Mr. Fillion: Pardon me, but it seems to me I can ask you this question, but since the answer is fairly vague, I'm going to turn to Mr. Warner.

You are utterly opposed to the proposed new system. You say, furthermore, that the previous request for proposal system was preferable and you gave the amounts of money that the government has saved over the past four, five or six years. Would the old system still enable the government to save money or have you squeezed so hard that there's no room for further savings?

[English]

Mr. Warner: Realistically, I think the maximum savings to be attained have been practically achieved at close to $30 million. We have to preserve the level or standard of service to the moving public required and expected from the moving industry.

Any further savings, I think, are more likely to come from internal efficiency and streamlining of the existing system. I think there is still some room for improvement in the way it is being administered.

[Translation]

Mr. Fillion: So there is still a little room for improvement. I'm going to come back to Mr. Baird because this is a very complex subject.

Mr. Baird, under your system, will private movers from regions such as my own, Saguenay - Lac-St-Jean, be able to stay in business without investing more than they have to date?

[English]

Mr. Baird: Yes.

[Translation]

Mr. Fillion: If we move toward the system of 40, 25 or 15, with four bidders, will small businesses be protected?

[English]

Mr. Baird: At 40%, 25%, 20% and 15%, nothing has really changed. The only change is United Van Lines may not have the 40% of the business if they don't give the best tender.

Their agent in your area could not continue on with 40% of the business. They could get 15% if they're the fourth bidder. The problem has been in the last four years, in trying to open up the bidding, that United Van Lines kept the 40% of the business.

It's understandable why these people are sitting here today. They do not want to lose their 40% of the business. Even though a lower bidder came up in the last four years, other than United Van Lines, they only gained an advantage of business. We'll say Allied Van Lines last year made a 14% reduction. I forget what United's percent of the reduction was. But by going down 14%, Allied Van Lines only received an additional 30% of their 20%. In other words, I think they got around 26% of business.

.1825

Had the system stayed the same, at the end of this year's business Allied Van Lines, even though they decreased the government's costs this year by 14%, would go back to their 20%. United Van Lines would stay at their approximately 35% to 40% of the business. It was ridiculous. Of course, United wanted no change. They had control of the marketplace of the government business by their number of paper companies and their regular companies.

So the agent, whoever this may be in your area, may gain considerably. If we use this agent in Lac Saint-Jean and we are the successful bidder, he may get 40% of the business, whereas now he might be an Atlas agent with only 15% of the business.

So there's give and take. I can understand United's complex issue of fighting this situation because they have the most to lose in it if they don't put the best price in.

I would like to correct one other area, too. There are not 800 moving companies out there. There are approximately 450 moving companies out there and 400 paper companies have been created. The IDC rules and regulations have created a bunch of paper companies. So there are not 800 moving companies. There are approximately 450. But I do think your agents will survive nicely with the new system if CN is a successful bidder.

[Translation]

The Chairman: I'm going to continue the first round of questions. Mr. Fillion, you will come back in on the second round.

[English]

Mr. Williams.

Mr. Williams: Thank you, Mr. Chairman.

Gentlemen, it seems to me we have three witnesses who are in the business and advocating status quo. We have a fourth member who is trying to get into the business and who is advocating the new methodology. I'm sure you're going to have your discussions after this meeting, but we'll leave this as it is.

I think we are going to see change. What we're going to end up with, I'm not exactly sure. But I was appalled at our previous meeting to find out how much IDC is in bed with the moving business, how much IDC is practically running your business for you. IDC is dictating how items should be wrapped, how items should be stored, when they should be delivered and this, that and the next thing.

I thought IDC was basically a large customer, but I find they were practically running your moving business. I, for one, will be advocating they get right out of it.

I understand the old system under your GLAC methodology, where everybody on the list gets a share of the business, is unfortunately something of the past. One mentioned things like the derrick business where you have your quota. Quotas are going; this is the bad news.

But I was again appalled that IDC was talking about going right to one carrier. I was just appalled they would go from one extreme to the absolute opposite extreme, which would just throw your business into total and absolute chaos. I don't think I'm fully in favour of what they're proposing, although it's not for us to micro-manage what they're trying to do. But their job is to run it well and report back to us that it is being run well.

If we assume things will change, I have a question for Mr. Warner. If things change to something approximating what is being proposed where there is a division between van lines, is this a more appropriate way? Or should the government be dealing with the independent movers as individuals?

Mr. Warner: I think, essentially, the market forces are going to take care of a lot of what is trying to be addressed or accelerated. This acceleration is going to adversely impact the independent movers financially and economically.

Mr. Williams: But should IDC deal with the van lines or should they deal directly with the movers?

Mr. Warner: We have a system where we have experienced both. We've had associations directly with the IDC's management personnel at the local market level. But we've never had this association directly with IDC in Ottawa. On the other hand, for cost-saving and money-saving efficiencies, IDC has decided to streamline the administration and deal with the van line directly in recent years. The van line in turn administers the moves to its members.

.1830

Mr. Williams: What's your preference, van lines or members?

Mr. Warner: When it comes to customer service, sir, I would rather deal on the local basis because it is much closer to the customer than if we are two or three or more times removed. Experience has proven this to be a far better manner in which to deal with the customer.

Mr. Williams: Let me quickly ask, Mr. Martin, if they should deal with the van lines or with the local agents.

Mr. Martin: The van line is owned by its agents and is there to serve them. They may deal with the agent if they wish; it doesn't matter to us as a van line.

Mr. Williams: Mr. Hoyt, what's your preference?

Mr. Hoyt: My preference? I agree with Mr. Warner 100%. The thing that makes our business different from freight is the fact that we deal with customers in their homes, in their bedrooms. Realistically, the closer we get to being hands-on with that customer - and in this case, the local base - the better it is for the employee who is actually going to be transferred.

Mr. Williams: Your preference is that IDC deal with individual lines.

Mr. Hoyt: Yes.

Mr. Williams: I was very interested to note Mr. Baird's comments, which were also referred to by Mr. Warner, about storage. I understand IDC dictated that you shall have x number of square feet of storage. It again appalled me that they got so far into running your business for you. Is the fact that 50% of moves require storage, along with 35% in the private sector, appropriate, Mr. Hoyt? Do you find that on government moves you use storage much more than in the private sector?

Mr. Hoyt: On government moves, because of the way people tend to move - taking their vacations, maybe taking time to find a house when they get to the destination - the storage requirement is definitely higher, yes.

As for the second part of what you've mentioned, under government regulations we definitely put excess warehouse space in in 1989-90 to match those regulations on that GLAC, and we took on huge expense. Some of our locations had to build additional buildings - even when the ones we had were not full - in order to stay on that GLAC.

Furthermore, there are those paper companies that we talked about. I would point out that those paper companies that we increased space for.... If paper company means what I think it does, we must have paid $100,000-plus for those independent, mom-and-pop businesses in Atlantic Canada as we bought them, one by one and as they became available in a free market circumstance. If those are paper companies and we took their employees in, in every case we included their equipment in our inventories and fleet lists. Those paper companies also had to meet the new size restrictions or the new size increases that were put on us. We're still carrying mortgages on all of those size increases.

Mr. Williams: So you're telling me it was actually government regulation that dictated that you have x number of square feet of warehouse space to be on the GLAC.

Mr. Hoyt: Yes, and we fought those tooth and nail before we put that investment out. We tried to point out to the previous government at that time that there was a problem. We weren't listened to. In the end we had to build the space or fall off the GLAC.

Mr. Williams: I had another person mention to me that members of the military, especially, and others in government get paid a flat rate of compensation for pounds moved to cover the incidentals, such as a propane tank you cannot move because you're not a dangerous goods carrier and so on. Because they're getting paid according to pounds moved, some people were actually picking up used sofas for $5 and $10 and were including them in the move so that they could throw them away at the end in order to collect a larger payment from the government. Have you seen any evidence of that?

Mr. Hoyt: If any company - it could be the Royal Bank, the federal government, or Esso - puts in place a flat moving policy and expects every family to fit into that policy, it's in trouble, because every family is different. But with any of our moving systems, we've seen many companies do this over the years. On government moves, we have found that those limits have changed.

