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2006 May Status Report of the Auditor General of Canada

May 2006 Status Report—Chapter 7

Exhibit 7.2—A client's request and a decision by Public Works and Government Services Canada not to enforce standards resulted in additional cost of $4.6 million

800 Place Victoria, Montréal, Quebec

The Economic Development Agency of Canada for the Regions of Quebec had been a tenant in Place Victoria for many years. The Agency's lease at Place Victoria was to expire in 2003. In 2001, the Agency worked with Public Works and Government Services Canada (PWGSC) to initiate a competitive tendering process to obtain the required accommodation for the Agency. The Agency's landlord at Place Victoria bid on the tender and was ranked fourth in the bid evaluation process. Two weeks after the tendering process had closed and the winning bidder had been selected, the Secretary of State for the Agency sent a letter to the Minister of PWGSC asking him to renew the lease at Place Victoria. The Minister of PWGSC approved the renewal of the lease at Place Victoria.

Despite the fact that PWGSC's guidelines require an economic advantage to the Crown to exist in order to justify a direct non-competitive negotiation of a lease and despite the absence of any economic advantage to the Crown, PWGSC entered into direct negotiations to renew the lease with the landlord at Place Victoria.

Because of the potential for recourse from the winning bidder in the tendering process, PWGSC also entered into a lease with the lowest bidder, even though it did not have a tenant for the space. Renewing the lease at Place Victoria cost $2.5 million more than the winning bid in the tendering process, and PWGSC paid $2.1 million in unproductive rent to that bidder while trying to locate tenants for the additional space. Some space in that building is still unoccupied.

The Agency's request not to move, combined with the lack of adherence to established guidelines, has cost taxpayers an additional $4.6 million.