Today we will be hearing from Tim McGrath, Assistant Deputy Minister, Real Property Branch, Public Works and Government Services Canada, and Ellen Stensholt, Senior General Counsel, Legal Services, Public Works and Government Services Canada.
You know how this works: we give you a few minutes for your presentation, and then we move on to questions and answers.
Mr. McGrath, you have the floor.
Thank you very much, Madam Chair.
My name is Tim McGrath. I'm assistant deputy minister of the real property branch of the Department of Public Works and Government Services. With me, as you mentioned, is Ellen Stensholt, our department's senior legal counsel from the Department of Justice.
As members know, the crown is involved in a legal dispute with Rosdev over the management of L'Esplanade Laurier and Les Terrasses de la Chaudière complexes.
At the request of our minister's office, departmental officials were asked to brief representatives from the Prime Minister's Office on the file. At these briefings officials reviewed the chronology of key events with respect to the Government of Canada's involvement with the two complexes and explained the various areas of disagreement. These briefings were strictly informational in nature, in that officials provided factual information; there were no follow-up actions required. Let me assure the committee that we did not feel pressured in any way to take any action as a result of these meetings.
Madam Chair, my colleague and I would be pleased to answer your questions.
Thank you, Madam Chair.
I apologize, I've been feeling quite sick today.
Thank you so much to the witnesses for appearing today.
As you know, the committee was concerned because there was a lot of attention with respect to Mr. Soudas and his setting up of meetings that were arranged with PMO staff and Department of Public Works officials. So the committee had some concerns and it's been having hearings on this.
I want to get a bit of information from you about these meetings--when they occurred, and some other details, if I could. Frédéric Loiselle, the former chief of staff to Public Works Minister Fortier, told this committee that he spoke with Mr. Soudas several times about the Rosdev file, prior to face-to-face meetings that took place in August 2006 in the office of the PMO. In addition to this meeting, Mr. Loiselle told the committee that two briefings took place with department officials to go over a property file and legal ramifications.
It is our understanding, Mr. McGrath, that you led these briefings. Is that correct?
In fact we weren't contacted by PMO directly on the file; we were contacted by the minister's office to attend a briefing that the minister's office had arranged with our deputy minister's office.
It's not an everyday occurrence to brief people from the Prime Minister's Office in attendance; however, it's not unusual that we, as the real property experts in government, be asked from time to time to brief on different real estate files that are technical in nature. In this situation, because of the nature of the lawsuits, I guess there was a feeling that there was a requirement to brief on the technical aspects of the file.
It may have been the minister's office that contacted you, but it was the PM's office that was setting them up, and then it was communicated to you by the minister's office that this meeting was to occur.
You say that it's unusual, and I'm wondering, did you not ask for the rationale and was none provided? This, as you say, isn't an everyday occurrence, and the Prime Minister's Office is showing a specific interest in this particular file. They gave you no rationale as to why this file and why these meetings?
I'll just answer that briefly and then turn it over to Ellen Stensholt.
I was at two meetings: one, as I mentioned, in January and another one in February.
I do not recall any members of the Prime Minister's staff being at the February briefing. I do recall the two members being there at the January briefing, and I've been told that a member of the Prime Minister's staff was at the October 27 meeting. That was Jean-François Béland.
I will try. I can do it in English, but not in French.
There are six files between us--the crown--and Rosdev. Three files are instituted by Rosdev; three files are instituted by us.
To understand the background, you have to know that in the case of both leases--for both L'Esplanade Laurier and Les Terrasses de la Chaudière--we do not control. We have leased from the owner less than 100% of the space. There is space remaining with the owner and there is some space that we leased that we have sublet back to the owner.
This has created a situation where we have shared operating costs. We have shared property taxes, shared hydro bills, shared water costs, sewage...all of these operating and maintenance costs are shared. There had already been some disputes with the old owner, with O&Y, on the calculation of the shared costs. These were largely resolved at the time that Rosdev purchased L'Esplanade Laurier.
