NRGO Committee Meeting

STANDING COMMITTEE ON NATURAL RESOURCES AND GOVERNMENT OPERATIONS

COMITÉ PERMANENT DES RESSOURCES NATURELLES ET DES OPÉRATIONS GOUVERNEMENTALES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, December 2, 1997

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[English]

The Chairman (Mr. Brent St. Denis (Algoma—Manitoulin, Lib.)): Good morning. We'll call this meeting of the Standing Committee on Natural Resources and Government Operations to order. Welcome all colleagues on both sides.

I would like to give a special welcome to Jim Stobbe from Public Works and Government Services Canada. Mr. Stobbe, you have some colleagues with you. If you'll kindly introduce them, we'll let you have the floor for a little while.

Today, for the record, we're looking at the performance report of the Department of Public Works and Government Services Canada. This is a continuation of a series of meetings, starting with the Treasury Board last Thursday, at which time we had an outline of the whole performance reporting process.

Mr. Stobbe, I invite you to introduce your colleagues and start us off.

Mr. Jim Stobbe (Assistant Deputy Minister, Government Operational Services, Department of Public Works and Government Services): Thank you very much, Mr. Chairman. I have with me today Joan Catterson, who is the director general of corporate policy and planning for the department. François Brazeau is the director general of the office accommodation and real estate sector. Barry Lipsett is the director general of supply program management.

I'm happy to be here again to discuss the performance report. I understand Treasury Board Secretariat officials briefed the committee on where this particular document fits in the context of the expenditure management system. I won't have to go into that.

We have a deck and I propose to take a few minutes to go through it. It's basically a summary of the information that is included in the performance report.

This particular document was tabled on November 6 and relates to the department's 1996-97 main estimates, which were tabled in March 1996. It is a report on the results of the department's performance. We're here because of a House motion in 1997 on performance reports, which split the traditional reporting to Parliament into two pieces.

This performance report is put in the context of the overall goal of the department, which is to provide the best value for taxpayers in respect of common services with due regard for the important values of prudence, probity, and transparency. Essentially by focusing on what our department does best, which is cost-effective common services, we allow other departments to focus on what they do best, which is essentially deliver line programs.

We're a common service agency involved in the delivery of a broad range of common services, providing a single-window access to much of the Canadian private sector in respect of doing business with the government.

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The departmental accomplishments are really based in a framework of four key themes...our contribution to the economic framework of government through such things as the procurement aspects of the implementation of the World Trade Organization agreement, NAFTA, and the FTA. By facilitating the government's procurement obligations under these agreements, we in fact facilitate small and medium-sized business's access to countries that reciprocate.

We are very much interested in getting government right. In fact, that's the raison d'être for the department. We provide common services, and through economies of scale and centralized expertise we're able to decrease government-wide duplication.

We're very much involved in partnering with the private sector and with other government jurisdictions within the country. We have examples of this via the Confederation Bridge, via our federal buildings initiative, and indeed through memoranda of understanding that we have with various associations, the Canadian Real Estate Association for one. Clearly, from a suppliers to government point of view we're very important to small and medium-sized business because in fact we facilitate their access to government procurement opportunities.

With respect to real property services accomplishments, as highlighted in this report, you'll recall from the last time I was here that real property services provides office space for approximately 160,000 public servants in 2,500 locations. They manage assets of about $7 billion and about 6 million square metres of space, 54% of which is owned. In 1996-97 we achieved significant cost savings. We cut the bill by $70 million.

We continued with our program on the federal buildings initiative, which is a joint exercise with the private sector to environmentally upgrade our buildings using private sector capital that is paid back out of savings achieved by specific projects. In fact, we have a considerable number of projects—14 contracts valued at $20 million—under way with respect to that initiative.

We have reorganized the branch to focus on serving line departments much better in order that they can do their job. We have created client service units that are basically dedicated to serving line departments and working with them to facilitate the delivery of their programs.

We have in 1996-97 spent a lot of time looking at what our core responsibilities are within real property services, and as a result of that review we have asked the private sector to provide proposals on 18 packages of properties for their management, to replace management that was provided in-house. We had 62 different responses from 14 different companies, and those are being evaluated now, with a possible completion of that evaluation perhaps before Christmas.

We're managing real property for the federal government. We're working very closely with the Treasury Board Secretariat and with other line departments developing new office strategies. Indeed, the report makes reference to some new office strategies, with particular reference to some work we did with the Department of Environment and the Department of National Revenue in Toronto.

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I'm sure members of the committee are all aware we've done significant work on what we call the parliamentary precinct in 1996-97. We finished the work on the Peace Tower. In fact, it was opened in December.

Supply operations, you will recall, procure about $8.2 billion worth of goods and services in about 17,000 categories. During the course of 1996-97 the Confederation Bridge, a very complex contract involving the private sector and what is really a build, own, operate and transfer, basically was completed.

We spent a lot of time helping business, small and medium-size business, access contracting opportunities. In 1996-97 a supplier promotion program was in place. That supplier promotion program has evolved into what we call Contracts Canada, in which our department, in co-operation with other procuring departments around town, has made a consolidated effort to make potential suppliers much more aware of opportunities.

We're very cognizant of green purchasing for sustainable development, and indeed procurement was one of the main thrusts in the department's sustainable development strategy, which was tabled in the House in April of this year.

We are doing a lot of work in what we call benefits-driven procurement, which is largely focused on issues we have with the procurement of information management and information technology.

We have automated significant portions of the supply operations through implementation of the automated buy environment.