We have moved things and wondered why we were moving them. I started out in the industry as a truck driver, through a family company. I definitely saw some of that, but we have not seen very much of that at all in the last two years. It seems the government is cleaning the act up on those items. If it was ten years ago and you had asked me that question, though, I would tell you it was a terrible problem. We were moving used washers and dryers that didn't work and had no motors in them. Why? Because of that. Lately it has been cleaned up a lot.

.1835

Mr. Williams: The IDC are proposing a 40%-25%-20%-10% split, and just a quick along-the-line, along-the-table. Bearing in mind Mr. Baird's comments that if the move is coming from Middleton, Nova Scotia, the work is going to get done there regardless.... I'm not buying completely your idea that the industry is going to be decimated and destroyed, because the government is still going to spend $85 million a year on moving. The question is who gets the business and at what price.

Is an allocation of a fixed percentage preferable, or should the lowest-bid carrier be given an opportunity, for example, to pick up the 40% to 55% of the business, or as much as he wants?

Mr. Hoyt: As far as I can see, the 40%-25%-20%-15% versus sole supplier is good. It's a lot better as one option over another.

Given the way in which the system works, the thing that really concerns us the most in it as an independent mover obviously is the fact that, depending on how many people actually tender, if we're not competitive enough we could fall out of that altogether. We realize that the business is diminishing to start with and that by 1996-97 we could see as few, in 1997, as 7,000 to 9,000 moves being proposed, versus 23,000 a year ago. We know that the business is going to go down, but that change is so quick and so sudden that it's giving us very little time to adjust.

I would also point out that it's the same thing, and the same concern has been raised.... I carry the proxies of Allied, North American, and Atlas agents with me in my briefcase. Further, we also have members of those van lines here, not just United.

Mr. Martin: In spite of Mr. Baird's thinking that I'm here for only selfish reasons, I really have another reason. I believe the main concern is that if somebody who has been accustomed to doing 15% or 20% of the government business over the years, and has developed up because that's the structure of the agency family, wins the 40% or 50%, then it will be an infrastructure disaster. The moves will not go very well.

Mr. Williams: So you're not in favour of the 40%-20% split?

Mr. Martin: I believe that it should stay with what the infrastructure has created.

Mr. Warner: Like Mr. Hoyt, I am here representing far more than just my own interests and members of many other van lines besides United. I feel that the existing system should stay the way it is. Again, let the attrition factor look after a lot of the things we're trying to deal with now.

Mr. Baird: I'm glad to see that Mr. Martin feels that he's the only one who can handle 40% of the business and the rest should stay where they are.

I agree with the change. I thought the IDC going to a single factor was what has decimated the moving industry in Canada. Wherever it came from, the thought process that brought it to that was completely wrong.

I agree with the system now. It's a fair system. The marketplace will evolve to the winning price having a fair share of the business.

Mr. Telegdi: Prior to being elected to Parliament, I never even met Mr. Baird. If you would have told me that in two years' time I would be getting involved in reading brief upon brief from government documents on the moving business, I never would have imagined that it was going to happen.

I want to clear up a couple of things, because I noticed some of the communications that came up. This one came from North American Van Lines and Spartan Moving & Storage Limited. I got my hands on it today. It refers to me: ``This person'' - referring to Mr. Baird - ``just happens to beMr. Telegdi's constituent and an associate''. Another rumour I heard on the Hill is that I was the largest shareholder in Corporate Moving services. Let me first say that not only am I not the largest shareholder, but I am not an associate, either. Mr. Baird is a constituent, and sometimes I wish I had never seen him, but be that as it may, we are here.

.1840

The whole issue of moving has been subject to numerous governmental reports, going back to 1991, of Consulting and Audit Canada. The previous government was going to change the system on move management. They were going to dissolve the IDC. The only reason that IDC survived is because there was a change in government.

Last night, I saw an item on Market Place about rate bumping in the industry, something that I have heard about before, and which is costing the taxpayers of this country a lot of dollars. I saw an RCMP officer last night saying that charges should be laid. I'm doing everything I can to find out the facts on that and to make sure appropriate action is taken.

The Bureau of Competition policy has done an exhaustive report on the industry. In a letter,Mr. Addy said:

In conclusion, we believe that the changes that you will be implementing will allay our concerns that the tender terms could induce violations of the 1983 Prohibition Order. While these changes will lead to enhanced competition in the market we remain of the belief that these benefits would have been enhanced further had all our recommendations been adopted and we will, of course, be monitoring this very carefully.

That was a year ago.

We had before us the IDC and the competition bureau, and what they're essentially saying is - and they reported it to this committee; it wasn't this committee that made the decision - that the new rule is going to be 40%, 25%, 20% and 15%, which is going to involve competition.

Listening to the various briefs and everybody saying they are providing the best price to the government, it would seem to me that if that's the case - and you folks are here, you are the freight lines - then put in your bids, and put them in collectively. You have been working with each other, and may the best person win, in a situation where it's a much more level playing field.

One of the things I was pleased about, when I saw it under the new rules, is that the future of the carriers is not going to be determined by whether or not one works for United, or any of the other van lines, if they don't win the bid. The business is going to be open to all the carriers, and I think that's a good thing.

It means that if you happen to have been working for a van line, and if they don't win, and if they have been offering the best price and the best service, then the status quo should remain. But if they don't have the best price, then those companies that have been affiliated with a losing van line - the business is going to be open to them, and I think that's a good thing.

I have a couple of questions that I would like to have a response to, and the first one is toMr. Warner. Is it true that the largest corporate mover, D. Armstrong, was suspended from performing government moves for this year due to weight bumping?

Mr. Warner: I have no knowledge of that. If he was, I don't recollect that he was.

Mr. Telegdi: I take it that you saw the program last night where they actually documented cases of weight bumping. Is that something that goes on in the industry?

Mr. Warner: I don't deny that it probably does occur, but I have to tell you that it doesn't happen so frequently. I couldn't tell you of many cases or any other incident that I'm aware of, other than what I saw on television last night.

Mr. Telegdi: I'm hopeful that maybe you and everybody here could write to members of this committee as to what procedures government might have in place so that those things do not occur.

.1845

The other thing I have become aware of in terms of government moves is that the insurance claims that the government pays out are something like double what they are in the private sector, yet I'm told that the service that is provided is superior to the private sector.

The one question I have for everybody is about the recommendation made by the previous government to abolish the 100 to 130 soldiers we have at the present time working for the IDC doing move management. How do you feel about that individually, in terms of getting the IDC to get out of that function of management of moves?

Could I start with Mr. Hoyt?

Mr. Hoyt: I don't pretend that I could ever tell the government how to do its business. All I can tell you is that we're movers, and as movers we move people. We use whatever method or system the government wants to have those moves performed under or by, but remember that, unlike Mr. Baird in Kitchener, we have an investment in real trucks, in real people we've trained and carried for years and have third-generation employees with, and in real buildings.

As long as those are used fairly and as long as this isn't thrown at us overnight in a ``it must go at the wall and stick'' scenario, as far as we're concerned, we can handle however the federal government, through a whole lot of very distinguished and knowledgeable and intelligent people, decides to do it. We can live with what is best.

As far as whether the IDC is the best answer or not...for thirty years we worked with the IDC. My father sat on many of those committees as an industry representative, to help try to work through those loops and hurdles that came at us as times changed and people changed. Again, we can work with or without, depending on what the government in its wisdom chooses to do. The thing is that in order to work we have to have moves to do.

Mr. Martin: What you're talking about is the administration and allocation of the business and, I suppose, the problems at the other end if something has gone wrong. We have no objection to who does that, whether it's a military person or a civilian person. It's immaterial to us, as long as the moves are handed out.

Mr. Warner: I think that in general terms, we the private and independently-owned moving companies share the same goals of the government: cost reduction, save money wherever you can. We're all taxpayers, or at least we used to be when we made a profit.

