1 2 3 TORONTO COMPUTER LEASING INQUIRY 4 5 6 7 ******************** 8 9 10 BEFORE: THE HONOURABLE MADAM JUSTICE DENISE BELLAMY, 11 COMMISSIONER 12 13 14 15 16 Held at: East York Civic Centre 17 850 Coxwell Avenue 18 Toronto, Ontario 19 M4C 5R1 20 21 ******************** 22 23 24 February 26th, 2003 25

2
  1                        APPEARANCES
  2  
  3  Ronald Manes   (np)     )Commission Counsel 
  4  Patrick Moore           )
  5  Daina Groskaufmanis (np)) 
  6  Linda Rothstein  (np)   )City of Toronto 
  7  Lily Harmer             )
  8  Robert Centa            )
  9  Gordon Capern   (np)    )
 10  David Moore             )MFP 
 11  Fraser Berrill  (np)    ) 
 12  Ken Jones      (np)     ) 
 13  Brian Heller   (np)     )Ball Hsu and Associates Ltd.
 14  Melissa Kronick (np)    )CUPE 
 15  Raj Anand (np)          )Lana Viinamae
 16  Bay Ryley               )
 17  William Anderson        )Wanda Liczyk
 18  Valerie Dyer   (np)     )Dell Computers
 19  Jennifer Lynch (np)     )
 20  Edward Greenspan (np)   )Jeff Lyons
 21  Todd White (np)         )
 22  Hugh MacKenzie          )Jim Andrew
 23  Bryan McPhadden   (np)  )Brendan Power
 24  
 25  Joyce Ihamaki           )Registrar

1 TABLE OF CONTENTS 2 Page 3 LOU PAGANO, Resumed 4 Cross-examination by 5 Mr. Hugh Mackenzie 4 6 Cross-examination by 7 Mr. David Moore 138 8 9 Certificate of Transcript 213 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

1 --- Upon commencing at 10:00 a.m. 2 3 THE REGISTRAR: The Inquiry is now in 4 session. Please be seated. 5 MADAM COMMISSIONER: Good morning. 6 MR. HUGH MACKENZIE: Good morning, 7 Commissioner. Good morning, Mr. Pagano. 8 THE WITNESS: Good morning. 9 MR. HUGH MACKENZIE: I'm perspiring only 10 because I -- I think I wore my warmest jacket, forgetting 11 that the lights were so warm but -- 12 MADAM COMMISSIONER: Well, we can't -- 13 MR. HUGH MACKENZIE: -- so you'll have to put 14 up with that. 15 MADAM COMMISSIONER: We can't tell from here, 16 Mr. -- 17 MR. HUGH MACKENZIE: Good. 18 MADAM COMMISSIONER: -- MacKenzie. 19 MR. HUGH MACKENZIE: That's great. 20 21 CROSS-EXAMINATION BY MR. HUGH MACKENZIE: 22 Q: Mr. Pagano, in terms of format what I 23 propose to do today is pretty much follow the format of your 24 -- of the -- of the Commissioner solicitor yesterday. Okay? 25 A: Okay.

1 Q: I'm going to go back and ask you 2 questions arising from your answers to those questions. They 3 should be different questions, not -- not similar but -- but 4 the format will be similar. Okay? 5 A: Okay. 6 Q: First, before I do that, I want to start, 7 sir -- 8 MADAM COMMISSIONER: Oh, I apologize. I 9 should tell you Mr. MacKenzie is the lawyer for Mr. Jim 10 Andrew. All right? 11 THE WITNESS: Thank you. 12 MR. HUGH MACKENZIE: My apologies, I should 13 have introduced myself. 14 MADAM COMMISSIONER: No, no. It's not. I do 15 that as a matter of course and I forgot this morning. 16 17 CONTINUED BY MR. HUGH MACKENZIE: 18 Q: Sir, one of the -- the points that was 19 created yesterday, at least in my mind, had to do with the -- 20 would it be fair to say inexperience of -- of the purchasing 21 fun -- function with leasing activities? 22 A: What I meant to say is that we did not 23 have the expertise in leasing activities and for any 24 purchase, the -- expertise in the evaluation of the results 25 of the quotation lies within the department.

1 Q: Okay. Now, my understanding is that you 2 were with the City and you -- you were with the City from 3 1989 as the director of Purchasing? 4 A: That's correct. 5 Q: Okay and I -- I also understand that 6 there was an arrangement between the City and -- and 7 Metropolitan Toronto to share the purchasing function? 8 A: That's correct. 9 Q: Okay and Mr. Andrew, of course, was with 10 Metro at that point in time? 11 A: That's correct. 12 Q: Okay. Mr. Andrew tells me that in 1991 13 there was a computer leasing program for Metro. Have you -- 14 are you acquainted with that program, sir? 15 A: I -- I don't recall. Possibly there was. 16 Q: Okay. If I gave you the name of the 17 leasing company, Meridian Leasing which eventually became 18 Grayvest, does that assist you in any way? 19 A: I'd have to go back and look at the 20 files, honestly because we do a lot of transactions. 21 Q: Okay. Were you aware, as well, that 22 there was a leasing program in effect with the Metro Toronto 23 police at or about that time as well? 24 A: I don't recall but there could have been. 25 Q: Okay. Were you aware of a leasing

1 program from about 1991 at Scarborough? 2 A: I would not have been aware of what was 3 happening in the other municipalities, as they didn't come 4 under my purchasing function. 5 Q: Okay. We heard from Mr. Stevens on 6 February 17th that there had been an MFP leasing arrangement 7 with the City of Toronto from about 1991. Were you aware of 8 that, sir? 9 A: I can not recall whether I was or not. I 10 -- I -- again, I'd have to go back to the files. We -- we do 11 a lot of purchases in a lot of areas, so for one to stand out 12 in my mind, I -- I can't honestly say that I remember. 13 Q: But those programs were -- were computer 14 hardware and software leasing activities. 15 A: True. 16 Q: Okay and -- and generally you weren't 17 aware of those or how they were treated, sir? 18 A: I -- I don't remember the specific 19 details. You know, the documents, a lot of that would be 20 handled by my staff and I would be made aware of -- of the 21 results of the quotes, if there were any reports, you know, 22 and there's a lot of reports that go through my desk so to 23 remember specific details about specific transactions, I 24 can't say that I do right now. 25 Q: In the early 1990s, sir, purchasing in

1 Toronto would have had a booking of probably -- of policy 2 practices, bylaws, directives, procedures, that kind of 3 thing, a procedures manual. Is that -- is that correct? 4 A: That's correct. 5 Q: Okay and that would, of course, be 6 updated from time to time? 7 A: That's correct. 8 Q: And would there have been a volume like 9 that immediately prior to amalgamation, either a binder or an 10 online document? 11 A: No, there would not. We did -- we have 12 and did start to work on the document but because there were 13 new procedures in place quite fast and new policies were 14 being approved and there were interim bylaws and we never 15 have finished it and we are still working on it and to -- to 16 -- I guess to compound on that, because of staff changes that 17 were assigned to work on it, it was never completed. 18 However, we did give training sessions to 19 departments. I also had my manager of client services who 20 had a purchasing group that used to meet every two (2) months 21 with representatives from departments to advise them in any 22 new procedures and policies that were in place and also to 23 provide any training if they required that. 24 Q: And that was for the -- the department, 25 if you will?