Our first file was filed by Rosdev in 2003, and this is for $24 million. It is with respect to the appropriate division of those operating costs. They claim that we owe them $24 million. We dispute that amount.
The Department of Public Works filed the second claim for damages of $2.7 million. We filed this in August 2004. This is when the caulking work was not, in our view, properly completed. I have to say these issues are all before the court, and I'm just giving you fact. I'm not going to comment on my view of the merits. But caulking, in the crown's view, was not properly completed.
The third claim relates to the option to purchase, which I believe you've already been informed about. There are two possible interpretations. We interpreted the lease provision. It gives the crown an option. There are two option periods, 2000-2005 and 2005-2010. If we exercise the option in the first option period, 2000-2005, everyone agrees the option price would be zero. What the crown did was give notice of its intention to exercise that option in 2004, but told Rosdev it would close on the option in 2010 at zero dollars. Rosdev said no, and we went to the court for an interpretation.
At trial we were told.... It was decided more or less on a summary application. The judge said that there were no issues; there were no facts in dispute. We couldn't exercise it in 2010 for zero; we could exercise it in 2010 for $18 million. That decision was appealed on procedural grounds that there were factual issues in dispute--that it was not appropriately decided in a preliminary matter--and the court of appeal sent that whole thing to trial and we are hoping for an early trial date.
The fourth claim was filed in April 2005 by Rosdev for damages it alleges it suffered out of the crown's termination of its property management agreements of both of those complexes. It says that it suffered damages; they've now amended their claim to $9.8 million, and they're also suing for reinstatement of the management agreements.
The fifth claim was filed in October 2005 by Rosdev with respect to Les Terrasses de la Chaudière and includes a counterclaim by PWGSC. This one is complicated. There are a whole lot of issues here. Rosdev at one point collected double rent from us through a clerical error on our part. We set off that rent against money we otherwise owed to Rosdev. Rosdev is now suing to collect that double payment. That's one item. That's a small item, but there are about six different items in the claim concerning Les Terrasses de la Chaudière.
The sixth and final claim was filed in July 2006 by PWGSC for amounts owed to PWGSC arising out of the sublease. Remember, I said we sublet some of it back to Rosdev. Well, Rosdev, under that agreement, owes us a share of their net profit. There's commercial space in L'Esplanade Laurier, and they owe us a share, and it is our position that that share has not been paid.
So these are fundamentally the issues at dispute between us.
Thank you, Madam Chair.
I think that brief outline would suggest to me that it would take more than three meetings for you to come and bring clarity to this committee with regard to these matters. There's no question that these are obviously complicated issues, and there are multiple issues, not just a single issue.
Mr. McGrath, you've been in your position for some time. I'm wondering if you could just give me some understanding of how this would have worked in previous experiences. Have you ever briefed the Prime Minister's staff before, in previous administrations?
Thank you very much for coming today. This has been very enlightening for us.
I think it is obviously to be expected that the Prime Minister's Office will ask to be briefed on certain files at certain times. Certainly there are issues that develop in the media that are politically sensitive, and the Prime Minister's Office will need to know the details. The only politically sensitive thing I could see in the Rosdev file was that it was about building a base in Montreal. It wasn't really on anybody's agenda. Anybody else might have seen this as simply an issue between the landlord and the federal government.
I'm trying to get a sense of what it was that set off this series of meetings. Mr. Housakos is quoted--I think the Toronto Star said he had approached Minister Fortier's chief of staff--as saying, “I told Fred, 'if we can help someone who is powerful, who is important in a riding like Outremont, why not help him?'” Out of that came the request for Minister Fortier's office to then set up a meeting with the Prime Minister's communications team and senior bureaucrats. Was Minister Fortier apprised of how these meetings were to proceed and the results of these meetings?
I have a final question.