We have a support program for aboriginal businesses, helping them take advantage of opportunities they could support.

We implemented a vendor performance policy to help us manage suppliers who have not performed according to contract.

1996-97 was really a maturing year for the work we do with all constituencies across Canada on the management of properties that result from seminal activity.

About the Receiver General, the government had announced an initiative to redevelop the government's financial administration and central accounting framework. Indeed, the Receiver General is a big part of that. We are proceeding with development of the supporting mechanisms to improve financial management in government. We have had a major initiative associated with encouraging Canadians to shift from paper payments to electronic payments through the use of direct deposit. In 1996-97 and indeed in the current year that has been a major success.

About our job as paymaster for the government, we have significantly streamlined the delivery of payroll services. In fact, we've decreased the unit cost by about 20%. At the same time, while the number of payroll accounts is going down, that means increased work in Shediac, where we administer pensions. We've handled that workload and implemented the changes that were made to the pension legislation to make it more portable and to decrease the vesting period.

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Just about everything the department does relies on informatics in one stage or another, and indeed the government telecommunications and informatics services group has spent a lot of time in putting infrastructure in place. The model of this organization has evolved in 1996-97 from being a supplier of services, where we make them, to in fact brokering the services from the private sector.

A good example of that new service delivery model is the implementation of telecommunications services supplier arrangements, which will be a series of contracts, two of which have already been announced, for long distance, both domestically and externally. Those two contracts over a four-year period are going to achieve a $24 million saving in government telecommunication costs.

As an example, the domestic long distance cost to government as a result of this contract is now 7.25¢, which is probably better than all of the ads that you hear on television for the various suppliers. That is a direct result of this new approach to delivering telecommunications, a direct result of the deregulation in the industry that is driving cost down, and a direct result of this department amalgamating demand from the various departments into one supplier arrangement.

They've also been very keen in promoting electronic commerce; indeed, direct deposit would not be possible without this organization. They've done a lot of work on government-wide e-mail. There are 200,000 public servants that are now networked. That's probably unprecedented in any government in the western world and it is a tribute to the technology that it's done. They've provided a directory to a majority of those 200,000 respondents. They're also the manager of the Canada site, which is the home page of the Government of Canada, and indeed on page 28 of the document you'll find the Internet address for the Canada site.

In 1996-97 we completed the privatization or sale of the Canada Communication Group to St. Joseph Corporation. We view that as a very successful initiative, because not only did we get $7 million for the assets but we also placed all of the people that were in Canada Communication Group, limiting the HR impact of that initiative.

We also, through the consulting and audit group, contributed consulting and audit services to other government departments on a fee-for-service basis. A significant proportion of that is supplied by small and medium-sized business. The demand for that service is growing quite significantly across the country.

The translation bureau has worked significantly in improving its bottom line, its quality of service, through improvements in productivity. It has significantly improved the syntax, if I can say that, with respect to translation from English to French, through making available their software, TERMIUM, to about 40,000 public servants across the country.

We did some significant evaluations of our businesses, common purpose procurement, the open bidding service, the effectiveness of our standing offers, our contracting for temporary help service, and client satisfaction with space consolidation. All of those studies are available on the Internet.

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Public Works and Government Services Canada is an evolving organization. We've tried to highlight some of the things we've done in 1996-97. The report is illustrative, not definitive; it's a dynamic organization and it's continually changing and making improvements.

Mr. Chair, that's an overview of what is included in our performance report for 1996-97.

The Chairman: Thank you, Mr. Stobbe.

Colleagues, you will have received a copy of this at your office.

Are you the biggest department?

Mr. Jim Stobbe: Not by a long shot, Mr. Chairman. National Defence, Human Resources Development, and Revenue Canada are all significantly bigger than we are.

The Chairman: We'll start questions with Madame Girard-Bujold.

[Translation]

Ms. Jocelyne Girard-Bujold (Jonquière, BQ): You discussed a great many points and I'm afraid you lost me along the way. However, I would like to ask you a question. I don't know whether it's you that handles the Canada Mortgage and Housing Corporation. Does your department manage that corporation?

Mr. Jim Stobbe: No.

Ms. Jocelyne Girard-Bujold: I know that negotiations are currently under way to transfer it to the provinces. The other day, we questioned Mr. Gagliano in the House and he told us that talks were under way between the governments of Quebec and Canada to transfer this area of activity to the province. Are you aware of that?

[English]

Mr. Jim Stobbe: Only inferentially. Our minister is the minister responsible for Canada Mortgage and Housing Corporation, but clearly it's a crown corporation at arm's length from the department. Our department basically has no responsibilities with respect to Canada Mortgage and Housing Corporation at all.

[Translation]

Ms. Jocelyne Girard-Bujold: Okay. I understand. You say you have streamlined pay service delivery. Where do you stand at this time on staff cuts and pension reform? You said you had given the department your support on those two points.

[English]

Mr. Jim Stobbe: The government passed some amendments to the Superannuation Act, which is the act governing pensions for former public servants. The changes to the legislation on pension reform had basically two pieces.

One piece dealt with how long you had to work before your pension became vested, and they decreased that period from ten years to two years so that people had more flexibility in what they wanted to do with their pension funds when they decided to leave the public service. The second component of the pension reform was indeed dealing with portability of pensions and the ability of public servants to leave the public service and go with other employers and take the actuarial value of their pension contributions with them.

