[Recorded by Electronic Apparatus]
Tuesday, June 20, 1995
.1103 
[English]
The Chairman: Order.
We're going to enjoy a bit of a change of pace today, getting away from some bills and getting back to contracting out. This will be the last set of witnesses scheduled for contracting out. If everything goes well, we might be able to finish this assignment early in the fall, perhaps just a few weeks after we resume sitting in the autumn.
Before we get to the witnesses, I want to indicate to colleagues that we're going to stay behind in an in camera session at the conclusion of this meeting for just a few moments so our esteemed researcher Mr. Adams can give us an outline of what he is planning to do over the summer so we'll be in a position to complete the final stage of our examination of contracting out early in the fall. So please don't rush away. I think our in camera session will not last very long.
We have the pleasure of having witnesses from the Treasury Board of Canada with us this morning, all from the financial and information branch: W.E.R. Little, deputy secretary; Alan Winberg, executive director; and J. McCrindell, assistant secretary.
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I understand that you gentlemen don't have prepared opening statements, although I do understand, Mr. Little, that you'd like to have the opportunity to present some documents.
Mr. W.E.R. Little (Deputy Secretary, Financial and Information Management Branch, Treasury Board of Canada): Thank you very much, Mr. Chairman, and thank you for allowing me this opportunity to appear before the committee.
What I would like to do, if I may, sir, is table with you three documents that have been prepared. The first is a letter from my president to you, which is in response to the letter you sent to the Hon. Art Eggleton on April 6.
Second, I'd like to table a one-page summary of the contracting-for-services framework within the Government of Canada, which is hopefully going to provide information that may help in further questioning this morning.
Third, I'd like to table with the members a report that I commented on the last time I had the pleasure of appearing before the committee. This is the report on contract awards by departments for goods, services and construction for the fiscal years 1991-92, 1992-93 and 1993-94, for your information.
The Chairman: Thank you for that.
If I may, I'm going to kick off the questioning, and then we'll get to Mr. Marchand in a moment. I have a couple of questions off the top.
The one thing we want to nail down today with the Treasury Board is answers to particular questions. Some of these questions have been prepared by staff. So that they're in a position to do the final stage of research, staff feels that certain questions must be answered. So I'm going to make sure that at least those questions raised by staff are answered by you people. I know my colleagues will have other areas of exploration.
My first question has to do with some background information and reporting to Parliament. The only ongoing monitoring done by Treasury Board of the contracting activities of departments is the annual report that departments and agencies are required to submit to Treasury Board on an annual basis.
The Treasury Board manual contracting volume, appendix K, requires that departments submit reports on the total number and dollar amounts of construction and service contracts. The report on the contracting activities is organized by contract limits and broken down into competitive and sole-source contracts.
So I have two questions for you: one, what is the use that Treasury Board makes of these reports; and two, would it be possible for Treasury Board to produce annually a summary of these reports for Parliament?
Mr. Little: In answer to your first question, Mr. Chairman, what use does the Treasury Board make of these reports, the primary purpose of the annual report is to examine how departments are responding to the contract policy that calls for maximizing competitiveness in contracting with the government.
The analysis we undertake is to determine whether the trend lines are in fact going favourably toward more competitiveness or whether there are reasons why it is either stable or going down. We undertake, then, a detailed examination by department of those departments that are at the lower end of the competitiveness stage, and we work with departments in improving their performance so that we can see overall a general increase in the level of competitive contracting within the government.
Second, we use it as an opportunity to examine the policy framework within which we are operating the contracting practices within the government. This is an opportunity for departments to raise with us any issues or concerns they have about levels of authority or the manner in which the contracting is taking place, either within the department or within a common service agency such as Public Works and Government Services Canada. It gives us an opportunity to review annually our own suite of contracting policies and, for that matter, the government regulations on contracting.
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To answer your second question, I have provided the committee today with a copy of this annual report as a step in what is already a very open process, with the outcomes of the report. In fact, we send it to all departments, together with a detailed analysis and work we want to do with them when we've completed that analysis. We expect certain responses we ask for on what they are doing or what action they will take to improve the situation. Secondly, we make this report available to the public by placing it in our library and on our bulletin board for electronic delivery to people who may wish it in the public.
The Chairman: Is that it on both questions?
Mr. Little: Yes, sir.
The Chairman: Thank you. I'll have more later. I may want to follow up on this. But we'll go to Mr. Marchand.
[Translation]
Mr. Marchand (Québec-Est): Good morning, Mr. Little. I have just been handed at lot of information, at the last minute, once again, and I find that hard to take. I have here information on the dollar value of contracting out for the latest fiscal years. Can you tell me what the differences are between competitive and non-competitive contracts?
[English]
Mr. Little: We define competitive contracting as the contracting that is placed in one of our approaches to the private sector, whether it is automatic, through the open bidding system, whether it is through placing of ads or requests for proposals in trade journals, whether in ensuring that even in smaller contract areas we have a minimum of three quotations from telephone bidding. Any case where more than one bidder has been asked to respond is in our view a competitive contract.
A non-competitive contract is a sole-source contract where only one bidder has been asked to respond. In those instances we have very clear rules laid out on when we believe it is appropriate for sole-source contracting to take place.
Mr. Marchand: What are those rules?
Mr. Little: There are four rules we've placed on sole-source. First of all, we have said sole-source contracting can take place in the event of an emergency, which is defined as being a very urgent requirement to deal with safety or health or in the national interest. That is not a very frequent use. We have an annual report we receive on that, and in the last year there were only nine instances where there was an emergency contract on a sole-source basis.
