November 16, 1998

PUBLIC ACCOUNTS COMMITTEE

The Committee met at 9:30 a.m. in Room 5038.

CHAIR (J. Byrne): Order, please!

I would like to call the hearing to order. My name

is Jack Byrne, for those of you who do not know me. I am Chairman of the Public

Accounts Committee.

First of all, I thank everyone for coming out this

morning. What we will do first is just go around the table and have everyone

introduce themselves so we can be familiar with each other. To my right of

course is Tom Lush, the Vice-Chair of the Committee.

MS MURPHY: Elizabeth Murphy, Clerk of the

Committee.

MR. M. NOSEWORTHY: Mark Noseworthy, Executive

Officer of the Public Accounts Committee.

MR. J. NOSEWORTHY: John Noseworthy, Deputy

Auditor General.

MS MARSHALL: Elizabeth Marshall, Auditor

General.

MR. DROVER: Bill Drover, Audit Manager

(inaudible).

MS WAKEHAM: Barbara Wakeham, Deputy Minister of

Works, Services and Transportation.

MR. CAHILL: Larry Cahill, Director of GPA.

MR. DAY: Joe Day, Manager of Purchase, Policy &

Compliance, Government Purchasing Agency.

MR. SMITH: Gerald Smith, MHA for Port au Port,

and a member of the Public Accounts Committee.

MS THISTLE: Anna Thistle, MHA for Grand

Falls-Buchans.

CHAIR: Thank you.

There are seven members on the Public Accounts

Committee. There are four here now - we need four for a quorum -, but Bob French

is on his way, I understand. We tried to have these meetings scheduled earlier

in the year and we had to reschedule twice. So we decided now we are going to go

ahead with them this week. We have four lined up, the first hearings being the

Government Purchasing Agency.

I don't perceive this to be a long hearing, to be

honest with you. We have a number of questions to be asked. Some of them were

generated from the Auditor General's comments in her report last year, 1997. So

what we can do maybe, if the Deputy Minister, Mr. Cahill or anybody (inaudible)

the witnesses - well, first we should have the swearing in of the witnesses. To

our left we have Mr. Noseworthy and Ms Marshall who have already been sworn

before the committee, so they do not need to be sworn again.

Swearing of Witnesses

William Drover

Barbara Wakeham

Larry Cahill

Joe Day

CHAIR: Thank you. Before we get into the

questioning and the concerns of the Committee, I will just highlight some of the

points that may be addressed by some of the Committee members. They would be the

situation with respect to the sole sourcing, the Public Tender Act, reporting to

the House of Assembly with respect to the public tender exemptions and late

reporting. I have a question with respect to human resources and what have you.

Maybe what we can do is this. If, Ms Wakeham, you want

to give a few opening remarks, you can; if not, so be it. Or Mr. Cahill or

someone from witnesses can.

MS WAKEHAM: I do not know if there is anything

that I can add except what is already in the Public Tender Act itself, and the

fact that we have made some amendments last year to the Public Tender Act and

the regulations themselves. With respect to those amendments, they are now

completed and are before Cabinet for approval so that they can be dealt with in

the next couple of weeks. That is basically it.

CHAIR: So you are under the old regulations.

Thank you. Mr. Lush, do you have any questions?

MR. LUSH: Not at the moment. I will just wait.

CHAIR: Do any Committee members have questions

they would like to ask? Ms. Thistle?

MS THISTLE: Yes, I would like to refer to page 2,

and that would be figure 2. In that outline there is $319,296 of purchased goods

that were purchased without going to public tender. I am wondering Ms Wakeham if

you could provide the Committee with an example of what type of purchases that

would fall into that category.

MS WAKEHAM: Essentially any purchases under the

old regulations under the Public Tender Act of less than $7,500 would go under

that category. That is anything from purchasing paper clips to whatever that is

required on a normal daily basis for operation: purchases where there was an

emergency that they had to respond to within twenty-four hours to be able to

deal with a particular problem; purchases where there was only one person, one

supplier, in the area that would have a capability of supplying those particular

goods. Those are the things that are normally registered as well within the

exceptions document.

MS THISTLE: When -

MS WAKEHAM: As to the specifics of that, I would

not be able to tell you if it was x or y or z, but we could go back and provide

copies of the - I assume we have copies of all the tenders. Not all the tenders,

of all of the requisitions that went out.

MS THISTLE: I know that the majority too, in some

of these examples, are textbooks for the schools, most of them that are

purchased on the mainland. Is that correct?

MS WAKEHAM: Yes.

MS THISTLE: In that particular example you would

not have any other person to go by or call for tenders, would you?

MS WAKEHAM: There would not be any other sources

to find. If a textbook fits within a particular curriculum is the one that has

been authorized by the Department of Education, that is the one that we have to

purchase for school kids.

MS THISTLE: Can you cite a particular type of

emergencies where you would have to purchase goods within a twenty-four hour

notice?