Both of those provisions required a significant workload to implement in Shediac. Shediac is the office that manages public service superannuation nationally. Both of those required significant work in Shediac to implement. In fact, we implemented them and we handled that work at the same time we were handling the additional workload that resulted from the government downsizing. As people left the government, a large majority of them indeed applied for pension.

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Both of those factors caused a significant workload increase in Shediac, which in fact we managed within the existing organization and, with minor exceptions, within the resources made available to that office.

So that was the reference made in the document to pension reform.

Ms. Jocelyne Girard-Bujold: Merci.

The Chairman: Mr. Cullen, please, and then Bob Wood.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you very much, Mr. Chairman.

Thank you, Mr. Stobbe, and the other officials, for the presentation. If we have a chance later, I would like to talk about EDI, OBS, and all the other acronyms, and also this build-own-operate concept. First, though, I'd like to talk a bit about supporting small business in procurement.

A company in my riding, NCM Software, is one I know Mr. Lipsett is well aware of. It's fairly aggressive at providing a window for small business into the procurement system and a software-type solution. Their work was heavily supported by the Canadian Federation of Independent Business. After much discussion, something satisfactory was put together. So I would like to thank the department, and Mr. Lipsett.

I think, Mr. Stobbe, you were involved at some point; I'm not sure.

Mr. Jim Stobbe: I'll take the credit, but I'm not sure either.

Some hon. members: Oh, oh.

Mr. Roy Cullen: I know Mr. Lipsett was. He probably heard enough from them to sink a ship.

In general terms, what is your department doing to assist small business to get into the government procurement arena? What else are you doing?

Mr. Jim Stobbe: I'll ask Mr. Lipsett to answer that.

Mr. Barry Lipsett (Director General, Supply Program Management Sector, Department of Public Works and Government Services): Our principal thrust to encourage small business to supply the federal government is through the Contracts Canada initiative. We provide regular seminars, information fairs and trade shows, aimed at small business, as well as aboriginal business in minority-official-language communities when businesses are located in minority-official-language communities.

What are the types of things Contracts Canada does? It provides a single window for small business to get that information about doing business not only with PWGSC but also with any federal government department. It provides a one-stop shop for supplier registration for the federal government and is a source of information on what government has bought historically—who we bought it from, and at what price—so that business can do that kind of market analysis before making a decision as to whether they want to enter that marketplace.

Mr. Roy Cullen: Thank you.

The electronic data interchange is being implemented quite aggressively in the private sector. I wonder if you could talk a bit about the status—what you see as the future for EDI within government, where you see that going, and what kind of efficiencies you see that leading to.

Mr. Jim Stobbe: There are really two components to EDI, or electronic data interchange, from our department's point of view. One is a financial EDI. Perhaps I'll address that from a Receiver General point of view. Then I'll ask Barry to comment on EDI from a procurement point of view.

We have two approaches for which we use EDI. One is the remittance of revenue to the Receiver General in respect of two programs. One is income tax remittances, largely from people with large payrolls. All of the payroll remittances come in on EDI.

This is an excellent way to do cash management, but it's also a big workload reducer for Revenue Canada, which gets all of the information in an electronic format. They don't have to deal with the paper and they don't have to deal with all of the forms associated with the various accounts. For the current year, we'll probably collect about $20 billion a year through EDI in respect of remittances to Revenue Canada.

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The second application we do on revenue inflows is also for Revenue Canada, for the GST. These revenue inflows depend very much on financial institutions in Canada—the banks, trust companies, and co-ops—being EDI-capable with their customers. The GST is not a large-volume operation and is just out of its pilot stage. In fact, only three financial institutions offer a service that allows us to do that, whereas all of them offer it on income tax remittances.

Paying government suppliers by EDI is also in its fledgling stage, and we have three or four suppliers we pay via EDI. The one that is growing the most is...we pay the supplier of government procurement cards through EDI, so it's a completely electronic transaction. But that's an area where we will have to expend more effort.

Mr. Barry Lipsett: We looked at the suitability of electronic data interchange for our procurement contracting functions some years ago, and it was our feeling at the time that given the nature of our business, which is essentially a very open procurement system where you put bids on the street and those bids are open to literally thousands of businesses, EDI wasn't a suitable technology for us to employ for that.

Our view was that EDI technology was much better suited to long-term trading relationships if you happen to be the Ford Motor Company and you're dealing with a parts supplier over many years. Of course, the thrust in the private sector has been to cut down the number of suppliers one deals with. Our thrust has been to expand access to the federal government. So our feeling was that EDI was not a suitable vehicle.

Fortunately, the Internet just exploded during that period of time and we are going full tilt in our contracting functions, solicitation, and eventually bid receipt through the Internet using the MERX system. I think, in retrospect, that was the right choice.

I look at our colleagues in the United States who invested heavily in EDI technology for their bid solicitation and contracting functions, and it's been virtually abandoned according to the latest GAO report I've read. The Internet is really the future for government procurement.

Mr. Roy Cullen: Thank you.

The Chairman: We can come back, Mr. Cullen.

Mr. Wood, then Mr. Provenzano.

Mr. Bob Wood (Nipissing, Lib.): Thank you, Mr. Chairman.

One of the goals the government set for the public works department is that it behave more like a business in the way it delivers services. Often, however, the department is asked to fulfil regional development roles by buying products locally and hiring local contractors, even though this may not be done at the best possible prices.

Is this contradictory mandate a problem for the management of public works, and can it accomplish both of these objectives?