1 A: Yes. 2 Q: Prior to amalgamation, did the City have 3 a policies manual for Purchasing? 4 A: We had a purchasing manual. I don't 5 recall a specific policies manual for Purchasing. 6 Q: Okay because one of the duties in your -- 7 in your job description has to do with developing procedural 8 -- let me see. The first -- excuse me, second bullet of Tab 9 35 in Exhibit -- in Volume 1, sir, is your job description, 10 job profile, 40410? 11 MADAM COMMISSIONER: I don't have that yet, 12 sorry. 13 14 (BRIEF PAUSE) 15 16 MADAM COMMISSIONER: Tab 35, was it? 17 MR. HUGH MACKENZIE: Yes. 40410. 18 MADAM COMMISSIONER: Hmm hmm. 19 20 CONTINUED BY MR. HUGH MACKENZIE: 21 Q: The second point, sir, says: 22 "Sets the overall strategic direction of 23 the division by establishing goals and 24 short term and long term objectives that 25 are aligned with the over strategic

1 planning initiatives of the City of 2 Toronto." 3 The second -- excuse me, third bullet says: 4 "Ensures Council bylaws, policies and 5 directives and applicable legislation are 6 followed in all purchases made for the City 7 by developing strategic purchasing and 8 materials management policies that meet 9 corporate and Council objectives, reviewing 10 and applying changes in legislation." 11 Would it be fair to -- to conclude from that, 12 sir, that there ought to have been a policy manual in place 13 at that time? 14 A: Well, this job profile was not created 15 until 19 -- oh, sorry, 2001, well after I was -- I -- I had 16 taken the position. However, we did make attempts to have a 17 manual in place and we are still trying to do that but in -- 18 in -- in view of the fact that a manual is not in place, we 19 advise departments by other means as to what the policies 20 should be. 21 Q: Okay. So it -- it's fair to conclude, 22 then that there wasn't a formal manual available for use by 23 your division or by the department generally with respect to 24 the purchasing function? 25 A: That's correct. There was no formal

1 manual. We have a draft manual. 2 Q: Now you said that your -- your staff 3 weren't particularly trained or knowledgeable with respect to 4 leasing. Were there people on staff, sir, that were -- that 5 had taken specialized training with respect to leasing from a 6 purchase perspective? 7 A: Not that I'm aware of, no. 8 Q: Okay. Are such courses offered or 9 available to -- to staff, to the best of your knowledge? 10 A: I have not seen any but there might be 11 some available. 12 Q: Is there professional training or 13 development activities or functions that would deal with 14 leasing to the best of your knowledge? 15 A: To the best of my -- my knowledge, I 16 don't think there is. There might be. 17 Q: B -- but you're not aware of any and your 18 staff didn't attend at such training and development 19 opportunities? 20 A: Not that I'm aware of. 21 Q: Okay. In the policy manual that has been 22 developed, is there a special section dealing with -- with 23 computer hardware and software leasing? 24 MADAM COMMISSIONER: You mean in the current 25 draft one?

1 CONTINUED BY MR. HUGH MACKENZIE: 2 Q: In the current draft volume, is there -- 3 is there a section specifically related to computer hardware 4 and or software leasing, sir? 5 A: Currently, I don't believe the draft has 6 a section on that. 7 Q: Okay. Are there special forms that have 8 been created by your department with respect to leasing as 9 opposed to purchasing? 10 A: No, there have not. However, a 11 requisition form is there. The request is made to my 12 department and we are responsible for the process as far as 13 issuing the quotation call document, receiving the -- the 14 documents and forwarding them to the departments. We do have 15 forms that have to do with the purchasing process. 16 MADAM COMMISSIONER: But are they with 17 respect to purchasing or leasing or they're -- 18 THE WITNESS: No, they're with respect to 19 purchasing. 20 MADAM COMMISSIONER: Purchasing. 21 THE WITNESS: Not specifically leasing in 22 general, no. 23 MR. HUGH MACKENZIE: Okay. 24 25 CONTINUED BY MR. HUGH MACKENZIE:

1 Q: So -- so it's fair to say that there's -- 2 there are no forms specifically related to the leasing 3 function at this time and there are no sections in the -- in 4 the purchasing policy and procedures manual that's being 5 created with respect to leasing and perhaps the special 6 issues that arise therefrom? 7 A: There are no special purchasing forms 8 that deal with that or in the draft manual. 9 Q: Sir, the -- Point 3 also refers to at 10 the -- 11 MADAM COMMISSIONER: Can we just follow up on 12 that, Mr. MacKenzie? 13 MR. HUGH MACKENZIE: Oh, yes. Please. 14 MADAM COMMISSIONER: Mr. Pagano, I'm 15 interested as to whether you turned your mind to whether 16 there should be something on leasing in the draft purchasing 17 manual or did you -- 18 THE WITNESS: I -- I -- 19 MADAM COMMISSIONER: -- has it come up or? 20 THE WITNESS: It has -- well, it's an area 21 that I think we should address when we complete the manual 22 and based on the findings of -- of this Inquiry, I think 23 that'll determine what should be in there and what shouldn't 24 but I think that there should be some specific instructions 25 when the manual is completed.

1 2 CONTINUED BY MR. HUGH MACKENZIE: 3 Q: Sir, I only raise that issue because I m 4 -- one of the -- one of the -- the issues that's arisen 5 before us has to do with, I guess you'd almost call it moving 6 targets or something like that. For instance, in the 7 Bombardier proposal for this RFQ or response to RFQ which is 8 actually found at Tab 19 of Volume 1, sir; do you have that? 9 A: Yes, I do. 10 Q: That's Document 18032 and that document 11 says we are not going to be able to compete in terms of 12 lowest price but there's a reason for that. Okay? It then 13 goes on in the -- in the third paragraph, the -- the largest 14 paragraph on the first page and -- and basically says the 15 reason we're not going to be able to compete strictly on 16 price is because we've eliminated all of the pitfalls. 17 What they've said is "Gotchas" are eliminated. 18 MADAM COMMISSIONER: Where is that? 19 MR. HUGH MACKENZIE: It is sixth line of the 20 third paragraph, Commissioner. 21 "Total cost of use, we focus on the total 22 cost of use and ensure that all of the 23 traditional 'Gotchas', are eliminated." 24 25 CONTINUED BY MR. HUGH MACKENZIE:

1 Q: Do you see that, sir? 2 A: Yes, I see that. 3 Q: Now, if you go to your job description, at 4 point 5, the fifth bullet point, left-hand column -- 5 A: I'm sorry, which Tab was the job 6 description? 7 Q: I'm sorry -- 35, sir. Again, 40410. In 8 the fifth bullet point -- just a second, I may have the wrong 9 point -- 10 11 (BRIEF PAUSE) 12 13 Q: It is point 5, talks about: 14 "Develops new and innovative methods of 15 purchasing, provides outreach to suppliers 16 to ensure participation in the bidding 17 process, provides technical and business 18 advice to clients on their purchasing and 19 materials management requirements to ensure 20 the best possible price for purchases made 21 by the City." 22 Would you agree with me, sir, that sometimes 23 the best possible price, doesn't necessarily equate to the 24 best return on investment? 25 For instance, the best possible price would

1 not consider that particular sentence from the Bombardier 2 offer would it -- proposal? 3 A: Well, I think the best possible price has 4 to consider everything that's in a document that's submitted 5 as a quote. I think everything has to be considered. 6 Q: Okay. Is there something in the RFQ that 7 was drafted, that would support that position, sir? 8 A: I believe we always put a clause in there 9 to say that the lowest price is not necessarily accepted. I 10 don't have the exact wording. 11 Q: But, what, if any, information have you, 12 that -- that the best price, was not considered but, in fact, 13 that there was consideration given to the Bombardier issue of 14 "Gotchas"? 15 Have you any information in that regard, sir? 16 A: No, because I did not do the evaluation. 17 Q: But, did not Mr. Beattie work with Mr. 18 Power, with respect to that? 19 A: I don't believe Mr. Beattie was involved 20 in the evaluation. I believe he supplied him the documents. 21 Q: That was just Mr. Rabadi -- 22 A: My understanding -- I believe, the 23 evaluation was done by IT and Treasury. And I don't recall 24 all the names, but, those two (2) are two (2) that I've been 25 told were involved.

1 Q: Mr. Rabadi? 2 A: I believe so. 3 Q: Okay. 4 5 (BRIEF PAUSE) 6 7 Q: Point -- financial information systems, 8 what systems -- financial information systems were in place 9 at the time of amalgamation for purchasing, sir? 10 A: At the time of amalgamation, I believe, 11 there were seven (7) systems in place. Each former 12 municipality had their own. And I don't recall the names of 13 each one (1), but, there were seven (7) in place. 14 Q: Okay. Now, this particular -- 15 A: Excuse me, I just want to correct that. I 16 don't recall if there was seven (7), there could have been 17 six (6). I believe that one (1) of the municipalities was 18 still on a manual purchasing system. 19 Q: A manual purchasing system was -- 20 A: Yes -- 21 Q: -- was that Etobicoke? 22 A: You know, I can't recall. I'd have to go 23 back. I thought it was one (1) of the smaller ones, but -- 24 Q: Okay. 25 A: -- I can't recall --

1 Q: You're not certain? 2 A: Yeah. 3 Q: Okay. 4 A: Now, I've -- my answer to that was 5 specifically for the purchasing systems. I'm not aware of 6 the purchasing modules. I'm not aware of what financial 7 information systems, as far as the accounts payable and 8 budgets, how many of those were in place. 9 Q: Was there a system, like the SAP system, 10 in which you could enter the -- the value of purchases and 11 enter a purchase order and determine what the status was in 12 terms of whether or not the full amount had been -- been 13 received, was there anything that would kick out information 14 when you reach, say the $40 million level? 15 A: That, sir, I'm not sure. 16 Q: Okay. 17 A: I do know that Etobicoke was on the SAP 18 system, but I'm not sure the version that they had in place 19 would have allowed that. 20 Q: But the six (6) systems you had, none of 21 them interrelated at that point in time, 1998, amalgamation? 22 A: No, I don't think they did. 23 Q: Okay. And in 1999, was there a capacity 24 to -- to in any way work a financial system among those 25 financial systems?

