PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, June 4, 1998

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[English]

The Chairman (Mr. John Williams (St. Albert, Ref.)): Good afternoon, ladies and gentlemen. I'll call this meeting to order. We are meeting pursuant to Standing Order 108(3)(e), consideration of chapter 7, Federal Laboratories for Human and Animal Health Building Project, of the April 1998 Report of the Auditor General of Canada.

This afternoon we have as witnesses, Mr. Denis Desautels, the Auditor General of Canada, accompanied by Mr. Shahid Minto, the Assistant Auditor General; from the Secretariat of the Treasury Board, Mr. Colin Potts, the Deputy Comptroller General; from Health Canada, Dr. Joe Losos, the Assistant Deputy Minister, Health Protection Branch; from the Canadian Food Inspection Agency, Dr. Norman Willis, the Executive Director, National Centre for Foreign Animal Disease in Winnipeg; and from Public Works and Government Services Canada, Mr. Michael Nurse, the Assistant Deputy Minister, Real Property Services Branch.

We'll start with opening statements from, first, the Auditor General, Mr. Desautels.

Mr. L. Denis Desautels (Auditor General of Canada): Mr. Chairman, thank you for the opportunity to present the results of our audit of the new Federal Laboratories for Human and Animal Health in Winnipeg, as reported in chapter 7 of our April 1998 report.

To put the subject matter in the proper context, our review of the government's part III estimates for 1997-98 identified planned expenditures of more than $ 32 billion over the lives of 160 capital projects, each costing $ 10 million or more. The size of these numbers indicates the importance of sound management of this aspect of government operations. Improvement in the planning, design, acquisition, and use of major capital assets over their life cycle can result in significant savings to the government.

The audit examined the major aspects of the design and construction of the Winnipeg laboratories. A unique dimension of this project was the concern over “biosafety”, or the maintenance, safe handling, and containment of micro-organisms that are infectious to humans or animals or both. I'm pleased to report that the departments involved have taken appropriate measures to ensure that this building is safe for both employees and the community. But the planning and construction of this project were not without problems.

There are three key areas of concern that I would like to touch on briefly in these remarks. The first deals with achieving the full potential for this new facility.

Facilities such as the Winnipeg laboratories are expensive to construct, operate, and maintain. We concluded that the new facility could accommodate significantly more than the number of scientists and support staff currently planned for occupancy. In addition, we noted that approximately 70 positions remain to be filled, or 40% of the staff that the client departments plan for the facility.

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Finally, a Health Canada study of its other laboratories across Canada has identified apparent excess laboratory capacity. A similar study by the Canadian Food Inspection Agency is currently in progress.

The preliminary studies and our work suggest a need for the departments to carry out optimization studies with a view to rationalizing their laboratory capacities. These studies might identify opportunities to relocate other programs to the Winnipeg facility.

At the time of our audit, the departments did not have a comprehensive business plan and strategy for ensuring that the new facility is fully used. Your committee may wish to seek commitments and timetables from the departments for putting these plans in place.

[Translation]

In my remarks to your committee on April 30, I noted that our previous audits of major Crown projects have identified a range of deficiencies in the approval and management practices. My second area of concern in the Winnipeg project, the need to strengthen the financial management and control framework for major Crown projects, deals with many of the same issues.

Treasury Board policy requires the disclosure of all project- related costs when seeking project approval. We noted that the approved budget of 142 million dollars for this project did not include all project-related costs, which we estimate at 176 million dollars. We believe that ministers should be provided with a clear and complete picture of how much projects will cost the taxpayer before approving them.

We would also expect that ministers would be provided with complete and accurate explanations when approving budget increases, but we concluded that this information was not provided when an increase of 48 million dollars was requested for this project.

We noted the lack of effective scrutiny by the Treasury Board Secretariat of the preliminary project budget and the subsequent budget increase requests, and the lack of effective monitoring of the project's progress, as required under Treasury Board policies.

We are concerned about a departmental culture that aims to spend the full approved budget whether or not costs savings are possible—what we are calling the "build up to budget" philosophy. We have noted instances where major cost reductions have been made in project scopes to meet budget requirements without adversely affecting program delivery. This raises the question of the need for having included these elements in the original project scope. We believe there is a need for departments and central agencies to identify incentives for achieving potential costs savings whenever possible.

[English]

My third and final area of concern relates to the project management and control framework.

The audit concluded that weak project management practices resulted in $ 5 million to $ 10 million of additional costs. Some of the contributing factors included the following: first, a lack of clarity and precision in consultant agreements and other contract documents, which resulted in disputes and delay claims; secondly, the hiring of separate consultants by Health Canada to review and duplicate the work of the prime consultants, which was expensive and disruptive; thirdly, a lack of teamwork among project staff of the two client departments; and finally, the absence of a single lead authority for resolving disputes.

The Treasury Board Secretariat and Public Works and Government Services Canada have agreed that improvements are needed in the management of major crown projects. We've noted, in this and in previous audits, instances of non-compliance with the Treasury Board policies for managing major crown projects, with no apparent consequences. We firmly believe the government's policies should be respected. We also believe the policies are sound and consistent with an environment of increased delegation of responsibilities to departments, balanced with the appropriate level of monitoring by the secretariat.

In closing, I would encourage the committee, to seek commitments from departments and the secretariat to implement the needed improvements, including closing the gap between policy and practice and seeking potential cost savings where available in future projects.

Mr. Chairman, that concludes my opening statement. Mr. Minto and I would be pleased to answer your questions.

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The Chairman: Thank you, Mr. Desautels.

We have an agreement among the witnesses as to the order in which they're going to speak, and now we will ask Mr. Joe Losos, the assistant deputy minister of the health protection branch, to give us his opening remarks. Mr. Losos.

[Translation]

Dr Joe Losos (Assistant Deputy Minister, Health Protection Branch, Health Canada): Thank you, Mr. Chairman. Good afternoon.

[English]

Thank you, Mr. Chairman, ladies and gentlemen, members of the committee, for the opportunity to address you on behalf of Health Canada.

The new federal laboratories complex in Winnipeg is a world-class facility, and we at Health Canada join Canadians in taking pride in it. The Winnipeg laboratory human health component must be considered in light of its pivotal role as the hub of the Canadian public health system and the constant evolution of the global environment in which it operates.

The health of Canadians is increasingly interrelated with the health and well-being of populations in other countries, so needs analysis for the Canadian public health system must be closely tied to the global approach to public health. Migration, tourism, and rapid movement of people and goods are all factors in the globalization of health risks.

The scope of international travel exposes Canadians abroad, and at home upon their return, to disease risks such as malaria and dengue fever, not generally encountered in Canada.

Since the time for most travel from anywhere in the world to Canada is less than the average incubation time for nearly all infectious disease known, the occurrence of an outbreak of a highly infectious disease in a distant country can now have major international repercussions due to the rapid transport of people and goods.

As the health protection program strives to be vigilant, it is guided by key events that reflect global needs. For example, in 1996 the World Health Organization report on infectious diseases indicated that we stand on the brink of a global crisis in infectious diseases and chronic disease, one from which no country is safe or can afford to ignore. The international community has recognized the urgent need for reliable and rapid surveillance systems for early warning of dangerous infectious disease outbreaks.

The reports on emerging pathogens from the Centres for Disease Control and Prevention in the United States and the Pan American Health Organization, the Institute of Medicine in 1992, 1993, and 1994 reports, as well as the report of the 1993-94 Mont Tremblant meeting on emerging pathogens all echo the same theme. Canada is one node in a global network. Prevention and control are global and national priorities.

Needs analysis must recognize inherently that some needs are as yet unidentified and that overall needs are increasing, both in breadth and complexity, around the world. These reports point to an obligation to build in readiness. If not, our recent experience leads us to conclude that we would now have to urgently build for another facility for prion disease, for example, a laboratory for that kind of work.

The opportunity to design and construct the Winnipeg facility presented the project management team with many challenges. Not insignificant among them was managing an extremely complex project over a ten-year period to address evolving programs and advances in the technology simultaneously.

Over those years we have had demonstrated the outbreaks of serious infections, such as ebola and plague, and of course the HIV epidemic, and prions—mad cow disease, as it is commonly known—and their implications for spreading nationally and internationally.

A laboratory of this advanced nature requires extra precaution to be taken to protect the employees, the community, and the environment. As Canadians would expect, safety continues to be our first priority. The Winnipeg facility has met or exceeded all safety requirements and will continue to do so. It will allow researchers to work with the most serious and lethal diseases, such as ebola and morbillivirus.

Canadians can be proud of this world-class facility, which reinforces Canada's established reputation as a leader in science. The interest it is attracting locally, nationally, and internationally is very exciting and will place Canada at the forefront of human and animal health research.

The maximum bio-containment level 4 programs will lead to considerable international collaboration, particularly with developing countries, and will include visiting scientists, doctoral and post-doctoral fellows from other countries. My branch, the health protection branch, is developing a comprehensive business plan for the Winnipeg laboratory to ensure it achieves its full potential.

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I'd like to conclude by quoting Dr. James Leduc, Ph.D., associate director for global health at the National Centre for Infectious Diseases at the Centres for Disease Control in Atlanta, who states to Health Canada in his report dated January 30 of 1998:

...let me again offer my sincere congratulations to the Government of Canada and the fine professionals that have had the foresight and wisdom to design and build the Federal Laboratories (in Winnipeg). These laboratories will become a critically important resource for the health and agriculture sectors, not only of Canada, but also of the world. Your nation should take great pride in this very significant accomplishment.

Thank you, Mr. Chairman and ladies and gentlemen of the committee.

The Chairman: Thank you, Dr. Losos. Now we'll turn to Dr. Norman Willis, the executive director of the National Centre for Foreign Animal Disease in Winnipeg.

Dr. Willis.

Dr. Norman Willis (Executive Director, National Centre for Foreign Animal Disease (Winnipeg), Canadian Food Inspection Agency): Mr. Chairman, ladies and gentlemen, members of the committee, I also would like to thank the committee for the opportunity to address you on behalf of Agriculture and Agri-Food Canada and the Canadian Food Inspection Agency in regard to the new animal health laboratory in Winnipeg.

I am the executive director of the CFA's National Centre for Foreign Animal Disease. Together with Health Canada's Bureau of Microbiology, we share this building. Our centre has been in the building since the fall of 1997 and has been transferring since then all of its diagnostic services to Winnipeg. As of May 4 of this year, we have assumed full responsibility for our foreign animal disease diagnostic program.

