:
If I may, I was going to mention this in my remarks, Monsieur Laforest.
On that particular issue, you're quite right. Mr. Marshall was invited to attend and Mr. Marshall did agree to attend and he was of course scheduled to be here. I did receive a phone call late yesterday afternoon from Mr. Marshall indicating that he had been scheduled for surgery out of town and he was called and it's being done today. In fact, it was out of the country, actually. Given that, and that there will be a week of recuperation, I didn't think I had any choice. He did indicate his associate deputy minister would be here and that his associate would be fully briefed on the file.
The way I would like to handle it is I would like the meeting to proceed. At the end of the second meeting, if we feel, as a committee, collectively, that we need the attendance of Mr. Marshall, he is certainly willing to come before the committee. That is something we could probably better deliberate upon at the end of the second meeting.
If Mr. Marshall is having surgery, first of all, I'm sure the entire committee wishes him well and a speedy recovery. I hope it's not serious.
The second point is that once we have determined we're going to have a hearing on a subject, we normally leave it up to the clerk to determine when the meeting will be held. I agree with Mr. Laforest. Having the deputy here on a serious matter involving hundreds of millions of dollars is important.
I'm trying to find out why we insist on having these meetings when these people can't show up. Why don't we have the clerk schedule the meetings with the witnesses we want, so we don't run into this problem of all these people and members of Parliament here when the important witnesses can't be?
I think we have to get this organization going, Mr. Chairman. I would like to talk to Mr. Marshall. He has some explaining to do on behalf of his department. If we're going to be prevented from that because we, as a committee, without consulting the witnesses, said the meeting has to be today, then we're as much at fault as he or anybody else.
Perhaps we should think these things through and ensure that the committee does work well and gets the job done properly.
:
Mr. Proulx, let me rule on that.
Mr. Fitzpatrick is entitled to table the document. I assume it's in both official languages. We accept it for tabling and for no other purpose. I'm not going to hear any more comments on what is in the document. The document, I assume, will speak for itself.
Anybody else? Okay then, we're going to move on, people.
Before we call upon the auditor for opening remarks, I want to make a couple of comments if I may. I want to remind all members that this is a committee of accountability; it's not a committee of management. We're here at this meeting to review the operation of the government insofar as this particular instance has occurred. We're looking at the issues of prudence, probity, efficiency, economy, and whether taxpayers' money was spent wisely. We're dealing with an issue of procurement and government contracting policies and whether the rules were followed and the principles of transparency and fairness adhered to.
We understand we have two representatives from Envoy. They're not here today. They're coming next Tuesday. I just want to remind the members of the committee--and I wanted to do it at the first opportunity--that those companies were not audited by the Auditor General. It's not our mandate to go outside the activities of government. However, these witnesses may corroborate or explain deficiencies in certain government contracting practices.
We're certainly not a committee of adjudication or retribution, and certainly I hope we don't get into such issues. I urge members to stay focused.
We thank you for this opportunity to present the results of chapter 5 of our November 2006 report. It's entitled “Relocating Members of the Canadian Forces, RCMP, and Federal Public Service”.
I am accompanied today by Ronnie Campbell, Assistant Auditor General, and Bruce Sloan, senior principal, who were responsible for this audit.
In 2005 the integrated relocation program handled the relocation of approximately 15,000 members of the Canadian Forces, the RCMP, and the federal public service, at a cost of about $272 million. Members of the Canadian Forces account for almost 85% of these relocations each year.
[Translation]
Our audit has raised a number of important issues regarding the integrity of the contracting process that led to the awarding of the two relocation contracts, and regarding the Department of National Defence's control of funds expended under the program. Our audit also raised concerns regarding the assessment of the program's effectiveness. Let me elaborate on these issues.
Government contracts should be awarded through a process that is fair, equitable, and transparent. We found that these contracts were not awarded through such a process, despite various warning signs. The request for proposal contained materially incorrect business volumes that gave an unfair advantage to the bidder who had the previous contract.
