Mr. Chairman, during the 1994-95 O and M review, the committee again recommended that the government consider creating a mortgage investment corporation. Although there is still no mortgage investment corporation in place, the government is preparing a prospectus to help assess the viability of such a corporation. The committee urges the government to proceed with this project in a timely manner.

Separation Of The Capital And O And M Budgets

Beginning with the 1992-93 budget, the capital estimates were separated from the main O and M estimates, and considered separately by the standing committee and by the Legislative Assembly. The rationale was that, by approving the capital budget in late autumn, there would be sufficient time for contracts to be tendered or negotiated, materials to be ordered, and shipments to be made during the brief shipping and building season applicable to many communities.

This process has not fulfilled its expectations. In Investing in our Future, the committee said:

"It became apparent during this last committee review that the separation of the budget into two parts is artificial and may even be counter-productive. It is impossible to examine capital expenditure requirements without considering the fiscal framework. The fiscal framework contains both capital and operating elements that require joint consideration.

"Soon after the two budget sessions were implemented, the Standing Committee on Finance recognized that it was unrealistic to review proposed capital expenditures without considering the associated direct and indirect incremental operating costs. Now the committee reviews incremental operating costs of capital projects outside of the context of departmental operating budgets. However, the picture still is not complete."

The committee understands the rationale for separating the budgets and reviewing them in two separate sessions in the Legislative Assembly. However, the reality is that tenders are not being let early. There appears to be real obstacles in the way of changing the tendering system to meet the established objectives. Even with an earlier approval process for the capital budget, government departments have not proven able to execute contracts in the manner expected when the dual budget process was introduced.

The departments put a tremendous amount of work into preparing for a full budget session in the fall. Committee Members are concerned that what little gains are realized through having two budget sessions are not worth the cost of the extra work needed by the departments to prepare for two budget sessions.

It appears, then, that the issue is not the timing of the approval of capital estimates, but the planning abilities of the departments. With better planning, there is no reason contracts could not be ready to go on April 1st of a new fiscal year.

Members of the committee are convinced that there should only be a single budget session each year. The time, effort and cost of split capital/operations and maintenance budgets outweighs the potential benefit originally anticipated. The next government may want to consider having only one budget session per year, while encouraging better capital planning in the departments. This concept should be developed further by the current government, and included in the transition plan they will be preparing.

The committee had recommended a review of the current process of separate reviews for the capital and O and M budgets. The review was to include an assessment of alternative methods for achieving early tendering of capital projects. The government is currently working on an analysis of this issue and the committee looks forward to reviewing the final results and recommendations. In the meantime, the committee will be looking for evidence of increased coordination between the Department of Public Works and Services and other departments to ensure the benefits of having a separate capital budget process are achieved.

Management And Delivery Of Capital Projects

In Investing in Our Future, the committee noted:

"Concerns arose throughout the committee's September 1994 review about the way in which capital projects are planned, designed and managed by the Department of Public Works and Services. Committee Members wonder if the means of coordinating and managing capital projects adopted by the Department of Public Works and Services, on behalf of the government as a whole, are as efficient and effective as they should be."

While recognizing the significance of the project management function, it is important to remember that it is an overhead expense. In times of tight financial resources, it is particularly important to ensure that capital spending brings about maximum benefit to communities and that overhead expenses are minimized. As a result, the committee recommended that the Financial Management Board assess the current project management process and report to the committee by the end of 1994.

The government has expanded the recommendation to include a review of the entire project management process and provided the committee with preliminary information on the review. The committee suggests that, while the review will be worthwhile, things can be done to improve the process in the short term. For example, the Department of Public Works and Services should enforce deadlines for tendering to ensure the maximum benefit and cost-effectiveness is achieved on all projects. Departments should give adequate priority to preparing a well-planned capital budget. The committee also encourages the government to assign the management of smaller projects, such as small garages, directly to the community where the project is to take place.

Labour Relations

Labour relations is, and will continue to be, a very important part of the government's agenda. Committee Members have noted a high number of grievances being referred to arbitration.

There appears to be a lack of utilization of the joint consultation process. Where possible, labour relations issues should be handled quickly, efficiently and as close to the location of the employee(s) affected as possible. Not only will this save the government from wasting time and money in extensive arbitrations, it will improve the morale and the productivity of all employees, including managers.

That's the report, Mr. Chairman. Thank you.