MS WAKEHAM: One would be firefighting, if we did

not have sufficient foam we would pay to deal with a particular problem, and

another would be difficulty with a flood, if a pipe burst and we had to get a

culvert in and deal with the issue in a very short period of time. Mostly they

are things that happen of a natural disaster type where you have to have an

immediate response. If the goods and stuff are not there then you have to

purchase them immediately to deal with it. We would have lights going out on a

runway that have to be replaced immediately, and those kinds of things.

MS THISTLE: I would also like to ask you this.

When you look at figure 3 on page 4, there were several examples of tender

exceptions that were not reported to the Minister of Works, Services and

Transportation within five days of awarding the contract.

MS WAKEHAM: Yes.

MS THISTLE: In fact, there was one incident when

an item was not reported for two years. What kind of circumstances would cause

this, and what can you do to avoid this in the future?

MS WAKEHAM: I think you are referring to the $7.2

million that was for the purchase of the water bombers -

MS THISTLE: That is correct.

MS WAKEHAM: - which was before my time. I

understand the reason that the report was not done was basically because they

did not realize they had to do a report, and that was an oversight on the part

of the department at that time. When they were notified that that was an

exception they had to file for, then the filing was done.

MS THISTLE: Are there any safeguards in place now

that would prevent that type of incident from happening again?

MS WAKEHAM: What we do on a regular basis is we

provide seminars to the MASH group which is the municipalities, the school

boards and the hospitals that fall within sort of the main portion of the

government funded bodies. We do not have a lot of compliance officers so we have

to do periodic checks with that group to make sure they are compiling with the

regulation. We do try and make sure they are fully aware of any changes within

the regulation.

One of the problems I think that we have had in the

past is that the five-day reporting period is too short a reporting time frame

for most municipalities, hospital boards and school boards, just because of the

volume of activity that is going on. One of the things that we are recommending

as a change in the regulations under the Public Tender Act is that they be given

a thirty-day time frame in which to be able to comply. That will give a better

chance for us and a better chance for the government funded bodies themselves to

be able to comply.

CHAIR: Could I interject here on the same train of

thought? In that same figure, figure 3, the Department of Works, Services and

Transportation, four blocks down, it says: "Relocate telephone lines for

highway." The figure is $145,244. It took two years for them to report that

themselves. That was not an outside body as such. Again, the Western Memorial

Hospital took two years. I was going to bring up the point on page 2, under

Scope and Objective, where the Auditor General says: "We carried out a review at

the Government Purchasing Agency to determine whether all public tendering

exceptions were tabled in the House of Assembly as required under the Public

Tender Act."

Apparently, there are quite a few that are not tabled.

Very often when they are - we do get the list in the House of Assembly, and it

is not complete. Again, the thirty days, what you suggested there, it does not

seem to fall within the range that people are reporting anyway. Is there

something concrete that can be done to get these people or these groups to

report?

MS WAKEHAM: Up to this point in time, I mean, it

is five days.

CHAIR: Yes, I know that.

MS WAKEHAM: Because the regulations have not been

put in. The five days seem to be a problem. With the exception of putting some

additional compliance officers in and additional resources that might be needed

to be able - because we have a very large group. We are talking about, I think,

568 different bodies out there. The difficulty we have with that is that we have

people who are doing purchasing and people who, in terms of departmental stuff,

internal, are fairly good in terms of picking up all of the exceptions. We are

relying on the government funded bodies to come forward and give us those

exceptions.

I think some of the problem will be relieved with the

thirty days. It gives us a much better chance to go back and check with the

people to make sure they are complying within the time frame. We can probably

put on some more seminars, although we are doing those on a regular basis right

now. The difficulty, I think, is the number of government funded bodies, whether

or not we can start an educational program to try and gear them up a lot better

to what their requirements are.

Sometimes they miss it. Sometimes if they are

acquiring something and there is a sole sourcer, there is a monopoly for that

particular thing, then it is not considered to be an exemption. This is what

happened, I think, with respect to your last one, on the two sole sources,

number two and three. My understanding was that they were not viewed as two

acquisitions, in that they were provided by a monopoly. They thought: This is a

sole source, so we do not need to report it. It came in after the fact.

This is some of the difficulty in the

interpretation

and the nuances in terms of what is an exception and what is not an exception.

CHAIR: Ms Marshall.

MS MARSHALL: Could I just add one point? The

biggest problem we are finding when we auditing these agencies is that they are

not publicly tendering and they are not reporting so they never, ever get in the

reports. The ones that were in that

summary, they get into the reports, albeit

late. But in the audits of the agencies it is almost pervasive through the

organizations that they are not complying with the Public Tender Act. They are

not tendering in the first place, and in the second place they are not reporting

it either. It is quite a significant problem out there in the agencies with

regard to non-compliance with the Public Tender Act.

CHAIR: I think, as we speak, for recording

purposes, we probably have to identify ourselves.

Further to that topic again, there is one point that I

want to make. On page 5 there is one of the responses from the department: "The

Government Purchasing Agency (GPA) does not have the human resources available

to perform compliance reviews of all government funded bodies subject to the

Public Tender Act, who are not tendering through GPA."

I just made a note here on this. Has the staff, or the

compliance office, been cut over the past few years? Have you less people than,

say, you had four or five years ago? Is that a part of the problem?