The request for proposal indicated that for each year of the contract, approximately 7,200 members of the Canadian Forces would use property management services. However, actual usage volumes provided by the Department of National Defence revealed that between 1999 and 2005, only 183 members, or approximately 30 members a year, used property management services.
It is essential to the integrity of government contracting activities that data contained in key contracting documents, such as the request for proposal, be complete and accurate. This is particularly important when one of the potential bidders is currently delivering the service under an existing contract.
[English]
The committee may wish to ask the Department of National Defence how it certifies the accuracy of data provided to Public Works for inclusion in requests for proposals. The committee may also wish to seek clarification from Public Works regarding how it verifies information provided by client departments when concerns are raised by potential bidders.
In our audit, we found that the Department of National Defence has inadequate financial controls in place for reimbursing the contractor for payments made on the government's behalf. The contractor is responsible for issuing advances to Canadian Forces members and payments to various service providers, such as realtors, lawyers, appraisers, and home inspectors. In 2005 these expenses were almost $180 million.
During the audit, National Defence indicated that it had begun to develop systems and processes that would strengthen its control over these payments. The committee may therefore wish to ask the Department of National Defence what steps have been taken to strengthen the department's control over these expenditures, and when this work will be completed.
In our audit, we also found that rates paid by the members of the Canadian Forces for property management services exceeded the ceiling rate established in the contract. Some Canadian Forces members paid amounts ranging from $800 to $8,000 for a service that the contract indicated would be provided at no charge. The committee may wish to ask the Department of National Defence what steps will be taken to ensure that these members are reimbursed the amounts that they paid for property management services.
[Translation]
A key objective of the Integrated Relocation Program is to provide members of the Canadian Forces, RCMP and federal public service with flexible relocation benefits that improve their quality of life. In our audit we found no evidence that the Treasury Board Secretariat, or the other departments, formally measure the program's performance.
The committee may wish to ask the departments what steps will be taken to measure the program's effectiveness in providing flexible relocation benefits that contribute to an improved quality of life.
Mr. Chairman, that concludes my opening statement. We would be pleased to answer your committee's questions.
Allow me to introduce Liliane Saint Pierre, who is the executive director of operations at the acquisitions branch of Public Works and Government Services. As well, I'm accompanied by Christianne Laizner, the senior counsel to Public Works and Government Services.
[Translation]
Mr. Chairman and members of the committee, I would like to thank you for inviting us to discuss chapter 5 of the Auditor General's report entitled "Relocating Members of the Canadian Forces, RCMP and Federal Public Service."
[English]
The integrated relocation program provides a variety of administration and relocation assistance to federal public servants within the Canadian Forces and the Royal Canadian Mounted Police. It is a mandatory program for members of the Canadian Forces and the RCMP, public service executives, deputy ministers, Governor-in-Council appointees, and public service employees represented by unions. In fiscal year 2005-06, the program handled over 17,000 relocations. The total flowthrough costs of this program, Mr. Chair, are approximately $280 million annually.
Historically, each department has been responsible for administering and managing its own employee relocations in accordance with the Treasury Board relocation directive. In 1999, a four-year pilot program was initiated to consolidate all relocation services with one service provider. Following a competitive procurement process in April 1999, Royal LePage was awarded a contract to administer this pilot program.
[Translation]
Due to the success of this program, TBS approved making it permanent, and in June 2002, following a competitive process, PWGSC awarded a five-year contract to Royal LePage. For ease of reference this could be called the first Royal LePage contract.
[English]
Following a CITT complaint and allegations from an unsuccessful bidder regarding a potential conflict of interest, Public Works and Government Services decided in August 2003 to conduct a new procurement process. This competitive process resulted in two new contracts being awarded to Royal LePage in 2004, one for National Defence and one for the Government of Canada, as a whole, and the RCMP.
It is worth noting that both the first and the second contracts awarded to Royal LePage have brought significant benefits to the government in terms of cost savings of over 25% over previous costs, as well as improved services. In addition, some 15,000 small and medium enterprises benefit every year from some $150 million in business opportunities, which are dispersed in an open and transparent manner throughout towns and cities across Canada.
