INST Committee Meeting

STANDING COMMITTEE ON INDUSTRY, SCIENCE AND TECHNOLOGY

COMITÉ PERMANENT DE L'INDUSTRIE, DES SCIENCES ET DE LA TECHNOLOGIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 3, 2001

• 0908

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I'm going to call the meeting to order.

Mr. Mauril Bélanger (Ottawa—Vanier, Lib.): May I bring up a point of order, please?

The Chair: Mr. Bélanger.

[Translation]

Mr. Mauril Bélanger: Madam Chair, what is the name of our committee?

[English]

The Chair: The name of our committee is the Standing Committee on Industry, Science and Technology.

[Translation]

Mr. Mauril Bélanger: Could we make sure that the notices of meeting that we receive reproduce the name of the committee accurately? On notices 12 and 13, the committee was referred to as the “Standing Committee on Industry” only. Thank you.

[English]

The Chair: Certainly, Mr. Bélanger, the clerk will take care of that. He's checking it out as we speak.

[Translation]

Mr. Mauril Bélanger: [Editor's note: inaudible]... a surprise, Mr. Clerk.

[English]

The Chair: Pursuant to Standing Order 108(2), our order of the day is consideration of the science and technology policies.

We're very pleased to have with us this morning, from the Canada Foundation for Innovation, Dr. David Strangway, president and chief executive officer; Carmen Charette, senior vice-president; and Manon Harvey, vice-president of corporate services.

Dr. Strangway has an opening statement. After that, we'll turn to questions.

Dr. Strangway.

Dr. David W. Strangway (President and Chief Executive Officer, Canada Foundation for Innovation): Thank you, Madam Chair and members of the committee.

You've already introduced my colleagues. In addition, Michel Lamoureux, vice-president for external affairs, is with us.

• 0910

We appreciate the opportunity to tell you about the impact we believe CFI is having on the innovation agenda and the enthusiasm we sense among researchers working in the universities, hospitals, and colleges across the country.

Much has transpired since we made our presentation to you last June. Since then, the Government of Canada has stated its objective to move Canada's research and development status from number fifteen among the OECD countries to one of the top five within ten years. You may remember that last year we made explicit reference to where Canada stood in the OECD statistics. It's interesting that the commitment has been made. In order to achieve this new level, government has committed to doubling research expenditures over this period.

The CFI invests major amounts of money in leading-edge research by putting in place the right working conditions to retain or attract top-quality researchers in Canada, training young Canadians for the knowledge economy, and supporting world-class expertise that will make Canadian institutes and Canada as a whole more competitive on the global scene. As you know, we explicitly support not-for-profit, non-government, research-performing institutions—not to mention, of course, the contribution all this research activity is making to the sustainable development, both social and economic, of many large and small communities across Canada. It is in this context that we operate.

Indeed, we are reminded every day that the bar is high and the expectations are great. This is cause for enthusiasm among our staff, our board members, and the volunteers who spend enormous numbers of hours reviewing proposals. It is also the reason we take our responsibility very seriously. We operate with a clear sense of purpose and a finite timeframe. Our programs have been designed to nurture the energy, creativity, and commitment that go into making innovation happen in this country.

Since my last appearance before this committee, the CFI has received two significant announcements of increases in its funding, one in October 2000 and one in March 2001, just a few short weeks ago, as well as an extension of its mandate to 2010.

In October $500 million was announced to provide a contribution to the operating costs of CFI-supported facilities and to expand international collaboration. These increases, the extension of our mandate, the creation of the Canada research chairs program, the doubling of the CIHR budget, increases to the other granting councils, as well as the establishment and additional funding of Genome Canada, represent an unprecedented level of support by the Government of Canada. It's sending a powerful signal to Canada's research institutions and shows the central role they are playing to ensure Canada's innovation capacity on the world scene.

As we conduct consultations with institutions and researchers across Canada, we find the mood is changing for the better. There is a great deal more optimism than there was just a few short years ago. It used to be research often had to be adjusted to the limits imposed by the equipment or inadequate facilities. Now researchers can dream again and carry out leading-edge research with modern tools in world-class environments. Bold new initiatives are now contemplated in a more entrepreneurial way, and strategic alliances can yield exciting results for industry, the provinces, and the many partners involved in funding the institutions.

I'm pleased to inform you that the CFI has financed 1,176 projects, for an investment of $873 million. Combined with the participation of all the other funding partners, this represents a critical mass of investment totalling nearly $2.2 billion. While these figures are impressive, it is important to note that the supported projects span the nation in large and small institutions, universities, hospitals, colleges, and in areas such as health, engineering, science, and the environment, including the social sciences and humanities.

To date, 95 institutions have received funds from the CFI. Among these are 28 smaller universities, 24 larger universities, 21 hospitals, and 22 colleges. These numbers show that our investments are reaching all regions of the country in a wide range of institutions. For instance, colleges are among those that benefit from the investments, since their research has now been recognized and supported.

• 0915

In addition, we note that the success rate of smaller institutions, at 55%, tends to be as high as, if not higher than, that of the larger institutions, at 50%. This success rate is determined by comparing the ratio of the number of projects funded over the number of projects submitted under our innovation funds.

Among the 1,176 projects funded to date, there are four that are national initiatives because they truly bring institutions, disciplines, and regions of Canada together. The Canadian light source at the University of Saskatchewan, for instance—the first of its kind in Canada—enables the analysis of materials in days or hours instead of years or months. This potential for speedy discoveries opens up research in a multitude of fields including pharmaceuticals, protein structures, and materials for industry. The project itself involves a wide range of partners, including the provinces of Saskatchewan, Ontario, and Alberta; 18 universities across the country; and many others, including government and the private sector.

There is also the Canada national site licensing project led by the University of Ottawa, whose membership is made up of 64 institutions across Canada. This project ensures that a wealth of scientific information can be acquired and shared by researchers in every part of the country. As a result, researchers in large and small institutions alike can have the same access to the knowledge they need to excel in their disciplines. Both of these examples are unprecedented, not only in their size and scope, but as illustrations of collaboration and collaborative endeavours that suggest a profound change in the research culture in Canada.

Through one of our programs, New Opportunities, we have provided 610 awards to 900 newly recruited researchers across Canada. We feel this is a major contribution to addressing a concern—which I know that all of you and all Canadians share—to retain, attract, or bring home our finest researchers in the same vein. We have already made research infrastructure awards to 40 holders of Canada research chairs since last December.

The institutions that we fund have to date successfully found matching partners for all projects, and, judging by the current letters of intent, this expectation continues at even accelerated levels. They are to be congratulated for this impressive effort. Their principal other partners have been the provinces, which provide amounts equal to the CFI contribution—that is, 40% of the cost of the infrastructure. The provinces deserve a great deal of recognition for their commitment and financial support. The remaining 20% has come from the private sector, the voluntary sector, or from the institutions themselves.

Our funding decisions are based on the assessments of hundreds of experts from Canada and around the world, who review the projects on merit. This is a highly competitive exercise. Its demand in dollar terms still outweighs supply by a ratio of about three to one. Clearly, many applications are turned down. Our criteria for selection include the qualifications of the research team, the vision, the innovative capacity, the sustainability of the project, and the benefits to Canada. There is wide recognition of the integrity of the decision-making processes adopted by the CFI as being fair and transparent, free from any form of interference or intervention. This independence is essential, and the government is to be commended for having created this unusual governance model.

Because the CFI is subject to somewhat different means of public accountability, we approach this aspect of our mandate very seriously. In fact, we even seek new, innovative ways to be accountable for the trust that the Government of Canada has placed in the CFI. For instance, we require annual progress reports for every project that we fund from each institution. These reports document the impact of the funding and explicitly lay out the benefits to Canada that are being achieved. The reports are posted on the website and form the basis for the annual review of the overall impact that the CFI funding is having in strengthening Canada's research excellence. They also provide a good look at the outcome of the research.

We also carry out third-party reviews of the impacts on the institutions and their researchers resulting from the CFI investment in support of their plans. These impacts include fostering multidisciplinary research and establishing new collaborations between colleges and universities as well as increasing productivity, with researchers adding new dimensions to their programs of research and conducting studies that were previously not possible. We have put in place tight control mechanisms to make sure that funds provided by the CFI to the research institutions are used in accordance with our guidelines. Financial reports are required from the institutions and audit procedures have been established to ensure adequate and efficient use of CFI funds.

• 0920

CFI has also innovated by requesting institutions to submit research plans and to establish their priorities. These are also available on the website.