In terms of the tenor of your question, if the government's IDC system is going to change and if those changes are going to impact the investments we've put in place in order to serve the needs of the government, I think it's only responsible for those changes to be programmed in over a much slower period than just the course of one fiscal year. As I said earlier, we cannot hope to respond to the reduction of revenue as quickly as the revenue is turned away to service the overheads we have in place now.

Mr. Baird: When I was asked to come to Ottawa some four years ago to make a presentation, the thrust of my presentation was that I basically started a move management company. At that time there were over 220 soldiers managing household moves. I've asked this question of the previous government and I'll ask it of everyone sitting here. What possible military function is there in having soldiers handling paperwork for household moves and putting restrictions on Mr. Hoyt's company of 10,000 square feet to add to a warehouse?

It was a soldier, a colonel in the military, Colonel Obie O'Brien, who made the decision that all of a sudden warehouses should be a minimum of 10,000 square feet. The industry followed and did what he said, and it was a ridiculous cost to the whole industry.

I believe the IDC has far exceeded their usefulness. This whole system, this whole mess that the moving industry is in with the government tariff and the government business, is basically because of mismanagement by the IDC. They should be out of the business and the private sector should be managing the household moves for the federal government at a great savings.

.1850

Mr. Telegdi: Thank you.

The Chairman: Mr. Telegdi, you can come back with your other question after the other members.

[Translation]

Mr. Fillion, you have five minutes.

Mr. Fillion: Mr. Warner, you told us that we should continue for at least four years with a system that is working well and that we are wrong to replace it with the proposed system.

In your opinion, and your report attests to this, the solution proposed under the new system probably comes from parasites that are trying to cut profits. That's why there is a change. Could you explain to me what you mean by that?

[English]

Mr. Warner: What I mean, Mr. Fillion, is if they want to compete in the same market or play in the same game that those of us with the investment in infrastructure on a local basis have already, then they too should have to abide by the same investment requirements. Otherwise we lose what we have in a very irresponsible manner for reasons over which we have no control.

May I add, sir, to correct something that was stated earlier with respect to Mr. Baird's comment about the movers in the local market being able to continue to share the 40%, if that's what a carrier receives, yes, it's true that I represent United Van Lines, but in all of the markets in which I'm operating - and they're all small markets, Kingston, Ontario being the largest - I don't have anything close to 40% of the local government business as a representative of United Van Lines.

[Translation]

Mr. Fillion: In your report, you ask disturbing questions such as: Who has an interest in wanting to change the system? Isn't this to satisfy the egos of certain persons? Isn't it also to make personal gains?

If you ask these questions, you must have reasons for doing so. Can you tell us exactly why you are asking these questions?

[English]

Mr. Warner: I'm asking those questions in the context that as a business person the proposed changes don't make sense to me or any of the other movers who I'm here representing. So for what other reason would those proposed changes be implemented? If they don't make good business sense, why are they being proposed? Why is the system being changed when there may not be real benefit or real savings to the interests that are involved at the present time? We can't provide any more. We've already provided upwards of $30 million in savings.

[Translation]

Mr. Fillion: So what you mean is that, despite the proposed new system, we won't be able to realize the anticipated savings.

[English]

Mr. Warner: There may be bids below the existing levels. If in fact there are, I think there will be further acceleration of consolidation of companies, and companies closing. The margins are very tight now, sir.

[Translation]

Mr. Fillion: Mr. Martin, for you, a broker, a third person or a coalition is something of a magician. Don't you believe that the government could make profits or gains under a brokerage system?

.1855

[English]

Mr. Martin: I do not believe there is anybody out there who can form any organization to come in and win the 40% and provide the service that will be required, because they will not have the infrastructure. I predict that it will end up in some very bad service and some major changes in the middle of the peak season.

I don't believe there are tens of thousands of dollars left in it. The line haul is only in the $55 million range, and to get just one $10 million out of that, you're looking for a 20% discount. It isn't there.

Mr. Williams: I want to follow up on that point, Mr. Martin. Am I right in saying that your van line has 35%, give or take a few percentage points, of the marketplace?

Mr. Martin: Give or take.

Mr. Williams: But you're saying that nobody could handle 40%? Isn't that what you've just said, that no organization -

Mr. Martin: I was referring to what Mr. Baird specifically referred to, about CMS and CN winning this tender.

Mr. Williams: I see. So you're talking about an outside new creation of -

Mr. Martin: Yes.

Mr. Williams: - a new competitor coming in could not all of a sudden handle 40% of the market without building experience along the way.

Mr. Martin: That's what I thought this was all about, opening the bid to new people.

Mr. Williams: Perhaps. If the government were to stagger or spread their business out over a longer period of time rather than the peak three months, would that improve efficiency in your industry, and what would your projection for costs be, Mr. Warner?

Mr. Warner: It would certainly improve efficiency and it would help reduce our costs.

Mr. Williams: Mr. Hoyt, regarding the warehousing that you have had to buy to meet the government regulations in order to be a GLAC carrier, am I correct in saying you're telling me that you cannot adjust between now and March 31. Is it true that you have purchased this warehousing in good faith thinking that you would be a GLAC carrier, and if you're no longer such then would you be seeking compensation from the government?

Mr. Hoyt: Our company, along with all of the other Atlantic companies, was very clear about this. The biggest fear of the other owners I talked to when I got their proxies is exactly that. They have fixed costs with financial institutions now in the line of mortgages, term loans and so on. Yes, you're exactly right, if we don't have some time to find some diversification to possibly lease out some of that space, to find a way to sell some of the excess buildings and capacity.... In the market of today, to try to dump those buildings, especially in centres like Middleton, Nova Scotia, which was brought up, a town that has probably 15,000 people - and someone can correct me if I'm wrong, that would be a high number - is going to be almost impossible.

If all four van lines suddenly dump warehouse space in Middleton, every person with any kind of building in Middleton, Nova Scotia suddenly will take a huge real estate loss of investment.

My point is that if this change comes through, we need some time to be able to properly and responsibly manage the change to where you're trying to go from where we are right now.

Mr. Williams: The competition bureau was emphatic about the exclusivity clauses being removed from the contracts that the moving companies have with the van lines. If, perchance, van line A won the big part of the contract, 40%, and they didn't have enough van lines attached to their line to handle the move in Middleton, Nova Scotia or Burnaby, British Columbia, there would be nothing to stop them engaging on a subcontract basis a moving company from another van line with the exclusivity clauses removed. Am I correct in saying that?

Mr. Martin: I don't think there's any problem with local work. There may be a problem with long distance, but not with local.

Mr. Williams: Why would there be a problem with long distance?

Mr. Martin: I shouldn't speak for the other van lines on this subject.

Mr. Williams: Speak for your own.

.1900

Mr. Martin: All right, I'll speak for our own van line.

If that happens and we have agents wanting to do that work, on a local basis there is no problem because it does not conflict with our contract. On a long-distance basis what he would probably do, because we have a very.... I like to use the word ``loose''; it is a loose contract. If it's a two-way street and everything's okay, then we stay in business. Otherwise, forget it. They could terminate their contract with us in thirty days and do as they please.

That's our position. The other van lines do not have that position.

Mr. Williams: But the competition bureau is insisting that the exclusivity clause shall be removed in order to expedite, I presume, Allied Van Line doing work for Atlas Van Line, or whatever the score may be.

Mr. Martin: I don't think so. I think they want it to be removed so that other bidders, such as Mr. Baird, can come in and bid with full confidence that he can get people to do the work, because they won't have the work and he has it.

Mr. Williams: Is the competition bureau forcing this elimination of exclusivity to allow new van lines to be created? How do you feel, Mr. Baird?

Mr. Baird: I think you've got this wrong. Not only has the van line got a contract - that's fine, they should have a contract with their agent - but what happened was that the soldiers or the IDC decided to tell the moving companies that they could work only on behalf of their van lines. Not only was there a contract, but then the government, with which I fought long and hard.... How can the government tell a locally owned moving company in Middleton, Nova Scotia what he can or can't do? It's up to a businessman to say what he can do.

What was removed, I believe, was the exclusivity contract that was enforced upon the movers by the IDC. So they made the IDC change the rules.

Mr. Williams: Mr. Baird's point is that the government should get out of telling you how to run your business.