Canada's food inspection system ranks among the very best in the world. This status has provided Canadians with a safe, high-quality food supply at home and has ensured Canadian industry access to world markets. In fact, our inspection programs facilitate the export of an estimated $ 32 billion of annual trade in food, fish, animal and plant products. These programs are supported by the Canadian Food Inspection Agency's laboratory system, which includes our National Centre for Foreign Animal Disease.

The centre supports the protection of the national animal health status and the promotion of international trade through the prevention and control of foreign animal disease, that is, diseases not found in Canada, but which would have a devastating economic impact if introduced into the animal population.

I will not elaborate further on the programs of the centre due to time constraints, but rather I would like to highlight the uniqueness of the laboratory and stress to you the benefits and opportunities that it has provided to the federal government, to the agricultural industry, and to the Canadian public.

The ability to work safely with established and emerging diseases is very important to protect the health and safety of Canadians, as well as to protect our important agricultural industry. From the scientific perspective, the centre's advanced technology in biosecurity and biosafety has greatly enhanced our research capacity.

This centre is unique in Canada and in the world. It contains Canada's first and only level 4 laboratories, which is the highest laboratory safety level available, allowing work with, as Dr. Losos has said, the most serious human and animal diseases that exist in the globe. There are only a handful of level 4 laboratories in the world.

It is the first laboratory anywhere to be designed for both human and animal disease diagnosis and research. This is an intriguing concept, which is drawing great international interest, because, for the first time, scientists working on diseases that affect both people and animals will have the opportunity for collaboration within the same facility.

I am confident that we will continue to receive extremely favourable reviews from the international community and those involved in scientific research at this elite level. Canada is being recognized as having the most advanced state-of-the-art containment facility in the world. It's the result of years of planning and effort, and we can all be proud of this world-class facility. It's truly a Canadian asset.

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The centre has allowed us to expand our animal health program. For example, it will allow us to work with the most serious plagues of animal diseases in an environment of absolute safety for our employees, the animal population, and the neighbouring community in Winnipeg. This ability did not previously exist in Canada.

We will also work with a greater range of foreign animal diseases and emerging and unknown diseases. This expansion of our research program provides better protection to the Canadian agricultural industry, and ultimately, to the Canadian public in our country.

Training veterinarians to recognize foreign animal diseases that they may never have seen before is an important element of our program. The centre will allow us to expand our training program. Because there are so few research centres in the world where this can be done, this gives us an opportunity to provide training to other countries on a cost-recovery basis. It is our vision to become the preferred international source of knowledge on the diagnosis, management, and training in foreign animal diseases. I believe this new facility will put Canada at the forefront of both human and animal health research.

It will enhance the partnerships we already have and it will attract new interest in scientific collaboration, research, and training. Over the past year, we have had people from several countries visit who are interested in the centre.

Most recently, we hosted a meeting of the world's leading animal health association, the OIE, International Office of Epizootics. This meeting attracted representatives from 17 countries in the western hemisphere, many of whom had never visited Canada before. Delegates visited our centre and saw first hand what it could do for them. I'm certain this interest will continue to grow.

Within Canada, we have had excellent community support and interest from industry as well as academic and medical institutions. We are gaining a profile as an up and coming research and development institute within Winnipeg. We will be looked upon as a scientific leader, not only nationally and internationally within our respective fields, but in the public eye.

In closing, it was my objective today to explain to you how important such a facility is to Canada and to provide you with a sense of the vision that we have for its future. There are no words that seem to adequately express our pride in this facility and its potential.

I hope I have given you a brief glimpse as to how this new facility will enhance CEPA's animal research program.

Thank you for your time.

The Chairman: Thank you, Dr. Willis.

We'll now turn to Mr. Michael Nurse, assistant deputy minister of the real property services branch of Public Works and Government Services Canada.

Mr. Michael Nurse (Assistant Deputy Minister, Real Property Services Branch, Public Works and Government Services Canada): Mr. Chairman and members of the committee, I'd like to thank you for the opportunity to appear before your committee today to discuss the new federal laboratory facility in Winnipeg.

With me today is Mr. Bruce Lorimer, director general of the architectural engineering services sector, who will assist me with any questions you may have.

Public Works and Government Services Canada is proud to have the opportunity to be part of this project, with a team composed of custodian departments, private sector architectural engineering firms, not to mention a long list of contractors, suppliers, and other participants.

This team deserves recognition for a number of reasons. First and foremost, the facility is unique. It's the only facility of its kind to combine laboratories for the health of animals and humans, and it's one of a handful of level 4 laboratories in the world, as my previous colleagues have said.

These facts are significant, as building, planning, design, costing, and scheduling are based, in large part, on the experience and data from previous projects. In this case, there was not as large a data bank available as for most other building types, and only a few reasonably similar projects for comparison purposes. I believe this must be taken into account when reviewing the performance of this team.

As my colleagues have stated this afternoon, and as mentioned in the Auditor General chapter, the biosafety aspects of this project have been recognized as highly successful. I think you will all agree that this was the single most important part of the project. The commissioning process was fundamental to the success of the biosafety program.

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Commissioning is the process of testing, adjusting, and modifying all the components and systems of a building—examples are heating, air conditioning, thermostats, and other controls—to ensure that they function together as intended. Every building is unique, and a laboratory of this complexity requires a commissioning process of considerable sophistication.

[Translation]

I would emphasize that the expertise required during the whole project is most useful for the national and international markets. Actually, the project team has lent a hand to Sweden as well as to private enterprise in the USA.

[English]

While recognizing the success of the laboratory project and the competence of the team that designed, built, and managed it, we recognize that there are areas that can be improved.

Item 7.75 of the OAG chapter refers to the tailoring of consulting agreements. The consultant agreement dates back to 1987, and the construction contract goes back to the early 1990s. Both documents have changed since that date, and we have taken into account some of the points raised.

We have not finished revising these documents. We meet regularly with the task force of the Association of Consulting Engineers of Canada and the Royal Architectural Institute of Canada to improve our consultant selection processes and consultant agreements. We meet regularly with the Canadian Construction Association to improve the construction contract. In addition, the Treasury Board advisory committee on construction contracting is starting a full review of the general conditions of the construction contract.

As a result of the AG's observations, the definition of “errors and omissions” and a review of incentive-based payment clauses have been added to the agenda of the task force to respond to the comments regarding “design to budget”. These are both contentious issues, and it will take time to come to a common understanding between clients and consultants, and between various federal government bodies.

The Auditor General's report describes early estimates as being inaccurate. I mentioned earlier the lack of precedents for a project of this nature. Construction estimates are based on data gathered from previous works. If there are limited data, it becomes more difficult to provide a sufficiently accurate estimate. If there is a fault in this case, it is probably in the identification of risk.

In the very near future, we will be running a pilot course on risk identification, analysis, and management of our project staff. We will be preparing a best-practices document for using risk analysis as a basis for developing implementation strategies for our projects.

The Auditor General's report notes that, as with any complex project, adjustments were made to the contract documents through the change-order process. There is no doubt that change orders are best avoided. Anyone who has ever built or renovated their own house will understand that what seems to be a simple change can have a large and unexpected impact. Roughly half of the change orders were for the coordination or refinement of documents. Again, referring to the lack of precedents and a complexity of the facility, a certain proportion of this type of change is expected. I believe that in this case, reasonable due diligence was demonstrated by the consultant team.

Finally, I would like to make a comparison, if I may, in a very general way between the Centre for Disease Control in Atlanta and the Winnipeg facility. It should be pointed out that there are a number of important differences between the two facilities. For instance, the Atlanta facility has no administrative wing or heating plant.

We have conducted an exercise to adjust our costs to reflect these differences and allow for an escalation of Atlanta's costs, as it was completed a number of years ago, 1985. This exercise indicates that our costs are below those of the Atlanta facility.

In conclusion, Mr. Chairman, I would state that based on complexity and uniqueness, as well as meeting public health safety needs of the future, the taxpayer has received good value for money in the Winnipeg facilities.

Thank you very much.

The Chairman: Thank you, Mr. Nurse.

Now we'll turn to a frequent visitor before our committee, Mr. Colin Potts, deputy comptroller general from the Treasury Board.

Mr. Colin Potts (Deputy Comptroller General, Secretariat of the Treasury Board of Canada): Thank you very much, Mr. Chairman. Good afternoon, ladies and gentlemen and members of the committee. Thank you for the opportunity to speak on behalf of the Treasury Board Secretariat.

First, I want to say that we are pleased that the Auditor General's report concluded that this was a successful complex project. That being said, however, we shall continue to respond to constructive criticism and utilize lessons learned to improve our management practices and policies.

For example, the report indicates that for projects involving more than one client department, a single authority should be established as the lead authority to represent the interests of all clients and to be held accountable for project results.

I'm pleased to report that the government has already recognized from projects such as this that it is important to stress single accountability. It has put greater emphasis on this point in a 1994 update to the project management policy.

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The report indicates that the Treasury Board Secretariat should ensure that progress reports are submitted as required by the major crown project policy. At the time of this project, the policy of the day required semi-annual progress reports for the Treasury Board. Experience has shown, however, that such periodic automatic reporting was not as meaningful and useful as it might have been in terms of measuring progress against the important milestones of a project and therefore did not encourage 100% compliance. The policy was changed again in 1994 to require reporting to predefined key milestones in a project. This has resulted in better reporting.

With respect to the Auditor General's recommendation that incentives be developed to encourage under-spending of budgets where possible, the Treasury Board Secretariat agrees that the aim should be to achieve the most cost-effective result. As reflected in government policy, we believe this can best be accomplished by establishing budgets through benefit, cost, and option analysis, and by managing projects to ensure that approved objectives are met within budget.

Let me conclude by saying that we very much appreciate the efforts of the Office of the Auditor General in reviewing the management of this project and for the suggestions made. We look forward to further constructive discussion and dialogue before this committee on these issues.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Potts.

Before we turn to the questions and answers, I'd just like to say we have a little bit of business we'd like to conduct after the meeting. On the assumption we'll still have a quorum at 5.25 p.m., I'll bring the discussion regarding this particular issue to a close so we may discuss a couple of motions the clerk has brought to my attention.

Mr. Mayfield, you have eight minutes.

Mr. Philip Mayfield (Cariboo—Chilcotin, Ref.): Thank you very much. It's a pleasure to meet again to discuss this project that's been built in Winnipeg.

When I read the Auditor General's report, I think of the parable of the committee that set out to build a horse and ended up with a camel. It's not so much what the result is, but the process that was used to arrive at the construction of this project; the difficulty of bringing the two partners together and having a clear focus; staying within the budget; the long periods of time; and the hiring of a consultant to oversee the other consultants who had been there, and the cost of doing that. But I want to start at the end and perhaps work in the other direction.