Key areas of research are being developed by the institutions as a matter of priority and are reflected in their hiring plans as well. The investments made by the CFI are having the effect of increasingly reinforcing the institutions as Canada's principal research performers, a hallmark of those countries that also have a high level of GERD to GDP.

In recent commissioned reports, we've been able to identify some interesting indicators that reflect commercialization activities of universities in Canada. As the data show, you will see in the attached tables that Canadian research institutions are fully competitive with their American counterparts given the level of research support that they receive. It is also interesting to note that clusters are developing in many countries and in many parts of many countries. In all cases, universities and colleges are the single most important element in the establishment of a cluster.

With our funding increases and an expanded mandate, there are a number of CFI activities now underway or in various stages of development.

The New Opportunities program has been extended to 2005. Completion of the Canada research chairs program, slated for 2005, will include a further $250 million for research infrastructure to go with this from the CFI. The call for proposals for the innovation fund competition has been issued. Proposals are due at the end of May, but letters of intent have already been received, and decisions will be made by the beginning of 2002, when we expect to invest roughly $350 million more. Already the letters of intent show a substantial increase in demand to well over $1 billion, which was the level of our previous requests.

The call for letters of intent by July 3, 2001, has gone out for the two new international programs. These are the international joint ventures fund, whereby up to four projects for a total of $100 million will be invested in Canada to help establish collaborations with outstanding groups and facilities in other countries. For these, the CFI will fund up to 100% of the needed Canadian investment.

The international access fund is for projects in which a facility or program that is multinational in nature is needed for Canadian researchers to do transformative research. Here, too, the CFI will contribute up to 100% of Canadian participation.

Over the next few months, as we reexamine the ground rules for future proposal calls, we'll be asking institutions in developing their research plans and proposals to focus even more on the expected benefits to Canada. This includes plans for their commercialization activities. We will also be reporting publicly from a series of workshops that we have been conducting with input from a number of experts on selected areas of research such as nanotechnology, genomics, telecommunications, and others.

Madam Chair and members of the committee, the creation of the CFI was announced barely four short years ago in response to an urgent, longstanding need of Canada's research community to be properly equipped with instruments and facilities to be able to conduct world-class research. In the knowledge-based economies of this new century, it is hard to imagine how a country and its research institutions could do without this kind of support.

There is no doubt that, in doubling its financial commitment to research over the next 10 years, the Government of Canada is sending a powerful message about a long-term commitment to the thousands of people who are engaged in the innovation agenda of the nation and to those who aspire to become so engaged.

As I mentioned earlier, both the mood and the culture of the research community are rapidly changing in a way that I personally have never seen in my 40 years as a scientist and administrator.

As one notable commentator, Jeffrey Simpson, wrote in an article entitled “Here's some good news”,

My contacts in three provinces said the CFI program was being superbly managed. The procedure for selecting worthy projects was transparent and fair. The distribution of money seemed about right between big and small institutions and among the provinces. Praise like that doesn't come every day.

That's the way we like it at CFI. Wherever we can improve, we will.

Don't take it only from me, because many of the researchers will readily tell you about the impact the CFI is having on their professional lives, their research environment, and their communities. We should celebrate their dedication, hard work, and excellence in the pursuit of their ideals, because in the end, Madam Chair and members of the committee, it is not so much about CFI as it is about them and about the future of all Canadians.

Thank you.

• 0925

The Chair: Thank you very much, Dr. Strangway.

Now we are going to start with the questions. Mr. Rajotte.

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance): Thank you, Madam Chair.

Thank you, Dr. Strangway. Thanks very much for that presentation. I think you may have answered all my questions, but I have a few more I'd like to put before you. Just the hard ones are left.

You talked about the funding, and I believe it's on page 1 where you talk about the investment of $873 million.

Dr. David Strangway: Right.

Mr. James Rajotte: Then you talk about the 95 institutions that have been funded. You talk about 28 smaller universities, 24 larger universities, 21 hospitals. Would you know what percentage went to the smaller universities and what percentage to the larger universities?

Dr. David Strangway: We have shown in one of the tables the distribution by province. Of course that doesn't specifically answer your question, but roughly speaking it's gone in proportion to how they perform in the research grant competitions. So if you were to look at the research grant distributions of the Canadian Institutes of Health Research, the Natural Sciences and Engineering Research Council of Canada, and the Social Sciences and Humanities Research Council of Canada, there is a general proportionality. Of course we have totally different mechanisms, or similar mechanisms, but there's pretty much a proportionality there.

Mr. James Rajotte: So they have theirs broken down by institutions?

Dr. David Strangway: We have it broken down by institutions, and we have the list by institutions, but we haven't pulled out the number that says this much went to the smaller ones and this much went to the bigger ones.

Mr. James Rajotte: Okay. Could I just request maybe some time in the future...?

Dr. David Strangway: We can do that. We do have a complete table by institution, and of course we can add those up very quickly and give you a response. Obviously, more has gone to the bigger institutions than to the smaller institutions. They have a much wider range of activities, but I think it's important to realize that the proportionality is pretty similar to their competitiveness in all of the other granting competitions as well.

Mr. James Rajotte: My second question relates to the funding decisions, and I know you did go through it on page 2 of your presentation.

Dr. David Strangway: Right.

Mr. James Rajotte: I'm wondering if you just want to expand on how it is that this peer review board decides how much money goes to this institution or that institution, or whether an institution is worthy of getting funding.

Dr. David Strangway: The proposals come from the institutions, and that makes us somewhat different from the other granting councils, where the proposals tend to come from the researchers. In this case, the universities sort out where they want their priorities and where they see their activities going, and then the proposals come to us from the institutions. However, once the proposals are received, they go through the peer process. They go through a process which we call the MACs, which are the multi-disciplinary assessment committees, and these do not look at the distribution by institution. They look at the quality and the criteria that we've laid out to ensure that these fit those criteria. So there's not any preallocation with respect to particular institutions, and there's not an assessment that says this institution deserves more or less than any other institution. The proposals are measured on their own merit and how they fit the criteria.

Ms. Carmen Charette (Senior Vice-President, Canada Foundation for Innovation): In the upcoming innovation fund competition, we will have nine committees that will be reviewing proposals. On those committees, you have experts from all sectors, and about a third of the members are from outside Canada, also. Of the nine committees, we will have two committees that will recognize the differences in environments, in colleges on one committee and in smaller universities on another committee. Those differences that the committee will take into consideration are differences in critical mass, for instance—you won't have 200 researchers involved in a project in a smaller institution—and also the environment in terms of access to partners and those types of issues. So those fall mainly under the second criterion that the committee deals with. But in terms of quality standards, they will be looking to ensure that the standards are high.

• 0930

Mr. James Rajotte: I have just one more question.

I'm sure you've read the last report of the Auditor General, because he talks about the CFI and the special arrangement it has with the government. He talks about difficulty in judging the outcome we get from the money that's put in there. He says, for instance, there were no baselines against which to measure progress and determine whether the arrangement was working. You did touch on that in your statement, but I want to give you an opportunity to respond directly to his concerns.

Dr. David Strangway: I think his concerns don't only reflect that but also the nature of the structure and the arm's-length arrangement of the CFI. In that process, as you would be aware, we're not set up to be subject to review by the Auditor General himself.

However, we are ensuring that we go through the process of performance review and evaluation, and in the final analysis it's not only a question of the processes that CFI uses, but of the impact the institutions themselves have been able to achieve as a result of this.

I mentioned these progress reports. We're starting to document that activity. We will be bringing in a panel of experts, including people from across our country and from other countries, who will be reviewing all this and giving us assessment of the performance of the institutions. We may get good advice from them on how to do it even better. We are going through a process now in which we're assessing particularly the performance of the New Opportunities program, which is the one that came up first and got the first money out, and obviously there are significant results there.

What kinds of things are there in the New Opportunities program? Did it help the institutions to keep, retain, or attract, particularly, young scholars, to stay in or to return to Canada? Those are the kinds of things we're putting into our assessments, and that information will be made available to the minister, who in turn will be able to table that with Parliament.

Mr. James Rajotte: Is there a need or a problem with the Auditor General auditing the CFI?

Dr. David Strangway: The original structure that was set up by government, which was not our doing, was that we would be at arm's length and therefore not subject to that because we're a non-governmental organization. In principle, I believe there is a problem because the structure was set up so that we are at arm's length.