Mr. Baird: Exactly.

Mr. Williams: And they will.

Mr. Hopkins: This has been a very good and informative meeting. Some of our witnesses started by saying that they were new at this today. They've done very well. I wish that in my first year around here I would have done as well as they are doing today.

I started by saying, at the beginning of all this, that we are interested in the best service for the customer. I also said that with the Canadian Armed Forces going through a difficult period family-wise today, with the stress on them, they don't need another hassle. So we are all interested in doing a good job for them on the moves.

An interesting comment was that the GLAC is like a quota to a dairy farmer. I believe Mr. Hoyt used that term.

There have been a lot of comments to go on here. Mr. Baird said that people going out of business is ludicrous.

I don't want to misquote you. I think that's what you said.

The other thing that has come up today is investment in the business. Mr. Hoyt, do you have any idea of how many dollars you have invested in your business?

Mr. Hoyt: Again, I don't have the financial statements in front of me, but to my knowledge our company would have approximately $8 million in trucks, equipment, and properties throughout Atlantic Canada right now. We couldn't put a dollar value on some of the other things, but at present it would be in the range of $8 million.

To answer some of what Mr. Fillion asked when he asked Mr. Warner about profitability and if we could cut costs further, the biggest customer of the Hoyt group in Atlantic Canada is the military.

We did revenues last year of just in excess of $11 million and showed a profit that was under $100,000. Believe me, we would have liked to show the bank a lot more than that, and we wouldn't have minded paying taxes on it. That was because of some diversifying we did in other areas. Our moving division actually lost money last year.

Mr. Hopkins: Mr. Martin, do you have a handle on your capital investment?

.1905

Mr. Martin: We sent out a questionnaire a couple of months ago trying to find this out. We sent it to the principals of each company. Some of our companies have three or four branches, so we sent it to the principals. On that basis, we probably sent out about 105. We had a 39% return, and at that point the investment was $128 million.

Mr. Hopkins: Mr. Warner, what is the capital investment in your company?

Mr. Warner: The book value of my capital investment - and I stress book value - is approximately $1.5 million. The market value is substantially more...if there were a market for it.

Mr. Hopkins: Mr. Baird.

Mr. Baird: Well, I think Mr. Martin's comment is a little bit wrong.

Mr. Hopkins: No, what is the capital investment?

Mr. Baird: The capital on our new bid with CN will probably be.... I don't know what CN's investment in Canada is. They just spent $500 million on trains, so -

Mr. Hopkins: No, what is your investment?

Mr. Baird: My investment in my business?

Mr. Hopkins: Yes.

Mr. Baird: Probably close to $1 million in the last five years.

Mr. Hopkins: In the last five years?

Mr. Baird: I've only been in this business for the last five years.

Mr. Hopkins: A while ago a question was asked here about insurance, or I think in the business it's called replacement cost protection. I'm somewhat confused as to what is real insurance and what is replacement cost protection, but wasn't there a company out of Toronto just a short time ago that had a three-year contract in handling insurance? Did everybody have to deal with that company?

Mr. Martin: Yes, for three years.

Mr. Hopkins: What is the better alternative to that as far as settling claims is concerned? If you have one insurance company handling all the business, what effect does that have on the customer getting reimbursed on any claims?

Mr. Martin: As I understand it, for the three years that Unirisc handled the claims, the settlements were relatively slow. That's not just hearsay, because we were involved in each and every claim with Unirisc as much as our 60¢-a-pound or $1-a-pound liability was concerned. If they settled a claim for $500 and it involved 1,000 pounds, they'd send us a bill for maybe $100 as our share of that claim. This stopped last April, and we're still cleaning up claims from Unirisc. They haven't done one since last April.

Mr. Hopkins: What's the better system?

Mr. Martin: What they're currently doing. It was put in the tender and each individual van line is settling its own claims now.

Mr. Hopkins: We have all kinds of infrastructure here and it covers a broad range of things, but in a company like yours, Mr. Warner, what infrastructure has to be put in place to operate your replacement cost protection, your dealing with customers on a firsthand basis, your packing, your end result unloading and so on?

Mr. Warner: It's necessary for a small company such as ours to have minimal liability protection in place, but more importantly to have an overriding policy beyond the minimums we can provide in order to cover all possible instances of a disaster.

The van lines, whether it's United or any others, provide that type of infrastructure when it comes to replacement value coverage, because as a small carrier, we can't, frankly, afford to provide the maximum amount one should have. So we provide a minimum amount and the van lines provide us with the facility to have the additional coverage.

Mr. Hopkins: Mr. Hoyt, I'll go to you on this one. Do you make shipments by railroad?

Mr. Hoyt: No, we do not.

Mr. Hopkins: So on an A to B move, you're on your own all the time?

.1910

Mr. Hoyt: Absolutely. In fact, again, for our area a new railroad has been purchased in Nova Scotia, and my understanding is that railroad is doing its moves through moving companies in Nova Scotia. I would also point out to you that if CN had a better mousetrap, they would probably in fact be using it today, not getting A.M.J. Campbell. Again, the A.M.J. local agents suggested I mention that they're currently doing, with Atlas Van Lines, all of the CN moves in Canada, and that business has been tendered that way.

Not to mention the freight companies in our region and a company such as the Irvings, which is as capable in our region of cross-pollinating their businesses, so to speak. Again, all the business the Irvings do in moving they give to moving companies locally and have it tendered, as any other corporation does. They certainly have a diversity of trucks and equipment sitting in their yards around New Brunswick. Anyone who's driven by would recognize the numbers of trailers down there.

Mr. Hopkins: What infrastructure do you need if you're going to take goods from A to B via rail? If you're going to put it on rail when you take it from your home, you have to take it from rail at the other end and take it to the home. What kind of infrastructure do you need to have built into your company for that?

Since you mentioned CN Rail, Mr. Baird, what infrastructure do you have to handle that traffic and how are you going to operate that system? You didn't give Mr. Fillion the secret of your success. I wonder if, since you've thought about it for a while now, you would give us the answer to his initial question as to what your arrangements are and how you are going to do it cheaper. It's very important.

Mr. Baird: I think CN should be talking on behalf of themselves, but we have formed a new company, a joint venture, between Canadian National Railways and my present company, Corporate Moving Services. We will be bidding on the government business, and we expect the long-distance business to go by containers.

You asked about investment, especially for Randy Hoyt on the east coast. If we are successful in this tender, CN will be building approximately 300 to 400 brand-new 53-foot intermodal containers made up as moving vans to move across the country on long distance moves. This investment probably will be in the neighbourhood of $26 million and create a lot of jobs on the east coast. This equipment will also be equipped with blankets and everything required in a moving van, so there's a huge investment there. CN is not taking this lightly.

I think if CN can manage a billion-dollar company, they will be able to help us manage a $30 million moving business. They wouldn't not do this without a proper thought process.

The cost of transportation has been proven. Most freight companies are -

Mr. Hopkins: I'm asking you what infrastructure you have yourself to handle that system. That's the question.

Mr. Baird: It depends on the number of moves. Right now my company does not handle as a van line, because I don't do that today.

We were expecting to manage 4,000 moves this year for the federal government. We ended up with approximately 600 moves this year because of bidding circumstances with the IDC and cancellations of tendering, but that's a whole other issue. That will be going before the courts shortly.

We will have, if we are successful, the infrastructure to manage 40% of the government business.

The Chairman: Okay, you can come back after the other members.

Mr. Vanclief.

Mr. Vanclief: Thank you very much, Mr. Chairman.

First of all, I'd like to say I'm certainly not against change, but from my experience, not in the moving business, but in a business that had a lot of equipment - and we have an industry here,Mr. Chairman, that certainly has a lot of equipment, be it rubber bricks, mortar or whatever - I'm a firm believer that you don't set something aside if you can fix it and make it work better. I don't think anyone can deny that some improvements can be made to the process of moving and government moves in Canada, which is a very large business.

.1915

I think we're mixing a couple of things here. We're talking about the physical moving of personal property, and then every once in a while we talk about 200 and some soldiers, and I don't think they're doing the moving.