We had Justice Gomery here recently, and he raised a major red flag with this committee about the growing power of the PMO, the lack of accountability and transparency in political staffers who are being vested with more and more power. Yet they meet twice on a request that appears, in the media and our reports, to be about building a power base in Montreal, and you can't supply us with any clear notes or verification about what was said at that meeting.
I would suggest, perhaps, just so that everybody's bases are covered and there is a sense of transparency, that in future when you're going to be meeting with political staffers there be a very clear protocol in place about how that will be handled.
Thank you, Madam Chair.
I have to say that a number of elements of this just don't make sense. First, Mr. Warkentin asked for other examples where this has occurred. Of the two that were given, one is JDS Uniphase, which was a major national issue involving a million-square-foot $600 million deal. That was a massive transaction. I can certainly understand why the Prime Minister's Office would be interested in that. It's a national issue. The other is the parliamentary precinct. I think it's also obvious why the Prime Minister's Office would have an interest in the parliamentary precinct.
What we can't understand is what the motive was, other than what was stated in the Toronto Star, that Mr. Rosenberg is influential and has the potential to influence votes in Montreal. That is the only rationale we have for their briefing. So from what you're saying, three meetings were set up where all that was given was a briefing. They didn't ask any questions, and off he went.
Now, why on earth is that meeting held? Why are they holding a meeting just to get you to give them a technical briefing that could have been given in a page if they didn't have any questions for you? And then why were there subsequent meetings? It's not logical to me. This doesn't add up. It doesn't make sense when you explain.... Surely they must have asked questions or given some indication of what their motive was in having an interest in this file. They just told you to come in and have a briefing?
I would just say that this is actually how a committee should work in the sense that we have this big, glorious, bombshell headline in our newspaper. This committee takes a look at it, scratches it a bit, and we realize there's absolutely nothing there with every meeting. We're now down to this: what was the motive behind asking for the information?
For the full information of this committee, do you have a copy of the...? I'm guessing you used a deck when you briefed at the meetings. Do you have that information that you can table to this committee so we can see the information, so you can do that? I take it you have that in both official languages, and so on.
Honestly, I can't recall being asked. I can't remember their voices, and I'm good at voices.
You have to trust me that I have given serious thought to this. I knew I was coming here today, and I have really done my very best to remember. I've gone through my daytimer, where I often make notes. I have done everything I can to refresh my memory. I do not recall it.
I can remember going out. Another member of my legal services unit was with me, and I more or less remember leaving and saying, “Well, they didn't say anything, did they?”
Yes, so the NCC makes sense, and all of that.
We're talking about buildings in the second-largest city in Canada, with over 7,000 employees. So I think it's relevant to know whether or not those people are still going to be working in those buildings, or if they are going to have to commute to work. I think it's a relevant issue for the federal government in terms of its size and scope.
But in the past when you've given briefings pre-dating our government to PMO staffers and other ministries under the Liberals and the Conservatives—and Mr. Holland has set the standard on what these ought to be—I take it that those briefings have been of all shapes and sizes in terms of the files you've briefed others on.
Thank you, Madam Chair.
I thank you again for clarifying these issues for us. As you indicated, it's very complex. I don't pretend to understand it, but I just want to confirm that there were these two short meetings. The technical briefings were offered, no requests for action ensued, and there was no pressure at all for you to change your tactics. In fact, PWGSC has not even considered changing its position.
Ms. Stensholt just commented that the case continues to move slowly and surely towards resolution. And I would say, in the interests of all of us here and all Canadians, I hope that continues to move expeditiously towards resolution.
The question I have relates to Madame Faille's point, where she tied the sale and leaseback question into the Rosdev file. I just wanted to ask whether the Rosdev company was at all involved in the sale and leaseback initiative. There were no connections with the sale and leaseback offers and Rosdev.
Thank you, Madam Chair.
First, Ms. Stensholt and Mr. McGrath, I would like to remind you that Dimitri Soudas of the Prime Minister's Office was here on February 28. During that meeting, Mr. Holland asked him when the subsequent meeting with Public Works and Government Services officials took place. Mr. Soudas said that a meeting took place some time in August 2006. That is why I was so surprised to see that Mr. McGrath was not aware of the meeting.