For example, less than half of the members, who are the owners of CFI, are appointed by government. So in principle, I think there is a problem, because it would have the effect of causing us to look like a governmental agency as opposed to a non-governmental agency. But within the funding agreement, there are explicit agreements that mean we must put forward information that is suitable for the minister to table.

Mr. James Rajotte: Thank you.

The Chair: Thank you very much, Mr. Rajotte.

Mr. Bélanger, please.

[Translation]

Mr. Mauril Bélanger: Thank you, Madam Chair.

Mr. Strangway, I would like to continue along the same lines, and ensure that the Canadian Foundation for Innovation is indeed audited annually.

Could you confirm this for us and for the benefit of those who are listening to this meeting or who will read the minutes at a later date, could you tell us what the purpose of your audit is? This will show people that a genuine audit takes place.

Ms. Manon Harvey (Vice-President, Corporate Services, Canadian Foundation for Innovation): Legislation stipulates that we must use arm's length, outside auditors. Our auditors are Ernst & Young. An external audit is conducted annually.

Mr. Mauril Bélanger: Are these audit reports available publicly?

Ms. Manon Harvey: Yes. Our audited financial statements are included in our annual report which we publish and submit to the Minister of Industry.

Mr. Mauril Bélanger: Thank you very much. I just wanted to clarify the situation.

[English]

The Chair: Ms. Charette wants to respond to the question.

[Translation]

Ms. Carmen Charette: In addition, the funding agreement stipulates that an assessment framework, approved by our board, must be set in place. Consequently, in addition to the financial aspect there is also an assessment of action taken by the Foundation and other bodies to fulfil their national objectives, which are set out when they're set up. We have a time frame for assessing our various activities.

Mr. Mauril Bélanger: What proportion of the members of your board come from academia compared to the business community?

• 0935

Ms. Manon Harvey: Our board is made up of 15 members, of which half come from academia and half come from the business community.

Mr. Mauril Bélanger: Who appoints those people from the business community?

Ms. Manon Harvey: Firstly, seven members of our board are appointed by the Governor in Council and the remaining eight are appointed by our members. In setting up our board, it is our duty to strike a fair balance between academia and the business community.

Mr. Mauril Bélanger: When you talk about your members, who are they exactly?

Ms. Manon Harvey: There are 15 members with a status similar to that of the shareholders of a company. When the Foundation was first set up, the government appointed six members, who...

Mr. Mauril Bélanger: Who are they?

Ms. Manon Harvey: Their names are available on our Web site. They are all well-known figures.

Mr. Mauril Bélanger: Are they individuals or are they corporate bodies?

Ms. Manon Harvey: They are all individuals.

Mr. Mauril Bélanger: All right. Thank you.

[English]

That brings me to my first question, Doctor. You're a university administrator by profession, by experience.

Dr. David Strangway: Yes, I used to be.

Mr. Mauril Bélanger: I have some misgivings with a statement you made. Quoting from your presentation, you said “We”—that is FCI, presumably— “are presently examining the possibility of using commercialization as a measure of output and an indicator of the impact that the new infrastructure research funding is having”. How do you reconcile that with being a former university administrator?

Dr. David Strangway: I happen to be a former university administrator who put a lot of focus on the questions of commercialization, not to override other needs but because there are opportunities that arise during the course of research in which there are significant chances to do that kind of activity.

So one of the points we were trying to make in here is that on a commercialization basis there is this perception that we do not do as well from that perspective as the American universities do. However, the simple fact is that for every dollar of research that's put in, there's as much of that activity in Canada as there is in the U.S. We are every bit as competitive.

Mr. Mauril Bélanger: Okay, so if we are every bit as competitive, to use your words, then why would we try to enhance that even more? At what point do we deviate from the notion of research for the sake of expanding or pushing back the frontiers of knowledge as opposed to research to increase the profitability of the corporate sector?

Dr. David Strangway: The commercialization activity is not so much to increase the profitability of the corporate sector as it is to see whether we can create small spinoff companies, to see whether they can in fact, in turn, do interesting things. So this is the creation of businesses more than the feeding of current businesses.

Mr. Mauril Bélanger: Don't get me wrong—

Dr. David Strangway: Furthermore, let me also point out that there is all kinds of research that does not directly have that impact, and I'm a great supporter of that.

You mentioned that I was a university administrator. I was also a university scientist at one time, and in my own particular science background my specialty was the study of the moon and planets, which didn't have a whole lot of commercial spinoff but had an enormously interesting impact on the world of science, creating an environment in which exciting things could happen. So I am a strong supporter of basic research.

Mr. Mauril Bélanger: I don't have a problem with commercialization in and of itself. I just want to make sure that organizations and institutions that have been created don't necessarily do everyone else's work. There may be a mechanism other than the FCI that's more appropriate.

Dr. David Strangway: Absolutely.

Mr. Mauril Bélanger: I would wish for some carefulness in not polluting the mandate of the FCI by too much commercialization.

Dr. David Strangway: All we want to be sure of is that if there are such opportunities, they are taken advantage of for Canada, as opposed to forcing them to create those opportunities.

Mr. Mauril Bélanger: I have one final question.

You said you used to a research scientist in the field of astronomy. This committee has taken some interest in the field of astronomy and astrophysics and has supported the long-range plan of the Canadian astrophysics and astronomy society. In regard to the $100 million for international cooperation to finance four projects, would the astronomy and astrophysics long-range plan be eligible for this funding?

• 0940

Dr. David Strangway: The answer is partly yes and partly no. In principle, yes. As I understand the long-range plan, of course, it was looking for much larger dollars than that. So we obviously would not be able to respond to the full package they're talking about.

Mr. Mauril Bélanger: But it's over ten years.

Dr. David Strangway: Yes.

Mr. Mauril Bélanger: So you'll have time.

Dr. David Strangway: We have time, but we don't have enough cash in that program to deal with it.

The second point that I think is really important to understand is that we are mandated explicitly to fund not-for-profit, non-government, research-performing agencies, so we could not provide support to the National Research Council to carry out that mandate. There would have to be a request that would come from a group of institutions—probably universities where the astronomy's performed—and they would have to be the project leaders and managers.

[Translation]

Mr. Mauril Bélanger: Thank you.

The Chair: Thank you, Mr. Bélanger.

Mr. Brien, you have the floor.

Mr. Pierre Brien (Témiscamingue, BQ): I just want to make one small comment.

Earlier, Mr. Bélanger raised a point that I cannot ignore. An audit undertaken by an auditor and an audit carried out by an accounting firm are not the same thing at all. I would like that to be read into the minutes, because these two situations are completely different.

One thing in particular worries me. I am particularly concerned about the fate of small-scale universities, and also about all the indirect costs arising from research grants from either yourselves, the granting councils or university chairs. This holds true for large universities and also for smaller-scale universities, which cannot always get assistance in any other way. They have to make difficult choices.

If I'm not mistaken you have begun to offset some indirect costs, haven't you?

[English]

Dr. David Strangway: The indirect cost question is of course a very fundamentally important question. If you look at the present situation in Canada, we are in a very interesting time. We have this mandate to reach number five in the OECD countries. We have a government that has made a decision that this is a very important area for the future of this country. Secondly, we have a situation in the institutions where there are massive turnovers taking place. The number of retirements taking place is enormous. We have the potential in this country to capitalize significantly on these two phenomena, including the turnover in universities.

What you're talking about is not just an issue of a small university versus a large university, because, whether it's a large or a small university, the indirect costs become a very serious issue.

If we're going to achieve the levels that are being talked about and deliver the results that are being looked for, it seems to me there are really four elements that have to be thought about.

The first element is the salaries of the researchers, and the Canada research chair program does a lot to address that question.

Second are the facilities and tools, and the CFI does a lot to address that question with the funding that's brought in by the institutions.

Third, the granting councils themselves do not fund the full direct costs of research. They fund only a part of the direct costs of research—they make a contribution toward them. That cannot keep on going, because the universities not only subsidize the indirect costs, they also subsidize the direct costs.

Finally, the institutions—large or small—are simply unable to deliver the level of capacity that is called for in this objective unless the indirect cost question is dealt with.

So what has to happen is that we have to begin addressing what I call the full costs of research, which contain those four elements I'm referring to. I think the issue you raise with respect to small universities is very real, but I also would submit that the question of indirect costs is pretty serious for large universities as well. In fact, the large universities take the position that says we can't take any more of these grants that we have to keep subsidizing because we don't have the resources to subsidize either the direct or the indirect costs any more.