Mr. Chair, the roles and responsibilities for issuing contracts are complex. It is a joint effort between the department requesting the service and Public Works and Government Services. In this case, the Treasury Board Secretariat acted as the program authority.
When the first relocation contract was re-tendered, the team took several steps to ensure a fair and open process. The Auditor General has stated that due to an inaccuracy in one estimate in the RFP, namely, the expected business volume for property management services, the contract was not tendered in a fair and open manner. As such, the incumbent provider had an unfair advantage over other bidders. It is important to note the Auditor General also stated that in her opinion, this inaccurate estimate was due to a process issue and there was no evidence of malfeasance.
While we strive to ensure that our RFPs are free of inaccuracies, they inevitably arise from time to time. Our processes attempt to catch them or, at the very least, minimize their impact on the outcome. The Auditor General has reported that PWGSC followed its established processes in awarding the contracts.
In relation to the estimate for the RFP for property management services, it's important to note that this was only one of six elements on which bidders were being asked to provide pricing. The other elements were appraisals, legal services, real estate commissions, building inspection, and rental search services, which accounted for approximately 88% of the overall financial evaluation.
[Translation]
As well, the RFP called for the financial bid to account for only 25% of the overall evaluation, while 75% of the points were granted for quality of service being proposed. This structure was used to emphasize the value of service when employees are moved as well as to reduce any advantage an incumbent might have had in pricing its bid.
[English]
The project team also introduced additional features designed to open the RFP to as many new bidders as possible. A fairness monitor checked the technical elements of the bid, which accounted for 75% of the evaluation, and certified that the process was done in a proper manner. The Auditor General has also reported that this part of the evaluation was done in a fair manner.
When making financial bids, different bidders frequently propose different financial strategies. Some will bid higher than their competitors on one element and lower on another. It is hence not possible to isolate one element and speculate as to how a bidder may have reacted had this been the only element in the overall bid.
[Translation]
In our view, which we have expressed to the Auditor General, the process we followed, taken as a whole, sufficiently compensated for any error in the one element of the RFP information, and has resulted in a fair and open competition.
[English]
Having said that, we are open to examining our roles and responsibilities in conjunction with our clients and with the Treasury Board Secretariat to make improvements.
We thank the Auditor General for her recommendations, and we intend to implement them.
I'd be very pleased to respond to questions at this time, Mr. Chair.
:
Madam Fraser has rightly pointed out that one of the keys here, rule number one, is that the tendering process must adhere to principles of fairness. As Mr. Laforest points out, in the request for proposals it was indicated that 60% of the 7,200 deals here would use property management services, but the actual volume wasn't anywhere close to 60%; it was less than 1%. If it had been any smaller you would have needed a microscope to see the damn thing.
When bidders asked for more information on that they got stonewalled, and they were told that the 60% was basically in the ball park. If I understand this correctly, when it comes to scoring on this system, that's going to be part of the scorecard. And this is a very tight, competitive process.
I'm going to say that if Mr. Marshall goes to see his surgeon this weekend, and the surgeon performs an operation on him and there is that kind of discrepancy in the medical information that is available to Mr. Marshall, we should all get down on our hands and knees and pray for Mr. Marshall, because I think we're going to have problems here.
Madam Fraser, do you agree with me that the discrepancy is substantial here?
:
Thank you very much, Chair, and thank you all for your participation today.
We have two meetings scheduled. We have a lot of ground to cover in two meetings, and I suspect that unless we start getting some “'fessing up” around here we're going to be here a lot longer than two meetings, because we have a world of difference between the Auditor General saying there are serious problems in here, serious discrepancies, lack of information, and lack of accountability.... And we're not hearing a lot of mea culpa from the departments, which means that you disagree, that you feel comfortable defending....
