Opening Statement to the Committee On Public Accounts
Chapter 7 – Federal Laboratories for Human and Animal Health Building Project (April 1998 Report)
L. Denis Desautels, FCA
Auditor General Of Canada
Mr. Chairman, thank you for this opportunity to present the results of our audit of the new Federal Laboratories for Human and Animal Health in Winnipeg, Manitoba, as reported in Chapter 7 of the April 1998 report.
To put this subject matter in the proper context, our review of the government’s Part III Estimates for 1997-98 identified planned expenditures of more than $32 billion over the lives of 160 projects, each costing $10 million or more. The size of these numbers indicates the importance of sound management of this aspect of government operations: improvements in the planning, design, acquisition and use of major capital assets over their life cycle can result in significant savings to the government.
This audit examined the major aspects of the design and construction of the Winnipeg laboratories. A unique dimension of this project was the concern over “biosafety”, or the maintenance, safe handling and containment of micro-organisms that are infectious to humans or animals or both. I am pleased to report that the departments involved have taken appropriate measures to ensure that this building is safe for both employees and the community. But the planning and construction of this project were not without problems.
Achieving Full Potential
There are three key areas of concern that I would like to touch on briefly in these remarks; the first deals with achieving the full potential from this new facility.
Facilities such as the Winnipeg laboratories are expensive to construct, operate and maintain. We concluded that the new facility could accommodate significantly more than the number of scientists and support staff currently planned for occupancy. In addition, we noted that approximately 70 positions remain to be filled -- 40% of the staff that the client departments plan for the facility. Finally, a Health Canada study of its other laboratories across Canada has identified apparent excess laboratory capacity. A similar study by the Canadian Food Inspection Agency is currently in progress.
The preliminary studies and our work suggest a need for the departments to carry out optimization studies with a view to rationalizing their laboratory capacities. These studies might identify opportunities to relocate other programs to the Winnipeg facility.
At the time of our audit, the departments did not have a comprehensive business plan and strategy for ensuring that the new facility is fully used. Your Committee may wish to seek commitments and timetables from the departments for putting these plans in place.
Financial Management and Control Framework
In my remarks to your Committee on April 30, I noted that our previous audits of major Crown projects had identified a range of deficiencies in the approval and management practices. My second area of concern in the Winnipeg project, the need to strengthen the financial management and control framework for major Crown projects, deals with many of these same issues.
Treasury Board policy requires the disclosure of all project-related costs when seeking project approvals. We noted that the approved budget of $142 million for this project did not include all project-related costs, which we estimate at $176 million. We believe that ministers should be provided with a clear and complete picture of how much projects will cost the taxpayer before approving them.
We would also expect that ministers would be provided with complete and accurate explanations when approving budget increases, but we concluded that this information was not provided when an increase of $48 million was requested for this project.
We noted the lack of effective scrutiny by the Treasury Board Secretariat of the preliminary project budget and the subsequent budget increase request, and a lack of effective monitoring of the project’s progress, as required under the Treasury Board policies.
We are concerned about a departmental culture that aims to spend the full approved budget whether or not cost savings are possible -- what we are calling the “build [up] to budget” philosophy. We have noted instances where major cost reductions have been made in project scopes to meet budget requirements without adversely affecting program delivery. This raises the question of the need for having included these elements in the original project scope. We believe there is a need for departments and central agencies to identify incentives for achieving potential cost savings whenever possible.
Project Management and Control Framework
My third and final area of concern relates to the project management and control framework.
The audit concluded that weak project management practices resulted in $5 million to $10 million of additional costs. Some of the contributing factors included the following:
The Treasury Board Secretariat and Public Works and Government Services Canada have agreed that improvements are needed in the management of major Crown projects. We have noted, in this and in previous audits, instances of non-compliance with the Treasury Board policies for managing major Crown projects, with no apparent consequences. We firmly believe that the government’s policies should be respected. We also believe that the policies are sound and consistent with an environment of increased delegation of responsibilities to departments balanced with the appropriate level of monitoring by the Secretariat.
In closing, I would encourage the Committee to seek commitments from departments and the Secretariat to implement the needed improvements, including closing the gap between policy and practice and seeking potential cost savings where available in future projects.
Mr. Chairman, that concludes my opening statement and I would be pleased to answer your Committee’s questions.