1 A: No. No, there was not. 2 Q: Okay. Now, when was the need for an SAP 3 system identified? 4 A: I'm really not sure, I believe it was 5 identified prior to amalgamation, but I'm not certain as to 6 when exactly it was identified. 7 Q: Mandy Rattner, I understand was the 8 consultant to the City implementing SAP, and the last name is 9 spelled R-A-T-T-N-E-R. Sir, do you -- do you know that name 10 or that person? 11 A: Yes, I do. 12 Q: Okay. And did you work with her in any 13 way in terms of -- with respect to the implementation of that 14 system? 15 A: Yes, I did. 16 Q: Okay. And my understanding, and I -- I 17 don't understand the SAP system, but my understanding is that 18 fund management should have been one (1) of the first 19 modules; is that your information? 20 A: I don't recall if it was or not, 21 honestly. 22 Q: Okay. This job description, we were 23 talking yesterday about obsolete equipment. It's point 6, 24 bullet point 6 on the left hand side of the job description, 25 job profile. It says:

1 "Ensure a maximum recovery for 2 obsolete/surplus goods." 3 Do you see that, sir? 4 A: Yes, I do. 5 Q: Yesterday we were talking about leasing, 6 and the fact that there was a sale/buy back arrangement 7 associated with this particular RFQ? 8 A: Yes. 9 MADAM COMMISSIONER: They have a leaseback, I 10 think it was. 11 MR. HUGH MACKENZIE: Excuse me, buy and 12 leaseback, I apologize. It doesn't seem to be dealt with in 13 the job description? 14 MADAM COMMISSIONER: Well, I think that if I 15 recall, Mr. Pagano said that the job description came out in 16 2001. 17 MR. HUGH MACKENZIE: Yes, but my 18 understanding, Commissioner, was that yesterday he said that 19 this particular job description accurately reflected his 20 duties and responsibilities in 1999. 21 THE WITNESS: And I believe it did, yes. 22 23 CONTINUED BY MR. HUGH MACKENZIE: 24 Q: Okay, so would you agree with me that 25 that's an oversight in the job description, both in 1999 and

1 -- and with respect to today? 2 A: No, I would not. The -- the duties of 3 Purchasing is -- is to -- had always been, and even in the 4 former City, my role had always been to ensure the best 5 return on sale and obsolete goods and that's reflected in 6 this job description. Sorry, on the obsolete or surplus 7 goods. 8 Q: But in -- in this particular case where 9 there was a sale and leaseback arrangement, the goods 10 wouldn't necessarily have been obsolete? 11 A: That's correct. 12 Q: Okay, but it doesn't appear to be covered 13 in the job description, is there -- would you agree with me 14 that that's an oversight in the job description? 15 A: Well, the sale of -- of City property is 16 not in the job description either, and that's not something 17 that is my understanding anything would be in my job 18 description. 19 Q: The sale of City property is -- is not an 20 aspect of Purchasing? 21 A: No, it's not. 22 Q: Okay. Unless it's obsolete equipment or 23 something like that? 24 A: Only obsolete -- obsolete or surplus 25 equipment.

1 Q: Sir, I just want to deal with one (1) 2 document, if -- if we could, and this isn't in your 3 materials, it's actually at Tab 41, Volume 2 of Irene Payne's 4 documents. 5 MADAM COMMISSIONER: We'll get that for you. 6 Tab 41? 7 MR. HUGH MACKENZIE: Yes. 8 9 CONTINUED BY MR. HUGH MACKENZIE: 10 Q: Do you have that document, sir? 11 A: Yes, I do. 12 Q: Begdoc 29280. It's a City of Toronto 13 Information Technology service branch request for proposal, 14 do you see the front page of that? 15 A: Yes. 16 Q: Okay. Have you ever seen that document? 17 A: No. 18 Q: Okay. So in preparing for today, that 19 document wasn't brought to your attention? 20 A: I don't believe I've seen this document. 21 Q: Okay. That's fine. 22 MADAM COMMISSIONER: Is it in his materials? 23 MR. HUGH MACKENZIE: It's -- it's not in his 24 materials but it's -- it was alleged to have been a City of 25 Toronto document so I just wanted to see if this gentleman

1 was aware of it. 2 3 (BRIEF PAUSE) 4 5 CONTINUED BY MR. HUGH MACKENZIE: 6 Q: Now, sir, yo -- you were appoint -- 7 appointed to your position at Purchasing and Material 8 Management in April or May of 1998 and at the time of your 9 appointment, there was just you in the new group? Is that -- 10 is that the situation and then you had to staff around you? 11 A: I was the new director and I had staff 12 that were scattered amongst the various municipalities and so 13 I did have staff. 14 Q: Okay and was it you, sir, who -- who 15 derived or developed the organizational structure that you 16 were going to have in the new City? 17 A: It was developed not only by myself, it 18 was developed with input from staff, from departments and we 19 had also, at the time, hired an outside consultant, Johnson 20 Smith International, to develop the new structure. 21 Q: Okay and did you participate in the -- 22 the writing of the job descriptions or the approval of the 23 job descriptions, position schedules? 24 A: I'm sorry, which position schedules are 25 you talking about?

1 Q: You have, I believe, six (6) direct 2 reports, is it? Five (5) or six direct reports? 3 A: Yes, six (6). 4 Q: Six (6) and those sp -- six (6) each have 5 job descriptions? Descriptions of the -- of those positions? 6 A: Yes. I think you're talking about the 7 job calls that were issued at the time? At the time they 8 didn't have job descriptions. 9 Q: Okay. 10 A: So I did have input in that. 11 Q: Okay. So you had input in the job calls 12 but there weren't job descriptions, per se, at that point? 13 A: No, not at that point. 14 Q: Okay and at that point in time, sir, were 15 you able to fill all of the positions that reported to you 16 quite readily? 17 A: I think they were filled by July or 18 August that year, yes. 19 Q: Okay. So in 1998? 20 A: Yes, that's right. 21 Q: Mr. Spizarsky, he had been at the City 22 with you? 23 A: Yes, yes. 24 Q: Okay. In 1999, what were his 25 credentials? How long had he worked with you?

1 A: He had worked with me since I became the 2 Director of Purchasing for the former City of Toronto. W -- 3 Q: So that was '89, sir? 4 A: Yes. Yeah, he was there before '89 and 5 he had his designation -- his professional purchasing 6 designation. 7 Q: Okay and that designation, again, sir? 8 I'm sorry, what was it entitled? 9 A: I believe it was CPPO. 10 Q: Okay. Purchasing -- purchasing -- 11 Certified Purchasing Professional of Ontario? 12 A: Public Purchasing Official, I believe. 13 Q: Official? 14 A: Yeah. I'd have to check on that. I 15 don't remember if he had that or if he had the PMAC 16 designation but he did have -- 17 Q: He had a designation -- 18 A: Yes, he did. 19 Q: -- of some kind? Okay and what's the 20 training for that designation? 21 A: There are various courses that need to be 22 taken. The requirements, you know, are dictated by the 23 associations. I don't recall, you know, the complete 24 training that's required to obtain the designation. 25 Q: Is -- is it a program that takes place

1 over a number of years? Are there a specified number of 2 courses or do you know? 3 A: I know that there is a specified number 4 of courses and as far as the length of the program, I'm not 5 sure. 6 Q: Okay and do you know whether that course 7 has -- has exposure to leasing or specifically leasing of 8 computer hardware or software, as a either course or aspect 9 of a course? 10 A: I don't recall that it did then, I'm not 11 sure if it does now. And I'm just going from memory from 12 having taken a look at some of the courses that they've 13 offered when I've seen information that comes across my desk. 14 But -- 15 Q: I understand, sir, that Mr. Beattie also 16 worked with you at the City of Toronto? 17 A: Yes, Mr. Beattie reported to Mr. 18 Spizarsky, at the time. 19 Q: Okay. And when was he hired into the new 20 position? 21 A: Well, there was -- there was no hiring 22 process for the buyers. The buyers -- they were slotted per 23 se in the new buyer positions. And I don't believe that 24 their positions have been harmonized to this day. 25 Q: Okay. To this day?