Mr. Jim Stobbe: I don't think it's a problem. I think there is a whole range of concerns around the issue you've talked about, but our policy on procurement is pretty clear. We provide equal access; we don't provide equal share. There's equal access to procurement opportunities right across the country, and basically those contracts are awarded to the people with the best bids.

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Mr. Barry Lipsett: I think the reality is that the scope that government has to use procurement as an instrument of industrial and regional development has been narrowed substantially over the past decade. That's been a function of the trade agreements that the federal government has entered into internationally, the World Trade Organization and of course NAFTA, all of which impose trade disciplines on how we do procurement. Even more significant than that is our own federal-provincial agreement on internal trade.

All of those agreements require that the federal government not discriminate against suppliers from the signatories to those agreements. That essentially means that for procurement that is subject to those international agreements, we have to treat the U.S. and Mexican suppliers or EU suppliers the same way we would a Canadian supplier. For the internal trade agreement it means as well that we have to treat a New Brunswick supplier the same as we would a Saskatchewan supplier. We cannot, either in building a specification for a requirement or in the evaluation of bidders, in any way build in a bias towards a particular supplier or a supplier from a particular region.

Mr. Bob Wood: My second question regarding government contracting practices goes to accountability. We hear lots of stories of how contracts are let to some companies without any other competing bids being accepted. I wonder if you could outline the types of cases where this might happen.

Mr. Barry Lipsett: In 1994-95, the latest statistics we have, about 35% of PWGSC contracts were non-competitive. There are a number of situations where you would be forced to go to a non-competitive contract. They're set out in Treasury Board contracting regulations as well as our trade agreements.

With the kinds of things we're looking at, in some situations it may be practical to deal with only one supplier. If we're leasing space, for example, if we have an existing space in a building, obviously we would want to lease space that's contiguous to that. We wouldn't want to go to another building. If you're buying spare parts for a CF-18, you can compete the initial purchase of that aircraft, which was done, but for the life of that equipment you're essentially married to McDonnell Douglas for your spare parts, or at least McDonnell's subcontractors.

There are other situations where we will sole source because it makes sense from the point of view of government policies. I'll give you some examples of that.

We sole source to CORCAN, the Correctional Service Canada prison industries program, because that serves a public policy purpose. We do a lot of contracting for the Canadian Commercial Corporation, where we essentially contract with Canadian suppliers on behalf of a foreign government, but that foreign government has made the choice of the Canadian supplier they want to deal with and we don't have any scope to compete with those kinds of requirements. The federal government has made a decision that it will only buy munitions from the company that purchased the old Canadian arsenals, so we only buy munitions from a Canadian supplier.

Those are a few examples. Obviously the other one that comes to mind is urgency. If you have a disaster, you don't have time to go out for public bids; you just go out and buy it.

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For very small procurements, those under $25,000, it just might not make sense to go out and call for several bids just because of the cost to individual bidders. Particularly in services, if you went out to architects and asked them to bid on a contract worth $25,000, if 10 of them bid you could very well exceed the value of a contract in terms of the investment those bidders would have put into preparing bids.

Mr. Bob Wood: So you're saying some of these contracts are at the discretion of local and regional managers. Is that right?

I'm just curious about what the cut-off amount is for which a manager can agree to a contract without going to a higher approval in the bureaucratic chain. Is there—maybe I should know this, but I don't—a comprehensive auditing process to ensure that the public is getting value for their money?

Mr. Barry Lipsett: Generally speaking, the contract approval authorities that PWGSC and other federal government departments have are lower for sole-source contracts, non-competitive contacting. Ministers have decided they want to have a much closer oversight of that kind of contracting activity, so there is much less discretion in terms of the size of the contracts that can be sole-sourced.

Mr. Bob Wood: Is there a good auditing process in place to make sure everybody's getting value for their money?

Mr. Barry Lipsett: The Auditor General certainly has paid a lot of attention to us recently, and we certainly do regular audits. I get a lot of attention from our own internal auditors, so I think it's there.

Mr. Bob Wood: Good.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Wood.

Mr. Provenzano and then Mr. Jackson.

Mr. Carmen Provenzano (Sault Ste. Marie, Lib.): I have two questions. First, Mr. Stobbe, you made a previous presentation to this committee where you indicated the substantial cuts in the numbers to the public service in your bailiwick. At that time I asked whether there were any figures that would allow us to get a handle on what kind of net savings might have accrued from these reductions. That information will be forthcoming?

Mr. Jim Stobbe: I haven't forgotten you, and that information is being worked on. The precise numbers.... I have some of the work sheets here because I kind of suspected you'd revisit this. It will be forthcoming.

In 1993-94 our utilization was 18,576 FTEs. By 1999-2000 it will be 11,271 on our existing plan—a little over 7,000 FTE reductions. At the time that was planned, it was expected that 1,300 of those would be through contracting out, and the rest through addressing efficiency improvements and workload decreases. We'll be bringing that information forward probably before the end of the month.

Mr. Carmen Provenzano: I would just underline that as one committee member I think that's a key set of figures to get our minds around.

My second question relates to the last question on political objectives—the political objective, for example, to increase regional economic development, and what role that might play in your department's consideration of making certain decisions.

For example, the realty services branch—we have reductions there that allegedly result in cost savings. The political objective is to increase the economic development of specific regions. There's a reality that when you take, just for example, realty services and you out-source those, chances are those services are going to be provided by someone far outside of the community that employed the persons who previously did the job for the department in that area. So there is a loss of jobs in a community.

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The political objective, naturally, is to keep the jobs in a community that needs them. I wonder whether you ever take this into account when you make a decision to outsource a service, when you know it's going to....