During the same meeting, Mr. Loiselle said that there had been a meeting in August attended by Mr. Béland. In response to Ms. Faille's question, he said that subsequent meetings with officials had taken place. That is another reason I'm so surprised to learn that Mr. McGrath was not aware of them.
That being said, I have a question for Mr. McGrath. According to our researcher's notes, the government said that severance pay was not part of the contract, that the government's decision to exercise its option to buy l'Esplanade Laurier— I expect that all of the Rosdev Group's demands are based on documents that support one party's case or the other's.
Yes. Unfortunately, I do not know all of the details.
I believe it was purchased from a trustee in bankruptcy. In what I've been reading to prepare for this meeting, I think there was a trustee. Olympia & York, at least, I believe had a trustee. It talks about Rosdev purchasing from a trustee, which says to me that there must have been a bankruptcy of Olympia & York.
I was doing international trade law. I don't know. I wasn't doing this at the time.
Ms. Stensholt and Mr. McGraw, my point is that when the federal government buildings were sold to Larco, Mr. McGrath and other officials were asked several times if there could be problems with future renters, with new owners. We were told that that had never happened, but nobody ever told us about problems with the Rosdev Group.
It would have been wiser and more transparent, for this committee, to tell us about all of the problems with the Rosdev Group. That way, it could have been part of the study of the sale of public buildings and the consequences of such sales.
Mr. McGrath, you played a major role and you told the committee that there were no problems and that the building sale had to go through. What do you have to say about that?
It was a statement you made earlier, and I just want to clarify.
We were not aware of that meeting, because it did not involve departmental officials. Even from the reports in The Globe and Mail it was clear, from what I read, that it was members of the minister's office and members of the Prime Minister's Office at that initial meeting. There were the two subsequent meetings with departmental officials, which I described, and then the third one with the minister's office.
As to whether we raised the question about Rosdev in previous discussions, we were asked on a number of occasions by this committee how we were going to deal with the property management by Larco, the new owner. Because of lessons learned from situations like Rosdev, the documentation has been changed and updated to ensure that we have control over the property management agreements.
There's a great deal of due diligence going on so that Larco is able to prove that they have the capacity to manage these assets. We have not, as of yet, turned any assets over to Larco for property management. There's agreement that the current property management company would stay in place until April 1, 2009, until such time as Larco is able to demonstrate the ability to manage the assets. We're doing that due diligence right now.
Also, the documentation between the parties is extremely clear in terms of remedy situations and remedies that exist, which were very much missing from the situation with Rosdev.
So we used our lessons learned from the Rosdev situation to better the documentation on the sale and leaseback initiative we undertook.
Thank you, Madam Chair.
As I indicated in the previous meeting, I thought it would be a good idea for us to take some time and look at the issue overall, as opposed to dealing with procurement and one-offs. I think we've all had a number of issues brought to our attention, either in procurement in general or access of small and medium-sized businesses to the federal procurement process.
That's the motion, and I understand there's a suggestion to perhaps have a steering committee meeting or a separate meeting to go over the dates and witnesses. I'm certainly amenable to that. I don't have a problem with it.
I intentionally left the witness list out of the motion because I suspect that different members of the committee are going to have different witnesses they would like to have appear. I think this gives us the opportunity to think about it for a day or two and then come forward with witnesses that we feel would be appropriate. That's why I've deliberately left that witness list out of the motion.
I think it's a good suggestion that we have a steering committee meeting or an alternate meeting, and I look forward to that happening in the near future, if possible.
Thank you, Madam Chair.
I only want to say that we will definitely support this motion. Last May we did have a briefing by the procurement officials, and I think it's important that we follow up. In fact, it was our intention at that point to go into more detail on some of the different departments and other issues, but there were other things that have taken our time. So I think it's important that we go back and revisit that in more depth.