27
  1                 A:  Yes.
  2                 Q:  So, there's not a new job description that
  3  responds or relates to the positions as they exist today?
  4                 A:  Well, the new buyers are being hired under
  5  the former City of Toronto job description.  The buyers that
  6  were there before, are still under the former municipality's
  7  job descriptions.
  8                 Mr. Beattie was under the former City of
  9  Toronto.
 10                 Q:  Okay.  Would those job descriptions
 11  reflect how the purchasing function was performed in the old
 12  Cities?
 13                 A:  I believe they would.  I haven't looked at
 14  them for awhile.  What they would reflect is the
 15  responsibility of the buyer in the position, not necessarily
 16  how the function was -- was undertaken in the former Cities.
 17                 Q:  Okay.  So, what you're saying is there
 18  would be some fair level of consistency among the buyer
 19  position job descriptions?
 20                 A:  I would say so.  I'd have to review them
 21  again, but, I would say yes, as far as the duties of the
 22  buyers.
 23                 Q:  You talked yesterday about a problem --
 24  about losing staff.  Was that also happening in 1998 and
 25  1999, a fairly high level of turnover?  People going to other

28
  1  Cities, people leaving or going to industry, et cetera?
  2                 A:  In 1998 and 1999, there was staff leaving,
  3  but, it was mostly due to incentive packages because the City
  4  was restructuring.  I'd say probably around 2000 was when it
  5  was noticeable that the people who had gotten these new
  6  positions were starting to leave.
  7                 Q:  Okay.  And in 1999, was your view that the
  8  function was not being performed as well as you had expected? 
  9  Was there chaos in terms -- or problems in terms of not
 10  having purchasing or financial information systems up and
 11  operating effectively?
 12                 A:  Well, having to operate on different
 13  systems was challenging.  But, what we did, from what I
 14  remember, is we did shut down a few of the systems and we --
 15  I believe by 1999 and prior to amalgamation, I don't recall
 16  if we had only two (2) or three (3) of the purchasing
 17  systems.
 18                 And that's what I'm referring to.  I can't
 19  recall, you know, what the other systems were doing.  But, I
 20  believe we only had three (3), we had amalgamated them all
 21  into three (3) prior to going onto the SAP.
 22                 So, we -- we were trying to make it easier to
 23  function by going to less systems.
 24                 Q:  One (1) of the duties in your job
 25  description, sir, just sorry to take you back to that.  But,

1 on the right-hand column, the second -- 2 MADAM COMMISSIONER: Tab 35 is it? 3 MR. HUGH MACKENZIE: Yes, Tab 35, 40410. 4 5 CONTINUED BY MR. HUGH MACKENZIE: 6 Q: It talks about your duty, sir, of 7 providing ongoing leadership, do you see that? 8 A: Sorry, which point was that? 9 Q: On the right hand column, second point. 10 It starts: 11 "Provides ongoing leadership." 12 And it's -- it talks about: 13 "Developing personnel, so that employees 14 are competent and qualified to ensure 15 adequate service levels." 16 A: That's correct. 17 Q: Okay. And adequate service levels were 18 -- were -- were something that was -- was very important in 19 the -- in the purchasing function, isn't that correct? 20 A: Yes. 21 Q: As what you're trying to do is provide a 22 -- a seamless -- effectively seamless purchasing process, 23 that works according to the -- the plans, the bylaws and the 24 procedures that have been established? 25 A: Yes, I would say that's right.

1 Q: And would you agree that there's an 2 aspect of that is the -- the outreach that's talked about in 3 the job description, with the Department itself? You 4 mentioned a few minutes ago you went out and assisted in 5 training the Department, in terms of purchasing? 6 A: Right, in terms of the process, yeah, the 7 purchasing process, yes. 8 Q: Right, hmm hmm. So, you're trying to 9 train your staff, and in post-amalgamation was that a 10 problem. Did you find that the level of training development 11 or the standards of operation of Purchasing staff varied? 12 A: Can you explain that, I'm not quite sure 13 what you're asking. 14 Q: After amalgamation, you're trying to set 15 up a purchasing function that operates seamlessly, as 16 probably it did earlier for you when you were operating the 17 City of Toronto function; right? 18 A: Yes. 19 Q: Okay. And many of the people that you 20 have are coming in from other Cities; is that fair? 21 A: That's correct. 22 Q: Okay, and those people, some of them were 23 better trained than others, or better -- more knowledgeable 24 of the process than others. Is that a fair conclusion? 25 A: Well, I think the processes were

1 changing, so I think some of them might have had larger 2 volumes or exposed to different commod -- or not different 3 commodities, some commodities they might not have been 4 exposed to, more so than others. 5 But as far as better trained than others, I 6 would have to go back and see, but I think they all had 7 training. 8 Q: Hmm hmm. Were you satisfied with the 9 skill level of the people in the staff, post-amalgamation? 10 That's -- or did you feel that there was a necessity to send 11 them out for training and development? 12 A: Well, I think training and development is 13 always important, whether it was before amalgamation or after 14 amalgamation. 15 So, you know, I mean I had staff before 16 amalgamation that were training as buyers, and I also had 17 some after amalgamation. So, I think -- I can't say if it 18 was more important before or after, I think it's always 19 important. 20 Q: Okay, but at that point in time, 21 amalgamation when -- as you mentioned, the -- the -- the 22 workload was -- was quite overwhelming, isn't that -- I think 23 that was your conclusion. And you have new staff coming from 24 various backgrounds, other Cities, other policies and 25 procedures, and with that amount of work, were you able to

1 send people out for training and development? 2 A: I can't -- I don't think we were able to 3 spare people to go on a lot of training and development. 4 Q: And are you able to do that now, based on 5 what you told us previously, about the kind of manpower 6 shortages that you are experiencing? 7 A: At the current time we cannot spare a lot 8 of people to go on that, and it's because of these shortages. 9 Q: And would you agree with me that in 1989 10 and 1990, that was a problem? 11 12 (BRIEF PAUSE) 13 14 A: I'm just trying to think, because we were 15 busy trying -- or we were busy amalgamating the -- the 16 purchasing function and setting new policies and procedures 17 in place, you're probably correct that staff didn't have 18 enough time or as much time to go out for training 19 development but I don't recall how many went, what courses 20 they went to. That's something I'd have to research. 21 Q: In 1989 or 19 -- excuse me. In 1998 or 22 1999, what departmental training activities did your division 23 put on? For instance, was there a Purchasing and Material 24 Management training activity performed for Information and 25 Technology division?

1 A: I can't recall if there was one 2 specifically for that division but we did -- and I don't 3 remember exactly when but there was a group that was headed 4 by my manager of client services at the time where -- whereby 5 representatives from all the divisions in the City would meet 6 and I don't recall the frequency of that now. 7 And it was to discuss new procedures in place 8 and if training was required, it would be requested through 9 that group and I know that there was training supplied on the 10 new financial information purchasing manual and at the same 11 time, they were also made aware of new policies and 12 procedures and -- and that was made available through that 13 group. 14 Q: So Purchasing and Material Management 15 training was available upon request by department 16 representatives? 17 A: Well, we did the initial training when 18 the new systems were implemented and there was some training 19 or advising the departments through correspondence, through 20 meetings, as to what the new procedures and after that it was 21 on request, after the initial training. 22 Q: Okay but you're not aware of any training 23 that was done in -- in Information and Technology division or 24 to Lana Viinamae or any of the people working for Mr. Andrew? 25 A: I can't recall. It might have happened

1 but I'd have to go back and ask my staff and try to see, you 2 know, who was trained at the time, if it -- if there was any 3 request. So I can't recall. 4 5 (BRIEF PAUSE) 6 7 Q: Tab 43 in your materials, sir, is an org 8 chart, it's -- or the organization chart for the finance 9 department and your box is under the -- the box entitled 10 "Chief Financial Officer and Treasurer" and there's a span of 11 control, there, of seven (7). So that's a span of control of 12 seven (7) line functions, each of those had fairly 13 substantial staff, is that correct? 14 A: That's correct. 15 Q: Okay. Were there, as well, staff 16 positions reporting to Ms. Liczyk? The -- the box of the 17 Chief Financial Officer and Treasurer at that point in time. 18 A: I'm sorry. Could you repeat that? 19 Q: The -- the 20 MADAM COMMISSIONER: Was there staff also 21 reporting to Ms. Liczyk? You mean apart from the seven 22 (7) -- 23 MR. HUGH MACKENZIE: Yeah. There's -- the -- 24 these -- 25 MADAM COMMISSIONER: Right.