The second rule is that there will be sole-source contracting when there is only one person who can respond to the need.
Third is when it is in the public interest not to request more than a single bid.
Fourth is largely around national security issues or instances where you are, for example, contracting for the services of a professor to give a lecture. You would obviously want an individual who specifically could do the job for you.
Fifth, we have defined anything under $30,000 for service contracts as being both in the public interest and in the private company interest...not to go through the heavy paperwork and work associated with bidding for competitive contracting.
Those are the areas when we define sole-source as being acceptable.
[Translation]
Mr. Marchand: Those are, in fact, criteria that allow the government to award non-competitive contracts as they see fit.
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You mention the national interest, those cases where only one person can respond to the need and also special situations. No wonder many contracts awarded by government are non-competitive.
I find it hard to accept contracting out because Treasury Board has done no study and because no one in Treasury Board, not even the Under-Secretary, has told us that you have made a cost effectiveness study on savings due to contracting out.
Can you summarize the minister's recommendations? I haven't had time to read them. What are they supposed to improve? The contracting-out system?
[English]
Mr. Little: I'd like to make sure I clarify the question. Contracting out is an expression being used that has a specific meaning to us because of the way in which we've negotiated with the unions on workforce adjustment. In the case of this terminology, contracting out refers to taking an operation that currently is in the government and moving it out into the private sector or to some other delivery means, thereby making the current employees surplus. There have been very few instances of that happening in the government in the last few years, on that specific reference to contracting out.
If you broadened the question to the issue of contracting generally for services, which is where you're much further into the kind of reporting you've been referring to, then I can answer the question in terms of the summary you're asking for in the president's response to you.
We believe we've established a framework for contracting whereby we can provide you with the assurance that the framework calls for value for money to be the hallmark in all of the contracting that takes place in the government, whether it is competitive or sole source. What we are after is best value for the taxpayer in the work or the goods or the construction we're contracting for.
[Translation]
Mr. Marchand: May I interrupt, Mr. Little. We have been told very often by Treasury Board and by many others that contracting spelled savings. But there is no evidence to that effect and no studies to prove it. I think it was the Secretary of the Treasury Board who stated before us that no studies had been made to demonstrate black on white that there really are savings to be made with contracting.
There are always special circumstances, very limited cases such as highly specialized needs where the government has no alternative but to contract out. But generally speaking, the cost effectiveness of contracting has not been proven for those $5 billion to $9 billion the government spends in contracts every year. So, even if you state that there is a framework to make sure that savings are made, there is no evidence that it is indeed the case, at least as far as I'm concerned.
[English]
Mr. Little: I'd like to respond to the hon. member by referring to the fact that the reference I'm making is to ensuring value for money, whereas your reference is to the saving of dollars. There's a very important distinction in my mind between those two, because you're asking me to show you studies that have indicated that money is being saved.
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I'll refer you then to a document, which I'm prepared to table with the committee if you wish, that we call the ``Make or Buy Study on Administrative Services''. In response to earlier questions from this committee, we deliberately undertook a review and a study of the contracting that goes on for temporary help in the administrative area where there's a choice between hiring individuals into the public service or contracting for -
The Chairman: I think that's already been received, Mr. Little. I think we got that. It's dated May 11 or something.
Mr. Little: Yes, sir.
The Chairman: We've had it for more than a month.
Mr. Little: There is a specific reference to where we undertook a piece of work to try to determine from your perspective why we can say we have undertaken a framework analysis that indicates that it's actually more economical to go through the hiring of temporary help than it is to hire permanently beyond a twenty-week period.
Second, sir, if I could refer you to this particular chart we have put together, we have departments that are responsible in the framework for certifying value for money. In every contract that's let and every contract that goes out, there is a requirement under the Financial Administration Act for the manager who let that contract to certify that the work that was requested was completed according to the contract requirements. He certifies that the work has been completed to the satisfaction of the contract and therefore the value of money has been achieved.
We then require a second signature on the payment that indicates that the work has been completed satisfactorily and the payment can be made.
We also then have an audit regime that goes in place in departments that periodically examines the contracting practices of that particular department to ensure that the process is being put in place and that value for money is being achieved. Those audits then are looked on in our terms in the framework and we in turn occasionally do cross-departmental audits. For example, we did one recently on temporary help to ensure that the value for money was being received. That audit was undertaken by Public Works and Government Services.
The Chairman: Thank you. This round of questioning is completed.
Just before I turn to Mr. Duhamel, this is the first time we've seen this so-called Contract Activity Report, 1993-94 that you presented to us a few minutes ago. Has this been done for some time? When was it first started?
Mr. Little: The report was first created in 1991, Mr. Chairman. You did not see it in 1992-93 because we were going through the changes of the NAFTA agreement, which caused us to hold off for one year the production of the report to simplify reporting procedures with departments. So you now have 1992-93 and 1993-94 combined in this report. You will next see this report in the fall when we complete the 1994-95 analysis, and we'd be happy to table the report with the committee in the fall when it's ready.
The Chairman: What do you do with the report? I hope it does more than just gather dust.
Mr. Little: Absolutely, sir. We undertake a detailed analysis. We are undertaking a detailed analysis of the departmental performance in relation to the contracting report they gave us. As I mentioned earlier, the intent is to work with departments to ensure that they are increasing the amount of competitive contracting that's taking place.