Maybe you don't. I don't know if you think about it or not.

What is the interplay between the political objective and what you're trying to accomplish, sir?

Mr. Jim Stobbe: As officials of the department, we put proposals together basically to operate in the most cost-effective way we can. Those proposals would be submitted to the minister for his consideration and approval. The political considerations would not be in our proposal. The pursuit of cost-effectiveness and efficiency would be in our proposal.

Presumably, when the minister considers them, political considerations might impact on his or her decision. But certainly they wouldn't be front and centre in any proposals we put forward from the department as officials.

Mr. Carmen Provenzano: That's it for me.

Mr. Jim Stobbe: Mr. Brazeau would like to add something to that.

Mr. François Brazeau (Director General, Office Accommodation Services, Department of Public Works and Government Services): In terms of jobs, there is no question that we're doing that to be as efficient as possible, but the packages that were put out required some thresholds in terms of job retentions. The experience generally is that any successful bidder on these contracts would have the infrastructure across the geographical area. So many, if not most, of the jobs that are associated with the actual facilities would be retained in the geographical areas. The economies would come more from the overhead activities associated with those activities.

Mr. Carmen Provenzano: I have a question that flows from that. When you're going to outsource, is there a rule of thumb criterion in terms of minimum cost savings? I think I heard that when you're outsourcing you've got to be satisfied that you'll save at least 10%.

Mr. François Brazeau: That's correct. On the outsourcing of the property management, the threshold was a 10% saving.

The Chairman: Mr. Jackson.

Mr. Ovid Jackson (Bruce—Grey, Lib.): I have three questions for our guests.

I sneaked into the AG lock-up this morning. There was one thing that he was concerned about, your procurement cards. I wonder if you have an accountability regime and if maybe you could send us a copy of it.

I'll ask the questions and they can respond afterwards.

I understand that since October 1995, 3.5 million people have signed up for your direct deposit. I know there are savings both with your procurement cards and with this direct deposit. I know that some old-timers like to get the cheque themselves, because they don't want it transferred.

I know that sometimes we as a government have a problem with that too, because when we transfer money electronically, people say “What has the federal government done for us recently?” Notwithstanding that, there is a change. It's a better way of getting that money deposited. I'm sure it saves a lot of stamps and a lot of headaches with people pilfering cheques and what not.

I wonder how you're doing on that file.

Also, how is it working with regard to some of the changes for your project 2000, modernizing that?

The other question I have, coming from Treasury Board, is, what's your department doing about the La Relève initiative? Is it really improving public service morale? As far as I'm concerned, we have one of the best public services in the world. I know that it has to renew itself. I know that you've been bashed around by us politicians and what not. Still, you can retire on early relief and you can get yourself a job and be an expert on the CBC and get three times your money.

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That's just a comment. Could you answer the question for me?

Mr. Jim Stobbe: Maybe we'll start with the procurement card. The procurement card and the ability to use a credit card to procure small items are a facility put in place for all departments. Each department has its own management regime. Indeed, our department has a policy on procurement cards and the responsibilities of the holder of the card, the responsibility of the supervisors of the card when that card is used to review the bills and to authorize payment of the bills. We would be glad to provide you with a copy of our department's policy on the use of procurement cards. But each department may tailor the policy to their own circumstances as long as they presumably have a good regime of internal control, which I believe Public Works and Government Services Canada does have.

We have enrolled 3.5 million Canadians in electronic payments since 1995. It was a key component of our program review. In fact, today more than 60% of all government payments are issued electronically. That was significantly boosted recently as a result of a direct-deposit campaign we put out in September of this year. Between September of this year and today one million Canadians enrolled.

We save on average 50¢ every time someone moves from cheques to direct deposit. We issue about 190 million payments a year, so we're saving in excess of $50 million from not operating in a paper mode. Those savings relate mostly to banking fees, paper stock, and postage fees.

It has also enabled us to streamline our cheque production facilities greatly. In 1993 we had 17 cheque production offices across the country. We reduced that to 11. In 1996-97 we reduced it to four. We now have four cheque production facilities across the country. With the decrease in the number of cheques we issue, coupled with some new technology, we're saving about $5 million a year outside the direct savings through the reduction in cheques.

The comment you made about the elderly not liking the program...in fact, the elderly are our strongest supporters. About 80% of all Canada Pension Plan, 80% of old age security, 85% of public service pensions, and 95% of RCMP pensions are on direct deposit. That is, to be quite frank, a lot higher than our wildest expectations. So it's quite clear that Canadians of all ages have embraced the use of electronic technology.

About understanding where those payments come from, we are arranging with the major financial institutions that accept these deposits to make sure they identify what those payments represent on the bank account statements and in the passbooks of the various financial institutions.

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It's not consistently applied across all financial institutions, but by and large, the majority of them.... Indeed, when they make an old age security payment, it's referenced as a federal government old age security payment. It probably isn't quite as visible as an envelope with a “Canada” signature on it and a cheque, but nonetheless, it certainly identifies the payment as belonging to the federal government.

Your third item dealt with—

Mr. Ovid Jackson: I asked about your information technology as well.

Mr. Jim Stobbe: That was the issue of the year 2000 or Y2K. As I said in my opening remarks, just about everything the department does relies on information technology. There are basically two components to our preparation for the year 2000.

One is to make sure that all of the application software that issues government payments, collects government revenue, facilitates procurement, or manages our physical assets in real property services, is Y2K-compliant.