I have a couple of questions for Mr. Baird because it's still not clear in my mind. Mr. Baird, do you have investments in trucks, warehouses, and storage yourself? You say you have a move management company. Are you a broker? In my definition of broker, if you were to get the bid, how would you provide that service to others?

You just said you are connected with Canadian National. If I go back to my first comment, why do you think it would make business sense in Canada to have CN invest millions of dollars in new infrastructure and containers when we already have millions of dollars invested by the people in this room and in the moving business in Canada today? Why would we do that?

You said earlier that none of those people would go out of business, but a minute ago you said CN was going to start a whole new moving system.

Mr. Baird: Yes, it would.

Mr. Vanclief: Everybody agrees there aren't going to be as many moves. There isn't going to be as much to do, so why in the name of time would we, as taxpayers...? Somebody's going to have to pay for it. I would have to assume some of these other bricks, mortar and rubber are already paid for, so there is an investment there.

Why would we as taxpayers, if we could avoid it, create a system where millions and millions of dollars are invested in infrastructure in a business when we're already over-supplied, over-stored, over-bricked and over-rubbered now?

Mr. Baird: Do you want me to answer that?

Mr. Vanclief: Please.

Mr. Baird: Are you basically saying anyone with a new business idea can't provide it to the Government of Canada or anyone else? We won't know whether we and CN can do this business until the tender is out. We may not be the lowest bidder. The truck over the road may still be cheaper. We don't know that. We're going to have to compete in the marketplace.

If we are successful, then this investment will occur. The difference will be in long distance moving of, we'll say, 1,000 miles and more. The move will be by container in some of the cases. It was done this past summer. Allied Van Lines used containers a lot this past year. I think it spent $1 million with CN on container shipment. So this isn't something new. It has been done by some of the van lines already.

Some trucks may come off the road, and that's good or bad depending on whether you're an ecologist or not. It depends what your outlook is. Some long distance moving trucks may come off the road if CN gets into the long haul, but those truck drivers will take their trucks and probably haul freight or do something else.

It might eliminate fifty moving vans. The other three van lines, if they're successful, will still probably move their goods over the road. That's their business. CN will not start up a brand-new moving company. We will be using present moving companies all across Canada that are willing to do our work.

In costing out what we have spent in the last six months - and CN has spent a considerable amount of money on this - we believe we should be able to give more money to the local moving companies than under the present system of everyone taking their commissions - van lines, etc. - all the way through. So we expect to return more funds back to the local moving companies than is presently returned now. That's our plan.

Mr. Vanclief: I would like to make one comment and then ask Mr. Baird a question at the end. My comment is not pointed at any of the people here. I think it's pointed at the system we're all involved in.

Compared to the knowledge in the room on moving tonight, my knowledge is limited. But I have seen very clearly the in-your-face conditions for moving household goods, which I understand is quite a thick document. Over the years - it's maybe like our tax system - you have just kept adding to it and adding to it.

.1920

Certainly, no matter how the moves are conducted in the future I think that needs to be carefully looked at. If conditions and regulations aren't there and something goes wrong, the members around this table or the government will pay. Somebody will ask why the government didn't make sure certain conditions were applied. I think maybe we're over-governed there.

One final question to Mr. Baird. If you - and maybe you do - meet the conditions necessary to be on the GLAC list, can you bid today the same as everybody else around the table? Are you on the GLAC list now?

Mr. Baird: No. The GLAC list has been removed on the new bid. The list the Bureau of Competition Policy had - the GLAC list - was a restrictive practice to let only certain van lines bid on the business. The whole GLAC list of carriers has now been removed and the IDC has said these carriers will now be able to do work for any supplier.

Mr. Vanclief: When the GLAC list was there, was it there to give some assurance and confidence to the employer - the government - who was hiring the move? Did it give some confidence that the rubber, bricks, management and expertise were there to provide the service desired and expected by the customer?

Mr. Baird: It was there to meet this so-called bible, as you said, of rules and regulations. To be approved you had to meet all the requirements on this list.

Mr. Vanclief: Are you saying we shouldn't have some of those?

Mr. Baird: No, you should have some of them.

The Chairman: Mr. Grose.

Mr. Grose (Oshawa): Gentlemen, as usual I'm confused. I thought I understood competitive bidding, but this is the strangest story I've ever heard.

You bid on the contract, and we know who's going to do the major portion of it regardless of what the price is. So the people who claim they're the only ones who can run it - I believe it's United - can bid high. The bids of the other three that are going to get 25%, 20% and 15% had better be medium-priced because you're going to meet them anyway, and they need to make some money. So if this is competitive bidding, it sure isn't the competitive bidding I'm used to.

Your story about capital investment and wanting to be phased out touches my heart, but not by much. That's part of competitive bidding too. I've been in business for 35 years and I've taken some bad hits. I've bid on contracts I didn't have the equipment for. This may be what Mr. Baird's doing, but I don't know and I don't care.

I've taken bad hits and I've won some. If he does not have what he says he has, if his office and all his equipment are in his hat, then the day he wins the bid, I would assume, he's going to be hot on the road to see you who have the equipment. That's when you can hold his feet to the fire. That is my impression of competitive bidding.

This thing about companies bidding and a company designated beforehand going to take the major portion of the contract is something I've never heard of before. You have a business with high capital investment and I realize that. That's the way business is. As Harry Truman said, if you can't stand the heat, stay out of the kitchen. You are asking to be protected or phased out of a present system, but I think we ought to clean the system up and make it a competitive bidding system.

If Mr. Baird wins, put a penalty clause in his contract that will really turn the heat on him if he can't meet the requirements, and then guess who it will go back to. This is my idea of how competitive bidding is done. I really think you would probably be better served in the long run that way, rather than through this hybrid thing that seems to have grown.

I'd like your comments on that, because if I'm out of line on my concept of competitive bidding let me know.

Mr. Martin: You're right on.

Mr. Hoyt: First of all, the comment was made twice that regardless of the price we bid we would get 40%. Part of being in business is also that if you want to gain market share you can buy up a competitor in Canada in almost any business. Over the years we have bought out competitors of North American Van Lines in New Brunswick, of North American Van Lines in Saint John, of Atlas Van Lines - and these are agents of...I should say in fairness - in Halifax; in Newfoundland, Allied Van Lines Agencies. As we've bought them, we've been buying them to try to consolidate, a little, a bigger market-share position.

.1925

We have paid big dollars to the people who had those investments so they could retire. In most cases that's what was happening. As we've invested that money, if we've taken a larger percentage of the market share, under GLAC, is that right or is that wrong? Is that the reason Canadians invest in business? I think that's the reason Canadians invest money.

As we invested it.... I see my father right now, a gentleman who has been in the moving business and was put in by his father before him, taking that investment and looking at three or four years of losses and a couple of years of super-slim profits, well under 1% of revenue....

We've been working with it. We've done without ARFA, Atlantic regional freight assistance, which we got hit on in Atlantic Canada. We've taken the reduced numbers in the base cuts. We've taken what's thrown at us.

Responsibility.... When I say to slow it down a little bit...just give us a chance to try to find a bit more diversification for some of that. Again, I apologize if I'm trying to touch your heart, but it's really hard, in some of these small towns, to get rid of some of those assets in a real hurry without dumping them and causing chaos in those little towns.

Mr. Grose: I understand your problem. I have a yard full of assets...not quite the same kind of assets as yours; in fact, they're more literally what I just said. But there's no market. No one needs them.

I was interested in your statement about the book value and the actual value, if you can get it.

Mr. Warner: Market value.

Mr. Grose: The market value is what you can get tomorrow, cash -

Mr. Warner: Right.

Mr. Grose: - not what it should be worth. I know that very well. I have a line of nice trucks sitting and waiting for a buyer, and they aren't worth a nickel. So I understand your problem. But by the same token, either we're doing competition and competitive bidding or we're not.

[Translation]

Mr. Fillion: Mr. Baird, do you think CN will like the idea of investing $26 million in containers if it has to request proposals each year, as it must under the interdepartmental committee's new approach?

I have a little trouble imagining how a company such as CN can invest $26 million when the contract guarantee doesn't exceed one year. What do you think?