1 2 CONTINUED BY MR. HUGH MACKENZIE: 3 Q: These are line positions that are marked 4 here. 5 A: Yeah. 6 Q: I'm wondering if there were what -- what 7 are called staff positions, as well. For instance, special 8 projects advisor, legal advisor, programs advisor, something 9 like that. Do you know of additional reports to Ms. Liczyk? 10 A: Well -- 11 Q: Besides an assistant. 12 A: All I know for sure is the assistant. As 13 for others, I'm not -- I don't know for sure. 14 Q: Okay. Was it easy to -- for you, sir, to 15 -- to get in touch with Ms. Liczyk in 1999, say, to discuss 16 matters? 17 A: Yes, I -- I'd say she was accessible. 18 Yeah. 19 Q: My understanding was that she was an 20 extremely busy woman, worked tremendous hours, is that your 21 understanding, as well? 22 A: Yes. And she was and often times I would 23 call her early in the morning, if I needed to contact her and 24 vis-a-versa. 25 Q: Would you contact her late at night?

1 A: I don't recall if -- if I ever did. But, 2 I do know that if I had to, I could. 3 Q: Weekends? 4 A: I do recall speaking with her on weekends, 5 a few times, yes. 6 7 (BRIEF PAUSE) 8 9 Q: Let's talk about the Councillor's computer 10 lease, sir. The roll out of the Councillor's computer lease 11 was the very beginning of January, 1998, is that correct? 12 A: I believe so, yes. 13 Q: And my understanding is that all of the 14 equipment, under that lease, was returned at the three (3) 15 year mark, is that your understanding, as well? 16 A: I don't know for sure. 17 Q: My understanding is that there were no 18 penalties or "Gotchas", to use Bombardier's terminology 19 ascribed to that program, at the end -- you have no 20 information with respect to that? 21 A: I have no information as to when they were 22 returned. It was -- quotes for the leasing were obtained, 23 purchase orders were issued. 24 Q: Sir, who was involved in the -- in the 25 quote process for the Councillor's computer leases?

1 A: I believe it was Mr. Beattie. 2 Q: My understanding was that it was Mr. 3 Spizarsky, have you any information with respect to that? 4 A: Mr. Spizarsky, was Mr. Beattie's manager, 5 at the time. Mr. Beattie reported to Mr. Spizarsky, but, my 6 understanding was that the quotes were obtained from Mr. 7 Beattie as a buyer. 8 Q: Okay. So, is it a standard practice or 9 process to obtain quotes as in the circumstances for the 10 Councillor's computer lease, over the phone? 11 A: At the time, the time frame to implement 12 the -- or to have the computers come in, was very short from 13 the time that we got the request. 14 And it -- it is feasible that in such -- at 15 the time, during -- because such a short time, that the buyer 16 could get quotes over the phone. 17 But, I do believe, that Mr. Beattie had 18 recorded information. The buyers would have to record the 19 information on the quotes that they got, along with the 20 description. 21 So, there was a process in place, and there 22 still is that if they have to get quotes over the phone, they 23 can. 24 Q: Sir, have you read the auditor's report on 25 the -- on the Councillor's computer lease. The auditor

1 report that was dated January 28th, 2002? 2 A: I don't have it with me here and I haven't 3 reviewed it in awhile, but, I have read it, yes. 4 Q: Can you tell us what the conclusions were, 5 with respect to that report? 6 MS. LILY HARMER: Madam Commissioner, the 7 document hasn't been put in the witness material. And I 8 certainly don't have a copy in front of me, and I don't know 9 how this witness can be asked to recite a conclusion of 10 something that he didn't know was going to be put to him. 11 MADAM COMMISSIONER: Do we have that? Is that 12 in any of the documents? 13 MR. DAVID MOORE: I think, going from memory, 14 in the Council minutes of February 2002, that go on for some 15 seventy (70) or eighty (80) pages, I think subsumed within 16 that document, there are a series of reports. 17 And I have a recollection of reading something 18 about this issue in that material. It may well be that 19 report. I'm going from memory. That -- that document is one 20 (1) of the last documents in Volume 2 of the Mayor's Book of 21 Documents. 22 MADAM COMMISSIONER: Mr. MacKenzie, do you 23 anticipate that you'll still be asking questions at 11:30, by 24 the break, because if you are what I would recommend is why 25 don't we save this question or this series of questions until

1 the break, and if we can find the document, then Mr. Pagano 2 can take a quick look at it, see if it's quick enough for him 3 to be able to refresh his memory on it. 4 MR. HUGH MACKENZIE: Sure, that's fine, 5 Commissioner. 6 MADAM COMMISSIONER: Would it be 7 objectionable to you to tell us what the questions are, so 8 that Mr. Pagano can be reading it for that purpose, but you 9 don't have to if you don't want to, I'm not trying to force 10 your hand on that, but if it's a long document, it might make 11 it a little easier for him to find. 12 Or I'm quite happy to have you share that with 13 Ms. Harmer at the break, if you want? 14 MR. HUGH MACKENZIE: Yes, I'd be -- I'd be 15 happy to share it -- 16 MADAM COMMISSIONER: Oh, all right, thank 17 you. 18 19 CONTINUED BY MR. HUGH MACKENZIE: 20 Q: Sir, that my understanding was that there 21 were telephone quotations taken from a number of -- of 22 prospective suppliers by a representative of Purchasing and 23 Material Management; is that your information? 24 A: That's -- yes, that's my information. 25 Q: My question then is, is it appropriate

1 under the Purchasing Material Management Guidelines, Policies 2 and Procedures, to -- to take quotes over the phone as they 3 were for that -- that lease? 4 A: At that time, yes, we were working under 5 the -- the policies of the former City of Toronto. 6 Q: Okay. And the documentation that was in 7 affect to perform that telephone process, was appropriate in 8 your view, or in the view of your Purchasing Department? 9 A: I didn't view the document -- 10 documentation. Are you talking about the documentation as 11 resulting from the process? Or -- 12 Q: I understand that there was sufficient 13 documentation sent over that I thought it was Mr. Spizarsky, 14 but let's say it's Mr. Beattie, someone from Purchasing set 15 out to -- to take telephone quotes. Were there any questions 16 or issues with respect to the documentation provided to 17 Purchasing? 18 A: There was none that was brought to my 19 attention. 20 Q: Were there any issues with respect to the 21 quotations received and the selection of MFP, as the -- the 22 -- the lease company, for those computers? 23 A: There were no issues brought to my 24 attention, that I can recall. 25 Q: Okay.

1 (BRIEF PAUSE) 2 3 Q: Sir, you mentioned that -- that you don't 4 -- or Purchasing doesn't sit down with a Client Department, 5 to discuss their -- their -- their actual needs, but only 6 with respect to the purchasing process? 7 A: That's correct, the need is determined by 8 the Client Department. 9 Q: Okay. Would it be fair to say that the 10 knowledge of the Department representative with respect to 11 the purchasing process, is generally lower or substantially 12 lower than that of Purchasing? 13 A: The process as far as issuing quotations 14 and tender calls, the policies that -- that -- that have to 15 -- that go hand in hand with that. The -- the closing of 16 tenders, the summarizing the results, I would agree, yes, 17 yeah. 18 Q: Okay. 19 MADAM COMMISSIONER: What do you mean, Mr. 20 Pagano, by summarizing of results? What does that mean? 21 THE WITNESS: Summarizing is preparing the 22 list of the bidders -- 23 MADAM COMMISSIONER: Okay. 24 THE WITNESS: -- and sometimes they include 25 the pricing where the pricing is warranted, sometimes not,

1 and forwarding that information to the department. 2 MADAM COMMISSIONER: You don't mean the 3 evaluation? 4 THE WITNESS: No. 5 MADAM COMMISSIONER: Okay. 6 THE WITNESS: No, I do not. 7 MADAM COMMISSIONER: Thanks. 8 9 CONTINUED BY MR. HUGH MACKENZIE: 10 Q: So you talked about the fact that there 11 are two (2) components to the RFQ. One being a description 12 of need and the second being boilerplate. 13 A: Yes. Yeah. 14 Q: Okay. Let's go to the RFQ. Tab 13, 15 Volume 1, sir. 16 MADAM COMMISSIONER: Tab 13? I don't -- 17 MR. HUGH MACKENZIE: No, it's at Tab 12. My 18 apologies. 19 MADAM COMMISSIONER: Okay. 20 MR. HUGH MACKENZIE: That tab, sir, starts 21 with a quotation request, 6104. If you turn the next page, 22 6105, is that the start of the RFQ? 23 THE WITNESS: I believe so. 24 MR. HUGH MACKENZIE: The contents of that 25 page, sir, boiler plate?