I notice in your statements you're still in the process of building a comprehensive building plan. It's a concern of mine that a project of this magnitude and complexity would have a business plan being built at this late date. I understand there's overcapacity, particularly in the level 2 stages of this, and at least at the time this report was written there were perhaps 70 or so scientists who hadn't been brought onto the scene yet.

So first of all, how are we going to achieve full potential for this? What is your plan for that? What memoranda of understanding do the two partners and any other partners that may be involved have in achieving this full potential?

Dr. Joe Losos: Perhaps I could start, sir.

The work plan to address the Auditor General's specific comments certainly has been put in place. The business plan for the lab centre for disease control, in its capacities, began in the winter months. It includes other laboratories of the health protection branch, not just the Winnipeg facility—for example, our microbiology facility in Guelph. We have to look at it as a whole. This is well under way. The request for proposals will be tendered in mid-June. Dr. John Wade, ex-dean of research of the University of Manitoba has been hired to facilitate the complex of our relationships with the local university and other partners in the area.

We have to remember that this is a very quickly changing environment. Even the reports I alluded to in my opening comments from the Centre for Disease Control in Atlanta, the World Health Organization, and the others are now starting to be dated. We have to adjust our approaches and game plans constantly as things go on.

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We have linked this analysis, as the Auditor General has recommended, to the previous analysis of extra space at level 2 that we did over the last couple of years, and we'll continue to look at that as our programs are rebuilt.

The health protection program in general is being redesigned. You've heard of Dr. Roberta Bondar's science advisory committee that is overseeing a large-scale revamping of the health protection programs. That will impact very heavily on the future of these laboratories.

I've just received a letter from the United States inviting us to participate in a—

Mr. Philip Mayfield: Dr. Losos, I only have eight minutes, so—

Dr. Joe Losos: Sorry.

Mr. Philip Mayfield: I'd like to tie something else in here. You've mentioned there are other facilities in Ottawa. I understand there's a laboratory in Winnipeg built in 1987 at a cost of about $ 12 million. In that facility, the containment laboratory was never even commissioned.

It seems to me in this extra facility, the amount of space that has been allocated is something like an average 100 square metres per scientist, which is maybe double what other labs of that nature would have. How do you intend to tie in all of this space with the other laboratory space in a comprehensive way that Canadian people can look at and say “This is a big job, it needs to be well done; there's no waste here”? How can you describe that, please?

Dr. Joe Losos: The Winnipeg facility is very different from the other facility in Winnipeg. When a scientist or a technician works in a level 3, they do not work in these laboratories all the time; they need back-up space in level 2. That is also very true in level 4, where they can only enter in pairs for a maximum of four hours at a time, and even that's rare. They need back-up space. So where a normal laboratory would have x number of square feet per individual—

Mr. Philip Mayfield: So you're saying there's no extra space.

Dr. Joe Losos: There is extra space. The laboratory wasn't built for today and yesterday; this laboratory was built for today and the future. Since this thing started to be designed, we now realize there's a looming problem in the United Kingdom with prion disease and we have to gear up for prion disease in this country. That wasn't planned in the original make-up of that laboratory, but we now have the facility in which we can move quickly in that direction.

Mr. Philip Mayfield: It seems to me there are always very big plans. I recognize that while this was first thought of a long time ago when the planning was done, Public Works came in and said you hadn't budgeted enough money for the plans you had. So the budget was increased, and even at that there was still $ 5 million to $ 10 million less.

One of the problems seems to be more general. It seems as though there is a budget set for a project. The culture is to spend all that money, and if we need more, we'll get it. But there never seems to be any idea that we will spend only what's required and perhaps save the Canadian taxpayer the money that's not needed.

I'd like to ask the Treasury Board representative, Mr. Potts, what efforts he is making in his department to change this culture of spending the last nickel before the project is completed.

Mr. Colin Potts: Hopefully, we're making considerable progress. I mentioned in my opening statement that we've already revised the project approval management policies. One of the changes is to ensure we get full information when the projects first come forward for preliminary approval. There is a requirement in these major capital projects that a project paper be prepared that sets out the project itself and its requirements. It goes into quite a bit of detail. We're really emphasizing that type of information be provided and thought through, with detailed budgets up front.

Mr. Philip Mayfield: So there's an effort to work on this culture. I'm really pleased. But there are one or two details that I omitted. I want to know when the business plan will be completed and what memoranda of understanding exist. I'd like to have those details in writing for the committee, if you'd supply them, please.

Could you answer them verbally and then supply at least when the business plan will be completed?

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Dr. Joe Losos: The business plan should be finished by the end of the summer, sir, and we can provide that to you in writing.

And your second question?

Mr. Philip Mayfield: It was about the memoranda of understanding that exist between the partners in this project. Could you supply copies of those to the committee as well?

Dr. Joe Losos: We have a memorandum of understanding with the Canadian Food Inspection Agency and the health protection branch in general. It's already in place. We're revising that as we gain more experience with how each agency works. Negotiations are under way with Dr. Willis to set up programs together on prions, which will be done under formal agreements.

Mr. Philip Mayfield: How about the understandings between the two main partners?

Dr. Joe Losos: As I say, the main partner is the Canadian Food Inspection Agency and Health Canada. As we speak, there is a memorandum of understanding between these two parties on how the two agencies interrelate.

The Chairman: We'll get that in writing during the summer.

Mr. Philip Mayfield: Thank you, gentlemen.

The Chairman: In fact, perhaps we could get it in writing for distribution before the House breaks in the next couple of weeks. Would that be possible, Dr. Losos?

Dr. Joe Losos: Yes, but the actual business plan, sir, would not be ready until the end of the summer. The MOU is available now.

The Chairman: Thank you very much.

Mr. Desrochers, eight minutes, please.

[Translation]

Mr. Odina Desrochers (Lotbinière, BQ): Thank you, Mr. Chairman. I would also like to thank all the people taking part in this discussion this afternoon for the information they've given us.

We recognize the merits of the laboratory, but we're concerned with the way it was built and the way the budget was spent. When Treasury Board approved the 142-million-dollar budget, was the amount revised downwards or upwards based on the requests of your two clients who submitted this request for a building?

[English]

Mr. Michael Nurse: The initial Treasury Board submission was presented as an identification of what the cost of the project would be based on the requirements of the clients. I'm not sure of the exact date, but this was presented towards the beginning of the project.

We then worked together to implement the project. As any changes were required or any things were identified in the reporting process we have with Treasury Board, which is being phased in based on the input of the Auditor General, we provided those reports to the Treasury Board. We have worked together to monitor those costs and have attempted to work within those costs as best we can in light of the complex nature of the project that we referred to earlier.

[Translation]

Mr. Odina Desrochers: I'd like to get more on this matter. I've worked for a real estate organization that was, in a manner of speaking, the prime contractor for the government's real estate projects. When client departments submitted their projects to Treasury Board, we often witnessed a downward revision of the project and, to meet initial requirements, there were often envelopes added on during the process to finally get up to the amount that the departments wanted to get in the first place. Was this the process for you? Actually, I'm wondering if the 142 million dollars represent the initial amount requested. Was that amount revised upwards or downwards?

[English]

Mr. Colin Potts: Mr. Chairman, perhaps I could try to respond to that question. I don't have the information with me as to whether the amount was revised upward on balance, but the final amount that was approved was the $ 142 million.

I'd like to point out, though, that initially the revised budget was presented, I believe, in May 1991 and it wasn't approved until August 1992. Through that period there was, I believe, considerable discussion—negotiations, if you like—between the board and the parties involved. It wasn't the case where the project was submitted for effective approval and accepted by Treasury Board. I understand considerable discussion took place.

If you would like further information, Mr. Jeff Parker, who is with me, may have further information on that, Mr. Chairman.

The Chairman: Does Mr. Desrochers want to pursue it further?

[Translation]

Mr. Odina Desrochers: It seems to me my question is clear. When a project of this scope is being planned, the department submits initial requests. I'm trying to find out if those requests represented an amount over or under 142 million dollars. That can make the whole difference and explain why the project finally cost 176 million dollars and why you had to spend 5 to 10 million dollars to hire consultants to fine-tune your project. That's the gist of my question.

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[English]

Mr. Colin Potts: Mr. Chairman, I think if you go back to the early history of it, the original request for a preliminary project approval was $ 145 million, but there's another figure estimated that could be considerably more than that. At the time, Treasury Board—and this was, I believe, in 1989—directed the departments to go back and then come forward with their final project approval within the $ 145 million, not within the higher figure. So there was already some pressure put on the department to live within that initial number.

The Chairman: Mr. Minto, did you want to say something on this issue?

Mr. Shahid Minto (Assistant Auditor General, Office of the Auditor General of Canada): Mr. Chairman, perhaps the information is in paragraphs 7.53 and 7.54 of the Auditor General's report.

If I could just take a minute, sir, there was a budget put forward for $ 145 million, as Mr. Potts says, of which $ 93.9 million was for the Winnipeg project and $ 51.1 million was for Health Canada's disease control centre in Ottawa. At that time, Public Works disagreed with that budget. We believe the information was passed on to the Treasury Board Secretariat, but as the chapter noted, unfortunately it was not passed on to the minister.

And just relating back to that, sir, then, if you go to paragraph 7.54, you will find that an increase of roughly $ 41.7 million was asked for in the budget. Our concern with that was that this increase was not properly justified.

The Chairman: Thank you, Mr. Minto.

[Translation]

Mr. Odina Desrochers: One last question. When you look at all the amounts and all the adjustments that happened you get the impression there was a problem with the planning and the primary contracting during the building. Things are also being said about the lack of team spirit with the two departmental teams involved. Could that serve as a partial explanation for the problems you had in properly steering and directing this project?

[English]

Mr. Michael Nurse: I'll certainly try to be as accurate as I possibly can. There is no doubt that when we set out on this project we, with the cooperation of our two departments, presented the best information we had. As I mentioned in my opening remarks, this was a complex project. We brought whatever knowledge we had to it together as a team and went forward on this. Our plans were laid out in the best possible way with the information we had, and I think we did that with good partnership amongst us.

In a project like this, involving three parties and two clients, there are sometimes disagreements, and we understand that. But I believe, certainly in the time that I was involved, that those disagreements were dealt with by the senior management of the department. We made effective decisions, we kept the people informed, and we acted upon those decisions.

But in the nature of a project like this, there are sometimes changes to the plan. When those changes took place, we moved ahead. Our concern was to produce the best facility we could, and we think we did this. But when you look at the size of this plan.... Certainly there are changes. I believe the cooperation was very good.