The Chairman: Thank you.
Mr. Duhamel.
Mr. Duhamel (St. Boniface): Gentlemen, thank you for your presentation. I want to talk about competition a bit because it seems to be a sensitive point and perhaps one that needs to be looked at in some greater detail.
Through the course of the hearings, the committee has learned that contracting out is in general efficient and economic. In contracts awarded through competition, there's this feeling that there has to be competition. There has to perhaps be more. In fact, you'll recall that one objective of government contracting policy is to encourage competition.
The committee also learned that for fiscal years 1992-93 and 1993-94, almost half - I think it's 46% - of all service contracts entered into by the government and the private sector have not met this objective of encouraging competition. Now, it may depend upon the way in which we look at encouraging competition; I acknowledge that. I can't speak for the committee, but if it were to want to recommend that efforts be made to increase the proportion of contracts that are awarded through competitive tendering, obviously information of the sector of contracted activities where managers should make such efforts becomes absolutely crucial.
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The problem is, as I understand it, that Treasury Board has no information on the proportion of sole-source contracts versus competitive-tendered contracts by the sector of activities. Perhaps I'm wrong, and you can correct me if I am.
The questions are as follows. Do you believe - I need an opinion here - that it would be useful for the committee to recommend that information on the proportion of sole-source versus competitive-tendered contracts by the sector of contracted services should be included in the reports on contracting activities that departments and agencies produce annually for Treasury Board? Do you think such information would be a useful tool for managers to know in which contracting sectors - for example, there's management consulting, office cleaning, etc. - improvements have to be made for increasing the proportion of competition?
Perhaps you could address that for me, and if we have time, I have a few other questions that I'd like you to address.
Mr. Little: Let me answer quickly then to give you more time. In the question of contracting, the report currently is divided by generic terms of goods and services, and construction. That is the definition we use to determine where things are.
In terms of individual departmental activity, it is not hard to understand that most of the work that goes on - take, for example, a department such as Human Resources Development - is connected to activity largely around contracts for professional services, certain survey work, certain policy development work, and things like this. We can sort of determine by department what they are largely contracting for.
The problem with breaking it down further is that we now go to another report, which is public accounts. Annually we have available, by reporting objects, how much money is being spent on a variety of activities.
My suggestion would be that this is an area we could more properly mine for you as a means of giving you the type of information you are looking for as opposed to bearing yet another detailed responsibility on departments to define their contracting by activity, which can be quite a detailed task to undertake. And I'm not sure it would add very much to the knowledge base other than what we can provide you now.
That's my opinion on whether you should ask for even more detail when in fact we could probably find enough detail in the current reports to give you better information.
Mr. Duhamel: Could I interrupt briefly? If that or something similar has been prepared for the public accounts, then clearly the work is being done by someone, or have I misunderstood a point?
Mr. Little: No, it's my explanation, sir. The public accounts provide the detail on money spent by activity through the reporting object or economic object, but it doesn't tell you whether it's competitively or non-competitively contracted.
Mr. Duhamel: Of course.
Mr. Little: In the contracting reports, we look at competitive and non-competitive in the three sectors, but I can't tell you, by reporting object, how that money is being spent.
I hesitate to offer this, but we have under way a proposal that we are bringing forward to change the financial management framework and to be able to go to a modernized accounting system that will bring to bear a much easier way of bridging those two situations.
Mr. Duhamel: I think that's very important. It's easy for us to have those feelings, because we really don't have the detailed information or the background you have. There's a lot of information, but it's not always compatible. It's very similar, but it's not necessarily to be used as a direct comparison. Perhaps that needs to be looked at further.
There's another feeling I have about these policies. I don't want to say that people ignore them, but everybody is so busy, I acknowledge that. I really get annoyed when people suggest we're not doing this, but they don't pay sufficient attention to the policy as perhaps with a directive. It's easy to slip through or around. It's not necessarily with any malice; it is just that people have things to do.
I wanted to ask whether or not that is in your opinion somewhat true, quite true or totally untrue.
Second, what mechanisms are there - this is another feeling I have - that are really insufficient? I'm not giving the impression that we have to establish a policing force, but that somehow people could do things that are not necessarily bad in the sense of being intentionally contrary to policy but leave something to be desired.
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Could you address those two points?
Mr. Little: In the first instance, I think there was a variation of response to your issue: is it true, not true, or whatever. Some people are very conscientious. Fortunately it's most of the managers and the contracting staff. They are very conscientious about following the policy, and they work hard at being able to produce good value.
The pressures against that, where you get issues where it may not be followed precisely as we would like, is where there's a question of time and priority, even knowledge, which makes it easier to go to non-competitive contracting, for example. In some cases there is a very good and valid reason for it to be done. In others it's a question of priority.
The work we can do to enhance where we already are is to continue to reinforce the need for good training of the people who are involved, provide them with easier tools to use, so they can in many cases automatically be provided with the kind of information that is so laborious to pick out, to try to enhance the electronic enablers that enable us to get the information out and the contract request back in, to work at providing check-lists, where there aren't any, that can help people who are maybe not as experienced to work on this. This is work we want to undertake.
What we're trying to do is to move away from the detailed, routine kind of reviews that are not providing a hell of a lot of additional value-added; to free ourselves from that, increasing the accountability for others to make sure it's working at the routine level and moving to the higher-value part of the contracting framework, where we can provide more assistance and better support to those who are in the departments, contracting.