MR. CAHILL: We did not have a staff unit for

compliance. Compliance became an issue, like you say, through the results of

audits done by the Auditor General's department. Basically we saw a need some

time ago that we needed that. What we tried to do was build a staff out of what

we had. What we did is we classified a few people into the positions of

compliance officers and we really stretched our own staff to the point where

this is as far as we can get, as far as staffing for that purpose only. What we

do have now is basically the Manager of Policy and Compliance here, and we do

have two other staff members that take care of the compliance issue.

Like I say, with GPA we have a large scope because we

delegate authority to fifteen departments. Basically what we do is we are

responsible to make sure that they comply with the legislation. They must take

care of the internal workings as well as they have to do an audit on GPA itself.

As far as outside goes, we go as requested. Say there

is a complaint that comes into the minister. We will go and investigate the

complaint as it comes through. That the best we can do with the staff we have

available at this point in time.

CHAIR: Ms Thistle, did you want to continue on?

MS THISTLE: As the Deputy Minister stated, with

568 agencies reporting to your department, I am just wondering what kind of

mechanism can you put in place to have a turnaround, where you actually brought

it to the attention of your department within five days. It is almost unreal to

expect that but thirty days seems reasonable.

MS WAKEHAM: I am hoping that it will make a

difference. There certainly is a difficulty right now. I do not think anybody is

trying to say that we have sufficient staff to be able to deal with all 568 or

be able to deal with them in a relatively short time frame in terms of doing

exceptions. We are aware that there is a problem. We are trying the best that we

can in terms of dealing with that.

If it is possible, we will try and beef up the number

of educational seminars that we have in terms of the regulations and in terms of

their compliance. Outside of that, unless there was a fairly significant

increase in the number of compliance staff that we have, then I do not think it

will have sort of a 100 per cent turnaround in terms of the significance of the

problem right now.

CHAIR: Is there any type of a penalty that can be

put in place for people not reporting?

MS WAKEHAM: We do not have one at the moment.

MR. CAHILL: It was thought about and then, like I

say, sort of more or less put aside again, right. I do not know the reason why

it was done, like I say, why it was put aside. There were thoughts on the

legislation that we put a penalty in place, but from what I understand we just,

more or less, changed the regulation to say no, that is not necessary to put

that (inaudible). It is not necessary to put that in.

MS WAKEHAM: Thank you.

CHAIR: Mr. Smith?

MR. SMITH: No questions, Mr. Chairman.

CHAIR: Mr. Lush?

MR. LUSH: No.

CHAIR: I have a question. With respect to page 2,

figure 2, the Auditor General notes that in 1996-1997 the Exception Reports

tabled show that 85 per cent of the $36,654,886, $31,349,553 was for sole source

supplier. That seems to be pretty high for sole sourcing. It was mentioned here

earlier that a lot of this was for purchase of books and what have you, sole

sourcing and that. Is there anything that can be done to get around that? That

is a lot of money. It is page 2, figure 2.

MR. CAHILL: From the GPA's perspective, like I

say, most of our sole source acquisition, as we know, is for (inaudible)

purchases, (inaudible) publishers themselves.

CHAIR: Yes.

MR. CAHILL: From the other government funded

bodies we have no way of monitoring or trying to determine if it is sole source

acquisition without adequate staff resources to do it. It is more or less

(inaudible) check and see if it is in fact a sole source.

CHAIR: What you are saying to me is what seems to

be the big problem here in (inaudible) and runs through all of this is staffing,

not having the proper staff.

MR. CAHILL: To do a good compliance and ensure

that, in fact, something is urgent, something is sole source, yes, it comes down

to staffing.

CHAIR: Has there been any analysis done of

comparisons with respect to the number of staff that will be required to handle,

say, a fair portion of this compared to what government may be losing, or

different agencies may be losing in sole sourcing?

MR. CAHILL: There is no analysis done.

CHAIR: There is nothing done to compare that.

Welcome, Mr. French.

MR. FRENCH: Sorry I am late, sir, but I had no

other choice.

MS WAKEHAM: Mr. Chairman, can I ask a question?

CHAIR: Yes.

MS WAKEHAM: This is to Ms Marshall. In the

auditing that has been done of the government funded bodies, do you have a

listing where there is sort of a higher degree of non-compliance versus lower

degree, and the nature of the type of non-compliance there is?

MS MARSHALL: Generally speaking, there is more

non-compliance out in the agencies of the Crown. If it is okay with you, Mr.

Chairman, I can distribute this.

CHAIR: Sure.

MS MARSHALL: These are some examples from since I

was appointed Auditor General. We audit for compliance with the Public Tender

Act on an ongoing basis. This contains exceptions from different agencies of the

Crown. As I indicated earlier, almost all agencies of the Crown do not comply

with the Public Tender Act. They do not tender in the first instance, and even

when they do not tender they do not report to the minister. Since they do not

report it to the minister it does not get into the House of Assembly so the

ministers are not aware, and the Members of the House of Assembly are not aware,

of the exceptions to the Public Tender Act.