[English]

Mr. Baird: Yes, because they see this as a tremendous opportunity for a new product line for CN to get into. What the government business does is give them a volume of business to get this investment and start paying for this investment. They fully expect to put this to the private sector and corporate Canada, for corporations. And yes, once CN is in this business, their long distance moves will be handled by containers, not through Atlas Van Lines. Certainly CN and ourselves will be after corporate business, such as the Royal Bank and other businesses, to do the moves by, we believe, a lower-cost method for the corporations and the Canadian public.

[Translation]

Mr. Fillion: Has CN assured you that it was ready to invest that much money?

[English]

Mr. Baird: If we win the bid, I guess we'll have to have the containers to move the goods.

[Translation]

Mr. Fillion: If you get it, it's for a year. Since CN will have to issue a request for proposal each year, will it be prepared to invest $26 million for one year? That's a risk you run, particularly since you don't have any equipment. The other three companies have already invested in equipment.

[English]

Mr. Baird: It's not a risk, because if we win it this year I'm sure we'll win it next year and the next year and the next year. We have confidence in our bidding process and our cost factor that the over-the-roads cannot match us.

.1930

You have to understand what's changing in the marketplace. There are reasons why the van lines don't want to get rid of the long distance moving trucks, because that's basically how they control their agents. The agent has no way of costing a move other than through his van lines.

This will give all moving companies in Canada a way of moving their household goods other than through their van lines and their structured cost system that's there now.

It's too bad we weren't sitting at the table five years ago. I listened to a speech by Mr. Hunt, who has the largest trucking company probably in the world, J.B. Hunt. Five or six years ago I was at a truckers' convention and he pounded on the table and said that he would never move one of his freight trucks over the rail. In the last three years he has changed his 17,000, I believe, or 9,000, freight trucks to intermodal units. For anything that's over 500 miles, he now moves his freight trucks by intermodal rail.

The biggest CN expansion is by the freight companies of Canada moving their trucks from one end of Canada to the other by rail, rather than over the road, in order to reduce costs.

This is nothing new. I haven't invented anything new. CN has invented nothing new. They are taking products that they have and are looking at a product line to get into to be able to provide the Canadian public, they believe, with a better mode of transportation across this long land of ours. Time will tell. Maybe they're wrong. It's their investment; it's their business.

We have a joint venture signed with CN. The papers are all signed and sealed. It's their investment.... I shouldn't say ``their investment''; it's our investment, and we're really looking forward to providing this service to the marketplace.

Mr. Williams: I was appalled to find out by how much the government was into running your industry. I can assure you that, if I have anything to do with it, they'll be all the way out of running your industry. They will become a customer, albeit a big one.

I hope that you've taken to heart the remarks that have been made regarding competition. One should never fear competition. When I was in business, I was the competition. I didn't have to worry about the others, and of course vice versa.

The moving van lines have an advantage at the moment because they have equipment that's already up and running, perhaps somewhat depreciated. Here we find out that an aggressive competitor wants to get into your business, but he has to go out and spend money on brand-new equipment that's not depreciated and so on. We can't protect you from someone who wants to muscle their way into your business.

The concern I have is that we have allowed you to become overly protective over the years. We've told you to do certain things through regulation. You've had to spend and invest money strictly to meet regulations, and that concerns me.

Mr. Baird, I was concerned about your evasiveness when everybody else was quite honest and upfront about the capital involved in their particular business. I don't think I ever heard how much you had involved in infrastructure, whether you were capable of handling the contract the day after you got it, and so on, and that concerned me. But I think we're going to see some shake-outs in the moving industry.

I'd like a quick answer from all of you. Is an April 1 change far too quick?

Mr. Hoyt: Absolutely.

Mr. Martin: Probably.

Mr. Warner: Indubitably.

Mr. Baird: No, not at all.

Just to answer you about our infrastructure, if we are successful, we'll probably create 50 to sixty jobs in Kitchener - Waterloo.

Mr. Telegdi: I'm hoping that we'll have bids that are not around the table and are not presently doing government business. That's the whole point for the competition bureau and why we're forcing this change so very strongly.

We in government right now are into the politics of pain. We have been cutting back on many programs because we just do not have the money.

.1935

Let me say that government moves represent 35% of the household moving business in Canada and they have an incredible impact on the private side of it as well. So what we have done in government has probably created inefficiencies over time that make every one of you vulnerable in the time of free trade. If somebody in the States comes up with a better mousetrap, under free trade they can be right up here doing all the business.

I think it's critical that government never interfere to the extent that the IDC has. They have demanded ridiculous requirements. On the one hand, you're telling me that you have the best prices and you have the best service. On the other hand, I hear that if there's competition, IDC made us uncompetitive. You can't have it both ways. It has to be one or the other. If that was the problem, then that should be so identified, and maybe there are ways of dealing with it.

To all my colleagues as members of Parliament, I would suggest that you get Demand Video to show you Market Place. One of the companies that was featured was a United Van Lines carrier. To United Van Lines, Mr. Martin, I can only say that if they misrepresented you and your industry, you'd better go after Market Place. That was shown on national television last night.

I actually had zero, zilch to do with it. It so happens I found out it was on. I tried to contact the executive producer. We just haven't been able to connect, but I'm going to be contacting him. I'm going to be requesting some of their files.

In terms of the new moving thing, I can only say good luck to all of you. The industry has to get stronger and has to be more competitive, because if it doesn't then somebody could come in here from the States under free trade and do it all. We depend on the moving industries being done in this country. So I'm very serious when I say it's imperative that we stay ahead of the competition to the south.

The Chairman: Thank you.

Mr. Hopkins.

Mr. Hopkins: Thank you, Mr. Chairman.

This is a really interesting discussion. CN is going to buy blankets for Mr. Baird and pack the furniture. What about trucks?

We haven't heard anything about infrastructure. I want to come back to Mr. Martin because I asked him about infrastructure. If you're using a rail system, what infrastructure do you need in total to handle that operation?

Mr. Martin: First of all, we've looked at the rail system. We're very much aware of their rates and what they charge. We understand that under certain circumstances we can haul it for slightly less, but not a great deal less.

In looking at it, about 30% of the military volume can actually be handled in domestic containers because of the location of the terminals that are required to lift. After that, you require trucks to haul it if you want to go any further. In other words, the furthest you can go is Vancouver, but you want to get to Comox, which has a large military base. That would be by truck, ferry, up the island, and back again.

There are a lot of restrictions in their mode and there remains one hell of a lot of business that has to go by truck because it's the only way it can go. It's quite different for a freighter to put something on from Calgary to Toronto than it is for us to put something on from Calgary to Toronto that has to be delivered in Camp Borden.

There's quite an infrastructure required in this whole operation, just in terms of the organization of getting it loaded at the right time and getting it delivered at the right time and satisfying the customer and still being able to make a dollar.

I think there's just not enough talk around here about making a dollar. I'm not going to apologize to anybody for wanting to make money. I was raised in a capitalist country. What's wrong with this goddam country is we need some more profit.

Mr. Hopkins: Well said.

Mr. Martin: That's a good positive attitude, really, and I am competitive.

There's one more thing I want to say, if I may take the liberty. There's been too much talk about rules and regulations. The rules and regulations have done the job, but what do you think we get from a corporate account? The corporate account tells us what to do. Do you know what he does to us if we don't do it? We don't get any more business. That's a tough regulation. Give me the government ones any day.

.1940

Mr. Hopkins: Mr. Chairman, there's just one question I'd like to put to Mr. Baird.

What is your background in the moving business? What companies have you been with in the past?

Mr. Baird: Are you ready for this, Charlie?

Mr. Martin: I'm ready.

Mr. Baird: My brother and I started out with one truck in 1960. We had a small moving company in Kitchener, but it became the largest United Van Lines agent for a long time - probably 25 years. Not only was it the largest United agent, it was the best. We had the best claims record, the best drivers, and the best service.

Circumstances led me to get out of the moving business approximately ten years ago. I was asked by the Royal Bank to start up a move management program because of problems they were having with the moving industry and with their employees in moving their household goods.

So I started that program and I managed moves for corporations.