1 MADAM COMMISSIONER: The second page is it or 2 the first page? Sorry. 3 MR. HUGH MACKENZIE: Excuse me, I just 4 drowned myself. 6105. 5 MADAM COMMISSIONER: 5, thanks. 6 7 (BRIEF PAUSE) 8 9 THE WITNESS: The contents appear -- well, 10 what these contents are just is information that would be 11 supplied by the department. 12 13 CONTINUED BY MR. HUGH MACKENZIE: 14 Q: The introduction, then, would be provided 15 by the department, would it? 16 17 (BRIEF PAUSE) 18 19 A: Yes, I believe it would have. 20 Q: Okay and what, if any, role did 21 Purchasing or representatives of Purchasing have in that 22 first paragraph? 23 A: I can't answer that. My staff might have 24 read it and could have suggested changes. I mean, there were 25 -- my understanding is that there were numerous drafts

1 produced. They could have looked at that. I -- I don't know 2 for sure. 3 Q: Okay and when you say your staff, would 4 that be Mr. Beattie? 5 A: Probably Mr. Beattie and or Mr. Spizarsky. 6 Q: And Mr. Spizarsky perhaps? 7 A: Yeah. 8 Q: Okay. Now, with respect to the 1.1 9 business requirements, and that continues for the next two 10 and half (2 1/2) pages or something approximating that. 11 Would those be a description of need or boilerplate, to use 12 your words? 13 A: No, I would think that this is 14 information that would have been obtained -- that would have 15 been provided by the department as to what their business 16 requirements were. 17 Q: Would there have been input, as there was 18 with the introduction, from Purchasing? From Mr. Spizarsky 19 and or Mr. Beattie. 20 MS. LILY HARMER: Madam Commissioner -- 21 MADAM COMMISSIONER: I don't think he said 22 there was. He said that his staff might have had input into 23 it, not that they actually had. 24 MR. HUGH MACKENZIE: Okay and we'll have to 25 hear that --

1 MADAM COMMISSIONER: Right. 2 THE WITNESS: Yes, that's correct. 3 MR. HUGH MACKENZIE: Okay. 4 MR. HUGH MACKENZIE: Let me just ask you, is 5 Mr. Spizarsky available to us? You mentioned that you'd 6 spoken with him 7 THE WITNESS: No, I -- I -- 8 MADAM COMMISSIONER: He's not a City employee 9 any longer. 10 THE WITNESS: I did not speak with Mr. 11 Spizarsky. I mentioned that I had spoken to Ms. Corbett. 12 MADAM COMMISSIONER: I think, Mr. MacKenzie, 13 if your question is if he's going to be a witness, at the 14 moment he is not listed on any witness list that I've seen 15 and he's no longer an employee with the City. So to the 16 extent that if he's required and we needs to find him, then 17 I'd suggest you speak with Commission Counsel. 18 MR. HUGH MACKENZIE: Okay, thank you. 19 MADAM COMMISSIONER: Okay. 20 21 CONTINUED BY MR. HUGH MACKENZIE: 22 Q: Mr. Spizarsky took early retirement? 23 A: Yes, he did. 24 Q: Did it have to do with health or 25 performance, or was it just one (1) of those post

1 amalgamation package offered acceptance? 2 MADAM COMMISSIONER: Wait, before you answer 3 that. 4 MS. LILY HARMER: I just have difficulty with 5 this line of questioning. I don't -- I don't know why it's 6 necessary for Mr. MacKenzie to ask Mr. Pagano, these 7 questions. 8 And there are information and privacy concerns 9 that I don't -- I can't articulate them right now, in terms 10 of exactly what the Act might require. But, I'm concerned 11 about them and confidentiality issues and I just want to 12 register that concern before we go any further this line of 13 questioning. 14 MR. DAVID MOORE: Can I just say something? 15 Because I -- I have some questions, or anticipate having some 16 questions, not exactly the same as this, but, in connection 17 with Mr. Spizarsky. I was intending to ask, when he retired 18 from the City. I would have thought -- 19 MADAM COMMISSIONER: I don't think when he 20 retired is an issue. I think the question was, did it have 21 to do with health or performance or post amalgamation? 22 MR. DAVID MOORE: Okay. 23 MADAM COMMISSIONER: And the health component 24 might be personal information, the performance would also be 25 a personal information issue, although, I'm certainly willing

1 to hear from Mr. MacKenzie, as to whether or not, he felt 2 there was an issue there, or whether he's throwing out an 3 open ended question. 4 MR. HUGH MACKENZIE: No -- 5 MADAM COMMISSIONER: But, before I hear from 6 Mr. MacKenzie, why don't you finish. 7 MR. DAVID MOORE: Yes, I would have thought, 8 at least based on what I've heard so far, and some of it is 9 new that we weren't aware of before, at least from our 10 perspective. 11 I would have thought, that in order to -- to 12 fully understand what happened in the purchasing process and 13 the RFQ process, for example, that there would have been some 14 inquiry made of Mr. Spizarsky, to get his perspective on what 15 happened and how it happened and why it happened et cetera. 16 I don't believe that he was one (1) of the 17 individuals interviewed by KPMG, so we don't have any 18 information from that source. 19 Fairly, he was the person to whom Mr. Beattie 20 reported, and we see Mr. Spizarsky's name on a number of 21 memoranda. Frankly, there's some documents that I would have 22 thought might be available, that I don't believe are in the 23 database, that presumably he would have had in his file. 24 So, I -- I was intending to ask some questions 25 about the extent to which information was available from Mr.

1 Spizarsky and the extent to which the City looked into that, 2 or made any inquiries, so that it could understand better 3 what happened. 4 Now, that's not -- 5 MADAM COMMISSIONER: I have no difficulty with 6 any of those sorts of questions. Those are all job related. 7 In fact, in his file, would not even be his personal file, 8 whatever information he would have or documents he would 9 have, in that file, would belong to the City, not to him 10 personally, in any event. 11 So, I have no trouble with any of those 12 questions, subject to -- if Mr. Moore has, Mr. Pat Moore, has 13 any comments to make, that maybe I'm not aware of. 14 MR. DAVID MOORE: Yes. 15 MADAM COMMISSIONER: Mr. Moore? Pat Moore? 16 MR. PATRICK MOORE: Thank you, Commissioner. 17 I'd be pleased to speak with Mr. David Moore and any of the 18 other Counsel who may be issued in talking about Mr. 19 Spizarsky. 20 He's not as you've observed, on a witness 21 list, at this point. On the witness list, of course, is Mr. 22 Beattie, and Counsel have Mr. Beattie's documents, I believe 23 and a short summary of his evidence. 24 It's my understanding that Mr. Beattie was 25 closely and personally involved in both the Councillor's

1 lease transaction and in the roll out of the 1999 RFQ 2 process. 3 And so it may be that his evidence will be 4 sufficient for all of us. It may be that it won't be. But, 5 it was our belief that we should start with, Mr. Beattie, and 6 see whether or not an issue with Mr. Spizarsky remains. 7 MADAM COMMISSIONER: I'm not sure if you're 8 saying -- was Mr. Spizarsky ever interviewed then? 9 MR. PATRICK MOORE: He has not yet been 10 interviewed. 11 MADAM COMMISSIONER: All right. So, in terms 12 of -- I think as I mentioned on probably the first day or so, 13 about a hundred people had been interviewed. 14 At that point, Commission Counsel, narrowed it 15 down to about forty (40) who would be required to testify. 16 So, Mr. MacKenzie, I don't know if you were wanting to go 17 much further on this. 18 Would you let me know what -- 19 MR. HUGH MACKENZIE: Not much further. I -- 20 Mr. Spizarsky, as I understand it, was an active participant 21 in the drafting of the RFQ, as was Mr. Beattie. 22 My understanding is, that the RFQ as a 23 particularly important document in the purchasing process, is 24 a central and sufficiently central figure that we should be 25 able to ask him questions, and if we can't ask him directly,