[Translation]

Mr. Odina Desrochers: One last, tiny question, Mr. Chairman?

[English]

The Chairman: You have one minute left.

[Translation]

Mr. Odina Desrochers: Agreed. How does one explain the comment about the lack of leadership and lack of a central authority in charge of settling differences? You told me about a partnership that worked very well but, at the end of the day, who was making the decisions?

[English]

Mr. Michael Nurse: Mr. Potts made reference to the fact that the experience we've had.... And we do learn from the practice we have had. The policy is changed to identify a main party for a future project of this kind. For this project, we did operate as partners and we did consult with each other and make collective decisions.

When one looks back on it, it is better, from a policy point of view, to identify a single source for the decision. I think that point's well made. But I do want to reassure you that in regard to the collective agreement we did meet together and consult, and then we made a collective decision to proceed in a certain direction.

I think it worked well under the circumstances, but I do accept the point from a learning point of view: it's better to have somebody who makes that decision in the final analysis, and that's why the policy has been changed.

The Chairman: Thank you, Mr. Desrochers.

Now we'll turn to Mr. Myers for eight minutes.

Mr. Lynn Myers (Waterloo—Wellington, Lib.): Thank you, Mr. Chairman.

• 1620

I want to first of all thank the presenters for their comments today.

I wanted to just comment briefly on the pride I heard exhibited with respect to the Winnipeg facility. I understand it is a world-class facility and the esteem is well deserved.

Dr. Losos and Dr. Willis, you talked about prion disease, and certainly that's an area of concern. Clearly you would have protocols in place where you would respond to perceived or real crises, and I wonder if you could walk us through what those are for prion disease.

Then perhaps, by way of comparison, you could use a domestic problem—for example, the recent J.M. Schneider problem with some sort of luncheon snack, I guess it was. Do you use the same kind of protocol or is it different? I'd be interested in what mechanisms are put in place for an international problem versus a domestic one.

Dr. Joe Losos: I could start that off, Norm, on both.

Thank you, sir. That's a very interesting question.

We've had protocols on prion disease. These have been known for a number of years now as being problematic in a number of instances in cattle. For example, were they a risk in the early 1990s with the use of animal products in therapeutics, biologics, cosmetics and the like? So we've had protocols in place as to how our regulators thought about these things for that period of time.

I think it's fair to say, though, that after the explosion of study and research in the United Kingdom over the last number of years, the amount of information has really skyrocketed, so we're having to adjust our protocols for managing these things and our capacity.

Where we thought we could deal on information we got from other countries, we now know we can't, so we have to build up that type of laboratory capacity internally. So our ability to respond, together with the Food Inspection Agency and the public health system, is now on the design table, and this laboratory is going to be in the forefront of that happening.

I'll comment on the second piece, food-borne outbreak. That's a perfect example of how the Food Inspection Agency and the health protection branch do work hand in hand and have to work hand in hand.

Very often the actual risk to the public is picked up by the public health system, by the astute mother of a child or a doctor in the community, and that triggers a whole series of events, which is the realm, really, of the Lab Centre for Disease Control and the foods directorate of the health protection branch. We do the analysis of whether that is or is not directly related to a food product.

Very early in that game, the Food Inspection Agency is at the table with us, and we take it from there all the way to entering the company premises, doing the investigations, making the recall, making public warnings, or whatever it takes. There is a whole series of set procedures in both agencies to make that work.

Technology being as explosive and developing as quickly as it is, we're working very hard to catch up to these technologies, apply these technologies, and make the hurricane watch for this kind of problem absolutely as early as we can.

So this is really an area of development that the Winnipeg facility itself will be a spearhead in.

Norm.

Dr. Norman Willis: From an animal health point of view, protocols are in place for the diagnosis of prion diseases. Prion diseases in several species of animals have gone back a long time—scrapie in sheep, for example. Protocols are in place to prevent the importation of animals or animal products containing prion diseases.

The recent identification of a potential link between human disease and animal disease—BSE, bovine spongiform encephalopathy—has opened the potential for a zoonotic connection in this class of diseases. Also, within the last year, the containment status of the organism has been upgraded to level 3, where it was level 2 before. This provides the opportunity now in this facility, which does have this bio-containment, to have work done from both the human side and the animal side, collectively and cooperatively, in this facility.

Mr. Lynn Myers: Thank you very much.

I wanted, Dr. Losos, to go back to something you said in your opening comments about what the World Health Organization is saying and about standing on the brink of global crisis. That tends to set off alarm bells, and you tend to get frightened by those kinds of comments.

• 1625

I wonder if you could comment on that in terms of where the international community is at right now, where we as Canadians are at, and what we are doing to build in the readiness, as you point out, in terms of being ready for the kinds of problems that seem to be on the horizon.

Dr. Joe Losos: I would recommend that 1996 report to you, and if you're interested I can get you a copy. It's interesting reading.

To take an example, tuberculosis, which was a disease that was well controlled, certainly in the industrial world, up until a very few years ago, is enjoying a massive rebound internationally. Other diseases, parasitic diseases that were controlled in the 1950s and 1960s, are having a major rebound because of the decreased economic situation.

So the World Health Organization understands that where perhaps we thought, foolishly, with the advent of antibiotics that things were okay, we now know that's not the case. With international travel, fast communication, the transport of food products and other products very quickly around the world these days, the whole game has changed as far as relationships are concerned.

The World Health Organization has a process in place—and I chaired the seminal committee of that meeting—to start to create a global lattice of vigilant systems, where centres would be chosen to be the vanguard looking for variations in these types of organisms.

As I started to say earlier, I've just received a letter inviting Canada to the table to create that lattice. Several years ago that would never have happened. The United States would have been the North American representative, if you will, on that development. The reason they've asked us to this table is in large part due to that Winnipeg facility.

Mr. Lynn Myers: Very good.

I have one more quick question. Something opposite triggered this in my mind. In terms of the audit and when it was done, it identified that 70 staffing positions were vacant. I wonder if you've had a chance to review that. Are those staffing positions filled? What's the plan in terms of what's happening with the staff?

Dr. Joe Losos: They aren't filled yet. A number of the staff had a choice whether they would or would not move to Winnipeg, and for family reasons and personal reasons, a number of them chose not to go. That causes a staffing problem. On the other hand, it allows us to rebuild the workforce, and for something of this size and complexity, we've already started to have a fair bit of success—I can't give you the numbers today, but I can certainly get them for you—in attracting people to work in the facility, including internationally renowned scientists.

For prions, for example, in large part, on the health side, we're going to have to find people internationally, to bring them in for two- or three-year stints while we train our Canadian scientists to take over, but certainly we'll be finding people internationally and we are doing that already.

Mr. Lynn Myers: Thank you very much. That was very comprehensive.

The Chairman: Thank you, Mr. Myers. I'm going to interject here.

I mentioned we would move to some other business at 5.25 p.m., but I understand we might be losing one of our members. As long as we still have quorum, I would like to introduce this motion, of which I understand all members have a copy. The clerk has passed it around.

I will read the motion.

That the Chair of the Committee be authorized to seek the authority and the necessary funds to permit up to five (5) members of the Standing Committee on Public Accounts and two (2) staff persons of the Committee to travel to Yellowknife, Northwest Territories, to attend the Nineteenth Annual Conference of the Canadian Council of Public Accounts Committees, from August 15 to 18, 1998; and that the members attending the Conference utilize their air travel points to travel to the Conference.

If there isn't going to be too much debate, maybe we'll just move quickly to a vote.

Mr. Telegdi.

Mr. Andrew Telegdi (Kitchener—Waterloo, Lib.): I'll move that.

The Chairman: It's moved by Mr. Telegdi. Is there any discussion?

(Motion agreed to)

The Chairman: Thank you very much.

My apologies for the interruption. Now we'll return to Ms. Wasylycia-Leis.

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Thank you very much, Mr. Chairperson. I'd like to thank the presenters also. This is the first time I've been at the public accounts committee, but it's timely for me. I've had a number of questions from constituents and other people in Winnipeg, so I'd like to ask some questions following upon those posed by Mr. Myers about staffing.

• 1630

I think there is certainly an appreciation in Winnipeg that this is a world-class centre and that there's a real willingness on the part of the local health care community to work with the scientists and technical experts in this centre, but there's also a concern that perhaps we might have a white elephant on our hands. I want to pursue the point raised in the Auditor General's report about 70 positions that have yet to be filled and the 40% of capacity that has not yet been attained.

First of all, my understanding is that as of a couple of weeks ago, a permanent director was still not in place for the lab in Winnipeg. Is that still the case, and if so, what are the plans to have that position filled?

Dr. Joe Losos: Yes, that is true. The person who ran that bureau up to this point decided he would not move to Winnipeg. We will go into full-blown staffing right after this point.

Temporarily taking over is Dr. Wendy Johnson. That's on the health side. Norm Willis is the director on the animal side.

Ms. Judy Wasylycia-Leis: I have a follow-up question to that. In the plans for filling the vacant positions, you indicated that the first option was for professional staff in labs in Ottawa, and I guess other places, to take up the positions in Winnipeg, and that some were not willing to do so for personal reasons, or for whatever reasons.

What is your plan to fill those positions? Is there a problem in terms of attracting the scientific and technical expertise required given the limitations on salary or job descriptions? What is your current plan to meet that?

Dr. Joe Losos: Certainly salaries have been a problem for us. There is no denying that. This facility itself, though, has attracted a lot of attention. For instance, Dr. Heinz Feldmann from Marburg, Germany, is joining us because of the facility, because of the opportunity to build up a level 4 program—that is, for haemorrhagic fevers like ebola and that kind of virus—and just because the facility is what it is. So that's in our favour as well.

Our deputy has been in contact with the Public Service Commission to set up a special project, if you will. I've been in contact at my level, the ADM level, with the Public Service Commission and Treasury Board to set up a pilot project for flexibilities, if you will, to go forward very quickly to recruit nationally and internationally.

This is a priority we will invest in. We will put FTEs and dollars into going out to academic centres in other countries and getting this facility up and running as quickly as we can.

Ms. Judy Wasylycia-Leis: I've had calls from a number of constituents indicating they had hoped to apply for jobs at the lab in Winnipeg but were told that the positions were only open to people from Ottawa and they were not able to apply.

Given the vacancies, at what point does that restriction get removed? Is it possible for people, perhaps not permanent civil servants but those on term, to apply for jobs that are posted?

Dr. Joe Losos: I have never heard of the “Ottawa first” theory, but I will guarantee you that if you send me the curricula vitae of these people in Winnipeg who are interested, I will expedite them into the competition process.