So your point is very fundamental, and as you look ahead and think about the capacity of the Canadian institutions to rise to this new level, those four elements are all key to achieving that.

[Translation]

Mr. Pierre Brien: Thank you. Your reply was very clear.

I would like to explain my concerns regarding small-scale universities. In Quebec, the Université du Québec, which is a recent university, does not have all this private foundation baggage. That is my major concern regarding smaller universities. Of course, I represent a region where the university is on a small scale.

Indeed, I recognize that the same problem exists for major universities.

[English]

Dr. David Strangway: Yes.

[Translation]

Mr. Pierre Brien: But, in my opinion, they have many more options.

• 0945

In terms of the fourth point regarding indirect costs, what would be the most effective plan of attack? Where should funding for indirect costs come from? Should the granting councils consider costs as a whole, and therefore, indirect costs? Should the Foundation play a bigger role? Who should be responsible for funding indirect costs?

[English]

Dr. David Strangway: I'm not going to make a case for more funding for the Canada Foundation for Innovation, obviously, because we have an enormous responsibility with what's already been committed. But I do say that these issues need to be addressed and the full cost of research needs to be addressed. If people were to choose to do that through the CFI, that would be fine, but it could also be done through the granting councils. There are a variety of structures. I think if you're clever, you could think of different ways in which you could, for example, weight the indirect costs of large versus small, and so on. So I think there are a variety of ways of doing it.

My fundamental thesis is the full costs of research have to be covered because the institutions can no longer subsidize this level, and this new level of research activity we're getting into. That is an enormous level that makes it very tough for institutions to take on new research projects, small or large. I would suggest that you might be able to look at ways of weighting the indirect cost question.

[Translation]

Mr. Pierre Brien: Is this a figure which is recognized or accepted by everyone? Several universities have told us that, as a rule of thumb, indirect costs are running at 40%. Does this figure seem realistic to you?

[English]

Dr. David Strangway: Everything I know from my previous experience is that 40% is a pretty reasonable number. It's always a difficult question, because particular programs or projects may cost a little more or a little less, but 40% is pretty well established and pretty broadly based. There's a good basis for 40%.

[Translation]

Mr. Pierre Brien: I have one final question. In light of the extra money you were given in October and again recently, what commitments do you think you will be able to make on an annual basis over the next few years? How do you intend to spend your budget over the next few years?

[English]

Dr. David Strangway: The $750 million is explicitly for the period from 2005-2010, so we will not be looking to spend that money too quickly or too soon. What this basically means is that the CFI cashflow out to the institutions will be something like $300 million a year between now and 2010. So we will be continuing at about the same level, and by adding five years and $750 million, it more or less extends us at about the same level we're now functioning at.

[Translation]

Mr. Pierre Brien: Thank you.

[English]

The Chair: Thank you very much, Mr. Brien.

Mr. Lastewka, please.

Mr. Walt Lastewka (St. Catharines, Lib.): Thank you very much, Madam Chair.

Dr. Strangway, I'm probably going to repeat some of the questions that I've had in the past in our discussions, but I think they're valuable. I'll talk a little bit more on the small and large universities. You and I have talked about this in the past.

When proposals are being brought through for CFI funds, and there's a requirement for researchers in the proposals, is there a question concerning whether the researchers are in place, or are they to be put in place, and is that a criterion in judging whether the university gets a CFI fund?

Dr. David Strangway: The quality of the team is absolutely crucial to the proposal. In general, there has to be a sufficiently qualified team in place. There may be plans to expand it or to add additional people, and that of course could add weight to the review process, but fundamentally the team either has to be in place or identified, so they have been recruited or are going to arrive sometime in the near future. The quality of the team is absolutely crucial. If they add or are planning to add new positions to go with it, it's not a particular difficulty, it's a great pleasure. But unless there's a chance to look at the quality of those new researchers as well, then it doesn't really add to the weight of the proposal.

• 0950

Mr. Walt Lastewka: I have a concern based on past experience. When a person at a smaller university is attracted to a large university because of a CFI fund, I have great concern that we're causing more difficulty to the human resource problem in universities.

Dr. David Strangway: I understand your concern. For those committee members who don't know, Mr. Lastewka and I were at Brock University some years ago when they opened the centre for wine studies. That was a wonderful occasion. The principal investigator in that project left Brock shortly after it was finished and went to another large university out on the west coast.

I think these kinds of things are going to happen, and I think they're going to happen independently of CFI. In fact, CFI wasn't a contributor to the person moving because the CFI facility was at Brock.

I think we're going to see this happening, and it is not just because of the chairs and CFI. It's because of the point I was making earlier, which is that the turnover rate and the replacement of faculty members within the Canadian university system over the next ten years will be massive. Even if there's no growth, we're talking about hiring 20,000 people, and the 2,000 chairs are a wonderful contribution to this. But the universities still have to recruit 18,000 people in that process. Everybody is expecting that the demand for places in universities will rise, and you hear numbers such as 30,000. This is at a time when it's happening globally, not just in Canada.

I think your point is an important one. But there has always been movement between universities, and I think it will continue.

I don't think that the chairs are particularly exacerbating that. In fact, you could make an argument that says that because some of the smaller universities have a significant number of chairs, they actually have some tools to ensure that they stay there, around the niches and the focuses of research that small institutions have established, such as Brock with its wine centre.

Mr. Walt Lastewka: You mention a number of times in your report the benefits to Canadians. The reports from the universities on the use of CFI funds have to include a section on the benefits to Canadians. What is the process by which the CFI fund is informing Canadians of the research and the benefits to them? What procedure is there?

Dr. David Strangway: We probably have a lot more to do, but we're in the process of establishing an e-magazine online. It will contain lots of interesting stories as well as the results of this activity. We put lots of this information on the web. We participate in a lot of media activities and so on. We think we do a lot. We do believe we have to do a lot more, though, because we do believe it is important that people understand what it is we've been asked to do and what's being accomplished by the institutions.

Also, remember that we're dealing with 95 institutions, all of whom want to tell their communities what it is they're doing and accomplishing. So, in part, our role from that point of view is to facilitate those institutions and ensure they are getting the word out about what they have been able to do, because what we're doing is enabling them to do things they couldn't have done otherwise.

Mr. Walt Lastewka: You led right to my next question. I don't believe that the universities are doing a good enough job to inform ordinary Canadians. They're informing within their area, but I'm thinking more of the people who are not part of the university network. How do we communicate with those Canadians who are paying for the CFI fund? I don't see the universities doing that.

Dr. David Strangway: We think we have to do a lot more. We think we have to spend time with the institutions making sure they understand that this is part of their obligation. And it's not just an obligation with regard to CFI, obviously. It's an obligation with regard to a number of other activities as well. So over the next few months we will be spending a fair amount of time with these institutions reminding them of what their responsibility is given the confidence that has been placed in them through us, through the chairs, and through the various granting programs and trying to ensure that.

That doesn't mean we won't do things. We believe we need to do more, but we also believe that there's an enormous resource of people who have the capacity to get that word out. We want to make sure they're doing a better job.

Mr. Walt Lastewka: Do I have time for one more question?

The Chair: Sure.

• 0955

Mr. Walt Lastewka: My last question goes to the commercialization of research. I, too, have always supported that a portion of basic research that must be done should not be tampered with by the private sector or have a need for commercialization in that area. So I want to talk about the other part. I don't want to get into the discussion between you and Mr. Bélanger, because I think we all believe that a certain amount of research and development needs to be commercialized.

When we did our science and technology review and our productivity review in this committee, for which you provided input, we heard a number of times that what's lacking in many universities is an ability around the transferring and commercialization of research. I've visited a number of universities and felt that the University of Alberta in Edmonton was one of the best as far as commercializing and transferring research and providing feedback to the researchers. In your travels and discussions with universities, have you seen any improvement, or is that still a major problem for Canadian universities?

Dr. David Strangway: I think it would be naive to say it isn't still a problem, but I would say that the improvement has been pretty dramatic. You can look at the equity holdings a university may have in some of its spinoff companies, and there are significant returns coming back to the institutions. There's an increasing realization that it is in their interests not only from the point of view of public policy and ensuring the opportunities that might be there are not missed, but in fact there's a significant opportunity, through, as I say, holding equity, royalties, licensing, and so on, for significant funding to come back so that you can in fact fund the seed activities at the beginning of it. You see more and more reports of that kind coming out.