The reports that get tabled in the House of Assembly

are not accurate, the ones that are prepared by Mr. Cahill (inaudible).

MR. CAHILL: From what I understand, it goes beyond

just exceptions. We are talking about acquisitions that are done in the course

of a day.

MS MARSHALL: Right.

CHAIR: Exactly.

MR. CAHILL: Because they are over and above

(inaudible).

MS MARSHALL: Quite often an agency will not tender

and they will say it is because it is the only available source or it is an

emergency, but quite often we question whether those reasons are valid. I am

sure you have seen instances of that too.

CHAIR: I reviewed some of these myself, some of

the exceptions listed, and they say sole sourcing, the only source available and

what have you, and emergencies. I look at them. I had a number of them

highlighted, I was going to bring them here today, and I said: There is no point

bringing them up, we will make the point anyway.

In this report that you are receiving there now, the

Public Tender Act Non-compliance one, for example in the year 1997 it reads:

"Newfoundland Liquor Corporation: Lease of space - $18,750 - not awarded to the

preferred bidder: Acknowledged in general." There are also: "Lease renewals -

$28,500, $34,102, $57,911, and $29,850 - approval was not obtained from the

Lieutenant-Governor in Council." The Newfoundland Cancer Treatment and Research

Foundation: "One contract $417,500 was not awarded to the lowest bidder." There

are all kinds of things like that throughout. I certainly have some concerns

about that.

MR. CAHILL: From the Government Purchasing Agency

perspective, we might say, all we do is get a Form B in from the government

(inaudible) to report the exceptions. (Inaudible) these types of agencies which

you are talking about, non-compliance with the Public Tender Act over and above

exceptions, in order to do that properly we will need staff. No question about

it.

MS MARSHALL: Those instances we have identified in

that report we just handed out, the Government Purchasing Agency probably would

not be aware of almost all of them, because the agencies are not complying with

the Public Tender Act. They are not tendering and they are not forwarding the

information.

AN HON. MEMBER: Exactly.

CHAIR: So how do we correct that problem? That is

(inaudible). Again, staffing. It is as simple as that.

MS WAKEHAM: Unless we can go out into the

government funded body itself and do our own sort of audit for the types of

purchases that they are doing, then we would not be able to have the information

to be able to determine whether there is non-compliance or not. It is as simple

as that.

CHAIR: On page 2, figure 2 again, Lease of Space

for Government Departments is $2,762.521. Is that the total amount of money

government is paying for rental space throughout this Province?

MS WAKEHAM: Is it $2.7 million?

CHAIR: It is $2,762,521, Lease of Space, under

Government Departments, it says.

MS WAKEHAM: I do not have an answer to that

question but I would assume that is not the correct (inaudible). Like I say,

this is only dealing with the renewals.

WITNESS: It is just exceptions under (inaudible).

CHAIR: Again on page 5, the second last paragraph

down there, probably the last sentence, says: "In addition to this, GPA proposes

issuing a `promotional package' to the government funded bodies which outlines

the requirements under the Act and names and contact numbers for assistance."

Has that been done?

MR. CAHILL: The answer is yes. We do go out and

basically what kind of package we give out is the Public Tender Act and probably

our policy. We provide a seminar. We work cooperatively. The federal and

provincial government work together on this seminar. As a matter of a fact, it

is done this week, one in Corner Brook and Gander. We do try to cooperate from

the federal-provincial perspective, and also we give out as much promotion to

the Public Tender Act and regulations as we can.

CHAIR: To try to relieve the problem that we have

with respect to the exemptions and the sole sourcing and what have you - because

I think that sole sourcing is a problem myself. I do. There is probably a good

percentage of these sole sourcing that is legitimate, no doubt in my mind, but I

think there is a certain percentage, and I don't have the figures, that probably

is questionable. If we do not have the staff, if government do not have the

staff to do the inspections and to do the follow-up for compliance and what have

you, I think it is very important to educate, as you said earlier, all the

different agencies, municipalities, and what have you. That 568 number that you

use, would that include the municipalities?

MR. CAHILL: Yes.

CHAIR: Yes. I think that is something that could

be done maybe through the Federation of Municipalities.

MR. CAHILL: We work with the Federation.

CHAIR: Yes, I would think so. With respect to this

very point that you are making here with promotional packages, you say it is

done, but it is only done in certain percentages.

MR. CAHILL: We do have a formalized package that

we pass out, say at seminars and so on. What we do basically again is copy the

Public Tender Act, copy the regulations. We are looking at electronic tendering.

We also give them how to get access to our tendering, that type of thing. That

is what is provided. We call that a package.

CHAIR: I have been there. I have been the mayor of

a small municipality. It was only last September we had a lot of new councillors

elected, and a lot of new mayors and what have you. You send out a copy of the

Public Tender Act to people who are not used to reading legislation and what

have you, it could be like another language to them. I do not know if this

should be followed up on with respect in particular to the municipalities.

MR. CAHILL: What we try to do is meet with as many

of the municipalities and basically when we are sitting down we go through the

Act in a formal session. We go through the Public Tender Act and through the

regulations and we explain to them what exactly it means. We ask for questions

and this type of thing. So if they come and ask what sole source means we try to

explain to the best of our knowledge what sole source means and where you should

use it.