In fact, our plan has identified 508 different computer programs or applications that support the department's operations. About 150 of these remain to be made compliant to Y2K.

We have a plan to do that. We think that in terms of application software we have a good handle on what work has to be done, and we have the resources in place to do it. Our plan is to have that work done for April 1, 1999. Then we'll have nine months to get the bugs out.

The second component of year 2000 in terms of the departmental operation is to get the infrastructure, meaning the computers themselves and the operating software on which they run, Y2K-compliant, whether it's the big mainframes that generate the government payments, the machines that sit on top of desks, or any machines in between.

We're quite a way from making that happen. One thing we're dependent on is suppliers providing a Y2K-compliant version of the operating system or the hardware. In all cases, that has not happened yet. So sometimes we're dependent on the private sector, the suppliers of this piece, to become Y2K so we can integrate it into our hardware. But again, we have done a lot in that respect, we have a plan to complete that, and we're confident we'll be done for 2000.

As we're doing that, we're testing this operating software to ensure its Y2K compliancy. When we do that, we post it on the Internet to make that information available to other government departments so they don't have to go through the same thing we're going through and so that they can build on the experiences we had. So we're not only doing it for our own department, we're providing a service to other government departments as well.

Finally, in terms of ensuring that the government has the necessary technical resources to do the systems work necessary for this Y2K exercise, we've undertaken a procurement initiative, after consultation with line departments and suppliers, to ensure that the private sector provides a body of technical experts we can use.

If you like, maybe you could talk to that initiative, Barry.

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Mr. Barry Lipsett: We put an RFP out on the street. We've worked on the RFP, as Jim has said, with other government departments to get a sense of the size of the year 2000 problem. We have worked with Treasury Board and we've worked with the industry to put together an RFP that is an attempt for us to lock in the private sector resources that the federal government will need to help us solve the year 2000 problem and to lock it in at a price. I think everybody is aware there's a lot of fear that as we approach the year 2000 the skills to fix the systems will be increasingly scarce and the price will be bid up.

Industry was telling us that unless we acted very quickly we might not be able to get these kinds of resources in a year's time. We have an RFP out on the street right now. It guarantees a certain level of business to the private sector and a formula for allocating that business to companies that participate and succeed in the bidding process. In return for that guarantee, we'll have some locked-in prices and we will have resources set aside in the private sector to help solve our problem.

Mr. Ovid Jackson: The RFP is a request for personnel?

Mr. Barry Lipsett: A request for proposals.

Mr. Ovid Jackson: The last question was with regard to La Relève.

Mr. Jim Stobbe: In our department, it's hard to answer. La Relève has become very ingrained in our department, as I'm sure it has in other departments around town. I'm not exactly sure how to start.

Clearly, the demographics of the people who work in Public Works and Government Services Canada is not unlike the demographics across the public service itself. In the next ten years an awful lot of the people who currently work in Public Works and Government Services Canada are going to be eligible to retire, and they probably will. That includes a large proportion of the senior managers of the department. The problem is that logical feeder groups to replace those people have exactly the same demographics as the senior managers of the department.

Clearly, our La Relève initiative is not a short-term proposition; it is focused on a couple of things. One is ensuring that we have the right people to deliver our programs as they evolve. As you can tell from this report, our programs are evolving constantly; whether it's through the application of information technology or contracting out, the programs are changing constantly. The skills set we need to manage those programs is changing, so a very big piece of our La Relève program within the department is to create a learning organization so we have the proper skills to do the business of the department as it evolves over the next five to ten years.

That's a big job. It's a constant job; it's something we work at all the time. The other logical solution to this problem is to hire new staff at more junior levels and bring them along. As we mentioned the last time, Public Works and Government Services Canada hasn't been in a hiring mode since it was formed. We've been in a de-staffing mode, and in certain areas we'll continue to be in that mode until 1999-2000. At least we see now some areas where in fact we will be hiring new staff; we will be bringing new people into the public service.

I think in 1996-97 there were less than fifty new people brought into the department from outside. In a department of 12,000 or 13,000 people, that's not enough to ensure a renewal of the workforce. As we are reaching the end of our de-staffing program, we will be doing staffing to augment our learning strategy. I think that's probably the shortest description of a sort of two-pronged approach.

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As I said, La Relève is ingrained in the department. For just about anything we plan to do now from a program point of view, the automatic question is about human resource impact. What skills do we need? What are we going to do? How are we going to communicate this to staff? It's almost an automatic response to just about any proposal that comes forward, and it probably is indicative of the concern we have that we are building an organization not only to deliver today's programs but to be able to deliver tomorrow's as well.

Mr. Ovid Jackson: Mr. Chair, I just have one little question left.

One of the things about the civil service is that you have people with experience. I have no doubt that each generation brings a bunch of nerd kids—people with brains and intelligence—who could replace us all, so I'm not concerned about the fact that the new guys will have the skills. What I'm concerned about is people like yourself, who are here and have to make that transition. How are we doing that way? Are we letting everybody out the barn door, or do we still have enough people to help transfer those skills that are required to bridge that gap?

Mr. Jim Stobbe: As our performance report indicates, I think we're managing our programs and delivering on our commitment, and I think when we produce our report for 1997-98, this will have evolved a lot more. Clearly, that doesn't happen without management and leadership. I think our department has a good management team. It meets regularly and discusses issues, and for the most part addresses those issues head on.

So, yes, I think we have the skills to deliver the departmental program. At least, we should have them today, and we're trying to address ensuring that we have them for the future. But if you have any input into the consideration of a strong committee report, we could talk to you afterwards.