In this document I put some of that kind of information on a global basis in relation to Canada. We had a study done recently about commercialization from that particular perspective comparing Canada and the U.S., which is where this data have come from. It's remarkable that there's a lot of awareness and self-interest in the institutions, which after all isn't a bad thing, so I think it's improving sharply.

To pick up on Mr. Bélanger's point, it can't go too far, because you also have to ensure there is the really good basic research. In the end the really good stuff mostly does come out of the basic research where somebody sees an interesting opportunity. Many of these opportunities arise unexpectedly. They arise because somebody found something they never thought about, and then they begin to think about whether there is a further opportunity. So the situation is improving dramatically, and probably more can be done.

Mr. Walt Lastewka: Just to follow up on that, you mentioned you did a study comparing Canada and the U.S.

Dr. David Strangway: It was based on what's called the Association of University Technology Managers in North America. We do have that study, if anybody would like a copy of it. It really documents what has happened in the universities in the U.S. and Canada and gives a time series of this level of activity and a number of indicators. In the document I gave you, the indicators in table 2 and the information in table 3 came from that source.

The Chair: Thank you very much, Mr. Lastewka.

Ms. Desjarlais, please.

Mrs. Bev Desjarlais (Churchill, NDP): Actually, Mr. Bélanger and Mr. Lastewka really made my job a whole lot easier, because that was exactly where I was going to direct my question.

The foundation is set up to provide funding for not-for-profit, non-governmental institutions. You just commented on the need for commercialization and that there are benefits through the royalties and equity with spinoff companies. Who would be running the spinoff companies that are benefiting from the royalties?

• 1000

Dr. David Strangway: I'll answer the question, and then I'll ask Carmen to amplify on the benefits to Canada. For us, commercialization is only one of the benefits. There are many others that are fundamentally important to us.

On the question of spinoff companies, we at CFI have not tried to dictate to the universities what they should do. Each university sets its own framework and policies for patenting, licensing, and so on.

What seems to be happening, in a general way, is that universities may take ownership in spinoff companies. They may hold 5% or 10% of equity, so they may become owners or partial owners. But universities are not particularly good at managing highly entrepreneurial small companies, so they create boards of the sorts of individuals who have experience in managing these things. I'm distinguishing between owning and creating a small company and managing it—which I see as two different things.

I think some institutions do have the capacity to do some start-ups, at least. But in many cases they will do that through some kind of a partnership or arm's-length board, which has the capacity to actually make the business decisions needed for these small start-ups to be successful.

Mrs. Bev Desjarlais: So the universities don't run the companies as such—the board, or other parties, or whoever, are involved in running the companies?

Dr. David Strangway: It's pretty rare for the universities to run the companies themselves. As I say, they may have an ownership position in them. If it's a patenting, licensing, or royalty agreement, they may have the framework agreement to do it, but they would typically not be the ones to manage the companies. If they thought they had the capacity, maybe they would try, but my sense is that there are more successes when you bring in experts to run them.

Mrs. Bev Desjarlais: We don't have an Auditor General's report, but I recognize that an audit has been done. Would there be any audit to compare the royalties paid back to a not-for-profit university, and the funding to the university? What's the amount of return in that regard?

Dr. David Strangway: Well, that's a very tricky question for CFI. We provide the facilities and the equipment, and the universities provide the faculty and the graduate students who actually do most of the work. So I think it's pretty tricky for us to claim credit and somehow try to monitor and manage it all ourselves.

Fundamentally, the question is whether this process of collecting and looking at information from the universities helps us to learn whether we had a significant role in contributing. But we're only one of many players who make that possible.

Mrs. Bev Desjarlais: The Ernst & Young audit wouldn't indicate what's happening between the funding going into CFI for the not-for-profit university or non-governmental agency, in comparison to royalties that are—

Dr. David Strangway: We ask that question in our annual progress report; we are asking for that information. But I think we have to be sensitive to the fact that we're just one among all the sources that come together within the institutions. We are a very key source, and we want to know if we've enhanced opportunity and activity. But we have to be sensitive about not claiming credit for all of it.

Mrs. Bev Desjarlais: I just have one more question. You've emphasized that commercialization isn't the sole aspect, and I'm glad to hear that. But you say that when you re-examine the ground rules for future proposals, this includes how they plan to increase commercialization efforts. I'm a bit concerned that if there isn't a proposal to increase commercial efforts, this would be a deterrent to a project receiving funding. I want to clarify if that is the case.

Dr. David Strangway: We don't see it that way. The statement was very carefully positioned to say we're going to ask them how they plan to do it—as opposed to us telling them they have to do it.

Mrs. Bev Desjarlais: But if they don't have a commercial aspect in their proposal, would that prevent them getting funding?

Dr. David Strangway: I don't think so. There are many other benefits to Canada.

Perhaps I'll just ask Carmen if she will say a little bit about how we look at the benefits to Canada.

• 1005

Ms. Carmen Charette: We define benefits to Canada very broadly. They include socio-economic benefits, benefits to society—how they help to improve quality of life, health, the environment, and so on.

We haven't defined innovation in a very strict way. The OECD definition talks about new processes in services. We've defined innovation in a broad way: innovation in policy, for example. The knowledge acquired by using infrastructure can lead to benefits that are much broader than that.

Mrs. Bev Desjarlais: Okay.

Ms. Carmen Charette: The committees look at all those benefits. They don't say this one is commercialization, so we're going to prefer this one over this one. No, it's all taken into consideration.

[Translation]

I would like to raise one further point. We have talked about financial audits, but there are also audits like the ones conducted by the Auditor General or by individual departments themselves to assess performance in terms of the objectives that were set for a particular program.

[English]

The Chair: Thank you, Mrs. Desjarlais.

Ms. Jennings, please.

[Translation]

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you, Madam Chair. I would also like to thank you, Dr. Strangway, and your two vice-presidents.

Ms. Charette, I would like to come back to the issue of the audit.

I sit on the Public Accounts Committee. I am very concerned that the government has decided to set up a body and to invest a lot of money in it and that it will not be subject to the same governance as other departments or organizations. What I mean by that is that the Auditor General of Canada will have no authority over this new body.

I am well aware that you conduct an external audit. That fact was made very clear earlier on. I am also fully aware that you are currently setting up an assessment process. However, when you state that legislation stipulates that there are owners, I'm sorry, but in my opinion, no matter what is laid out in the law, the real owners are Canadians because the money belongs to them. Referring to owners or shareholders is in my opinion, complete fiction, because the real shareholders are taxpayers. That is my first point.

Secondly, the move by our government towards the setting up of this type of agency, which cannot be monitored by members of Parliament through the Auditor General and, for example, the Public Accounts Committee or any other standing committee for that matter, is worrying.

I'm aware that you function within the legislative framework under which the Foundation was set up. I also understand that there are provisions which stipulate that there are shareholders who are appointed by the government and that the other members are appointed by the board itself. I would imagine that you have quite a turnover. Consequently, you are complying with the law. However, I just wanted to put my concerns regarding this type of situation to you.

As a member of Parliament, I was elected, not only to represent those voters and people living in my riding, but also to represent the interests of all Canadians from sea to sea.

When I see an organization such as the Foundation, which to a certain extent, falls outside... It goes without saying, that we do have control, but given the structure of the enabling legislation, we only have indirect control. That concerns me. I know that the Auditor General, who finished his term of office last Friday, was very concerned about this issue. In several of his reports, he referred to the government's move towards the creation of bodies falling outside the monitoring ambit of members of Parliament.

• 1010

I don't want to ask you a specific question. All I want to do is to put my concerns to you. In light of the fact that you do indeed fall outside the limits of the monitoring process by members of Parliament, I appreciate that you have nevertheless developed an assessment process and that you are attempting to be as transparent as possible. I am somewhat reassured by that, because you are not obliged to do any of what you have done or are doing. In my capacity as a member of Parliament, I am somewhat reassured by your approach. Firstly, because it demonstrates transparency and accountability to the real shareholders and owners and secondly, because it shows that this issue is a concern and a priority for the Foundation.

That's all I want to say. Thank you.

[English]

The Chair: Thank you very much, Madame Jennings.

Before we move to the second round, I still have some questions on this. I want to clarify a couple of things.

In your comments to Mr. Lastewka, Dr. Strangway, you said—if I understood correctly—that the research team must be in place as one of the criteria. I see in your opening statement, “Our criteria for selection include the qualifications of the research team”. Is that now a fact? Because this is opposite to a conversation that you and I had in January, and opposite to the conversation that you had a year ago with the university that I represent.