Mr. Duhamel: Are you saying you are trying to provide greater clarity, clearer expectations, at the front end, so the accountability function becomes automatic? If you do this and this and this, then in fact you do respond to the policy and the needs as expressed by Treasury Board and others. Have I seized that?
Mr. Little: Yes, sir.
The Chairman: I'll now go to Mr. Murray.
Mr. Murray (Lanark - Carleton): Mr. Little, as the chairman indicated, there are a number of questions we need answers to for the purposes of our study. I have one of those questions. I'll read it pretty much verbatim. It's about professional consulting services.
In the last ten years the average annual growth rate in contracting expenditures has tended to be more important in the consulting sector and for professional services in general. But apparently Treasury Board has never produced a booklet or guidelines to give advice to managers on how to obtain best value for money from external consulting or other professional services. In countries such as Australia and Great Britain, for example, such guidelines have existed for at least the past ten to fifteen years. Would it be useful if the committee recommended that Treasury Board produce a guide that would give useful advice to managers on how to deal with and how to get the best value for money from external consulting and professional services in general?
Mr. Little: The answer of course is yes, but I would qualify it by saying we already have undertaken, through departmental training courses and departmental procedures, if you like, work that goes in the direction you are referring to, where we have specific value-for-money criteria people can use.
We also set it up in such a way that managers have assistance from contracting specialists in departments. We get many calls in the centre: how do I go about this, what is the best method, how can I ensure I get whatever? We establish standing offers, for example, as a means of quickly identifying professional services that are available for people at a reasonable price and where they can be sure the quality is standard. In some cases we bid those. In others we just make reference so it's available.
We have made available now, on an open bidding system, a very rapid means of being able to survey what is available. It's at the departmental level that you see this happening.
We don't have a specific document that has been prepared as a guide, but I'm certainly prepared to look into the possibility of using my staff in the future in helping develop a framework that might help train the trainers, if you like.
Mr. Murray: It sounds as if the information is there. It is just a question of pulling it together and packaging it.
Mr. Little: We also use seminars and we have a very interesting contract network that culminates in an advisory committee, where we share best practices. I wouldn't want to give you the impression that not a lot goes on.
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But if you asked me to produce the Treasury Board booklet or guideline on best value for professional services contracts, we haven't undertaken a piece like that. We're certainly prepared to look into it to see how much we can produce that would be value-added to what is already there.
Mr. Murray: Thanks.
I have a couple of questions relating to this diagram you provided us with. First, is the dotted line optional between Public Works and Government Services Canada and departments just suggesting that departments can, if they wish, use the services of Public Works and Government Services Canada?
Mr. Little: There is a mandatory requirement for using a PWGSC. At the risk of providing you with too much information, could I provide you with another document, which is the authority levels that are in place where departments are authorized to proceed on their own and above which they have to go to PWGSC as the government contract agent. Or, in certain instances, they have to come to the Treasury Board and ask for approval before they proceed. I don't think we've shared that document with the committee before, and I've prepared it to give you two pages just about what that framework is. If I could have that passed out, it might help, sir.
The Chairman: It will be done.
Mr. Little: Basically, what happens is that - let me take goods, which is the easiest one - we have a regime that says that departments may contract up to $40,000 non-competitively and $400,000 competitively, provided that PWGSC has delegated the authority to do so.
In fact, PWGSC authority is at about $5,000 as an average. We've authorized other exceptions, but basically it's $5,000. So for any good contract the department wants above $5,000, it must go to PWGSC as the contracting authority.
Below $5,000 they don't have to, but they may if they wish. Some of the smaller organizations, for example, with very limited contracting capacity, will go to PWGSC as the central agency.
I could give you other examples.
Mr. Murray: That explains it.
At the bottom of that page, where you talk about other fair access safeguards, they're all trade related, really. My question relates to whether or not there is somebody in the government actually keeping an eye on all of those areas, or is it a question of somebody, perhaps in the United States, who has wanted to bid on a contract feeling that they were unfairly shut out and complaining? Is there a process in place constantly to monitor those areas: the World Trade Organization, NAFTA, etc.?
Mr. Little: Yes, sir. The Canadian International Trade Tribunal is set up to be a judicial body that deals with contracting generally and complaints that may be received at present just from NAFTA, but in the future -
Mr. Murray: But would there have to be complaints? Would somebody else have to bring it to the attention of the tribunal?
Mr. Little: Largely, yes. They have an interest in what the overall situation is, but I would have to characterize it as being a place where you go with a complaint: ``I should have been given an opportunity to bid on this contract, but I wasn't'', or, ``I don't think I was fairly dealt with under the terms and conditions of the NAFTA or, after July 1, the internal trade agreement that we've signed with the provinces and two territories''.
In the case of the World Trade Organization, it's even more international, where you can go with big complaints, but they're largely trade related. You can go there if you feel that your contracting ability has been restricted unfairly. Those are large safeguards.
There's one other part of this that is interesting. In the case of NAFTA, there is now a limit of about $63,700 for services and goods, above which you're expected to go to international competition. You have to open your system. A lot of exceptions have been built in, and our calculation is that about 20% of the Canadian government's contracting in fact is within that high competitive range.
In the case of the internal trade agreement, there are many fewer exceptions. It's mandatory to go to competitive bidding across the country. In this case, about 75% of the Canadian government contracting will be under those provisions.
So although it's a complaint area, if you like, there are also provisions now that are forcing wider competition to be mandatory and we are working in ensuring that our contract guidelines and our contracting practices respect those agreements that have been signed.