We've also hired Dr. John Wade, a Manitoban, a Winnipeger, and he will facilitate our access to that university.

Winnipeg is known throughout North America and internationally as a strong centre for infectious diseases, so we will tap in heavily with cross-appointments in terms of their staff as well, part-time or whatever we can arrange.

Ms. Judy Wasylycia-Leis: All right. I will refer to you people who come forward.

Dr. Joe Losos: Please do. The more the merrier.

Ms. Judy Wasylycia-Leis: With respect to your comments about the prion reference work as it relates to blood, my understanding is that this capacity is not filled and there is no one in place yet to begin the work pertaining to prion work.

Dr. Joe Losos: That's correct.

Ms. Judy Wasylycia-Leis: What timetable have you set for filling that function within the lab?

Dr. Joe Losos: It's very difficult to say when we'll be able to attract people, but the director general of the Laboratory Centre for Disease Control, Dr. Shannon, and I will fly down to the prion lab at the National Institutes of Health over the next number of weeks. I'll be in Europe at probably the end of July, and I'll drop in at the facilities in the United Kingdom. We will see what kind of post-docs and scientists at a more senior level we can attract on short notice.

• 1635

On the health side—I'll let Norm speak for the agriculture side—we do not have a lot of capacity in Canada. However, we are part of international surveillance systems. We have epidemiologists who are very conversant with this disease. We just do not have the laboratory capacity.

So we have to gear up quickly. We can't afford to wait.

Dr. Norman Willis: We have a capacity for prion diseases now. I was able to attract an electron microscopist from Oxford University in England and to have this as one of the functions he deals with in addition to the identification of unknown pathogens.

We are in the process of evaluating the consolidation of all of our capacity for prion diseases at this site and of arranging for it to work cooperatively with the health side.

Dr. Joe Losos: Just to re-emphasize what Dr. Willis has said, we are not going to be reinventing the wheel here. We are working very closely with the animal side in prions and in other diseases—for example, the influenza during the Hong Kong outbreak.

So this is not only a marriage of convenience but also really smart science. We will not be reinventing the wheel where they have the capacity and we need it.

The Chairman: You have one minute left.

Ms. Judy Wasylycia-Leis: I'd like to ask, as quickly as possible, a question pertaining to the whole issue of the blood supply, which is before Parliament on a regular basis. I'd like to ask about the relationship between the lab in Winnipeg and the Bureau of Biologics, what kind of communication there is in terms of dealing with problems that come to the surface and whether or not there's a capacity at the lab in Winnipeg to address concerns about, for example, albumin, which we've raised in Parliament with respect to the possibility of contaminants in blood products coming into this country.

Is there a role through the virology lab for us to be proactive on those kinds of issues?

Dr. Joe Losos: Absolutely. This laboratory is part of a hurricane watch. It involves that laboratory and it involves a series of laboratories nationally and internationally. We look at genetic variations of hepatitis virus and HIV virus to see if these things will escape our screening systems for the blood supply, for example.

If one of our laboratories picks up something that is of danger to the blood system, then the notification of the regulator, the Bureau of Biologics, is automatic. I've set up a system where they systematically get together, weekly, biweekly, to go over, from the literature or from their own work, every possible emergence of viruses. They have to record their results and meet regularly.

Ms. Judy Wasylycia-Leis: One quick question?

The Chairman: Very quick, yes.

Ms. Judy Wasylycia-Leis: Were you given any directive to look into the amount of albumin that came into this country, through the emergency drug release program, produced by Alpha Therapeutic, around which there's a great deal of concern?

Dr. Joe Losos: Yes. We've worked with Alpha Therapeutic, Baxter and Bayer for the supply of both 5% and 25% albumin.

The Chairman: Thank you very much.

Mr. Mahoney. We're now moving to four-minute rounds.

Mr. Steve Mahoney (Mississauga West, Lib.): With your indulgence, maybe I'll ask all of my questions and then allow each of the people to respond, starting with the Auditor General.

Looking at this project from a public accounts point of view as opposed to a medical point of view, we have partnerships between Health Canada, Agriculture Canada, Public Works and Government Services, and Treasury Board to develop the facility. Your report, frankly, is quite scathing in many areas, and I wonder if there are too many cooks in the kitchen on this thing. I wonder why there are such statements as “retroactive approvals” of payments made by Treasury Board, and “non-compliance” with their policies. You stated that several million dollars could have been saved on the project.

Out of all the Auditor General reports I've dealt with, even being on this committee for a short time, I find this one to be most critical. So I'll leave that for you, sir.

Mr. Potts, perhaps you could respond to that question as well.

• 1640

I also noted somewhere here that 38% of the construction costs were related to consultants. I wonder if that's because of the nature of the project, the type of consultants that might be required due to scientific requirements, or is it a legitimate criticism that simply too much money was spent on consultants?

To Mr. Nurse, your report at the end, sir, dealt with a comparison to the Atlanta facility. I don't quite understand that. They don't have a heating plant, but they certainly would have air conditioning requirements that would far exceed Winnipeg's throughout the year. I didn't quite get your point. Maybe you could expand on that. Is Atlanta some kind of a benchmark that governments should use in developing this kind of facility?

To the two doctors, gentlemen, I thought your responses—and I appreciate your pride in the facility and understand the sensitivity and the difficulty in building it. I think originally it was to go in Etobicoke in Toronto and there was a huge.... Is that not the same one? Well, there was an attempt to build one there and there was a huge outcry—

Dr. Norman Willis: I thought that was in Mississauga.

Mr. Steve Mahoney: No, it wasn't Mississauga. But it would have been, had it been—

Dr. Norman Willis: Had you been there.

Mr. Steve Mahoney: Yes, exactly! No doubt.

In any event, I was somewhat surprised, I guess. Maybe it's good strategy. You seemed to ignore the AG's comments and told us about the facility instead of responding to the criticism that was levelled, in both of your reports. I'd like to know your reactions to those criticisms. They're very serious criticisms. The auditor has identified $ 5 million to $ 10 million in excess spending, retroactive approvals of accounts, lack of teamwork, lack of leadership. I don't know how it could be more damning, frankly, from a public accounts point of view.

Let me ask one final thing in a more scientific and perhaps less critical vein. All of these diseases that we fear and the viruses and everything...every year in my community one or two young people die of Meningitis and we can never figure it out. While it's not a public accounts issue, I wouldn't mind hearing some comments on that.

Thanks.

The Chairman: Thank you, Mr. Mahoney.

Mr. Steve Mahoney: I'd like to thank everybody.

The Chairman: I think you hit everybody. You just about used your four minutes, too, and we haven't had a response yet. We'll ask the witnesses to be as brief as possible, and we'll start with Mr. Desautels.

Mr. Denis Desautels: I'll ask Mr. Minto to answer.

Mr. Shahid Minto: Thank you, Mr. Chairman.

Mr. Chairman, let me deal with the issue of leadership and who was in charge here. We have paragraphs 7.79 to 7.85 dealing with that particular issue. We notice several instances where the client departments had significant difficulties agreeing among themselves on how to resolve the problems. It's also true, sir, that most of these problems were in the early phases of this project. I think from mid-1995 onward, the project did stabilize and things seemed to work better.

The important thing, just to give you an idea of the frustrations people are looking at, is if you look at paragraph 7.83 we find that although Public Works was the contracting authority, Health Canada went out and spent $ 1.6 million on its own consultant to look at the work and the scope and the documents all over again. Now, this added considerable frustration for everybody and slowed down the process. There are three or four examples here.

One of the things that happened over the life of the project was that there were 13 different members who served on the committee that was overseeing this, for terms of two to three years. Now, decisions had to be made by consensus. By the time people got the project knowledge, they were gone and somebody else was there.

Treasury Board policy agrees that for projects like this, there should be a single authority and single accountability. The question really is, how do we move from the policy to the practice and how do we tie the two things together?

On the issue of whether there was too much money spent on consultants, I think our colleagues from Public Works will deal with that.

Perhaps I can clarify the Atlanta facility thing very quickly. The report is silent on the cost comparison for the simple reason that the documents that were presented to decision-makers were adamant that a comparison was not possible. They listed 10 reasons why the two facilities and their unit costs should not be compared.

We took that advice and did not do the comparison, so I'm unable to comment on the information that has been provided this morning.

• 1645

The Chairman: We're a bit over time. However, we'll now turn to Mr. Potts and get a response from him. Again, we don't want you to just reiterate what Mr. Minto has said, but perhaps there's additional information you'd like to add.

Mr. Colin Potts: Basically, I'd like to comment on the role of Treasury Board in this, which is more general. We have set the policy and have set the policies in place that apply right across government, and our ongoing role there is more one of monitoring. Certainly, departments come to Treasury Board, in terms of some Treasury Board ministers, for approval of projects and for financing approval, particularly major capital projects. So that's the role that was played. It's more of a government-wide....

Once that is done and the approval has been given, it's up to the respective departments to implement and manage, and they are really accountable for the final results of the project.

On the 38% consultants, I'm also going to defer to Mr. Nurse to perhaps deal with that question as someone more knowledgeable than I am.

Mr. Minto mentioned the move from policy to practice. I think that's already in place. In 1994 we brought the new policy into place requiring a single authority to be accountable for these sorts of projects. This project started well before then.

The Chairman: I think we'll actually have time to come back to you, Mr. Mahoney, but we're now going to move to Mr. Mayfield and Mr. Telegdi to give the other members—

Mr. Steve Mahoney: They can answer the questions afterwards.

The Chairman: Mr. Mayfield, four minutes.

Mr. Philip Mayfield: Thank you very much, Mr. Chairman.

I want to ask you this, Mr. Potts. In the Auditor General's account he talks about increased costs of $ 5 million or $ 10 million that were attributed to inflation and GST. Yet in the analysis there was virtually no inflation; the costs of inflation and GST might have been 10% of the increase.

I believe the word “misinformation” was used. To my mind that's a fairly serious word and I'm wondering how does your department or how do government departments hold accountable those who make statements that in fact are misinformation?

Mr. Colin Potts: I think the process is that we take the information that is represented to us by departments in good faith, and we had no reason to question that at the time that information was presented to Treasury Board. It is reviewed within the board and there is considerable discussion that takes place between the analysts at the board and the particular departments involved in any particular issue.

The monitoring of that, or perhaps the accountability when issues do arise—and perhaps there has been misinformation, as the Auditor General has pointed out. I think other mechanisms are in place, such as audit, which happened here—an internal audit within departments. These were the sorts of procedures we were going to put in place or will see that they're in place to prevent that from happening in the future.