1 to ask them indirectly in order to obtain whatever 2 information we possibly can. 3 MADAM COMMISSIONER: Well, I don't think 4 there's any -- I wasn't aware that he was involved in the 5 drafting of the RFQ, and the City is shaking its head as 6 though they don't seem to be aware of it either. You may 7 have information that is coming to us now for the first time. 8 MR. HUGH MACKENZIE: Okay. 9 MADAM COMMISSIONER: But in terms of being 10 able to ask Mr. Pagano any questions having to do with Mr. 11 Spizarsky's involvement in the drafting of the RFQ, I have no 12 difficulty with that whatsoever. The rules -- the strict 13 rules of hearsay evidence don't apply here and I don't have a 14 problem. 15 The issue arose because you asked whether Mr. 16 Spizarsky took early retirement because of health performance 17 or a post-amalgamation and I think that the health and the 18 performance part that has the City concerned, in terms of 19 your question. 20 MR. HUGH MACKENZIE: I accept that, I have no 21 problem -- 22 MADAM COMMISSIONER: Okay. 23 MR. HUGH MACKENZIE: -- I'll retract the 24 question -- 25 MADAM COMMISSIONER: All right.

1 MR. HUGH MACKENZIE: -- and -- and move on. 2 MADAM COMMISSIONER: Okay. 3 4 CONTINUED BY MR. HUGH MACKENZIE: 5 Q: But, sir, in terms of the business 6 requirements, point 1.1. 7 8 (BRIEF PAUSE) 9 10 Q: You have told us that -- that that 11 generally would have come from the Department. There's two 12 and a half (2 1/2) pages. 13 A: Yes, I believe so. 14 Q: And you've also told us that you 15 personally had -- had no involvement in the -- the 16 preparation of this document, or at no time reviewed this 17 document; is that fair? 18 A: I do not ever see -- remember seeing it 19 before it was issued or after. 20 Q: Okay. Do you recall hearing from either 21 Mr. Spizarsky or from -- from Mr. Beattie, that there was a 22 $40 million plus leasing transaction that was being RFQ'd? 23 A: I can't recall specifically, but I do 24 know that Mr. Spizarsky had always kept me informed as to 25 what, you know, what was being issued, and generally as to

1 what they were working on. Not everything, if it was you 2 know, something minor, no, but I don't recall any specific 3 discussions with him, but I'm sure that they must have told 4 me that they were working on this with IT. 5 Q: Okay. Were you aware, sir, though, that 6 there was a -- a large dollar ticket item that involved 7 leasing at that period of time, in May of 1999? 8 A: I might have, I can't say for sure. 9 Q: And if you had been made aware of that, 10 would you have had concerns or issues with respect to the 11 fact that it was a computer lease, or a lease for computer 12 hardware and software? 13 A: No, I don't think I would have. 14 Q: Okay. What if any, special training, did 15 Mr. Spizarsky have with respect to leasing? 16 A: I don't recall if he had any. 17 Q: What if any, leasing -- computer leasing 18 activity had he been involved in, to the best of your 19 knowledge, prior to May of 1999? 20 A: I can't recall right now, he might have. 21 I don't know if he was involved with the other leasing that 22 you have mentioned. I'm not sure. 23 Q: You talked yesterday about the word that 24 we find at 1.1.5, 1.1.6 and elsewhere in this, the word being 25 mechanism. Do you see that, 1.1.5:

1 "The Respondent must explain the 2 mechanism." 3 And the same wording used at 1.1.6? 4 A: Yes, I see that. 5 Q: Is -- is -- is that a wording that is 6 atypical of the purchasing experience? 7 8 (BRIEF PAUSE) 9 10 A: I guess it would have to depend on the 11 nature of the purchase, I wouldn't say it's used in every 12 document that we issue. 13 Q: But you've seen it before in documents or 14 leases have you? 15 A: I can't recall that I have. I really 16 can't recall. 17 Q: In this document there is -- there is no 18 definition of a procurement sensitive period. Is there a 19 reason for that, or is it an oversight? 20 A: Can you explain what you mean by 21 procurement sensitive period? 22 Q: Well, we've had a bit of inconsistency 23 about that but -- 24 MADAM COMMISSIONER: Well, we've been calling 25 it a blackout, I think is --

1 MR. HUGH MACKENZIE: A blackout. 2 MADAM COMMISSIONER: -- maybe the way you put 3 it. Have you heard us talk -- have you heard any talk -- 4 THE WITNESS: Yes, I have. 5 MADAM COMMISSIONER: -- of the blackout 6 period? 7 THE WITNESS: Yeah. 8 MADAM COMMISSIONER: That's -- 9 THE WITNESS: I have referred to that term. 10 MADAM COMMISSIONER: Yeah. 11 MR. HUGH MACKENZIE: Okay. 12 13 CONTINUED BY MR. HUGH MACKENZIE: 14 Q: That's -- that's what I mean by the -- the 15 terminology by the City has been procurement sensitive 16 period. 17 A: Right. 18 Q: Okay. So in terms of blackout, there's no 19 description or definition in the materials, the RFQ 20 boilerplate, with respect to that in the terms and 21 conditions. Is there a reason for that? 22 A: Well, it's something that I don't think 23 we've ever included and I think in the purchasing process, 24 it's understood that once a submission is made the evaluation 25 is done and there really is no need to contact the bidders at

1 that time because you're basing your -- your evaluation on 2 the document that has been supplied. 3 Q: In your policy manual for Purchasing and 4 Material Management, is there a section or some description 5 of a blackout period? When it extends for? What period it 6 starts, what date it stops or anything to that effect? 7 A: No, I don't believe there is in the draft 8 document. 9 Q: Okay and what is -- is there a practice 10 with respect to a blackout period at -- in your purchasing 11 division? 12 A: As far as my -- my division, once a 13 quotation or a proposal or a tender is closed, it's not 14 unusual that a bidder would call to find out when the 15 evaluation would be completed and you know, my staff would 16 give them information. You know, if it's in process and it's 17 expected to be completed by such and such a date. 18 You know, as I explained yesterday or whether 19 it's being reported for award to Committee and Council, my 20 staff will give them the detail but that is about it. I 21 wouldn't expect my staff to say I'm not talking to you 22 because you've submitted your proposal. 23 The information would be standard information. 24 It wouldn't be anything that would be concerning the 25 evaluation that's going on.

1 Q: But sometimes, sir, the prospective 2 supplier knows better -- the people in the department so what 3 I'm wondering is, is there any description in your purchasing 4 material or your purchasing policies or practices or 5 guidelines setting out what constitutes a blackout period? 6 A: I -- I can't recall that we do. No, I 7 believe we don't. We don't. 8 Q: Okay. Are there any sort of rules of 9 thumb or practices of which you are aware, sir, with respect 10 to a blackout period? 11 A: Well, I think I explained that the 12 practice is that once the documents are received, there 13 really is no need to contact the suppliers and the suppliers 14 understand that there's an evaluation process, as with any 15 purchasing process, and that once a decision is made, they're 16 -- you know, they can find out at that time what the decision 17 is. 18 I don't know of anybody who has a specific 19 blackout period in -- in their procedures. I might be wrong. 20 Q: But certainly you didn't have one? 21 A: No, there's nothing in there. 22 Q: Okay and -- 23 MADAM COMMISSIONER: Are you -- I'm sorry, 24 are you saying that in terms of if we were to look at 25 purchasing divisions or departments in other municipalities

1 or in the other governments, that there would not be anything 2 in their procedures or policies or manuals with respect to 3 blackout periods? Is that what you're saying? 4 THE WITNESS: Well, -- 5 MADAM COMMISSIONER: Or -- 6 THE WITNESS: I -- I haven't surveyed all 7 other governments, but I have spoken to some of the other 8 area municipalities and they've advised me that they don't 9 have any such clause about a blackout period. I think a lot 10 of them follow the same procedures as what we are following 11 that once it's closed, it's evaluated and there really is no 12 need to contact the supplier unless there's sp -- some 13 specific clarification that's minor but otherwise -- 14 MADAM COMMISSIONER: As I understand what, Mr. 15 MacKenzie, is sort of generally asking about, is if your -- 16 if your staff is aware of say blackout periods. 17 And your staff knows that there is no need to 18 contact the suppliers or the bidders, but, your staff deals 19 with that all the time, and they've had training on 20 purchasing and that kind of thing. 21 But, somebody from another department may only 22 put something out to tender every now and then. Maybe once 23 every few years even and so, how would they know that there 24 is anything even called a blackout period, or procurement 25 sensitive period or anything like that?