The Chairman: This round is done. I note the presence of Mr. Epp. I'm going to give him time to catch his breath.
Mr. Epp (Elk Island): Thank you, sir.
The Chairman: I'll allow Mrs. Chamberlain her turn.
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Mrs. Chamberlain (Guelph - Wellington): Why is the Treasury Board not keeping information on the full-time equivalent figures of the individuals who work temporarily? We've had a lot of discussion about that in committee: who those people are, how many they constitute, and really what numbers make up the factor of a wage figure, percentage-wise. I'm really wondering why Treasury Board doesn't keep those figures.
The second part to it is don't you think such information would be useful for departments to account for the size of the so-called ``shadow bureaucracy''? I think we need these numbers to be able to evaluate exactly what percentage of the salary scale these people are taking.
I'd really like a comment on this. I think it's a fairly important area. We have spent a lot of time on this in committee.
Mr. Little: Let me answer the second question first, if I may. We are very concerned about making sure the use of temporary help is appropriate to the need. The PWGSC has undertaken the first phase of an audit on temporary help, which has now come through two departments and to us. It generally indicates we're spending - this is in 1993 figures - something in the order of $73 million across the government on temporary help. I may have to check that figure, but I think $73 million is accurate.
The reason for my starting from this end is that what we're really saying to managers is that we want you to manage the salary budget, we want you to manage an operating budget, which is broken up between salary and operating, and we want you to do this in a way that provides best value at the highest level of service we can bring to the government service. By focusing on dollars, you are providing managers with flexibility to use the correct method of delivery to enhance the service...as opposed to FTEs, which are an artificial way of calculating what is in fact now through the operating budget method a $1 calculation and a $1 verification.
Second, this audit that was undertaken by PWGSC recently indicated that the contracting policy was correct but that there were instances where people were not following the contract policy. We have undertaken to work with departments now in verifying those areas that need improvement, such as not taking advantage of the lowest price available in that particular area - some work has been done to bring that to the department's attention - and where there are instances where the wrong classification is being hired to do the work. In other words, you're going to a higher value than you need to. So that's being pursued. We have now undertaken some fairly detailed work to do that.
My point is that through these kinds of audits and reviews I think we can provide you with assurances that we are doing the right thing with the dollars granted for providing the service by using dollar value as the verification, as opposed to FTE.
There is one last point I'd make. If you're looking at temporary help by FTEs, generally you're speaking about two or three weeks of work, a maximum of twenty. So you are calculating on 0.01 of an FTE. When we brought it together for you, I don't think it would make an awful lot of sense if we were looking at something in the order of $70 million to $100 million across the whole government in this particular area.
Mrs. Chamberlain: We talk about hiring some of these people. Some of them have been let go or have left our employment. There has been an ongoing issue through the committee about the fact that if these people leave employment, we don't have them any longer as regular full-time employees but we hire them back on a contractual basis. How does that all work out? What is the Treasury Board's feeling on that particular position, where sometimes these people come back? It's been alleged that sometimes we have to pay them even more when they come back in some sort of different life, so to speak. What do you think about that?
Mr. Little: We have in place now a regime that says if you are a former public servant and you're coming back to work for the government within a year of the time when you left, we make certain you don't get paid any more than you would have had you left the government through what is called a pension abatement arrangement. That's a standard practice that has been in place for some time now, and we've looked at the number -
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Mrs. Chamberlain: Does that mean then they collect their pension and also a salary while they're working?
Mr. Little: No, it means they don't collect more in a combination of what they get as a per diem and their pension than they would have had they been fully employed. So it's an abatement arrangement that caps the amount available.
The Chairman: Mr. Duhamel wants a clarification on this point.
Mr. Duhamel: I was looking at the figure you had used of $70 million. I rounded it off to $100 million. I divided that by $25,000, which is a low figure in terms of average salary perhaps, people working at the lower end of the scale. I came up with a figure of perhaps 4,000 people. That doesn't seem to be a whole lot, and frankly that's too large a figure; it's probably 3,000.
Is that in fact the correct figure - $70 million to $100 million? In a workforce as large as we have, that would be a very, very small percentage. There's something I'm not understanding here.
Mr. Little: Perhaps I can help, sir, by dividing it into categories. What I'm referring to is temporary help, which is help taken from manpower organizations that bring people in for less than 20 weeks. That's called a casual employee, temporary help.
The next category is term employment, where you bring people into the public service, but now you're dealing with perhaps a three-month contract.
Mr. Duhamel: How large is that bill overall?
Mr. Little: I'd have to come back to you, sir. I think we might have - and I'm guessing now - in terms of term employees at any given moment, perhaps 25,000 across the government as a whole.
Mr. Duhamel: Casual, term...?
Mr. Little: Then you have contract professional services, which is neither somebody who is hired through casual nor somebody who is hired as term within the public service. You then have another arrangement, a professional service contract, where you're bringing in a consultant for a particular specific piece of work. That's another category. Then you are into indeterminate employment.
Mr. Duhamel: I think that's what my colleague.... I don't want to speak for her because I know what has happened to others when they've done that, but I think she was looking at the overall -
Mrs. Chamberlain: I wondered why you were taking my turn.
Mr. Duhamel: Sorry.
The Chairman: I have indications from Mr. Bellemare and Mr. Bryden that they have questions, and we will be going to Mr. Epp.