If there are clear criteria, I'd really like to get a copy of them for the universities. When we met with Dr. Denis Gagnon, who was the acting president in February 1998, we clearly said that one of the things needed was clear criteria and a clear evaluation process.

Dr. David Strangway: Yes, sure.

The Chair: We still don't have it, as a committee. If you have it, I'd love to get a copy of it.

Ms. Carmen Charette: I'd be happy to provide those to you. They are very clearly laid out—the three criteria and the aspects under each criterion that are to be considered. Actually, the issue of recruitment is also addressed. We have funded—

The Chair: Just a second, I'm asking a very clear question here.

Ms. Carmen Charette: Yes.

The Chair: When you say “recruitment”, is it the criterion that the research team must be in place?

Ms. Carmen Charette: They have to demonstrate quality of researchers. That can include researchers in place and researchers to be recruited. We have funded projects where there was a clear plan for recruitment. That's what Dr. Strangway referred to—where there are clear plans. They intend to recruit so many people over so much time. Some of those projects are received very well.

There has to be a minimum number—an indication that there is the potential to build a critical mass. Some of that includes having some people in place who will help attract other individuals and build that team—depending on the type and scope of project they're proposing, of course.

The Chair: I don't dispute that there has to be some base in place, but I do hope that we're talking about innovation—

Ms. Carmen Charette: That's right, yes.

The Chair: —as we look at these proposals, and if we're funding only existing research teams, I see very little innovativeness about it. I see that the old is getting funded and the new is being left behind.

Ms. Carmen Charette: No, we're not proposing—

The Chair: I refer you back to the criteria that were established in 1997 in the budget. In the budget document it said that to receive funding, proposals should demonstrate through a business plan the planned partnership arrangements with other contributors, long-term sustainability through, for example, a complementary commitment to cover operating costs, and cost-effectiveness and meaningful performance review mechanisms and benchmarks. Now I hear that we're funding operating costs. What has happened to that very clear criterion from 1997 budget documents that we supported?

Ms. Carmen Charette: You're referring to the $400 million that was allocated to us for operating costs. Do you want—

The Chair: I'm referring to the budget documents of 1997 that establish criteria for setting up the CFI.

Ms. Carmen Charette: Yes.

The Chair: I find it difficult, as a member of Parliament, to explain how it operates and how it works and how it's funded, and to respond to concerns that are addressed to me as chair of the committee, when I see documents that clearly say that this is the criterion. Then I hear that projects that don't have operating costs or sustainability are funded. Then we come back to the government saying that they didn't have enough money for operating costs, so now we have to fund that.

It seems to me that there's not a lot of consistency, and it's not very clear. I'm trying to understand. I think research is vitally important to this country and I think innovation is vitally important to this country.

• 1015

How do I respond to concerns and how do I understand when I see clear criteria that aren't followed? Then I hear that we have to have a research team in place, but no, we can actually recruit. I'm trying to understand what the criteria are today.

Dr. David Strangway: On the operating costs, we had not had any capacity to fund operating costs until the decision that was announced in October. That criterion, with respect to operating costs, was explicitly only applying to projects that are considered after July 1 of this year.

So there's no retroactivity of those operating costs to prior projects that have already been approved. They all came in with the statement from the universities that they had been able to meet the criterion of operating costs.

When we look at the $400 million that was set aside in October for operating costs, that is of course a very large sum of money. But at that point we still had $1.2 billion of our share to be allocated to the institutions. So that $400 million will go to those new projects that come forward or to the institutions that bring forward those new projects that are now in the pipeline.

They will be seen as contributions to the operating costs because, again, this is one-time money. It is not recurring money. So this is an assist to the institutions with respect to operating costs. The institutions will still have to show that. There will have to be a change in the funding agreement in order to recognize that we can make a contribution towards the operating costs. But that $400 million will be in the sense of an allocation that goes in proportion to the grants that are approved, and that will then be dealt with by the institutions.

The Chair: Was this a request from the institutions or from CFI? How did this come up?

Dr. David Strangway: This was not a request from the CFI. The CFI reports—tells people what we do or informs them. But we haven't gone around asking for more, because we've been doing a lot with what we have.

In this case, what I believe happened is that the institutions—by and large—were conveying the messages that the operating costs of facilities were in fact becoming a limiting factor, and therefore that decision was made.

The Chair: I think it's quite important that we do have clear criteria and that people understand exactly how the process operates.

We do have a number of other questions from the committee members. Mr. Rajotte, did you have any more questions?

Mr. James Rajotte: Just a couple more, Madam Chair.

You have a breakdown in your presentation by province. That raises the question of the relationship with the provinces and the notion of provincial equity. My understanding is that they provide 40%. They match the 40% provided by the CFI. Provinces like Alberta, which are in a very good financial position, are obviously in a better position to provide these funds than other provinces. Does that contribute to some existing inequities in Canada, or is it immune to that?

Dr. David Strangway: We don't think it has led, at this point, to any provincial inequities, because we are getting proposals in. As I indicated earlier, there are already letters of intent for many more than were applied for last year or the year before, and they come from all parts of the country.

There may come a time when it will lead to that. I don't know. But so far, the institutions have been able to convince either their provincial governments directly or agencies like ACOA to ensure that they come in as partners.

So we have no indication of any kind that this has led to any inequities in distribution across the country. Will that sustain over the next decade? I don't know. But at the present time, it's obvious that every provincial government wants to reinforce this kind of activity. The universities want this to happen and that's why they submit the proposals to us. And at this point they have all received—in one form or another—the 40%.

• 1020

The 40% has come from provincial governments across the country. I think we will see the new funding that was provided to ACOA for the Atlantic Innovation Fund as a source. You may have seen in the Nova Scotia budget that was announced yesterday, I think, they have allocated a sum of money within the budget to ensure that they could be competitive. So far there is no indication of inequities of the kind you're referring to.

Mr. James Rajotte: My second question relates to to Ms. Jennings' comments about setting up these agencies that are arm's length from Parliament. What is the argument for setting up a CFI and then having them fund the institutions, versus the federal government simply transferring the money to the provinces, and the provinces transferring the money to an agency like the University of Alberta?

Voices: Oh, oh.

Dr. David Strangway: And you want me to answer that question?

Mr. Mauril Bélanger: Please do.

Dr. David Strangway: I think there are lots of interesting arguments. What you can be sure of is that this money going to the universities, the hospitals, and the colleges is going to go directly into the research operations. If research activity is important, this is certainly strengthening the country's capacity to carry out research.

Mr. James Rajotte: Are you going to answer the other question?

Voices: Oh, oh.

The Chair: Do you have any more questions?

Mr. James Rajotte: The last question I have for you, as a person who was at a university, is about a concern that gets raised with me by a lot of academics, and obviously more in the humanities, that universities are almost exclusively focusing their attention and resources on the commercialization of research. They are concerned that what universities were originally set up for—that is, as teaching facilities—is really becoming less and less a factor in universities.

I know it's not directly linked to your role in the CFI, but I'd like your perspective, as a former academic at a university, on whether we are spending too much of our focus and our attention on research at universities and less on teaching and the cultivation of talent and developing the researchers.

Dr. David Strangway: I must say, I don't think so. We have a situation in which the institutions across the country have been having a very difficult time.

I know I'm not supposed to talk about my former institution, but in my 12 years at one of the large universities in Canada I ended up taking a 30% hit with respect to the per-student support we had. That obviously leads to increased student-faculty ratios, and obviously leads to all kinds of things. It also leads to the fact that when you want to carry out the research and you get only a partial cost of the direct cost, and you get the indirect cost, there's less and less capacity to do it. I think this is one of the ways in which you can try to ensure that this mandate takes place. Furthermore, most of the universities will have the basic attitude that if you are an active researcher, it in fact does enhance your teaching.

The other side of that equation, and one of the reasons that universities and colleges and so on are interesting from the point of view of carrying out research, is in fact they have students who are involved in it. So while these things can be separated in some senses, the strength of what goes on in these institutions is because you crossed those lines.

You always have young people coming in. Whatever view you have, somebody walks in the door and says “Did you ever think about this?” Then you sit down and say “I never thought about it”...because they haven't established themselves yet in the discipline. I would submit that this is not taking away from the teaching mandate.

You also made reference to the humanities and social sciences. I certainly feel as strongly about those as I do about the sciences.

The CFI, of course, is an agency that provides facilities and equipment. Most of the facilities and equipment needs do come from the scientific engineering side and health side of the institutions. However, we have strongly encouraged people where they have capital needs to submit proposals. We have a significant number coming from the disciplines you're referring to.