Before we can go any further, we have to establish who we, as the committee, are most likely to believe, because if we do believe the departments and we think the AG is way off base, we ought to adjourn at the end here and let it go. Otherwise, we have a long way to go.
Before I go any further on that, I want to afford the Auditor General an opportunity to get an answer to the second part of her question, through you, Chair, to Mr. Bennett. The Auditor General was seeking information. Anybody can correct me at any time in any of my comments if I'm off base on a factual matter. Please feel free. My understanding is that she requested certain information. She was told that wasn't available.
Now, Mr. Bennett, upon being questioned, you're saying that the committee will have it, and you'll be glad to send it to the AG, but the second part of her question was if you had it, why didn't you give it to her when she requested it.
:
This is part of the problem, the fact it doesn't exist.
I want to start with some basics, Chair, because we do have a little time.
The Auditor General said in her report, “We have concluded for two reasons that the contracts were not tendered in a fair and equitable manner.” Today the Auditor General again stated, “Government contracts should be awarded through a process that is fair, equitable, and transparent. We found important contracts that were not, despite various warning signs.”
Yet today, Mr. Bennett, in your comments in your second-to-last paragraph, you say, “In our view, which we have expressed to the Auditor General, the process we followed, taken as a whole, sufficiently compensated for any error in the one element of the RFP information, and has resulted in a fair and open competition.”
Right from the get-go the Auditor General has concluded twice that it was not fair and equitable. You, sir, are taking a position that it is. Let's have that discussion.
:
Okay. I'm sure at the end of our process we'll decide whether we agree with that or disagree, with great respect.
Let me deal again with some of the obvious things as we whittle our way down.
As I understand it, part of the problem that's been identified by the Auditor General involves this whole 60% and the second figure, which was 40%, just to make it 100%. They said that in the bid, 60% of the 7,200 relocations were expected to require the property management services. And yet in the bid itself, apparently, it said that 60% of the Canadian Forces' members were renters and 40% were homeowners.
If only homeowners used this service and only 40% of the Canadian Forces own their own home, why would there be a figure that says 60% will require a management service that only people who own would need? From the get-go it seems there is conflicting information in the RFP. Can you comment on that, please?
Reading through this particular report and listening to the testimony, I can't help but feel the same way as Mr. Christopherson did when he stated that this may take us more than just two sessions.
Looking at what's transpired, I guess we'd have to break things down into three parts. We have a tendering process and we need to take a look at the issues around that, because it was not a fair or equitable process. The report establishes that. We have services being provided for which there are no tools or mechanisms to report and really have accurate information. Is there value, or how are those services being provided? There doesn't seem to be the accounting oversight that's necessary.
Finally, we spend $280 million per year on services, and we have no analysis of whether or not outsourcing provides any additional benefit or is cost-effective. From tendering, through to the actual delivery, to the whole idea of this, we should have serious concerns.
On the tendering process itself, Mr. Bennett, I was quite unnerved when you reported and basically tried to minimize the skewing of the tendering process by saying that 88% of the financial valuation was accurate. For something that involves hundreds of millions of dollars, I'd be in a panic about a 12% error if I were in your shoes. You seem to be stating, the way this is written, that you're quite pleased with that. I think that's a terrible result.
When you look at it, one of the bidding parties during this tendering process not only has the advantage of having accurate information, but has the additional advantage of knowing that the tender being put out is inaccurate in its requests. Plus there's an established relationship that in the past we had grave concerns about. I guess we'll be getting some of the documentation that establishes what some of the previous problems were in the relationship between the department and the contractor.
I'll skip over the actual delivery and the fact that there are no mechanisms in place to measure. It just states in paragraphs 5.69, 5.75, and 5.59 of the Auditor General's report that there was no accurate measure. It's fascinating. We could have had accurate measures for numbers, yet the only information that flowed from Royal LePage was self-serving. It was on the quality-of-life component of what they were providing. In paragraph 5.71 it talks about Royal LePage providing information back to the departments on quality of life, but we don't have the other numbers that would have played a key role.