Mr. Philip Mayfield: How would that prevent that from happening?

Mr. Colin Potts: It's a matter of really reminding departments of the policies that are in place, the need for full information, the need for accurate information, to talk to them in terms of the systems that are put in place that develop that information, how we can improve them. Pressure, if you like, would be the main mechanism.

Mr. Philip Mayfield: I'd like to go back to health, if I could, Dr. Losos. I've heard about the 70 people who weren't there, and I'm sure you've answered the question, but I don't have a clear understanding of what you've told me. Maybe you could speak frankly enough that I could understand the answer to that.

I understand that the Food Inspection Agency moved in earlier last month. I'd like to know when the health side will be fully moved in. If you could give me a date, I'd sure appreciate that. When will these positions be filled? When will that facility be working at capacity?

Dr. Joe Losos: The health staff are moving in as we speak. They should be moved in by the end of the summer. We will be hiring new staff for level 3s and level 4s. The level 3s will become operational before the level 4s, and the whole facility should be operational within the next 12 to 18 months.

The history of that level in every laboratory that's been built is that it takes a lot of fine tuning. This is not a laboratory; it's an extremely fine-tuned machine with backup systems and the like. Nothing is going to go hot in that laboratory until we're satisfied it works. So the history is that there are some months delay while we're fine-tuning the machinery and training up the staff. Therefore, I can't give you an exact date on the level 4.

• 1650

The Chairman: One short question.

Mr. Philip Mayfield: I want to talk about the other facilities. Is there going to be a process of decommissioning facilities in Ottawa and the other facility in Winnipeg or other laboratories? It seems to me that this unique modern facility is there, and certainly it's going to be taking over functions that others are providing. How do you plan to do that?

Dr. Joe Losos: Yes, sir, we've already done a study called the lab rationalization study on our square footage and what it's used for, and there will be decommissioning of space. Some of it will be imminent, and that is the space that has been vacated by virtue of laboratories that are moving. The other Winnipeg facility itself will be demobilized or not; we'll have to see over the next couple of years.

Mr. Philip Mayfield: Does that mean a serious downgrading of facilities in Ottawa?

Dr. Joe Losos: Yes, sir.

Mr. Philip Mayfield: Thank you.

The Chairman: Mr. Telegdi, four minutes.

Mr. Andrew Telegdi: Thank you. I can understand excess capacity because many government buildings, I know, in local municipalities build in some excess. However, they usually rent the extra space against the time that they need it, so perhaps this could be done for laboratories, even private laboratories.

Dr. Losos, you mentioned a work plan to deal with the AG's concerns. I want to ask the AG, have you been part of this work plan or has a work plan to address your concerns been discussed? Have you had input into it?

Mr. Shahid Minto: Perhaps I can answer that, sir. At the completion of the audit, the work plan was not in place. It was being developed. We have not been back since then to take a look at this work plan. Certainly, if it's the committee's wish we would consult with the departments. We have not been back since the audit was finished and we have not seen the work plan.

Mr. Andrew Telegdi: Dr. Losos, could you assure the committee that you're going to share the work plan with the AG as to how you're going to address their concerns?

Dr. Joe Losos: Absolutely.

Mr. Andrew Telegdi: I have another question. Given the increased activity in biotechnology, what kind of health risk increase would that involve?

Dr. Joe Losos: The technology is a huge, exploding industry. The predictions by the Medical Research Council and others are that biotechnology will be to medical science what informatics and computers have been for the information world. So we're anticipating an increase of 200% to 500% of the products that the health protection branch will have to manage over the next 10 years. That will be an increase in capacity in Ottawa, in regional laboratories, in the Winnipeg facility and the like. How it translates in the Winnipeg facility will be a tooling up of the sciences using biotechnology for all of the new risks, for example, that will emerge.

This is my opinion at this point in time—no more than that—but we have to get much more serious in public health about genetic diseases, the predisposition to genetic diseases and the prevention in that whole area. We're just on the verge of this at the present moment. I will predict that several years from now that laboratory will have much more capacity in biotechnology and genetic diseases and that it will be better coordinated. It will be coordinated with the Medical Research Council's initiative on the genome. I've already spoken to Dr. Friesen, the president of the Medical Research Council, to start negotiations there.

Mr. Andrew Telegdi: One more question, Mr. Chair. This is separate from the public accounts in the sense that it was addressed by Mr. Maloney about something that I think is a major concern. The dollars that might have been saved are certainly excessive.

There seem to be new outbreaks of polio and TB that I heard about in terms of us being more and more exposed to it because we don't have the inoculation programs we used to have. Do you have a comment on that?

• 1655

Dr. Joe Losos: Polio is eradicated from the Americas. There is a global program for polio eradication, and we're part of that eradication program and have regular monitoring systems. This laboratory will actually help with that monitoring of people who travel to other countries and may pick up the virus or have the virus from vaccines in other countries. They use live vaccines. I won't get into the details, but we do have a monitoring system.

Tuberculosis, as I mentioned earlier, has unfortunately enjoyed quite a rebound in the human population globally over the last number of years. It's now the single biggest bacterial killer around the world, and the problem is it's starting to build antibiotic resistance, so our vigilant systems together with the provinces have to be very strict. How that translates into that laboratory is it needs the connections, it needs the specimens coming into it, and it needs the level 3 containment in order to manage that.

Up until this point, we've literally been working out of a small level 3 cupboard to do this work in Canada. This laboratory in Winnipeg will allow us to get serious about that science.

Mr. Andrew Telegdi: Thank you.

Mr. Steve Mahoney: Mr. Chairman, I'm sorry, but on a point of order, there's a problem in the House, and we've all been called there, so I'm going to make a motion to adjourn the committee.

Mr. Philip Mayfield: Before you do that, may I have just one word, Mr. Mahoney?

I thought Mr. Telegdi was wise in turning to the Auditor General, and I believe the Auditor General said he would be at least willing to review the work plan. If the committee is in agreement, I would like to request that the Auditor General do that and include the business plan when it's completed.

The Chairman: One point at a time. We have Mr. Mahoney's point of order. We are just checking to see if the problem in the House has been resolved, since the bells are no longer ringing. If there is a problem in the House and since we don't have quorum, I'll respect the wishes of the members and suspend the meeting.

Mr. Steve Mahoney: They have the quorum.

The Chairman: Okay, so Mr. Mahoney's point of order is no longer a point of order, and Mr. Mayfield's interjection therefore is not required at this point in time.

We're back to Mr. Telegdi for about 30 seconds to a minute.

We'll give you a minute, Mr. Telegdi.

Mr. Andrew Telegdi: The other one is antibiotics. We seem to have new strains that the overuse of antibiotics is causing. Do you see any kind of relief on the horizon of that particular problem?

Dr. Joe Losos: I'm not too sure I see relief, sir, because the research in the pharmaceutical industry isn't quite enough yet. Certainly antibiotic resistance is a looming problem internationally. Some of the more common causes of pneumonia, for example, in some of our provinces are anywhere from 8% to 12% resistant to penicillin and some of the more common inexpensive medications. These are very troubling things with the organism called streptococcus; it has always been very sensitive to penicillin.

We're very aware of that. It relates to animal husbandry and our practices in use of antibiotics in the health care system. It relates to education of physicians and health care workers in general.

We have had a number of national consensus meetings on that. We have a work plan in place. I'll be happy to send you the proceedings of those programs.

How does that translate into the laboratory in Winnipeg? It translates in the following way. It is likely that we'll be working generally with tuberculosis in a level 3. If it's multiple-drug-resistant, we'll move it up to level 4, just because it's of so much risk, and that facility will in fact become a resource for samples from all over the country, where people should not be working with these things over an open bench in hospital, for example.

The Chairman: Thank you very much.

Now we'll turn back to Madam Wasylycia-Leis.

Mr. Philip Mayfield: Mr. Chairman, on a point of order, if I may, I would just like to repeat what I said. Following Mr. Telegdi's turning to the Auditor General, I would like to ask if the committee would agree with having the Auditor General review the business plan and the work plan that have been mentioned.

The Chairman: We don't have a quorum for the committee to pass a motion to that effect, Mr. Mayfield.

But let's see what the Auditor General has to say about Mr. Mayfield's request.

Mr. Steve Mahoney: Do you need me for quorum for that?

The Chairman: No, we still don't have enough.

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Mr. Denis Desautels: Mr. Chairman, we would be quite agreeable to working with the department concerned and reviewing their business plans, particularly their adequacy to respond to the issues that have been discussed here today.

The Chairman: Will you be able to report back to this committee directly, or will you have to report it to the House in one of your reports?

Mr. Denis Desautels: In terms of reporting back, it would preferably be done through one of our future reports, but in the meantime we can be quite practical and pass on our reactions to the department's concern. So if they wish, they could take those into account and adjust the plans accordingly.

The Chairman: And you can advise us perhaps of what you have told them.

Mr. Denis Desautels: Right.

The Chairman: Does that answer the question, Mr. Mayfield? I think it pretty well does.

Mr. Philip Mayfield: Thank you very much, Mr. Chairman.

Mr. Andrew Telegdi: Could you ask Dr. Losos if he agrees with that?

The Chairman: Dr. Losos, do you agree with that request? If the Auditor General passes his comments to you on the business plan you have developed, when you're reporting back to this committee could you perhaps include either a summary of his comments or his comments directly? Would that be possible for you?

Dr. Joe Losos: Sure, no problem.

The Chairman: Thank you very much.

Madam Wasylycia-Leis.

Ms. Judy Wasylycia-Leis: Thank you very much.

There are two areas of questioning. The first has to do with the question of the lab in Winnipeg not being up to full capacity. I know we've addressed the question of searching for and hiring the appropriate staff. I wonder, though, if some of the failure to get up to full steam is related to a shift in commitment and government agenda. From the day this centre was envisaged to the present time, we've seen a considerable shift in terms of government direction around the importance of public labs and independent research.

For example, in the health protection branch we have had the closure of the drug research lab and discussion on closing some of the food labs. My concern, if there is this general thrust away from government-sponsored laboratory research and scientific development, is whether it is having an impact in terms of the virology lab in Winnipeg being able to get up to full steam. That's the first question. Maybe I'll leave it at that and come back to my second specific issue.

Dr. Joe Losos: I know of no government scheme to cut back labs. We in the health protection branch have had a reality of program review, and we've had to pay for our program review cuts. We've had an over-abundance of some of the laboratories, which I've mentioned earlier, and they will be decommissioned as the Winnipeg facility takes shape.