We mentioned in our brief the library project. The library project is not about just science, technology, and medicine. The library project is about online materials of all kinds.

There is another project that is very much in the heart of the social sciences, which is one of the national projects. It is the establishment of research data centres across the country. StatsCan will put their data into these centres. Those centres will be on the campuses and those data centres will be used largely by the people in the social sciences for that purpose.

• 1025

So what we're seeing is people who realize increasingly that even in those disciplines you don't automatically think of in this way, there are in fact today, through all of the Internet connections, through the broadband pipeline, the optical pipeline across the country, all kinds of interesting things they can do that they didn't even think about doing before.

I would submit that at least we are open to those and we have funded a significant number of projects in the social sciences and some of the humanities as well.

Thank you.

The Chair: Thank you very much.

Ms. Carmen Charrette: Also, I think a number of the projects that could be defined as health, environment, engineering or natural sciences include researchers from social sciences and humanities who bring to the project that dimension of the research agenda they're pursuing.

That's also been very good in terms of encouraging a more multidisciplinary approach and looking at the whole issue, as opposed to parts of it.

The Chair: Thank you.

Mr. Cannis, please.

Mr. John Cannis (Scarborough Centre, Lib.): Thank you, Madam Chair.

Dr. Strangway, thank you for a very interesting presentation. I want to ask more about what my colleagues, Ms. Desjarlais and Mr. Lastewka, touched upon, and that is the private-public relationship.

Let me start by asking.... CFI funds research to the universities. I want to simplify for everybody, because there are a lot of questions out there and maybe we're not hitting the nail on the head.

Universities go out, and according to table 2 and table 3 you provided us with, there are licensing agreements, patent agreements, etc. I'll use the example of the Canadian Tourism Commission, where the government appropriates x amount of funds and the private sector comes in. There's a sustainability factor here. How are you going to be sustained if you're just putting this money out, as you said earlier, to the universities and to the researchers? The licensing unfolds through the universities. There's a revenue factor here. The revenue factor goes where?

Dr. David Strangway: The revenue, by the way the CFI was set up, does not come back to the CFI. The revenue goes to the institutions.

Of course, the question for the institutions to decide is how they want to structure this so they can take advantage of that revenue. But this is an issue we have not entered into explicitly in terms of trying to get revenue back into the CFI.

Mr. John Cannis: So there's a dead end here for CFI at some point in time, or unless the government—

Dr. David Strangway: When CFI was set up, we were set up with a five-year mandate. We were actually supposed to go out of business next year. It was meant to be a one shot....

Mr. John Cannis: You do agree with me that if we are going to stay competitive internationally, we must continue to support.

Let me be very blunt. Here we're looking at a province in our country that's talking about exporting one of our natural resources to provide free post-secondary education. Here's a mechanism that could be used to generate revenue to maybe provide free post-secondary education to our youth. If we're going to commercialize, if company A is obviously going into the profit mode at some point in time, surely there's an obligation, given it was taxpayers' moneys that initially started this research, to bring a commercial product to the market.

Do you agree?

Dr. David Strangway: I agree with that.

The question is in the way we're structured and the way the funding agreement was structured. We're structured in order to ensure that this benefit actually goes back to the institution itself, rather than back to CFI.

Mr. John Cannis: How is the institution then utilizing this revenue?

Dr. David Strangway: We don't determine how they utilize it. As I was saying earlier—

Mr. John Cannis: In your past experience.

Dr. David Strangway: —we're only one of the sources that goes into this. But the universities are beginning to realize that this is an interesting way to feed back into creating more research so that they can create more spinoff activities.

It is being used in the way you're describing. But it is being used at the institutional level rather than at the central level.

Mr. John Cannis: Thank you.

The Chair: Thank you very much, Mr. Cannis.

[Translation]

Mr. Brien, do you have any other questions?

[English]

Mr. Alcock, please.

Mr. Reg Alcock (Winnipeg South, Lib.): Good morning, Dr. Strangway.

Dr. David Strangway: Good morning, Reg. I haven't seen you for a long time.

Mr. Reg Alcock: No, you haven't. We were long overdue for a chat.

Dr. David Strangway: Yes. We haven't been at the Winnipeg airport together for a while.

Mr. Reg Alcock: No. It's probably been a good thing.

• 1030

Before I get into some of the broader questions I have, you were involved in the discussions concerning the creation of the chairs of excellence?

Dr. David Strangway: Yes.

Mr. Reg Alcock: You participated in the committee of five—

Dr. David Strangway: I don't remember the number, but there were maybe seven or eight, something like that.

Mr. Reg Alcock: And you support the decision that was taken there?

Dr. David Strangway: Yes.

Mr. Reg Alcock: I have to say one thing. As someone who has been a strong advocate of increased funding and part of a group of MPs here that have worked hard for the last eight years to drive the innovation agenda, I guess we all go through a loss of innocence at some time, and I did. I was, as you know, when the CFI was first created and you were named as chair, among the first to call you and meet with you, to want to talk with you about what an important initiative this was and how pleased I was with it. It was being driven by excellence—that was the criterion for it. I told you on more than one occasion, as I told the university I represent and anybody else who cared to listen, that I think challenging each other to be excellent is a good thing, not a bad thing. I think I've told you also on many occasions that I have no desire to see the selection process for projects changed from peer review to others.

However, this is a system that is not devoid of values. I've participated in peer review, as have you. The issues of merit and excellence are not objective. They represent the collective values of the people who are making those decisions.

When the decision on the chairs took place, what absolutely stunned me about it—it is the one decision that absolutely rocked my faith in those of you who are at the granting councils and those of you who participated in that decision—was that it went, as far as I'm concerned, against the interests of Canada. It was a decision that preselected the winners. It was a decision that did what we have argued against, those of us who have been fighting for change in the government's approach to the economy, a change for investments and innovation as a way of building the future for people, and against the selecting of winners.

You and your six colleagues made a decision that you would favour five universities over the rest. I think that's wrong. I think it flies in the face of all the arguments about merit and competition. Had you put those 2,000 chairs in a pool and said, there it is, universities, compete for it, it would have been different. To send a message to all the other universities in Canada, other than your alma mater and the alma maters of the people around that table, that they are somehow less worthy than the rest of the universities in this country I think was exactly the wrong decision. I think you violated a public trust when you made that decision.

I could stop here, or I could ask you some questions, if you like. Do you want to respond before I go on?

Dr. David Strangway: You and I have discussed this before, Reg, and I don't think we're ever going to have a full meeting of the minds on this question. The point to realize, I think, is that in some ways these were in proportion to the level of research activity, which in itself is based upon excellence. So it is perhaps a second generation, but it is still based upon the research excellence of those institutions.

I know you don't agree with me, Reg, but—

Mr. Reg Alcock: I fundamentally don't agree with you.

Dr. David Strangway: I know you don't.

Mr. Reg Alcock: I think that when you're spending public money, you have a responsibility to think about more than your own interests, frankly. I think the fact that the University of British Columbia got more grants than Manitoba, Saskatchewan, and the Atlantic provinces combined says something about your values.

Dr. David Strangway: Are you talking about CFI now or about the chairs?

Mr. Reg Alcock: I'm talking about CFI. I pulled down your staff off the website, I ran the calculations: UBC, one university, got $65,936,323. All the universities in Atlantic Canada, combined with all the universities in Manitoba and Saskatchewan, got a total of $59 million.

Dr. David Strangway: And you think I influenced that decision, Reg?

Mr. Reg Alcock: The decision was made by CFI.

Dr. David Strangway: The decision was made by CFI, by the peer process that was just described.

Mr. Reg Alcock: The decision was made by CFI based on a policy structure you supported, which said UBC, Alberta, Toronto, Montreal, and McGill are the only universities where you're going to find quality research in this country. Unlike the institutes for health research, which have discovered networks in these big pipes that you talk about and are prepared to link up researchers across the country, you and your colleagues made a decision that I think runs against the interests of this country.

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I think you guys have to get your heads around that, and you've got to think about what you're setting up. The comment I got last week from one of my friends in the Atlantic was “What they're doing is they're sending me a message that if I want my kids to get a quality university education, I've got to move out of my region”.

I think that's wrong. I think you have an additional responsibility when you're spending public money.

Mr. Walt Lastewka: I want to hear the answer.

