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2006 May Status Report of the Auditor General of Canada

May 2006 Status Report—Chapter 7

Exhibit 7.4—Funding mechanisms do not always support selection of the most cost-effective option

55 Bay Street, Hamilton, Ontario

The Investment Analysis Report that Public Works and Government Services Canada (PWGSC) prepared for this transaction recommended leasing and exercising a purchase option in the second year of the lease. The Treasury Board would not approve the purchase; rather, it approved an alternative to lease the property for 15 years—the most expensive option in the Investment Analysis Report. Choosing this option may cost the Crown an additional $13 million.

7575 8th Street, Calgary, Alberta

PWGSC officials prepared an Investment Analysis Report that determined the least expensive option was for the Crown to purchase the building for $27 million. However, in the absence of the necessary capital funding, PWGSC recommended the second- best option, at $31.4 million. This option recommended leasing the building for five years, with an option to purchase in year six. Selecting the second-best option may cost the Crown an additional $4.4 million.