The Chairman: Thank you, Mr. Jackson.

We'll go to Mr. Cullen, and then conclude with Mr. Wood.

Mr. Roy Cullen: Thank you, Mr. Chairman.

With respect to the open bidding service, I gather that you've revamped it and have a new and improved OBS. Without getting into the detail here, Mr. Chairman, what I was going to suggest is that for those committee members who have an interest, it might be useful if the department could organize a little demo. Perhaps it could take us through the new version.

Secondly, with respect to the property management and build-own-operate policy, I'm wondering if—not to take up the time here—you have a policy on it, or some information that you could provide.

Mr. Jim Stobbe: I hope I didn't mislead the member, but build-own-operate-transfer was in connection with the Confederation Bridge, where indeed that was exactly the contract that we put in place to build the bridge where the company built it. They're going to maintain and operate it for the next 35 years, and we're going to subsidize that operation in the amount of the subsidy that we provided to the ferry service.

Mr. Roy Cullen: I know it's relevant. In transportation, we're looking at private-public partnerships, and I think that's a useful concept. But in relation to government property, do you have any policy with respect to involving the private sector, either in developer proposals or build-own-operate scenarios?

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Mr. Jim Stobbe: One of them that we think hits two birds with one stone, improving government facilities but also being environmentally responsible, is the federal buildings initiative.

François, do you want to talk about the federal buildings initiative?

Mr. François Brazeau: In many of our facilities our inventory is taking on age, like most of us, and some of our systems, especially those surrounding energy, in some of our facilities were in need of upgrading. Together with Natural Resources Canada we put in place a program where private sector energy companies could partner with us and invest the capital funds required to renovate the systems, and their repayment would come from the energy savings that resulted. As Jim mentioned, we have 14 of those contracts in place now, and the capital investment was in the order of $20 million.

We're continuously trying to expand that program. In fact, we're about to finalize one in leased premises, where we're working with the landlord and the energy companies. We've agreed to a tripartite agreement that would provide energy savings and allow the energy company to invest in that facility.

Mr. Roy Cullen: I think that's an excellent development, particularly since it fits in with energy efficiency and greenhouse gases. I know if you look at build-own-operate, in many contexts if someone has to operate after they build they can build in a lot of efficiencies at the front end. So I would think there might be some possibility there for government buildings generally.

Mr. François Brazeau: Certainly it's a concept we're looking at. It's a source of renewal for the facilities and of partnering expertise.

As a result of the reduction in the number of federal employees we're not generally building new facilities, but as I mentioned, our facilities are aging and therefore they do need some renewal. Certainly we would be exploring that in other areas, especially those associated with greening our inventory.

Mr. Roy Cullen: One last question. When we got into contracting I was reminded...it seems to me, Mr. Stobbe, the last time you appeared there was a high-profile case; some contractor in Atlantic Canada was beaten out by an Ottawa contractor for 39¢. I think you were doing a review of that. I wonder if that review is complete and what you have come up with.

One thing that occurred to me as a layperson looking at it was that the way it read in the paper, anyway, the Atlantic Canada company won out marginally on technical merits but it lost the price bid by 39¢, or $1.39; whatever it was. I wonder how you make those trade-offs.

Also, is there a cost to moving a contract? There must be. Do you put any weight on that: by the time you rewrite everything, develop a new relationship...? Do you factor that in at all?

Mr. Jim Stobbe: It was $1.79 at the time, and the minister undertook to have that procurement reviewed. A review was done. The review concluded that the evaluation of that procurement had in fact complied with all the policies of the government at the time and that the award had been properly made. It did determine, however, that it wasn't $1.79, it was $3.49.

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As a result of that, the award has gone forward. It came into effect yesterday, as a matter of fact.

But the minister has directed us to review our policy on procurement to ensure that when there is administrative cost associated with moving suppliers it is factored into the procurement decision.

Mr. Barry Lipsett: That new policy was put in place last week and directs contracting officers, where they believe the transition costs from an incumbent contractor to a new contractor could be significant, to factor those costs into the evaluation scheme.

For example, if it had been in place in Atlantic Canada and the transition costs had been estimated at $1,500, a bidder who was not the incumbent in that contract would have had to overcome that hurdle of $1,500. It would have had to bid at least $1,500 lower than the incumbent to meet the costs to the crown of moving to a new contractor.

Mr. Roy Cullen: In this particular case, was there a difference in the technical proposals? In the newspaper it seemed to indicate there was. How do you factor that in?

Mr. Barry Lipsett: For the evaluation scheme there was a difference in the technical scores. They were quite close, but the incumbent contractor did have a higher technical score. But the evaluation scheme just set a single hurdle that any bidders would have to meet an 80% technical score to qualify. Both bidders exceeded that by a wide margin. So after having qualified on that 80%, the only thing that really came into play was the bottom-line price.

The Chairman: Thank you, Mr. Cullen.

Mr. Wood, I think you had one more question.

Mr. Bob Wood: The majority of members on the government side are from rural areas, and four of us are from northern Ontario, including the chairman, so I think I speak for everybody.

We often hear from local companies that they would have loved to have bid on a government contract but they didn't know about the competition. I know efforts have been made to modernize and make the open bidding service more accessible to small businesses and a new electronic tendering service is being set up on the Internet.

I guess the problem is businesses in remote areas still do not have access to this bidding process, for a number of reasons. They may not have the technology or know-how to access the information.