Dr. David Strangway: We fully understand the point that you're making. But, again, we receive individual proposals from institutions, and we have these arm's-length processes; we have review panels; we have the multidisciplinary assessment committees that look across the board at these activities, and there is no predetermination as to where these particular grants go or end up. This is strictly a quality-based process, as we described earlier to the committee.

I don't believe that there is any intervention of the kind that you're describing at the management level. This is a process of response. If you look at individual institutions and how they have performed, for example, on an annual basis, you will see that some of the universities you're talking about in some years have done well and in other years have done very badly.

So this is the way it comes out, Reg. I don't believe there's any built-in bias that focuses towards any particular set of universities.

The Chair: Last question, please.

Mr. Reg Alcock: Well, last question. Let me leave you with this: I believe that you have a responsibility over and above the simple administration of grants for a few institutions. You have a responsibility to this country that provides you with the funds.

Now you need to think about the building of the research infrastructure across this country. For you to forget about that or just say.... This is no different from saying, well, let's give it to the rich and let them do it.

That's the force that's in place here. That's the force that you've put in place, and that's the force you're supporting. I think the role of government, or the role of the public, is to push back against that.

Dr. David Strangway: Yes.

Mr. Reg Alcock: Not to hurt those that are strong but to build up those that could use the help. I don't see you doing that. I don't see it in your policy statements, and I don't see it in your actions.

So when you tell me it's this objective process, it's nonsense that it's an objective process. There are as many values in that peer review process, and as much signalling that goes on there, as any place else. It's a human process. Unless you are actively working against it, unless you are actively taking your mandate seriously, all we're going to do is hit a date. We're just going to exacerbate a curve that's already there.

You made a comment that you don't have any research on this—“we have no indication that there's any kind of inequality”. I'll send you some.

Dr. David Strangway: Okay. Thank you.

The Chair: Thank you very much, Mr. Alcock.

Dr. Strangway, for the record, I'd like to get some clarification on how you see the role of members of Parliament in the CFI.

Dr. David Strangway: We're obviously here, and every time we're asked we participate. We're always open to meeting with members of Parliament. You will understand that the structure that was put together with the legislation and the funding agreement is one in which the processes are arm's length from government, in all of these processes.

So informing and keeping you posted, but our mandate is not to go further than that, Madam Chair.

The Chair: I understand that you meet with us, but from my perspective as a member of Parliament and from others around this table, we obviously have direct contact with universities.

Dr. David Strangway: Sure.

The Chair: We also have direct contact with industry. One of the things I would like to see is to see industry more involved. But there seems to be this fear in the minds of the researchers that if they approach their members of Parliament that's a negative thing. I'm asking you, is that a negative thing?

Dr. David Strangway: I don't think it's a negative thing at all.

The Chair: So you welcome that?

Dr. David Strangway: We welcome it, absolutely. I don't think it has an impact on the decision, but I think we welcome people being fully informed. I think that's exactly what it is. The decision processes are what we've just been describing.

I absolutely see no reason why they shouldn't approach their members of Parliament. I see no reason why the institutions themselves, at the senior level, shouldn't approach their members of Parliament. But the final decision process that was set up was one that was at arm's length.

The Chair: I understand that, but you have to understand, Dr. Strangway, that we're talking about taxpayers' money.

Dr. David Strangway: That's right.

The Chair: And we're talking about the Minister of Industry still being responsible for how that taxpayers' money is spent.

Dr. David Strangway: I understand that.

The Chair: It still comes under his estimates. So with all due respect, I do think that members of Parliament should have some opportunity to not only have a say but to look at the criteria.

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When we met with Dr. Gagnon three years ago, we asked clearly for the criteria in the evaluation process, and I was hoping that's what would come forward today. I keep asking, and I keep requesting, and I keep saying, this is what the committee needs to understand in order to see if we're going in the right direction.

As we look at the whole science sector, we want to know that Canada is spending its money wisely. We think it's important to spend money, we think it's important to invest, but we also think it's important to be innovative. And innovative doesn't mean just the high-tech sector. If you go back and read the budget documents of 1997, the government clearly identifies that Canada's traditional industries—manufacturing, agriculture, forestry, mining, and oil and gas—also have a tremendous stake in new technology. They have been among the country's most innovative and productive areas.

Those are things we look at as a committee. That's why it's important for universities to know, and for colleges and hospitals to know, that they have the ability to come and meet with their members of Parliament if they don't think the process is working right.

You do support that, then.

Dr. David Strangway: Yes, absolutely. We will send you the criteria. They're very clearly laid out.

The Chair: A meeting took place last week with the deans of engineering, and the impression was left that they're not to come whining to their MPs.

Mr. Reg Alcock: Wasn't it “backwoods” MPs?

The Chair: Yes. The reference was to backwoods MPs.

I would hope, Dr. Strangway, you could assure us that this in fact is not the case.

Dr. David Strangway: If anybody took that out of anything I said to the deans of engineering, that's a pure perversion of what I said. What I said to them is not a question of not going whining to MPs. What I said to them is that they have to tell the world and everybody else what it is they're able to accomplish.

My explicit statement to them was very straightforward. I said “Ask not what CFI can do for you, ask what you are doing for the country with the assistance of CFI.” That was the explicit message I gave to them. I said “You have been given a mandate. You've been given a responsibility. You've been given the support through all of these different programs. You have to deliver results for the people of Canada.” That was the message I gave the deans. I don't know how they can take out of it what was reported to you.

The Chair: I think there's been concern—and I've raised this with you several times—among the university sector that if they talk to their members of Parliament their applications will not be received in a positive manner in the future.

I totally disagree with that, and I believe you totally disagree with that as well.

Dr. David Strangway: Yes. I have no difficulty whatsoever. The fundamental point is that the decisions are made in the mechanisms we've just described. That's what's in the legislation and that's what's in the funding agreement. That's the only point, as far as I'm concerned.

Talking with a member of Parliament is no issue. Why would it be a problem?

The Chair: Well, it shouldn't be, and that's why I'm hoping we can try to facilitate the investment of research and actually go to industry and explain to them why they should be more involved in the process.

Dr. David Strangway: Sure.

The Chair: It seems to me, as you and I have discussed in the past, that one of the things that should be on the website is what industries are participating, and where funding is coming from.

Dr. David Strangway: Yes. We haven't delivered that yet, but we did talk about it.

The Chair: I know, I checked yesterday.

Dr. David Strangway: I know you check every day.

The Chair: I'd like to see it on there. I think Canadians should know what industries and what companies are funding research in Canada and contributing to our universities, our colleges, and our hospitals.

Dr. David Strangway: Sure.

The Chair: I look forward to meeting with you again, and I look forward to receiving the criteria.

Dr. David Strangway: We'll send them to you.

The Chair: Hopefully we can move Canada ahead together.

Ms. Desjarlais has a last question.

Mrs. Bev Desjarlais: I said I didn't have any questions, but one came up after Reg's comment. I just want some clarification.

There was a question about the provinces not being able to meet the matching requirements, and you had made a comment that this may have changed a bit with their being able to access ACOA funds now, with the money in ACOA for innovation. Was that a suggestion that instead of the provinces now putting in their portion, money will come from ACOA, or agencies like ACOA, instead of the provincial match?

Dr. David Strangway: Let's be clear that the issue for CFI does not require provincial match. It requires they get 60% from somewhere. So far, all of the provinces have been doing it, although in the Atlantic they have been using the ACOA funds for the matching purposes.

Mrs. Bev Desjarlais: In essence, it's federal funding through ACOA, a double whammy in the Atlantic. Is that happening anywhere else?

Dr. David Strangway: I don't think so. In some cases there may be Office of Western Diversification money, but I don't know the answer to that question.

The point I was making referred to the announcement a few months ago about $300 million going into the Atlantic Innovation Fund. A statement was made that this was so that those institutions would be fully competitive for the matching funds to come into—

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Mrs. Bev Desjarlais: I guess until your comments today I hadn't realized that's what was happening. It's a double whammy.

Dr. David Strangway: I should add that government agencies, other than the granting agencies, are eligible to be partners. So when you come to an area like astronomy, for example, the NRC could decide to put some of its support behind astronomy to an agency that was operating outside of government. It could come in as a partner.

So government agencies, but not the granting councils, are eligible funding partners.

Mrs. Bev Desjarlais: Thank you.

The Chair: Thank you, Ms. Desjarlais.

Again, thank you very much, Dr. Strangway. We look forward to meeting this challenge together with you as we try to move to number five.

Dr. David Strangway: We'll keep talking.

The Chair: Thank you.