Before I get to Mr. Bellemare, I have a few questions for Mr. Little relating to the so-called make-or-buy guidelines that were developed for the costing methodology. They were designed to help managers evaluate the value for money of their contracting-out decisions.
I've noted that government expenditures on contracting out compared with total expenditures on contracting for services is very modest - $703,000 on a total of $5.2 billion. That was in 1992-93.
My first question would be, does this suggest that the make-or-buy guidelines apply to less than 1% of the government total expenditures on contracting for services?
Before you answer that question I have a couple more. According to the Treasury Board, these guidelines are intended specifically for contracting out, even though Treasury Board says it encourages departments to use them when making contracting for service decisions. So if Treasury Board says it encourages departments to use its guidelines, why is this not stated clearly in the make-or-buy document? I have a couple of questions after that, but go ahead and answer those two.
Mr. Little: If I may, I'd like to ask my colleague Mr. Winberg to reply to your questions.
Mr. Alan Winberg (Executive Director, Financial and Information Management Branch, Treasury Board of Canada): On the first one, you're absolutely right in the way you look at the figures.
Because contracting out has a very specific meaning when you would shut down an existing operation and stop the work that was being done by those employees and give the work to an outside contractor, that is very rare, and it is hardly occurring within our organization. So it's a very small percentage of contracting. Most contracting is for services, to do an operation or to have something done that isn't currently being done by a group of public service employees.
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In terms of the second question, the make-or-buy guide is absolutely neutral in terms of whether you would use it to assess work now being done in-house that might be able to be done better or more efficiently or at lower cost through an alternative arrangement, or to look at work that is not yet being done and you're trying to make the decision about whether to do it through a contract or to create an internal organization to carry that out.
It's a neutral document and it assists people to think through the various costs involved in running an operation in-house or purchasing it outside through a contractor.
It's tough for some managers to do this in our organization, because many costs in our organization aren't yet reflected in the manager's budget: the cost of accommodation, translation previously was not included, legal services - a whole range of services that are provided externally to the manager's budget.
The idea of that guideline is to help people think through all the various costs involved so they can make an accurate comparison and think of the costs that are incurred in addition to those they bear in their budget. So we strongly encourage it. As budgets are shrinking throughout the government, managers are using this guideline and similar types of analyses in order to better understand the costs and make their decisions based on the best economic choice.
The Chairman: What would you think, then, if this government operations committee recommended that it be stated clearly in government policy, in your policy, that these guidelines apply to both contracting-out and contracting-for-services decisions?
Mr. Winberg: We would encourage people to be using it in all kinds of situations. We think managers have to understand the costs and the benefits of doing things in-house or under contract. We would be ready to clarify that in the guide if it's not clear enough.
Mr. Bellemare (Carleton - Gloucester): In the language of the Treasury Board, you use guidelines all of the time instead of a procedures book. There don't appear to be any edicts that a manager receives from you, the Treasury Board. A manager in a department gets a guideline. But a guideline is all it is. If the manager feels that the guideline should be left aside because, in his or her judgment, it's better to do it his or her way....
Why don't you have a solid directive rather than just a guideline?
Mr. Little: The departments would tell you that we have a very hard-core set of directives on contracting. They're called the government contracting regulations. They're not a guideline; they're regulations. They are expected to follow them to the letter. The heart of the contracting policy framework is the government contracting regulations.
We then provide around that a set of guidelines that help people to understand what those regulations are requiring. But we do it on the basis that people are in different circumstances and we try not to provide monolithic direction but to give them flexibility within which to make proper managerial decisions according to their current situation.
Please don't translate that into meaning that we don't have a heart, a very hard level of ``This is what you will do'', which is in the form of our contract regulations.
Mr. Bellemare: I appreciate that answer.
In your response to our letter of recommendations, on page 4, recommendation 3, the recommendation from our committee reads:
- The Government of Canada, after it has been determined that contract work is necessary and
will generate significant cost savings, must ensure that surplus workers be apprised of
contracting opportunities and that contract proposals of surplus workers be considered on an
equal basis with all other contractors, taking into account their specialized knowledge,
experience and qualifications.
- Under the Management of Labour Strategy, departments have been encouraged to consider
surplus employees for opportunities of continuing employment.
As a local MP with the riding having the largest number of public servants, I'm concerned that Treasury Board is not concerned in my mind. You should do more than just say, gee whiz, we'd like to encourage the managers to think about these employees who are being cut. You use the word ``encourage'', but you don't do anything like order them to do things. You just encourage them, so there's no direction; there is no incentive.
Out there in the streets when I talk to people, they tell me that managers really look at a budget. They have budget constraints and restraints and they have to make a judgment call. Therefore, there's a conflict. They have a limited budget, and the cost of keeping on a surplus employee is much more expensive than that of contracting out, so what they do is contract out to whomever. Some people of The Ottawa Citizen say they contract out to their family or their buddies or whatever, and that gets even more complicated. It gets to the point where it is only a single issue. It's like bureaucratic corruption of sorts, but on a higher plane.
If we are going to cut 45,000 jobs, that of course doesn't mean laying off 45,000 people, because most of them will be transferred to the private industry, plus there are those who will take early retirement and incentives to leave. But there are also those who are in the category, for example, of employees who have to go - for some reason the government has decided they're on their way out - but who want to stay on for a few more weeks, a few more months, because they are approaching 50 years old and they have more than 10 years of experience on and off with the government.