CHAIR: How many municipalities would you have met

with over the past, say, three or four years?

MR. CAHILL: Patricia Hempstead is responsible for

the Federation of Municipalities. We work with her. Also, if a municipality

comes in and requests that we meet with them - like the City of Corner Brook, or

Grand Falls, and these types - we will meet with them. We try. The smaller ones

are not so interested or inclined to come to a seminar or anything like that, or

they are not inclined to ask questions about the Public Tender Act. We do not

reach as far out as that. The major ones we always make sure that they are well

aware.

CHAIR: The major ones? Because from what -

MR. CAHILL: We hold sessions now, all through. We

may put out, like I say, an advertisement that we will be in the City of Corner

Brook at a certain time. Seminars will be offered on the Public Tender Act,

regulations, this type of thing, and purchasing generally.

CHAIR: Yes, I can see that, but often times too

the cost involved for these smaller municipalities getting to these centres and

what have you is something. The point I am making is that if a package had been

done up, it would have to be, in my mind, pretty clear and precise as to what

they can and cannot do. If you cannot have the staff there has to be another way

around it, is what I am trying to get at. Maybe that is a way around it.

Does anybody else have any questions at all?

Mr. Lush.

MR. LUSH: More of a comment than a question. I

expect this whole process of educating and informing municipalities is quite a

task. I do not know how you do it, because outside of what you are doing you

can't - it becomes a particle impossibility to visit every town. I suppose the

only thing we can do is to try and enhance the workshop conference type thing

where we can get people to attend. We must also remember, as the Chairman

pointed out, that these people working on councils, it is a voluntary effort.

They are also working, they have commitments, so it is a difficult task.

I think I have only said that in terms of pointing out

how difficult the task is, and yet making sure we all put forward the effort

that we can in terms of acquainting people - those people in these agencies

responsible for carrying out government initiatives, carrying out government

programs - getting them familiar with the Public Tender Act.

I am surprised, after all of our hearings and all of

our dealings with the public, to find that a lot of this is done not through

intent, but rather through the fact that people are not familiar with the whole

process. It is a big job.

CHAIR: Thank you.

On page 6 of the hand out, the second paragraph, the

second sentence reads: "In situations where it is more economically feasible,

the Agency delegates restricted purchasing authority to various departments.

Officials of the Agency review and monitor this authority to ensure compliance

with policies and procedures."

Could you comment further on that?

MS WAKEHAM: That is basically a direct purchase

order, a DPO, that is less than $500.

CHAIR: Less than $500. So that would not total up

to a great amount of money, would it?

MS WAKEHAM: I wouldn't think so. The thing is that

you have to get certain immediate supplies or immediate (inaudible), so $500 is

a reasonable amount to pay to get these (inaudible).

CHAIR: Also, the next sentence there says: "...the

Agency will review purchasing files of other government funded bodies to

determine compliance with the legislation. This relates to specific situations

only and is not an ongoing activity."

MS WAKEHAM: That is basically when we are asked

specifically to look at something or we get a compliant. We go in and it is a

reactive as opposed to a proactive situation, instead of us going out on a

normal basis and doing monitoring of the purchases. If there is a complaint then

we go in and we investigate the complaint.

CHAIR: Again, does the Agency do any follow up

with the department and boards to see if they have missed any of the public

tendering exceptions?

MS WAKEHAM: No.

CHAIR: You do not do any follow up at all? Why? Is

it the staff?

MS WAKEHAM: Sorry, that is the answer.

CHAIR: How many more people do you need over

there?

MS WAKEHAM: We have fifteen government

departments, we have 568 agencies. We have a small group of people in GPA, we

have a lot of purchases that we have to go through. Hospital boards and school

boards should have, at least from my perspective, sufficiently intelligent and

trained people on those boards, from a financial perspective, to be able to

understand the legislation, to be able to make sure they are in compliance.

I do understand that the 290-odd municipalities where

there is a lot of volunteer work would have some difficulties, especially in

some of the smaller areas where they may not even have an awareness. Some of the

larger bodies should be able to comply with the act, should be able to read the

legislation, should be able to understand what their obligations and

responsibilities are.

Like I said, if we had some additional staff the

concentration should be on the municipalities who do not have the capability

themselves.

CHAIR: Thank you. Questions?

MR. FRENCH: Yes.

CHAIR: Mr. French.

MR. FRENCH: I am rather curious about something

you just said. Is the government now passing its responsibilities in the Public

Tender Act to boards? Did I just hear you say that -

MS WAKEHAM: No, no.

MR. FRENCH: - there should be people sitting on

boards who should know these things?

I can quote you one instance of a council where a

councillor was voted not in a conflict of interest. When the Auditor General's

department went in and did an audit on the town, the Auditor General's office

determined that this poor fellow, who raised the question himself in council -

and by unanimous vote the council was not in a conflict of interest, yet the

Auditor General's department said that it was. Are we now shuffling our

responsibility onto boards that are volunteering?