The other thing that has happened since last May is that we have a number of new members on the committee, so I think it's important that we continue this.
I think the overview is important first, but then I think we also need to delve deeply into the role of the minister, the mandate, and activities of the office of small and medium enterprises and also green procurement. These are issues we've talked about many times but have never really delved into in any depth.
There are other departments as well that I think would benefit from our studying them relative to procurement--Treasury Board Secretariat, Industry Canada, DFAIT, and others. I think if our researcher were to give us some advice as to which ones would be the most beneficial to study, that would be good.
I also propose that we hear from those entities that provide oversight with respect to procurement--so the Auditor General, the Canadian International Trade Tribunal, and the procurement ombudsman.
Again, I want to reiterate that it's important that we don't do this in a piecemeal fashion, that we look at it in a holistic manner, a more structured approach to the topic. Therefore, I want to concur with the idea that has been floated already that it's very important that the steering committee meet the very first Monday or Tuesday we are back so we can establish an agenda and a potential list of witnesses and do some good planning on this before we jump into it and head off in all directions.
Thank you, Madam Chair.
I'm supportive of this motion as well.
Madam Chair, during the steering committee, I wonder if you would be.... I'm thinking of the discussion we just had with Ms. Stensholt. I don't want to come to specifics, because we aren't in camera at this point, but I think that some of the discussion we had between her, yourself, and myself.... I wonder if we can incorporate some of that kind of backroom information that some of the civil servants have with regard to how we might be able to streamline this process. That may mean in camera meetings, because of course there are solicitor-client issues--maybe not even solicitor-client, but simply competitive issues. But let's think about that.
I have two quick points.
I'm not on the committee, so these are simply recommendations for the steering committee. I think the motion sort of speaks to this, but one is to make sure that someone asks about the procedures that are in place to help businesses in smaller areas. I`m thinking of splitting of larger contracts, etc., to help businesses in rural areas.
The second point refers to the fact that the federal government has an aboriginal program to help access of aboriginal businesses to federal government procurement. If we could have someone from that program come to explain how that works, I think it would be useful.
I'm certainly interested in looking at this issue. Since our whole committee is in some ways about procurement, I don't want us to try to take on everything in terms of this study, because this is sort of overall what we look at. So I would certainly be interested in some suggestions before we sit down, if Mr. Albrecht has a sense....
What we've been generally doing at committees here is suggesting two meetings, three meetings, or four meetings. Clearly, if we're bringing all these new players to the table, three meetings will certainly not be enough.
I would feel more comfortable if we had a general sense. I don't want us to go off studying every single department here. I think it would be a bit of a wild goose chase. There were certain issues raised about procurement and transparency, which is why we were interested in the ombudsman. The TPG case certainly raised a number of questions, and I was certainly not satisfied with any of the answers I heard. I think these are really pertinent questions.
The issue of the submarine contract was a very clear-cut one. Give us some clear guidelines so that we can come back and say this is how the process is done, and it's done in a fair and open manner.
There are certainly a few contested issues that I think we need to examine in order to apply a bit of a reality check or a counter-check against what we're going to hear from the bureaucrats. Then, at the end of that, we'll probably have a much clearer sense. So I'm supporting it, but I'd like to have a sense of exactly how far we're going.
We'd have to look at the overall procurement: how it works, what are the rules for larger contracts, and when does Treasury Board get in? We should start with that kind of an overview, because there are different levels of procurement. For major purchases, there's one way of dealing with it if there are large amounts of money over long periods of time, and then you have all the different levels. There may be some rules that can be changed or made better, but the rules are basically there.
You have to remember, some of this is extremely large. There aren't a lot of people who can bid on some of these things. So it is a difficult topic, but I think it's one that we should take on, much like we've done with other studies. Do a good study so that we can come up with some recommendations that make a difference.
Sometimes people feel that it's quite boring, but if you take some of the studies we've done, such as the accrual accounting.... Most people—you weren't here when we did it—thought that was the biggest yawn there was, but extremely important in the long term. Hopefully this won't be as bureaucratic.