The thing you saw on Market Place last night is what I hopefully try to stop the industry from doing in managing the household moves, because that's my business. I manage approximately 3,500 to 4,000 moves. I did all of the House of Commons work in the last election, moving all the people out and moving all you people in, and I did the constituency offices.

Mr. Hopkins: That's rather interesting. Did you sign that contract before election day?

Mr. Baird: Yes, I did.

Voices: Oh, oh!

Mr. Baird: Just so you know - listen to the movers laughing back here - it was done at 10% less than the government was paying for 30,000 moves that year. So if each one of you moved, I did all your moves at 10% less than the government and did not charge the government any management fee. Our claims were less than the government's. And you can get all that from the House of Commons because they handled the contract.

I've taken my thirty years of experience in the household moving business and basically got into a move management company. I did not ask for all this; I did not ask to be here today. The IDC asked me to come to Ottawa to make a presentation to them. When I presented to them how they were overspending - when compared to CN and Northern Telecom - by $35 million to $50 million, they fought me tooth and nail. They continue to fight me tooth and nail, and it has cost me hundreds of thousands of dollars to be sitting here today as a small businessman in Canada.

I don't take a back seat to any of the moving industry, because what business I have done, I have done perfectly as a free enterpriser. Actually, I pay more on my business than what the federal government pays on behalf of my clients to the moving industry than what the moving industry gets paid by the federal government.

Mr. Hopkins: Have you told us yet what company you worked for?

Mr. Baird: My own company, Baird Moving & Storage. I'm a United agent.

Mr. Hopkins: Were you tied to a van line?

Mr. Baird: Yes, United Van Lines. I was their largest booking agent.

Mr. Hopkins: When did you leave them?

Mr. Baird: Charlie, I left them sometime around 1988, maybe 1990.

Mr. Hopkins: And where did you go then?

Mr. Baird: I started up my move management business. I first started the move management division with a company called ERS, Employee Relocation Services, in Toronto. I was there a year and I then went out on my own to start up my own move management company, which is called Corporate Moving Services.

Mr. Hopkins: Were you ever at any time tied in with Mayflower?

Mr. Baird: Yes. My brother was for a short time after we left United. Because of differences between United Van Lines and Baird Moving, we left and went with Mayflower for two or three years.

Mr. Hopkins: One of the reasons I was asking is that I sort of sensed a little crossfire here with you as you started out today. I wondered what your love affair was with United Van Lines.

Mr. Baird: Let me just say something about the van line industry. If you are rating the van lines in Canada from one to ten - and I've told this ever sense I left - United Van Lines is a ten. Other van lines probably go down to a three, which is North American.

There is no better van line in Canada providing a better service than United Van Lines. They have the best group of agents across Canada. They have the best internal systems and computer system. They have the best claims service. And not only Mr. Martin, but Mr. Hoyt and Mr. Hoyt's father have worked very hard to take a van line that, when I started at about the same time as Mr. Martin did, was on top of a plumbing store in downtown Toronto, on College Street.

.1945

Mr. Martin: You had an earth floor in your warehouse.

Mr. Baird: That's right. There was an earth floor in our first warehouse.

We've spent 30 years together. I feel that I've put as much of my effort into building United Van Lines as some of the other agents have.

Mr. Hopkins: Mr. Hoyt, you brought up the question about the extent of storage area. Who actually asked you to build that?

Mr. Hoyt: The federal government tender presented that year had a requirement in it that, to try to eliminate what they were calling paper companies in Canada - the companies we bought and folded in.... They thought if they increased the warehouse space requirements they would eliminate some of those companies. In trying to eliminate those companies in some of the cities that we only had one or two moving companies in, with the way our buildings were configured we had to either add more space or get out of the business.

Mr. Hopkins: I have one final question, Mr. Chairman.

At a previous committee meeting we had the IDC and the Bureau of Competition here and I asked the Bureau of Competition this question:

Have you at any time suggested that there should be a sole-source contract policy?

Mr. Addy: May I confer with my colleagues? I was speaking in the spectrum and I don't know if you're asking if we have actually communicated that to the IDC. Is that the nature of the question?

Mr. Hopkins: Yes.

Mr. Addy: I'm advised, sir, that we have not. Our recommendation has been that a significant share should go to the winning bidder, but it has not been the sole source.

Now, if they didn't recommend it to IDC, where did this sole-source contract really begin?

Mr. Baird: Can I answer that with what I believe? I believe the IDC -

Mr. Hopkins: No, not with what you believe. I want a direct answer as to where this began. Do any of you know where this actually began?

Mr. Baird: I believe it was Major Harrison within the IDC who told me, at last year's bid, that he was going to change the moving industry considerably and said, ``Wait until next year's bid when sole source is into it.''

It was hatched within the IDC, and I believe they believe that if they go to sole source they could keep the move management, which they have strongly fought for from four years ago. They want to keep those one hundred and some soldiers managing this business, and sole source probably would have brought that to them.

Mr. Hopkins: That's rather interesting, because, Mr. Chairman, as you recall, at that meeting that day, I believe the IDC - either on that day or at another session somewhere - said that it was only in this business part-time and that this was not their full-time job in the department, if I recall correctly.

I think this business of having all of these one hundred and some soldiers involved is a bit ridiculous today.

Mr. Telegdi: I think he said - and I have it here - that 130 soldiers.... He was going to provide us with the exact number, but he said 130 FTEs. General Fischer said that he wasn't full-time on it and there are some others who were all part-time, but he said there were 130 FTEs.

Mr. Hopkins: Thanks, Mr. Chairman.

The Chairman: Mr. Verran.

Mr. Verran (South West Nova): Thank you, Mr. Chairman, for giving me the opportunity to make a few remarks. I want to thank all of you gentlemen for appearing here this evening because of your concerns. I know you're not here willingly and that you don't just want to come to Ottawa for a little vacation. You're here because of your dire concerns about what's happening in the moving industry.

To Mr. Hoyt, I just want to say to you, sir, that you may have trouble touching the heart of my friend, Ivan, but you don't have any trouble touching my heart because I come from that beautiful little town in the Annapolis Valley that was mentioned so often here this evening, the town of Middleton.

Some hon. members: Hear, hear!

Mr. Verran: No, sir, the population is not 15,000. I think if you took in the Greenwood area and surroundings, the town itself has probably 3,000. In that little town in the Annapolis Valley, which has been hit so hard by economic downturns and slowdowns, there are several moving companies coming in. There are huge warehouses there, Mr. Chairman, because of the previous regulations that were put in by the government.

.1950

I want to just mention one thing. Thompson's Moving & Storage in Middleton, Nova Scotia, is the second largest employer for 30 miles going west. On the other side, you can go 27 kilometres to Greenwood and then they take over.

Mr. Chairman, I will tell you, the people in this committee, the government, and any government members who are listening that I feel strongly about this. If this change takes place and Mr. Baird can come in as an agent for some other company, the second largest employer of people in the area, in the district in which I live, will go under. And no, sir, they will not be employed because another van agent will be coming in and, number one, after a short time they will be moving in their own people and they will have their own agents.

I'm sorry, Mr. Chairman, but one of the members here - I believe it was Mr. Baird - said CN would probably be the answer to this because they would move by CN, by track. They would box and they would carry. Sir, I'll tell you one thing. They won't move anything by rail in the area in which I live because there are no damn tracks left in our area!

Some hon. members: Hear, hear!

Mr. Hoyt: Mr. Verran, if I could add this for the members from Atlantic Canada who are members of van lines, yes, that is true. But the people I'm representing tonight come from an area that does not have any more rail than Mr. Verran's area does, except for a stretch of CN rail that goes from Halifax, up through the Wentworth Valley, and through one stretch of New Brunswick - and all the rest of Atlantic Canada is a vast and diverse area about the size of the province of Quebec. As a matter of fact, from Halifax, Nova Scotia, to St. John's, Newfoundland, you're looking at an area of some 919 kilometres with no rail. There are military bases along the route. To go to Yarmouth, Nova Scotia, we're looking again at an area with no rail for a distance of 300 to 400 kilometres. Most of northern New Brunswick is the same. It's going to be very difficult in our region to service anything by rail, and there are a number of military installations there, none of which are near any rail lines.