MS WAKEHAM: I am not sure exactly what it is

because we are not dealing with conflict of interest legislation here, we are

dealing with the Public Tender Act.

MR. FRENCH: No, but to me it is all the same

thing.

MS WAKEHAM: No. I'm not -

MR. FRENCH: You are saying there are people

sitting on boards. So if Bob French is on the Health Care Board of St. John's,

involving the Health Science Centre, are you saying that I should know, as a

member of the board? Are we passing our responsibility on to boards, or should

that not be the responsibility of government?

MS WAKEHAM: No. What I am saying, Mr. French, is

that under the Public Tender Act all government funded bodies have to be in

compliance with the Public Tender Act. We make the act available to the boards

and to the municipalities and to the schools and hospitals. We go and provide

seminars to the various boards. We indicate what the intent of each of the

sections of the act are. We let them know what the regulations are. We tell them

that if they are going to make certain things on certain exemptions that there

is a procedure that they have to follow and that there are forms that have to be

filed.

What I am basically saying to you is that the - and

the question that Mr. Byrne raised was: Are these people familiar enough to know

that they are supposed to be filing Form B? Are they familiar enough to know

that they can do certain activities without calling a tender and other

activities that require a tender? That is all I am saying. What I am saying for

the smaller municipalities is that even if we hold a seminar and we tell

everybody the seminar is going on, Mr. Byrne has already pointed out that a lot

of these smaller places do not have the capability to send somebody in. So they

will not get the same sort of one-on-one in terms of understanding what the

legislation is about. That is all I am saying. There is responsibility placed on

the boards themselves for compliance with the act. That is under the act itself.

MR. FRENCH: You know, I look at this thing that

was just passed out by the Auditor General's department. I look at a school

board that spent $14,500 on paving. The only explanation is that it was an

emergency? I look at buying $11,235 worth of sand, and "Verbal quotes were

obtained but not documented." To me that is certainly not good accounting on

somebody's part.

The other question I have is this. How many times

since the Auditor General's report came out, how many institutions that were

named in that report of non-compliance with the Public Tender Act, how many of

these things has Government Purchasing, which I guess is the Department of

Works, Services and Transportation, have we gone back, as government, to any of

these people and said: Hey, you had better be complying with this, or if not

somebody is going to pay a price with their head out the door? Have we done

that?

MS WAKEHAM: Mr. French, I just received this from

Ms Marshall so this is the first time I have seen some of these numbers and some

of the people. We have had complaints in the past where people have done things

from the various types of boards and we have gone out and investigated. How many

times? I will have to ask Larry Cahill to answer that because I do not deal with

it on a day to day basis.

MR. FRENCH: This is the question I am asking. I

realize the answer probably cannot be supplied to me today but I would like it

back in writing. Since the Auditor General's report was submitted, and the

number of companies or institutions that they pointed out that were not in

compliance with the Public Tender Act, I want to know how many of them we have

written or we have actually gone in and said: Listen, ladies and gentlemen, you

can't do this any more so give it up, and if you don't give it up somebody has

to pay a price? Have we done that?

MR. CAHILL: Basically what we do, on a continuous

basis, is review all the Form Bs as they come in. Form Bs do outline the

exceptions that are there and various things. We go back to them and say: Are

you sure you are reporting this properly? Say we have any concern whatsoever. So

we question, urge and require (inaudible) it is legitimate enough for us to

question. We go back and explain to them: Listen, this is the Public Tender Act.

Do you realize that if you cannot legitimize an urgent requirement or a sole

source you have to public tender it? We do that continuously. Every day when the

forms come in we go back to the government funded body and try to ensure that

they know, and to instill in their minds exactly what is their responsibility.

It is usually done.

CHAIR: Just further to that, in the document that

was sent to everyone before the hearing, on page 15, it says: "The Public Tender

Act,

Chapter 45, Contracts Awarded By Government Funded Bodies Without Tender

Invitation, April 1998."

The second one down, Gartner Group, says: "1. IT

Consulting and Research Services. 2. Only Available Source. No other IT Research

and Consulting company with breadth of service and depth of expertise as Gartner

Group Inc." I highlighted that and I question that because it was only a couple

of years ago government privatized Newfoundland and Labrador Computer Services.

Do you want to comment on that?

MR. CAHILL: I probably could comment. Like I say,

just offhand, I'm just coming out with (inaudible). The thing is, what has been

adopted in government is a Gartner rating for computers and this type of thing.

Perhaps at that point in time they were doing a little research or getting

Gartner to explain to them how it should be structured, this type of thing, how

they established a Gartner rating, how they apply to computers that are bought,

what falls into different categories because they are done in tiers, that type

of thing. That is probably what was done.

CHAIR: Yes. What I am leading to is what you just

mentioned earlier, the follow up and what is accepted as a legitimate reason to

have a public tender exception. On page 16, the last one, the Department of

Works, Services and Transportation, Tilden Interrent, $8,392. It says: "1.

Repairs to rental vehicle. 2. Only Available Source Paid directly to rental

agency."