Let's just go to the final result. You seem to be quite happy with it costing $280 million for 17,000 relocations. That's $16,500 per relocation. How does that compare to the private sector? I've moved a number of times, and it has never cost me anywhere near that amount. That's not even an accurate number, either.
When we take a look, we find out that some of the people who were being moved--well, ten out of ten situations--were paying between $800 and $8,000. I don't know what the average was, but if it was somewhere in the middle, it was $4,000 on top of this cost. My goodness, we're up to $20,000.
:
Actually, there were a number of points raised. In terms of how that price would compare with the private sector, you need to understand that it's a very complex bundle of services. So we would need to do a detailed analysis to look at the comparatives between how the service is provided to Government of Canada employees and in the private sector. I don't have that information.
There were other points made with respect to the relationship. I want to be clear, Mr. Chair, about the relationship and the steps that were taken in the 2004 process to make sure that it was a fair and equitable process. We completely replaced the team. Everyone involved in the first process was replaced. They had no involvement in the second process.
The second point is that we tried very specifically to make sure there would be maximum competition. We looked at the business volumes, and we tried to attract in every way the greatest number of suppliers possible to participate.
We looked at future capability. As I said, we introduced a new element. So we tried, in terms of the lessons learned and making sure there was a separation between one process and the other, to ensure that it was as complete as possible.
I have one last point, Mr. Chair, if I may, briefly. I want to be very clear that with respect to the reference to 88%, I was simply trying to put that in context. I was not in any way trying to minimize the impact. This is something we take very seriously.
I'm glad to hear that you're taking things seriously, now, Mr. Bennett, because as far as I can see, nobody took this contract very seriously. You opened your remarks by talking about the success of the program, the first one, the pilot one, and I don't think you even had a clue whether it was successful or not, because you had no information to evaluate it. So be that as it may.
Rear Admiral Pile, the Auditor General points out that Royal LePage was charging your employees between $800 and $8,000 for services they said they would provide for free. Are you going to get that money back from Royal LePage, and are you going to give it back to the employees who paid it in the first place?
:
I want that money back for the taxpayer, too.
Looking at paragraph 5.35 of the Auditor General's report, she says,“While PWGSC evaluated the bids properly, it did not pay adequate attention to the collective facts in bids submitted in response to the RFP.” And here we go again, Mr. Chairman. They tick off the check-boxes, but nobody connects the dots and says there is something wrong here.
I cannot in my own mind understand why, looking at two bids--this is not a hundred bids--how one says I need $50 million to provide this service, and the other one says I'll provide it for free--albeit under the table he collects the money anyway. But he provides it for free, and nobody asks if there is a problem here.
What do you say, Mr. Bennett?
:
Let's talk about best business intelligence.
Royal LePage had all the facts. Envoy had no facts, other than what you put in the RFP. You said 60% of all their moves are going to require property management services. First, that was factually wrong, because only 40% of the people own houses, and that is totally and completely inadequate. Then you come back and say we need $50 million to provide this one service. You tell us also in the technical evaluation that property management, for some reason, isn't in the technical evaluation. It's only in the cash part of the evaluation, according to Mr. Goodfellow.
I'm going to ask you, Mr. Bennett--this is a serious question: Are you aware of any collusion between any people, public or private--and Mr. Goodfellow has talked about pressure--are you aware of anybody, public or private, who put pressure on this bid to get it done this way?
:
You are telling me what you told the Auditor General. I find it scandalous that a department like Public Works and Government Services Canada, which manages billions of dollars, has no document to support a 75-25 weighting in a contract such as this one. Moreover, it led to a financial analysis—this is clearly indicated in Ms. Fraser's report—that was done by one person.
Once again, I find it scandalous that, in such a large department, responsibility for the financial analysis of such a major contract—we are talking about $280 million a year—was given to a single person. That leaves room for what could be called arbitrary decisions, as I mentioned earlier. I am trying to find the right words but this strikes me as surprising, to say the least. I find it very disappointing and unacceptable.