The political attitude around Health Canada, the public's attitude on the importance of the health protection branch, and the developments of the last number of months and future months will show that the branch will be strengthened. The Minister of Health has started the program for strengthening the health protection branch, and that will be heavily involved in laboratories. We're already investing in biotechnology and the biologics bureau, so we are investing in new sciences.

Ms. Judy Wasylycia-Leis: I appreciate those comments, but it doesn't answer the general question about how we restore what has been lost and how we create an attractive environment to keep scientists in this country feeling they're making a meaningful contribution.

My second question is on the blood supply and the role the virology lab plays in ensuring the safety of the blood supply. You said you were asked to investigate the question of albumin imported into this country through EDRP. I would like to know what you were asked to do, how you did it, and what the results were.

I remain concerned, and to date have received no assurances, that the albumin lots recommended for CJD-related withdrawal in the United States did not come into Canada. I'm really seeking information about whether, when you were given the direction to investigate, you proactively investigated by taking samples, tracing lots, and trying to determine the safety of that supply of blood product brought in under EDRP.

Dr. Joe Losos: Alpha Corporation of California was able to sell products in Canada until January of this year. They're a fully reputable firm. Our last review of Alpha Therapeutic was early this year, I believe, and I can get you that information in specific detail. The reason they could not import after January 1 was because the new regulation for establishment licences was brought in. In order to import into Canada at that point, they had to have a reputable importer. They did not have an importer. Therefore, because there was a shortage of albumin, which is used as a plasma expander in burns, surgery, trauma, etc., we had to use a special access program just to get it in so Canadians had the supply. It was not a safety issue.

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The Chairman: Now we're going to turn to Mr. Pratt for four minutes.

Mr. David Pratt (Nepean—Carleton, Lib.): Thank you, Mr. Chairman. My question is to Mr. Desautels.

I'm not a regular member of this committee, by the way, so I don't have much background on this. But just looking at the history of this project, I suppose one is left with the impression that there seem to be a lot of studies going back and forth as to what was the best means of proceeding.

Knowing what you know now about the history of the facility and the surplus capacity that exists, what is your feeling as to whether or not this facility, in terms of the expenditure of tax dollars, might have been best located in the national capital region, when you take into account the critical mass of scientific expertise in the capital and the facilities that were already here? What's your call on that?

Mr. Denis Desautels: That's quite a delicate question. When you look at the history of this project, this question was bounced around a lot. There are obviously, I suppose, advantages to consolidating some of these facilities in one place, but there are also other advantages to having it somewhere else.

In terms of value for money for the taxpayer, I would normally tend to take the broader view of that. There could be social or economic benefits that are real in decentralizing some of these facilities. In the course of our work, we have not really passed judgment on whether locating in Winnipeg was the right thing or not. In fact, we never do that.

We've looked at other major capital projects that have been located in different parts of the country, and we basically take those decisions as policy decisions. Once those decisions are made, we conduct our audit to determine if that decision has been implemented as efficiently and as well as possible.

I don't have a particular yes or no answer to your question. I believe that locating a facility like this outside of Ottawa can be justified.

Mr. David Pratt: I recognize that when you're speaking in broader terms, any sort of decentralization can be justified, depending on the circumstances. But I'm looking particularly at this case with respect to this facility. I'm not suggesting I have much background on this, but when you read through the chronology of the key events, you can't help but think there was a tremendous amount of public money wasted in the process of determining where this facility should go. Then, at the last minute, it was bumped off to Winnipeg.

It would seem to me it is also part of your role to comment on policy decisions of that nature. As you mentioned, decentralization can be justified in some circumstances, but in some circumstances it can't because sometimes it's done for purely political reasons, and sometimes those reasons are wrong.

Mr. Denis Desautels: In terms of value for money for taxpayers, what may have cost the taxpayers more money in this case than it should have was all the time it took to look at different alternatives and go back to the drawing boards.

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If a decision had been made earlier on exactly where to locate it and a decision had been made earlier in terms of consolidating both animal and human health in the same place, I think that could have saved, when you look at the history of this thing, a lot of effort, and of course a lot of money.

So to me, locating to Winnipeg was just one of the many episodes in the history of this particular project. And I think when you look at this, it's hard to believe that this thing started in 1975 and has now been delivered in 1997 or 1998. That's a long history. I think the length of that history, the number of returns to the drawing board, was more costly than anything else, as far as I'm concerned.

I think the hesitation and the difficulty of making a decision was what added most of the costs.

The Chairman: Thank you, Mr. Pratt.

I have a few questions of my own. I'm going to stand in for Mr. Mahoney, who unfortunately had to leave the committee, and continue the questions that he had hoped to ask earlier.

The first one is to Mr. Nurse. You mentioned in your opening remarks a comparison to Atlanta and the facility down there. Has Atlanta become a benchmark, a template? Why do we feel that we have to build up to, beyond or whatever, using that plant as a measurement?

Mr. Michael Nurse: I think there are a number of reasons, but in the interest of time I'll be very precise.

First of all, we talked about this being a unique facility. A number of comments were made about the efforts and maybe even about some of the issues around teamwork and everything like that that were raised by the Auditor General. There was a desire to demonstrate that there were a lot of very dedicated people who worked very hard on this and worked to the best of their abilities with the information they had.

Our desire here was to at least take an example of a similar facility that was built a number of years ago and try to display that this effort.... While there are issues that need to be resolved and worked on, and I certainly agree with those, you could look at it through the other end of the pipe: there was an awful lot of effort to bring this tremendous, world-class facility in.

I guess what we were trying to do—maybe it was crude—was give a comparison to explain the people who have put in up to 10 years of their careers and have worked very hard and have worked together as a team to try to deliver a very unique project. For better or for worse, that's what we were trying to do.

The Chairman: Okay. Thank you very much.

To Mr. Potts, 38% on consultants' fees: don't you think this is excessive? Or was there such a specialized need that this amount was justified?

Mr. Colin Potts: Mr. Chairman, I'm really not qualified to comment on that because I'm not familiar with the ratio of consultants' fees in the construction environment, but I do know fees are generally based on percentages of the total contract.

This is really Mr. Nurse's area of expertise, quite frankly.

The Chairman: We'll ask Mr. Nurse quickly. Is 38% excessive or justified?

Mr. Michael Nurse: First of all, the term is “consultant and administrative costs”. I just want to clarify that. And we feel that for this project, in terms of what we were looking at, it was reasonable.

The Chairman: Okay.

Mr. Minto, do you agree with that comment?

Mr. Shahid Minto: I'm just a little puzzled, sir. If you look at paragraph 7.76, the project officials that we talked to agreed that the costs are higher than expected, and then they give a whole lot of reasons for why they are higher, including: programming and construction delays, which is not a sort of unique reason for this project; extensive travel was required by a great many consultants and project staff from the offices in six cities; and last, the decision by Health Canada to have separate consultants to review the work of the prime consultants also added significantly to this.

I agree with Mr. Nurse. Yes, it was a difficult project and it was a unique project. But having said all of that, we still think 38% is very high.

The Chairman: Okay. Thank you.

Now, turning to the doctors, Dr. Willis and Dr. Losos, can we have your quick reaction to what Mr. Mahoney refers to as a “scathing report by the Auditor General”.

We'll start with Dr. Willis.

Dr. Norman Willis: The points that were mentioned included the cost, and as we looked at it from our program point of view, the space we have is less than the previous space that was occupied with this program. We did not exceed our cost in our design, and during the course of the project, after determining the functional requirement, we actually reduced the space in order to stay within the budget. We feel we respected the cost with considerable integrity.

• 1715

With respect to lack of teamwork, I think that through the course of this project we have achieved something that is quite special and now has considerable potential. I'm personally excited about the opportunity for what we can do between the departments. I think it's great.

The Chairman: Thank you.

Dr. Losos.

Dr. Joe Losos: I'd like to echo what Dr. Willis was saying. We have a lot of new demands on the health side that have come up since this thing started to be designed and planned: prions, more for blood vigilance, emergence, tuberculosis, and the level 4 facilities for which we had no capacity before.

Mr. Mahoney asked about meningitis. We've done meningitis testing just on a peripheral laboratory bench here. We'll have a full level 3 to do the testing now. We'll be one of ten laboratories in the world that can do the type of testing on meningitis that we can do, so the space will be justified very quickly over the next year or two.

The Chairman: This is a question that is more for public edification. Can you tell us why meningitis, which is a very serious threat to many of our young people, seems to break out with no apparent reason periodically in different parts of the country? Just give us a brief answer.

Dr. Joe Losos: There are various kinds of meningitis. Some of it can be sporadic. Some of it can in fact be epidemic, where the same clone of the organism breaks out in areas of close personal contact, such as hockey rinks, parties, university parties and the like, where this thing can be transmitted.

We have tracked this organism across the country—and internationally, actually—using the electrophoretic types that this laboratory will be doing. We have recorded from the east coast to the west coast that the clone is continuing and becoming more resistant to antibiotics. The vigilance systems on meningitis are alive and well. We're very vigilant on that very aggressive organism.

The Chairman: It's good to hear that the vigilance is alive and well. It's unfortunate the bug is also alive and well too.

Mr. Potts, the Auditor General pointed out in his opening remarks, and I quote:

We have noted, in this and in previous audits, instances of non-compliance with the Treasury Board policies for managing major Crown projects, with no apparent consequences.

Why?

Mr. Colin Potts: That's a very good question, Mr. Chairman.

The Chairman: They are always good questions.

Voices: Oh, oh!

Mr. Colin Potts: That's an excellent question from you again, as I'm coming to expect from you, sir.

Voices: Oh, oh!

Mr. Colin Potts: I think you will see changes as the government also continues to implement a recent report on modernizing comptrollership and putting in place better financial systems, getting better financial information, and strengthening the accountability issues so that we can monitor these issues, but also start to put in place where necessary the procedures or sanctions, if you like, in order to correct the problems, Mr. Williams. It's an ongoing role.

The Treasury Board has a role to monitor system-wide, across government. Individual departments are accountable for their results.

The Chairman: It's more than “monitor”, Mr. Potts, and we've talked about this before.

Mr. Colin Potts: Yes, sir.

The Chairman: The Treasury Board has to hold people accountable—

Mr. Colin Potts: Agreed.

The Chairman: —otherwise rules are irrelevant.

To Mr. Nurse again, in your opening remarks you mentioned that as a result of the AG's observations, the definition of errors and omissions and a review of an incentive-based payment clauses have been added to the agenda.

I would have thought that the property services branch of public works would have been into this many years ago. Why do we have to wait for the Auditor General to bring this to your department's attention? We would have thought this would have been part of the expertise within the department for years.