To me there has to be repair. We are talking about

repairs to a rental vehicle. What happened then, I suppose, is that Tilden took

the car, sent it out and had it repaired, and then government paid Tilden. Is

that what you are telling me?

MR. CAHILL: Exactly, that is what I would say

happened. I am only speaking off the cuff here because -

CHAIR: Yes. These are the type of things. There is

another one on page 20. These are things reported monthly when the House is

open, right? On page 20 the Department of Tourism, Culture and Recreation,

Transcontinental Print. Inc. it says: "2. Only Available Source. Contract

awarded to preferred bidder based on 196 pages in 1998 guide. Due to a

substantial increase in the number of new listings. Travel Guide has been

increased by an additional 40 pages."

Are we saying that they are the only people that could

have done the printing?

MS WAKEHAM: Those were additional sections.

MR. CAHILL: Those are additional sections. That

probably is because we already had a contract in place with them and we wanted

something else done to it. That is the only information I can give here.

MR. DAY: More than likely that would have been

publicly tendered. We probably made a few changes to it and just go back to the

(inaudible).

CHAIR: It is an extension or an add on to it,

(inaudible). That is the kind of question I suppose that come up.

MS WAKEHAM: The thing is that when we have a Form

B there is usually substantially more information that is provided in terms of

legitimizing either it being a sole source or it being an emergency or an urgent

requirement. When it is put forward it is only put forward in accordance with

the

section of the act that is either requiring us to say: These are exemptions

under 3E, 3B, or 3C (inaudible).

CHAIR: Yes. Mr. French.

MR. FRENCH: When the department has -

MS WAKEHAM: I do not know whether or not it would

be beneficial if we could put a bit more information in terms of outlining

exactly what the (inaudible) to these things so that we can answer the types of

questions you are asking right now. Why is it that it is coming (inaudible)?

CHAIR: When we get this, or I get it in the House

of Assembly, this report, these exemptions, I go down through it. The first

thing I look at is the amount of money that has been given and the reason why.

Sometimes you get this and you say: That does not look very sensible to me, but

it could be very sensible -

MS WAKEHAM: Very legitimate.

CHAIR: Yes, right.

MS WAKEHAM: The thing is that on all Form Bs, the

deputy ministers in the various departments - I cannot speak for the government

funded bodies because I am not sure exactly who reviews what in terms of the

forms coming through - but the forms coming through as an exception B in the

departments are all viewed by the deputy minister. I have questioned some of the

stuff that has been done by Form B and asked for additional information before

we even submit it. I am assuming, and I will make this assumption, that other

deputy ministers are doing the same thing when the Form Bs are coming to them.

CHAIR: Mr. French.

MR. FRENCH: Has there been anything done with the

new school boards in the Province to tell them that they should be in compliance

with the Public Tender Act? Has that been done?

MS WAKEHAM: As you know, we have made some

amendments to the Public Tender Act last year. As a result of that there were a

number of regulations that have to be put forward in compliance with those

sections of the act that have been amended. Those regulations are ready right

now. We intend to go out to each of the school boards, the hospital boards and

the municipalities and explain to them what is happening as a result of the new

regulations coming in. That will be done. We have in the past gone to school

boards and explained stuff. We will be making a concentrated effort to ensure

that everybody is fully aware.

MR. FRENCH: Once you have had the opportunity to

review what came out of the Auditor General's office today, like the

Newfoundland Liquor Corporation and so on, will these people be called? Will

somebody go to, I guess, the chairman of that board and say: Listen here

partner, you tighten this up. You cannot do this, you are supposed to report it,

and if you continue not to do your job then we are going to replace you? Will

that happen? I believe that this calls for this kind of action. When you see

people who go out and rent space and it is not the low bidder, then to me

warning bells go off. They go off to me anyway, and I would hope they go off to

other people.

As far as I am concerned, if we have people who we are

paying a lot of money to, to sit in jobs, and do not want to comply to the act

and the laws of this Province, if they are not going to do it then they are not

fit to serve in those positions. If I had my way they would not sit there. I

would replace every one of them if I had to. Because they either comply with the

Public Tender Act or they do not.

CHAIR: Thank you. Ms Marshall.

MS MARSHALL: That report that I handed out this

morning is just a compilation of -

CHAIR: Exactly.

MR. FRENCH: Yes, I know.

MS MARSHALL: That information is publicly

available when I release my report each year.

MR. FRENCH: Yes.

MS MARSHALL: It is out there.

CHAIR: Actually, they are taken out of the Public

Tender exemptions that have been reported in the House? No.

MS MARSHALL: No, they were never reported. Those

are examples -

MR. FRENCH: They were picked up when your

department was in there.

MS MARSHALL: Right, they weren't tendered and they

were not reported.

CHAIR: That's the point you were making Bob, I

suppose. Again, that is a decision for government to decide what they are going

to do, and if they are going to implement it and follow up and put penalties in

place or whatever. You alluded to it earlier.