Mr. Verran: Mr. Chairman, may I continue for a minute?

The Chairman: One final question.

Mr. Verran: I'm glad I brought that point up. I want to thank Mr. Hoyt for finishing it off for me, because I was going to come to that very subject for the Maritimes - Atlantic Canada and Newfoundland - which is where I grew up.

Mr. Chairman, I want to say another thing, if you don't mind. I don't want to say - as the gentleman right here, Mr. Baird, has said - there may be some trucks that would come off and that there will not be anyone employed on the local trucks. I don't want to see one damn truck in Middleton, Nova Scotia, or in the valley of Nova Scotia, come off the road only to see foreign trucks come in there to take over their business.

There's much more I could go on to say, Mr. Chairman, but I think you got my point. I want to thank you for giving me this opportunity to speak. I'll do everything I can, everything possible, to keep the van lines we have.

I'm an ex-serviceman of 20 years. My family and I were moved many times by these same van lines. I want to say that these people do serve families. They are loved by those families because they give them personal care in their kitchen and their bedroom and everywhere else. I want to say that I strongly support what they've done in the past. I would strongly suggest that they continue to provide that excellent service in the future.

Thank you, Mr. Chairman.

Voices: Hear, hear!

Mr. Baird: Can I just answer to that?

The Chairman: Yes, you can make one final comment.

Mr. Baird: I would ask the hon. member to check with his local agent, Thompson Moving. I think he should ask him how many container loads he loaded on CN for Allied Van Lines this summer. That's what he should check before he makes those statements.

Mr. Verran: If he did, Mr. Chairman, he hauled it by truck first because he goddamn well couldn't load it where I live in Nova Scotia!

The Chairman: There is one final question from Mr. Regan.

Mr. Regan (Halifax West): Thank you very much for this opportunity to ask a question,Mr. Chairman.

Gentlemen, when Mr. Grose asked you a question earlier, I wasn't entirely satisfied with the answer. Your reasoning on how the GLAC operation works at the moment, or how it has worked in the past, wasn't entirely clear to me at that point. The impression I had after that question was that the largest share wasn't based on the lowest price. My understanding previously was that the bidder with the lowest price would get the largest share of the business, and other bidders would have to match that price and would get lesser percentages, based upon the ranking and the bidding.

.1955

Tell me if I'm wrong and how I'm wrong.

Mr. Hoyt: I'd like to start that answer, Geoff.

You're not wrong at all. As a matter of fact, last year, because our van line, United, was not the lowest, and because Allied was in that particular instance, Allied did pick up a lot more business. As a matter of fact, Graham Thompson, an Allied agent in Mr. Verran's riding, told us that as we were experiencing a large reduction in revenue in Middleton this summer in our five companies... and yes, we do have five in Middleton, Mr. Verran. I would suggest we're very close to him as an employer now. With those companies we have bought over the years, we experienced about a 30% reduction out of Middleton. Mr. Thompson experienced about a 40% increase in business out of Middleton this year. That is a fact. And the same happened at every location.

So as our companies...as each company that is a GLAC-approved carrier came up on the equalization roster, it got less volume in an increase, or we didn't experience that increase that Allied would have experienced. Had we been the lowest tender, our 40%, from what we've heard tonight, would have been a whole lot higher. I only wish we did control 40% in the area I'm from.

Mr. Regan: Mr. Baird, do you have a reaction to that?

Mr. Baird: Approximately four years ago, I believe - and I could have this wrong... and our base was set with the limit as per the number of carriers the van lines had. The situation was always a ``me too'' situation. It never changed.

I may not have the exact figures, but I believe United Van Lines was at 37%, Allied at 25%. Whatever it was, it went down.

When Consumer and Corporate Affairs and the consulting people in the Auditor General's office did their reports, one of the things I pointed out was the ridiculous non-competitive business, because United kept that 37%, if that was the figure, and everything just stayed the same. The only thing they had to do was ``me too'' the price. At that time there was no incentive for anyone to put a lower price in, because they gained nothing.

Mr. Regan: What I just heard, I gather, is that -

Mr. Baird: He's talking about today. Let me just give you -

Mr. Regan: So am I.

Mr. Baird: You're asking for what you understood.

What happened, then...because they changed this, they originally went to giving a 5% increase to the winning bidder. The problem was that at the end of the year you didn't keep that 5%. If you were at 20% of the business and you put the lowest price in, and the incentive was 5%, you got 5% of 20%. At the end of that contractual year you went back to your 20%.

This year the winning bidder's incentive was 30%. Had United Van Lines won, with their R-base this year - and again, whether it's 35% or 37%; whatever the overall percentage of the business was - they would have gained 30% more business on their 35% of the business, or, if you want to say so, 9% of the business. That's how the tender has been set up.

So even though United Van Lines lost - it has never put a winning bid in in the last four years.... They tried. They weren't successful. If someone gained only 5% of the business, by the time you broke that down among the other three van lines, United Van Lines was losing, in the overall situation, only 1% or 2% of the business. Yet they went back up at year-end.

It was an unbelievably bad situation. That's why Consumer and Corporate Affairs changed it. There was no competitiveness in the bidding process.

Now what's happening, and what you have to understand, whether it's us or anyone else...and it could be United Van Lines.... They just had a bit of misfortune this year. If they win the winning bid, they're going to gain only 3% of the business this year. They're going to go from 35% or 36% or whatever they have up to 40%. But if Allied wins the bid this year...and if Allied was at 20% of the business, or if Atlas Van Lines was at 10%, or whatever it may be, they're going to go from 10% of the business, or 20%, up to 40%. That is a good prize to get to make your bid competitive.

It is ludicrous that last year Allied Van Lines reduced the tariff by 14%. Everybody had to ``me too'' it. To me, it was a ridiculous price. But all Allied gained on that business - and the Allied rep is here - is it went from 20% of the business.... I think they ended up with 26% of the business.

.2000

Had the present system stayed in this year, then they would go back to their 20% at the end of this year.

It was ludicrous. It was the most ridiculous system that was set up.

I don't know why the other van lines were happy to let United continue with 30% of the business, or 35% or 37%, but they were. They accepted it, instead of fighting this four or five years ago, when this R-base was all set. So the system has changed - I believe for the better.

Mr. Hoyt: I'd like to point out, Mr. Baird, with all due respect, the existing infrastructure that we have paid for, put in, the warehouses we've put in, the trucks we've put in, the companies we've bought. If, because of that, we have a larger share because we've invested a larger amount of money, then a percentage increase in our existing infrastructure of 30% means as much to us as a 30% increase would mean to a lower infrastructure, whether it be Allied Van Lines or Atlas Van Lines or whatever van line. It doesn't matter - it's 30% more business than they had the year before.

I don't care what business you're in - that's one heck of a prize. If I had a 30% increase this year in civilian business in Atlantic Canada, that would be a prize.

Mr. Martin: I believe the $30 million saving in the current 65% discount level to be quite a success for something that was uncompetitive.

Mr. Warner: By Mr. Baird's own words, United Van Lines is considered to be a ten in the moving industry in Canada -

Mr. Baird: I don't want you to repeat that.

Mr. Warner: I'll repeat it and thank you for the endorsement.

I'd also like to add one of the earlier references to last night's CBC TV show by a member of this committee - Mr. Telegdi, thank you - because they too said that United Van Lines, and I'm paraphrasing, was the best in the industry in Canada in its business.

Not to be glib, in this discussion about customer service and lowest prices.... Sir, I'm in the industry, but I got lost in the discussion on percentages here, and I have to work with them all the time. You're not there, so I can understand your confusion. Never, in my mind, in private business have lowest price and best service been synonymous with each other. It just doesn't happen in that way.

The Chairman: Thank you, Mr. Baird, Mr. Warner, Mr. Martin, and Mr. Hoyt, for coming, in the case of Mr. Martin from Edmonton and of that of Mr. Hoyt from Atlantic Canada, and answering our questions so clearly.

This meeting stands adjourned to the call of the chair.