Mr. Michael Nurse: I might ask my director general of architectural engineering services, because it's a very good question and a very important item. With the chairman's permission, I will ask him to very quickly give an expert response to this.

The Chairman: I must be asking a lot of good questions today.

So now we're going to hear from Mr. Bruce Lorimer, the director general of architectural and engineering services in the real property services branch of Public Works and Government Services Canada.

That's quite the title, Mr. Lorimer.

Let's hear the answer.

Mr. Bruce Lorimer (Director General, Architectural and Engineering Services, Real Property Services Branch, Department of Public Works and Government Services): Thank you, Mr. Chairman.

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We do in fact have a definition of errors and omissions within our branch, within our department. If I understand the Auditor General's comments correctly, it's in reference to disputes on the job site with the consultants over the definition of errors and omissions in the negotiation—

The Chairman: My question is, why are you only getting around to it now when I would have thought you would have had it maybe years ago?

Mr. Bruce Lorimer: We do have a definition of errors and omissions. It is causing conflict with the private sector, and the reference in Mr. Nurse's opening statement is with respect to a task force with the Association of Consulting Engineers of Canada and the Royal Architectural Institute of Canada. We are working with them to see if we can come up with a definition that will suit both ourselves and the private sector.

The Chairman: Thank you.

I was going to ask a question on the business plan, but that's been asked numerous times today already and we have the answer that you're going to provide it, but I'm just absolutely shocked at this point in time that you are only still working on a business plan. I'll just leave the comments there.

In paragraph 7.30 regarding Treasury Board guidelines, in which they're talking about monitoring the guidelines, the Auditor General has pointed out that:

We note, however, that the Treasury Board guidelines do not contain any provision for monitoring compliance with the guidelines.

Mr. Potts, perhaps this goes back to my previous question that you have rules and rules, but you don't have any follow-up, follow-up. Are we going to see some follow-up to ensure that your guidelines laid down by Treasury Board are adhered to?

Mr. Colin Potts: Mr. Chairman, I think we have to look at the follow-up in terms of the extent of non-compliance with this. Certainly when such cases do come to our attention, we will seek answers as to why the guidelines were not followed.

The Chairman: Thank you, Mr. Potts.

Turning to 7.40, which deals with excess capacity and the excess capacity you already had in the building that the Auditor General says was completed in October of 1987 at a cost of $ 12 million, 5,900 square metres:

We observed that the facility was being underused, and we were advised by Health Canada that the excess space is due to planned overcapacity for future growth that did not materialize....

Now you've gone ahead and built another building with excess capacity, which you are now alluding to as being there for potential future growth. How much overbuilding are we going to do?

Dr. Joe Losos: As I understood the planning of that first facility, Mr. Chairman, that was with the health protection branch the way it was 10 years ago. Since then, the Canadian Food Inspection Agency was announced in April 1997 and much of the capacity that the small laboratory in Winnipeg carried out has been transferred to the Food Inspection Agency. That laboratory, the Food Inspection Agency laboratory, the laboratory that worked on food safety, is very different from the level 3 and the level 4 facility. These are totally different laboratories as far as capacity is concerned and the type of programs within them.

The Chairman: Thank you.

Turning to 7.36, overspending, I see here that one of the projects, the animal virus laboratory slated to be built in Nepean, was cancelled because the estimated cost had increased from $ 52 million to about $ 93 million, but we'd spent $ 5.5 million before we got to the point of cancellation.

Where does the accountability lie as far as spending millions of dollars building a building? No, we don't want the building. Let's build excess capacity in Winnipeg. We don't want excess capacity in Nepean. The decision-making seems to be a little bit loose here. Perhaps we could get Mr. Minto to give us his opinion on this type of issue.

Mr. Shahid Minto: Mr. Chairman, what we've laid out for you in the report is a chronology of how things were happening at that time. The department is right; there has been program review. There have been reorganizations since that time, which have also affected the overcapacity issue, but there's no question that it was the policy at one time in the department to have overcapacity. Then the next building was again overcapacity and that's how it happened.

The Chairman: And they never went back to utilize the overcapacity they'd created in a previous building?

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Mr. Shahid Minto: I believe they've done a study now to look at that rationalization study, which would look at the total population of labs they have and their needs. Perhaps that will help.

The Chairman: Okay.

Mr. Nurse, how much overcapacity is there, where is it, and is it still a policy to build to overcapacity?

Mr. Michael Nurse: We're a service organization. We provide service to our client departments. There are different requirements for different clients. When they talk to us about overcapacity, they try to build in planning changes or eventualities. We'll meet on that and agree to that from a service point of view, and we'll design to meet those requirements. In other cases the requirements can be very precise and we can come to a very precise design issue.

In some cases there is every reasonableness to build in an allowance for change and inevitabilities, because that's the world we live in right now. What was happening five or 10 years ago is completely different now and will be completely different tomorrow. So we do allow for that and try to build in as much risk analysis as we can.

The Chairman: So it seems to be that Public Works builds to the client's specifications, the Treasury Board's guidelines are not being adhered to and the Treasury Board doesn't monitor their guidelines, and we do have the problem that it ends up in the taxpayer's pocket. I'm glad we have it here in front of the public accounts committee.

Mr. Mayfield, do you have a couple of last questions before we go?

Mr. Philip Mayfield: Yes, it's going to be pretty brief.

We've all been doing our job here today, I think, and I want to compliment you for being here.

Mr. Potts, earlier I was asking you about the culture of spending the budget and not just spending the dollars for value, and you mentioned that Treasury Board was indeed working on that. I also mentioned, I believe, executive leadership, single leadership, in this. I'm not asking for more verbally from you, but I'm wondering if some of the work that your department is doing on that could be shared with the committee in report form.

Mr. Colin Potts: We'd be happy to share it with you. I'd like perhaps to speak with you to see if we could be more specific as to what it is you're—

Mr. Philip Mayfield: The issue is how the Treasury Board is looking at this problem of spending the full budgeted amount and perhaps even more than that. Rather than having this culture within the departments that “It's there for us to spend, so we're going to spend it”, I'd like to know how you plan to deal with the various departments and Public Works so that you get money back if it's not needed and they don't necessarily go ahead and spend it because it's there. I'm not sure how clear that description is—

Mr. Colin Potts: Very quickly on that issue, the new policy that was put in place is putting a lot of emphasis, at the planning stage for these projects, on looking at the various options. What are the options a particular department might have for a building for a program when it's starting?

We are commencing a process of procurement reform where we're looking at the whole procurement function of government. Can we do it better; can we do it more efficiently? There's a particular process known as benefits-driven procurement. Again, the emphasis within that system is to look at the planning up front, the options, and ensure we're getting the best value for the dollar. That's a very active file we're working on.

The Chairman: Mr. Nurse, do you have a comment to make on the question Mr. Mayfield asked?

Mr. Michael Nurse: I'll be glad to. I think I made the allusion earlier too with the comments....

We do want to and we are working with the industry and with the committee I referred to, to try to build in some incentive-based proposals, where there is an incentive to work to a below design. So we are trying to do that and put that in place.

We have, I believe at least, created a very good working relationship with the associations. While we want to pursue that, it's important to work with the industry colleagues as well, because if we make a decision that's not consistent with the industry, we'll be facing complaints on that side. There is a balance we have to work through as well, and that's what we're trying to do, and I think we're doing it well in that area.

The Chairman: Last question, Mr. Mayfield.

Mr. Philip Mayfield: Just to finish this, the reason I'm asking for some documentation is so that our writers can perhaps include in the report something of what you're doing to rectify what I think is a problem not only in this project but perhaps extends very broadly. And related to that is the issue of a single executive lead on this.

Do you have anything you could share with our writers to include in your report on how you're doing? This is a problem we discussed when we were talking about the computer problem here. Each department is off on its own and there's no single executive lead in this. I'd like to know how Treasury Board is talking about that internally and whether they could share that with our committee.

• 1730

Mr. Colin Potts: I'd be happy to share some of that information that we have with the committee, Mr. Chairman. We'll work through your committee research staff.

The Chairman: Okay, thank you, Mr. Potts.

Just in closing, I would also emphasize the Auditor General's point that the taxpayers' money is to be spent wisely and well and that one should not build to budget, but build within budget.

I notice in paragraph 7.61 that the Treasury Board Secretariat, in its response, said that that they don't believe an incentive regime at the project level to encourage the underspending of budgets would be an effective way to achieve savings.

I'm not sure I agree with the Treasury Board. In fact, I don't agree with the Treasury Board, Mr. Potts, because Public Works and Government Services Canada did agree with the Auditor General's point.

Mr. Desautels, we'll turn to you for closing remarks.

Mr. Denis Desautels: Thank you, Mr. Chairman. I'll try to summarize this meeting and this whole issue as I've seen it today and in earlier discussions.

In terms of this particular project, effectively, the labs have been completed. They have been commissioned. We agree with other witnesses here today that this is a world-class facility. We said so in our chapter. I visited the place and was able to see that for myself. I should also say that even though we raised a number of issues in terms of the management of the project, in terms of the time element, this project was much better managed near the end than it was at the beginning.

But in terms of the project, again, what is left of importance to resolve for the taxpayer and the public purse is to optimize this world-class facility. I think there are significant challenges left, as we heard today, to achieve this optimization. At the same time, we also agree that there's a need to rationalize the rest of the lab facilities in the two departments concerned.

We would be quite happy to offer comments to Dr. Losos on the business plan, and he will be able to use those comments, if he wishes.

The main benefit of this hearing, as far as I'm concerned, is the possibility of improving the approval and management of future major capital projects. I think we looked at a number of those in the past, including this one, and we reported here on them. But we can see that there's still the scope or potential for improving the overall management of these projects. I think this is the main benefit of this hearing.

There's one important challenge that has to be faced—you and other members brought this out—and that is ensuring compliance with Treasury Board policies. We feel that the problems we raised have to do more with compliance with the policies than with the quality of the policies themselves. That's because even the policies by which this project was carried out were pretty good. I think there has been some more recent clarification of those. The earlier policies weren't that bad, but they weren't followed either.

So I think this is an issue for Treasury Board Secretariat to work out. It's a challenge that they have to deal with. They have to find a reasonable way to effectively track these projects once they've been approved.

The Chairman: Thank you, Mr. Desautels.

The next meeting will be next Tuesday, June 9. We'll be studying chapter 6 of the Auditor General's report, which deals with population aging and information for Parliament. I understand that one of the choices is not that we can't grow old, unfortunately. We will have the Office of the Auditor General and also, from the Department of Finance, the deputy minister, the director of fiscal policy, and the associate deputy minister.

The meeting is adjourned.