It is 10:20 a.m. and we have coffee there. We can

break for a coffee or we can go on through, because as I said in the beginning,

I don't think this is going to be a long hearing really. Most of the points have

been made, but I wanted to get in just a little bit with respect to the changes

to the Public Tender Act. I don't know if anybody else has anything else they

wanted to add or any more questions. I think what we will just do is continue

on, if it is agreeable, and then we can adjourn if nobody else has any further

questions.

The changes to the Public Tender Act, when these were

made last spring in the House of Assembly, personally I had a few concerns, as

we all know, a few questions that I brought up in the House.

With respect to regulations that are not in place yet,

if the tender act that went through the House, the changes that were made - so

if there are no regulations in place, basically the only guidelines that

departments, agencies or whatever would have now would be the act itself and not

the regulations. So -

MS WAKEHAM: No, they have the old regulations.

CHAIR: So the old regulations are -

MS WAKEHAM: Are still in effect until new

regulations replace them.

CHAIR: But wouldn't the old regulations be

contradictory to the new Public Tender Act? None of them?

MS WAKEHAM: No.

CHAIR: You are sure? Because if -

MS WAKEHAM: We are making changes. If we are

changing clause 8, we are changing it from five days to thirty days, and that's

in the regulation in terms of reporting. Up to this point in time they are still

operating under the five days until they get a new one, which will be thirty

days.

CHAIR: I was thinking along the lines of the

amounts of money that an agency or department could award. I think it went from

$7,500 up to $10,000, it went from -

MS WAKEHAM: That is in the act, so we operate

under the act.

CHAIR: So that is all applicable?

MS WAKEHAM: What is in the act they operate from,

under the act, any regulations pursuant to the act. They are still using the old

regulations until the new regulations replace them.

CHAIR: In the act itself - from memory now - in

the opinion of the Minister of Industry, Trade and Technology, if by going to

tender the best value for the dollar will not be obtained they do not have to

tender; or, in the opinion of the head of a government funded body, which would

be a municipality I suppose, or housing or whomever, the best value for the

dollar would not be obtained by going to public tender then they do not have to

go to public tender. They can have a request for proposal, or deal with anybody

they want to deal with, I suppose, on a given issue. Is that going to complicate

anything for the department in any way, do you think?

MS WAKEHAM: I am going to have to ask Larry to

answer that one.

MR. CAHILL: Basically, as you know, (inaudible)

changes that have been made in the act recently, as of June 5. In the act it

reads by regulations. That is probably the hold-up on the regulations; it was

the hold-up. We were trying to draft a guide on how to do an RFP, and also what

economic development would mean, so the changes will be made in the new

regulations to explain clearly - hopefully clearly - to the government funded

bodies exactly what is expected (inaudible).

MS WAKEHAM: I would also like to say that with

respect to the economic development component that is under ITT - and it has to

be addressed by the minister - that has to be in compliance with the internal

trade agreement which specifies what an economic development activity is. There

is not a whole bunch of flexibility there. There are some very specific areas of

which the economic development clause can be used, and those have been

identified and agreed to by all of the Provinces.

CHAIR: That was one of the questions I asked in

the House, of the minister, with respect to a definition for economic

development. I did not get an answer at that time, and now you are staying there

is a definition?

MS WAKEHAM: I am saying what there is, is a

guideline under the internal trade agreement -

CHAIR: Guideline?

MS WAKEHAM: Yes - which states what could be

considered for the purposes of economic development.

CHAIR: That is for industry, trade and technology,

but -

MS WAKEHAM: No, for government as a whole.

CHAIR: For government as a whole?

MS WAKEHAM: Yes.

CHAIR: So an economic -

MS WAKEHAM: The only reason that the Minister of

Industry, Trade and Technology is cited is because the administration of the

internal trade agreement is through her department.

CHAIR: For housing or liquor corporations or

municipalities, all the same criteria applies.

MS WAKEHAM: Yes.

CHAIR: Does the Auditor General have any more

questions or concerns to be addressed?

MS MARSHALL: No, I do not have any more comments.

CHAIR: No?

Does anyone else have anything they want to bring up?

Any comments to clue up, or anything like that?

MS WAKEHAM: I guess the only comment I would make

is that we are aware that we have a problem in terms of being able to deal with

the government funded bodies. This is not the first time that - I think the

department has been cited in terms of its ability to go out and be able to do

the audits and do a proper compliance with respect to government funded bodies.

It is a great problem. There are a lot of them out there and we will try and do

the best we can with the resources we have available. We are hoping to

concentrate some more effort with respect to getting the new regulations and get

an explanation and stuff out to them.

The best we can do is - if we do not know there is

information there, that is not being provided to us, it is very difficult for us

to be able to react to it.

With respect to Mr. French's question, we will go

through and provide you with a written comment in terms of your question. That

is it. Thank you.

CHAIR: Before we adjourn, I want the committee to

stay back and have a little discussion on another matter before we leave for the

day.

In the meantime I would like to thank all the

witnesses for coming out; I appreciate your time. I thank the Auditor General

and her staff for coming out; I appreciate it. We will be seeing a lot of you

this week anyway, in the next three or four days. Thank you once again, and

hopefully things will work out in the near future.

MS MARSHALL: Thank you.

The Committee adjourned.