I do not know how such a process could be deemed to be fair and honest. You say that things worked well, but I cannot believe that. As Mr. Williams said earlier, it led to a difference of $48.7 million. No one reacted. If the bid had been half as much, that is, $24 million, everyone would have wondered why the difference was so great. Here, the difference was between zero and $48 million, and the department did not react at all. Give me your opinion about this, because I do not understand.
:
Fair enough. I just want it to be crystal clear that we're all crystal clear.
The crux of this matter, as I understand it, has a lot of different pieces attached. Because there was an inherent unfairness, according to the Auditor General and according to the person at the company that wasn't the bid winner, and because information was wrong, there wasn't an actual fair bidding process. That does get into current times in terms of what the government's going to do about this situation, but we'll leave that aside and deal with it in another place.
The first question would be, in your opinion—and I'd like the Auditor General to respond, because it picks up on where one of the other members left off—isn't a $50-million difference in two bids something that would raise an eyebrow, in that somebody is either a super business person who has found a way to make money out of thin air; or that there's something wrong here, that there's an advantage somewhere; or that somebody doesn't have the capabilities to provide what they're saying for that amount? Isn't that a big enough amount of money between two credible bidders to have somebody raise an eyebrow and say, “Wait a minute. These are two credible people, so these things should be a few million apart, not tens of millions.”
:
But we can't just let it go at that. That's not good enough, I'm afraid. To say to you that a bidder chooses to put zero and therefore that's up to them, it's a business decision.... If somebody bid on a new bridge and they put zero for concrete, somebody ought to be saying “Wait a minute. How the heck can they do that and still manage to do the job in a way that's acceptable?” So let me get into a little more detail on this.
And by the way, I realize it has to be tweaked with legal people, but one other thing I'd like to ask you for is a one-pager on that apparent conflict of interest, what the circumstances were, and what was found out. I don't need names or an indication, but there's nothing wrong with telling us what the circumstances were. If you decide not to respond, then send a letter in saying that and we'll deal with it. But I'd like to at least get a précis on what happened there, because I don't know.
On the second one, there were complaints, apparently. You have stated that you didn't know these huge problems were there until the Auditor General found them, yet the bidders commented on both aspects: the inaccuracy of the 60% and 40% in the template of the RFP, but also wanting to know what the actual volume numbers were. The answer came back that the numbers were not available, but we're going to deal with that.
:
When I look at the chart that the Auditor General has given, PWGSC is the body that looks after the integrity, the accountability, and the equality of a contract. These are the guiding parameters of procurement, and we have a lot of people who get concerned. They keep on saying this doesn't happen and that government gives bids to whoever its friends are. As legislators, we try to ensure that there is a fair process. I hope that, as an operational body under that legislation, you would do the same. Hence, I have a question.
In paragraph 5.27, the Auditor General says that in regard to “the request for proposal, we noted that a potential bidder had asked PWGSC to provide figures showing the actual use of property management services”, but there was no correct information. If you don't have correct information, how does one believe in the integrity of the process? How does one respect that there was equal treatment given to any other bidders? There were bidders who were there before and who probably had knowledge of it.
So can you give me some comfort as to where I can get some satisfaction on this information, and whether it's the Treasury Board policy that financial evaluation of a bid like this should be done by one person? I know you told me you have probably changed it for the next round, but I want to know where the integrity is, where the accountability is. Thirdly, there should have been a holistic approach in reviewing the bid, but management seems to have not gotten the right collective information, so they couldn't make the decision. How do I trust the process?
I just want to request, and I can do it by way of motion, if you require it....
One would be that there has been reference a few times to these 280 questions, and in the key area we keep asking about just one and two. Could we get, for one thing, a copy of all the questions that were asked and the answers that were provided? That's one thing, and two is a copy of the internal departmental complaint process in detail: generically, if I'm a bidder and there's a process and I have a concern, what is my process; what am I informed of?
Please provide that in writing, and whether or not there was any—and I'm emphasizing “any”—variation from that process with regard to these contracts.