What, if anything, is being done to help these small businesses outside the urban centres compete for government contracts?

Mr. Barry Lipsett: We certainly try to make the system as open and accessible as possible. Most communities now have access to the Internet. I think there are very few communities in Canada that don't have access to the Internet. The MERX service is available in a dial-up version as well for those who don't have access to the Internet.

We do put a lot of effort, in our Contracts Canada seminar series, into going out to small communities. These are not just big city events. We send guys right out into the field, to aboriginal reserves and small towns, to give them some insights into how the bidding system works.

I think small business is adopting technology very quickly. In fact, we've been astounded at the rapidity with which small companies have adopted Internet technology since we first started electronic bidding in 1992. We really had a concern at that time that this would be a real barrier to small business. Small business has responded very quickly.

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They have state-of-the-art technology, by and large. Not only our surveys of small business but also the CFIB's surveys indicate that they're pretty technologically competent.

That's not to say that everybody has it.

One of the things we have done in our work with Cebra, the operator of the MERX system, is that Cebra has arranged to have terminals access the MERX service in Bank of Montreal branches across the country. That's just another effort to provide that kind of service to small and medium-sized communities.

Of course, Industry Canada has an effort to put Internet access out into small communities as well, and that's certainly a help to small business in accessing federal government opportunities, as well as a world of other information.

Mr. Bob Wood: Do you have any information or a breakdown in the department of how many bids come from rural Canada or outside urban centres?

I know Mr. Stobbe just had the big one there, but anyway....

Mr. Barry Lipsett: We've never looked at that dimension.

Mr. Bob Wood: I'm just curious, that's all.

Mr. Barry Lipsett: It could be done. We'd have to define metropolitan centres and where the suburbs ended and remote and rural communities started, but I think one could get an approximation.

In our contracting system we have information on the companies to which we've awarded contracts. So we have their name, address, postal code. I suppose the postal code would be a good indicator of urban or rural. So that's what we could provide.

We don't retain information on bidders. I should make that clear. We retain information on winners.

Mr. Bob Wood: It would just be interesting to know if the message is getting out, that's all.

The Chairman: The other day, when we had Treasury Board Secretariat officials here, a question that came up on both sides of the table was on what was referred to as voice mail.

It was the issue of a typical Canadian wanting to access the federal government, as we're seeing more often in the private sector as well, but getting electronic sequenced answering service on the telephone.

At that last briefing they had with them a professor from Australia, and he mentioned that one of the states of Australia has implemented a regime so that if it is important to people to have a real live person answer the phone, they put the resources to it.

I understand that there's no centralized answering, reception, for the federal government right now. I don't think there is. Have studies ever been done on pulling everybody together under one reception service and, through that amalgamation, saving dollars, which would allow us to have more people so that a live person would more often be answering the phone, at least initially, and then redirecting that call to the appropriate party or department?

It's an issue of federal visibility at the grassroots level, which is very important to rural members like me, and I think it's a way for the federal government to show the public that we're here and we're alive and we care about their questions and their concerns.

Maybe it's a subject that our committee might pursue in the new year, but we thought we'd take a stab at it by asking this question now.

Mr. Jim Stobbe: I am not aware of a government-wide study that has been done.

Voice mail you either love or hate.

The Chairman: Mostly hate.

Mr. Jim Stobbe: Well, that's very interesting.

One of the people who I always test to make sure that what we're doing works well is my mother. She's 91 and she receives old age security and a government superannuation benefit. She likes direct deposit and it works.

So we often have conversations about our mothers and how that works. Yesterday somebody was saying that their mother was very frustrated by the fact that some of her friends don't have answering machines and she can never get a hold of them. It's not the technology; it's how it's used.

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Studies were probably done in large departments that have a tremendous number of enquiries. I believe HRDC and Revenue Canada have studied in depth the question of answering telephones and whether it's better to have a real voice first or a real voice last in terms of interfacing people with the automation. I have voice mail, and the only time it goes on is when I go home at night. Other than that, I answer the phone.

In fact there is a government-wide capacity called Enquiries Canada that's facility-managed by GTIS, Government Telecommunications and Informatics. It can put up a lot of lines in a hurry and in fact answer with real people. It's an excellent example of the public sector using the private sector, because they have a contract to provide, on I believe three hours' notice, up to 200 or 300 people to answer the phones.

I'm very familiar with this process right now, because the day CUPW announced their intention to strike, we put 50 lines up in Enquiries Canada to tell people face to face how they were going to get their payments. I know whenever you get a peak like that, that facility is used by most departments around town. Indeed, since we put that facility up, 66,000 telephone enquires have gone into that centre. That's a 1-800 number.

We also have a 1-800 number associated with MERX. We have a 1-800 number associated with direct deposits, which is answered in Shediac, and indeed when you phone that enquiry centre, you get a real person. It's only if all the lines are tied up that you default to voice mail.

It is quite a study, depending on what the business application is and depending on how individuals use it. My belief is that on balance, the Canadian public is probably served better by the existence of a voice mail system than if we didn't have one. That's not to say you won't get irritated with a voice mail system that says, “If you want this, press one; if you want this, press two”, and when you go to two, it says, “If you want this, press three; if you want that, press four”, and finally, “If you want to talk to somebody, just stay on the line”. But on balance, the Canadian public is probably better served because voice mail exists than it would be if it didn't exist.

The Chairman: Thank you for that, and on behalf of all members, thank you for your presentation today. Possibly sometime next year we'll have you back on some other matter. Thank you.

The meeting is adjourned.