At any rate, I think we should do this. We should get together and come up with an overall plan. We'll ask our researchers to sit down with me and with us, and also, please make sure you think of people you'd like to bring before the committee.
On Thursday we have a meeting, and we might, if we have time, have a short meeting to discuss this again. But maybe we're not giving our researcher enough time.
Thank you, Madam Chair.
First, I am glad that the motion was put forward and that the party in power has agreed to have us undertake, and I quote, “a study of the federal government's procurement process”. I think it will be very interesting.
I would like to be sure that we will not be spending just three sittings on this. The motion reads “at least three sittings”, but if we need five, six or even ten sittings, we can take all the time we need.
Personally, I would like the committee to study National Defence's procurement processes, because Public Works and Government Services is the department that studies and sets out plans and specifications for equipment, and so on. Of course, several witnesses will tell us about National Defence's procurement.
Thank you, Madam Chair.
I just want to comment on the point that Charlie made, that he doesn't want it to go on forever. As far as I see this as it relates to Canadian taxpayers, this is the kind of thing we should be spending a lot more time on. I think we're often being penny wise and pound foolish here, by trailing off on all these little rabbit trails, when this is the kind of material.... We had this on May 17; we had a briefing. I think we gave them maybe an hour; 30 minutes I think is my memory of what that time was, an overview.
But following that meeting, the department officials sent us this paper with all the numbers of different agencies: foreign affairs, international trade, foreign direct investment, Export Development Canada. It goes on and on, with a number of different departments that we have never even looked at.
So I think it's important that we have a timeline, and if after the steering committee meets it says we need six meetings, we have six meetings. But to get to the root of this, I think it's important we give it the diligence it deserves.
Well, I suggest I would not want to do it this Thursday. I think we're trying to get a sense of where we're at. I would certainly agree if we perhaps had a special Monday meeting with the steering committee. I would prefer that we have a sense of the names before we come in, so we don't all suddenly sit down, see the names for the first time, and then spend two hours bickering.
I think we might be able to do this over the week break, if we could start to put the names together, find the time in advance that we could look at them, and then we could perhaps just engage in a discussion, so when we actually get to our steering committee meeting, we will....
I would also like to suggest that we give our research people time to put together a plan. There's a week's break. Then they can come up with a plan at that point. If there is a series of names, we might be able to look at it together.
Whether we have a full meeting or just a steering committee meeting depends on what's there and what we have scheduled. Sometimes it's just as well to have a meeting of the whole committee to decide some of these things.
It's an important issue. If we can, if our researcher is ready, we'll plan a steering committee on the Monday we return. Otherwise, we'll do it sometime following that. He's working on our report on the pay and benefits.
I want to call the vote on this motion, which I think is a great motion, by the way, and then I want to talk to you about a few little things.
(Motion agreed to) [See Minutes of Proceedings]
Carried unanimously. Thank you. I think that's terrific.
Now, before you all rush out, here are two things. This afternoon we are going to receive a copy of our report on the pay and benefits issue, with the changes identified, with the names of the people who suggested the changes. So I would ask that you look at that so that when we come back on Thursday we will have one witness for the first hour, and then we can go to that report.
If there are any major changes, please notify the clerk so that we can actually pass a motion, pass this report, have it printed during the week's break, so we can then deposit it when we come back.
There is another thing I'm going to circulate. I'm going to circulate two documents. I had a meeting with some people, this week actually, from pay and benefits. They brought along two pay and benefits clerks from CSIS. The CSIS clerks advised me—and I thought it was kind of funny, because the meeting was in camera, but they obviously must have heard we had discussed them—that their job really was less complicated in many ways than the jobs of others, because they only had one collective agreement and only 200 unionized personnel. I just wanted you to know that.
The other paper I'm circulating is about what different places are paying. I just think it's important for you to have that before we pass the report, hopefully on Thursday.
Thank you very much.
I'll adjourn the meeting at this time.