I find the conflict is that the manager says, but what about my budget? If I do that, if I'm sensitive, I'm hurting my budget and I want to save. I'm going to do this only when I personally decide it's necessary.
Do you get the drift of what I'm trying to say? I'm thinking of those 45,000 and of some of them who want to stay on these extra days, extra weeks, extra months. All you're doing when it's time to contract out is suggesting that we encourage the managers to consider them. I find that's not good enough.
The Chairman: Do you have an answer, Mr. Little? We're running out of time on this round.
Mr. Little: Mr. Bellemare, let me say as a member of your constituency that I'm very happy you're taking the position you are. I feel it's very important that we care very much about the employees and that we should take every effort we can to ensure that any downsizing or transition that has to go on is done with a lot of sensitivity.
We've done more than issue guidelines in a sense. First of all, we have controls on staffing, which means we're not hiring any more at this stage of the game until we've been able to absorb some of the surplus employees who are being declared redundant, if you like, through the various processes we have in place.
Second, we've established with the unions a set of adjustment committees across the country, and we're working closely with them to be able to define correctly where there are situations where we can bring into place substitution for term employees, where we can remove secondees so that we can keep people on, where we can put an alternative policy in place where somebody who wants to go can go and somebody who wants to stay can stay if there are appropriate qualifications and experience levels.
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We've worked hard at being able to provide managers with full flexibility so that they don't just have salary dollars but budgets that they can manipulate in order to make sure they're getting the best value. The fact is that the restraints we're working under are such that we have to find different ways of delivering the services, because there's less money available to do what we were doing.
The vast majority of managers are enormously sensitive to the fact that they have to change what is a team and family approach to working together. Many of them have been together for many years. It's not easy to go through this. I want to assure you that most managers are doing this with an enormous amount of sensitivity to the concerns that you're expressing.
I'm outside my area of expertise here, but let me give you that as an initial response.
Mr. Bryden (Hamilton - Wentworth): Am I to understand that this report on contract awards by departments is the entire report? This is the report on contract awards by departments for goods and services, and construction. You were talking about this. Is this everything that one gets in the particular report?
Mr. Little: Yes, sir.
Mr. Bryden: That's the whole thing. Can I then draw your attention to the second page and the line on Transport Canada. It's alphabetical, you will notice.
I was looking at the figures. I'd like to make a comparison between the 1992-93 figures and those of 1993-94 on that line. You will note that under the non-competitive contracts, Transport Canada spent $141 million on that in 1992-93 and $331 million in 1993-94. This means that the amount of non-competitive contracts for one year increased by $190 million. Correspondingly, If you were to compare the figures for competitive contracts between those two years, $449 million to $281 million, you'd see that the amount of competitive contracts decreased in the same period by $200 million.
Can you explain to me why this is so? Why did Transport Canada experience an enormous increase in non-competitive contracts and a corresponding decline in competitive ones in that particular one-year period?
Mr. Little: There are some fairly easy answers to some of the issues, but to give you a detailed answer, sir, of course, I don't have that information available.
Mr. Bryden: Can you give me an undetailed answer?
Mr. Little: Yes, I suspect that most of this is caused by contracts awarded around ship refits. Second, I would say that we had aircraft repair and overhaul, and specific work on airport maintenance that probably caused this to be the case.
Mr. Bryden: May I ask you why, then, in a report like this that comes to a body like this that has a certain supervisory role, there isn't some kind of interpretation of this kind of anomaly in these lists of figures?
Moreover, I've only had twenty minutes, but I can take you through a number of serious questions that I have about this comparative data. I don't understand why, in this report - you say this is the report - there is no interpretation of at least highlighted interpretations of the figures you see before you. Is this not something that is normal?
Mr. Little: I think, in this instance, we're dealing with the fact that this report has just been made available for us to table with the House. We are in the process of doing detailed analyses with individual departments in order to determine exactly the kinds of questions you're raising: why are you moving toward non-competitive or competitive contracting, whatever the case may be.
Mr. Bryden: Some of them aren't moving at all.
Mr. Little: Exactly. We're doing the analysis now that helps us work with individual departments. The question is, where is the line at which I should come before you and give you detailed answers? And where do departments hold the accountability for explaining to you what it is that they're doing?
Mr. Bryden: My problem is that this data is so raw that unless you really pursue it, you can't get any indications of answers to your questions. It leads to other questions.
I'll give you another example, if I may. As this is a report that is supposed to help us measure compliance with the directives that say to use competitive bids rather than non-competitive ones, then where is the ratio column? Where is the column in this data that tells me the ratio of competitive versus non-competitive contracting out?
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If you'll forgive me for saying it, that type of information on lists like that is so elementary.... It would enable people such as us on this committee to see at a glance whether, for example, the Department of the Secretary of State is in any way complying.
Actually, if you look at those figures, they're coming down generally, but there is no real increase. I didn't work them out in detail because I don't have a calculator, but I will bet you the ratio of competitive to non-competitive has remained the same.
If we had that kind of data, at least then this committee could say, all right, the Secretary of State department is not complying, whereas some other, Treasury Board or Veteran Affairs, is complying. I would submit to you that perhaps you could review the way in which these data are prepared and give us a little more assistance next time it's presented before this committee.
Mr. Little: I'd be happy to take that request under advisement, Mr. Chairman.
The Chairman: On that question, Mr. Little, when you come up with analyses of one kind or another, would they then be appended to raw reports of this kind or what?
Mr. Little: Sir, my problem again becomes that endless statistical work can go on. To what level is it valuable for me as a Treasury Board official to appear in front of you, and what is really work that now should be followed through with individual departments? I need to get a sense from you of what it is you would see as useful. It's no use asking me to provide you with detailed questions on departmental activity, because I'd only say here's what I think, and then I'd have to go back and respond.
Would it not be better for you to have particular areas of questioning followed up with individual departments? I would suggest it would give you a better answer.
Also, if it's an accountability issue, my accountability is to provide you with a framework around which we expect certain things to happen and to show you we're monitoring it and we're reporting on it. Whether in fact it's being followed is an accountability in relation to individual ministerial accountabilities.
The other thing I should point out to you, sir, is that this report is designed for the Treasury Board and we are tabling it as a matter of request from the Treasury Board ministers. So I've designed the report around what their requirements are and we're providing you with an overview. It's not a detailed report we are required to provide to Parliament at this point. I would suggest that if we were tabling it we'd have a much different approach we would have to take into consideration, or the president would have to take into consideration.
The Chairman: I want to take you back to the so-called make-or-buy guidelines, which are now applied specifically to contracting out, although you can encourage having them applied or used by managers for contracting for services. When would you update the guidelines or make a commitment that those guidelines should be used for everything right across the board - not just encourage that they be used and applied but that they must be used?
Mr. Little: I'm sorry, sir. When would we undertake to...?
The Chairman: When would you make a commitment that these be applied right across the board, to all the expenditures?
Mr. Little: I would make a commitment to return to you with options and the approach we would like to undertake as soon as you reconvene and we come back to you on that particular issue. At this point I'd like to analyse the outcomes and workloads associated with a direction of that nature and to determine with my president the approach he would like to take.
Mr. Epp: I would like to ask you what your response is to this statement, that sometimes contracting out is more expensive, sometimes it's less expensive, and in an organization as large as the Government of Canada there's no way of putting down guidelines or directives that would ascertain that everything would always be done in the best way. In other words, we just need to carry on, trust our managers, and hope it works out not too badly.
Mr. Little: Sir, is that a question?
Mr. Epp: Yes. I want to know how you respond to that statement.
Mr. Little: Sir, I can't accept the premise that somehow this is laissez-faire, let the manager do whatever he wants and we're out of control. If that's the basis of your question, the answer is no, we're not. We have a very useful and practical approach to this and we are getting very good value for money that we have been entrusted by taxpayers to spend on their behalf.
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Mr. Epp: In other words, you're saying that you can determine under what conditions contracting out is more efficient for the taxpayer.
Mr. Little: I'm sorry, I have to come back to the definition. To us, ``contracting out'' has a terminology or definition that is connected to work that is currently being done within the public sector that we are deliberately moving out to the private sector and declaring employees surplus. Very little of that is done. In fact, I think the figure was less than 1% in terms of contracting out.
If you're talking about contracting for goods, construction and services, which is now looking at some $8 billion a year, then we're in a regime where we have placed a framework around the need to obtain value for money around the contracting procedures. We have a framework, we have a review audit evaluation track that goes in, and we have individual managers signing specific accountabilities to ensure that the particular contract was put in place and value was received. So in that context we have a very powerful framework around which we're trying to operate.
Is it perfect? No, because there are far too many people -
Mr. Epp: That's what I was getting at.
Mr. Little: But there's another part of this, which is ensuring that we don't overload the administrative controls and administrative procedures, where you don't get anything out the other end because you've got this huge, laborious kind of check and balance that you've put in to guarantee that absolutely every dollar is there, in the way we do for the accounting part of it.
I hope that helps you, sir.
Mr. Epp: Yes. That's satisfactory.
Mr. Bryden: Would it be appropriate for the committee to ask for an explanation of the figures I've cited for Transport Canada? Is it something the committee would support me on in trying to get information?
The Chairman: Do you want an explanation of the ratios or the -
Mr. Bryden: The figures are so dramatic, this $200 million increase, that I think an explanation is warranted.
I'll point out that also in the Department of National Defence, even with the decline in non-competitive bids, last year such bids still totalled $1.4 billion. When there's no competition, there is good cause for us to be concerned and to want some kind of explanation.
The Chairman: Unless I hear objections from committee members, would you mind,Mr. Little, perhaps providing some detailed response to Mr. Bryden's question? Maybe we could get, at least in the first instance, a reply with respect to Transport Canada, and then you could follow up a little bit later with some analysis on some of the other figures that are contained in that report. Would that be fair?
Mr. Little: I'd be happy to undertake to provide a written reply in the case of the Transport figures to which Mr. Bryden has referred, in conjunction with the department. In the case of further analysis, we're working with departments through the summer in an analysis, and when you return in the fall I'll be happy to return to provide you with information to answer questions that you may have in more detail.
The Chairman: Thank you.
At the risk of belabouring this point on make or buy guidelines, there is some feeling that there's confusion because they apply to only the 1% of expenditures. Would it not be better, perhaps for the sake of removing the confusion, just to scrap that set of guidelines and come up with a new set that would apply to all expenditures?
Mr. Little: I'd be pleased to undertake a review of that approach, Mr. Chairman, and to return before you with options that we've considered to respond as best we can to that proposal.
The Chairman: I appreciate your coming today. Thank you very much. I hope that you will have a good summer.
We'll allow our witnesses to take their leave.
Colleagues, don't rush away, because we have just a couple of minutes of business, I hope, to do in camera.
[Proceedings continue in camera]