1 That's certainly what I would be interested in 2 knowing -- 3 MR. HUGH MACKENZIE: That's it, Commissioner. 4 MADAM COMMISSIONER: -- and I think that's 5 where Mr. MacKenzie, is going. How would they know? 6 THE WITNESS: Well, I guess we rely on the 7 departments that if they're going to have staff that are 8 going to be dealing with purchasing issues, that they are 9 made aware of the purchasing process and procedures and they 10 can do that by asking us to give them some training. 11 Otherwise, you're right, they may not know. 12 MADAM COMMISSIONER: How would they know to 13 ask that question, if they don't know anything about 14 purchasing? 15 If I don't know anything about purchasing and 16 I'm working in one (1) of the departments in the City, and my 17 boss tells me to do an RFQ or an RFP, I don't really know 18 what the difference is, but, I contact you or your staff, and 19 I say, can you give me a little bit of a training thing, they 20 might give me that. 21 But, I might not know to ask them, is there a 22 time when I'm not supposed to be speaking with this people? 23 Is there a time when they're not supposed to be contacting 24 me? 25 THE WITNESS: Yeah, I would rely, I guess, on

1 my staff to advise them of that, but, what happens in most 2 cases, if they don't know they do ask. But, I -- you know, 3 you do have a good point that unless they ask, they might not 4 be told. 5 6 CONTINUED BY MR. HUGH MACKENZIE: 7 Q: What would your staff tell them though, 8 sir, I think is the issue? I mean if you don't have any 9 guidelines or -- or policies or practices with respect to 10 that point, what would your staff tell them? 11 A: Well, my staff are purchasing 12 professionals and I would expect that they know that during 13 an evaluation period, they really should not be speaking or 14 dealing with suppliers, as far as, you know, changing 15 anything in the documents that have been submitted. 16 You know, and if they have minor 17 clarifications, you know, that might be okay, depending on 18 the nature of it, that sort of thing. So, I would rely on my 19 staff, as professional purchasing people to advise them 20 accordingly. 21 Q: But, there are no guidelines to that 22 effect, is that what you're telling us? 23 A: No, there aren't -- there aren't. 24 Q: Sir, a point -- 1.1.20, that's the 25 flexibility term. Do you see that? At 6107 is the Begdoc

1 number. 2 3 (BRIEF PAUSE) 4 5 A: Yes, I see that. 6 Q: Okay. Now, when you and Mr. Pat Moore, 7 discussed that earlier, you indicated that that would cause 8 you some concern? 9 MADAM COMMISSIONER: I think it was with 10 respect to 1.1.21. 11 MR. HUGH MACKENZIE: Oh, okay. 12 13 CONTINUED BY MR. HUGH MACKENZIE: 14 Q: What if any concern would you -- would you 15 have with respect to 1.1.20, sir? Deferral of payments? 16 A: I don't know if I would have had any 17 concern with that. That's really a payment issue, not a 18 purchasing matter. 19 Q: Okay. So, if the -- if it were a three 20 (3) year term and payments were extended over four (4) years 21 under the lease, that would not be a purchasing issue? 22 A: That's not what the clause says so -- the 23 arrangements for payment would not be something that I would 24 be involved in. 25 Q: Okay. So, that's not a purchasing issue,

1 then? 2 A: I believe not. 3 Q: It's described there: 4 "From time to time the City may require 5 payment flexibility in terms of deferring 6 payments into a future fiscal year." 7 That's not a purchasing issue? 8 A: Well, I think, well, in my mind, the issue 9 there is how the payments will be made and I would assume 10 that that's something the department would have discussed 11 with the appropriate staff whose involved payments. 12 And it would be taken into account in the 13 evaluation, I would hope. 14 Q: Do you know if it were taken into the 15 evaluation, sir? 16 A: No, I do not. 17 Q: 1.1.21: 18 "The City may from time to time negotiate 19 separate corporate license agreements, for 20 major software acquisitions, and expects 21 the Respondents to incorporate these into 22 costs into a lease agreement." 23 Was there something in the purchasing 24 guidelines that would be offended by that paragraph, sir? As 25 they existed in '99?

1 A: No, I believe not. But I think the 2 guidelines focus on the process. No, I don't think there 3 would have been anything in the guidelines. 4 Q: Okay. So, this wouldn't offend, 1.1.21 5 would not offend the purchasing guidelines or practices? 6 7 (BRIEF PAUSE) 8 9 A: I don't think my staff would have been 10 able to determine whether or not that would have been of a 11 concern at the time. 12 Q: Okay. Sir, if we could go on to Begdoc, 13 same tab, Begdoc 6108, point number 2, "Instructions to 14 Respondents", would that constitute a description of need, to 15 go back to your terminology, or boilerplate? 16 17 (BRIEF PAUSE) 18 19 A: Some of this is boilerplate, where -- and 20 in cases where this is included in the draft and my staff 21 might not repeat it in the document. 22 Q: Would some of it not be boilerplate, sir? 23 24 (BRIEF PAUSE) 25

1 A: Well, the wording might be a little bit 2 different than what we normally use. I don't recall that we 3 put 2.3 as part of the boilerplate. 4 Q: But that doesn't in any way offend a 5 purchasing guideline, does it? That particular 2.3? 6 A: No. 7 Q: Okay. 8 A: No. 9 Q: Anything other than that, that is 10 atypical, but not boilerplate? 11 12 (BRIEF PAUSE) 13 14 A: No. 2.1, I'm not sure what the wording 15 that we would normally put, but, no, there's nothing there. 16 Q: Okay. The next page, sir, Begdoc 6109, 17 that's a form entitled, "Supplier Name File Update". What's 18 that document, sir? 19 A: That's included in the document so if the 20 supplier has had a name change or an address change, or the 21 commodity that they -- that they supply us, or want to bid 22 on. It's to ensure that we have the most updated information 23 in our supplier bidders lists. 24 Q: Okay, so in terms of whether or not that's 25 a description of need or boilerplate, it's more boilerplate?

1 A: Yes, it's just -- 2 Q: Okay. Next document 6110, sir, "Notice 3 of No Bid"? 4 A: That's correct. 5 Q: Is -- is that a boilerplate document? 6 A: This is a form that we include so that 7 the supplier can advise us why they're not bidding, and 8 whether they wish to stay on the list, it's on the bidders 9 list, it helps us to reduce the list so that we're not 10 sending it to suppliers who aren't interested in bidding on 11 that commodity. 12 Q: Okay, so that's an update to your records 13 form? 14 A: Yes, it is. 15 Q: Okay. The next one (1), "Canadian 16 Content", that you would agree is boilerplate? 17 A: Yes, it is. 18 Q: Okay. 19 A: Policy. 20 Q: Same with "Workers' Rights Summary 21 Sheet", sir? 22 A: Yes, it is. 23 Q: The next page, 6613, "Worker's Rights". 24 That's boilerplate? 25 A: Yes.

1 Q: 6614, that's a continuation of the 2.1 to 2 5 on the earlier page? 3 A: That's right. 4 Q: And in terms of those "Instructions to 5 Respondents", sir, are any of those not boilerplate? 6 7 (BRIEF PAUSE) 8 9 A: This is information that's included in the 10 documents that go out, to the best of my knowledge. The 11 wording might not be exactly the same. 12 Q: Okay but nothing on that page, to the best 13 of your knowledge now, sir, offended the purchasing 14 guidelines at that time? 15 A: I wouldn't think it did, no. 16 Q: Is there something that prevents you from 17 giving a yes or no answer, sir? 18 A: Well, I -- I guess it's hard to remember 19 what all the guidelines were at that point. I mean, it was 20 back in 1999 but I don't -- I don't think that this would 21 have caused any concern from my staffing, keeping in mind I 22 didn't use this and compare it to what the guidelines were. 23 Q: Okay. 2.7 deals with the City's right to 24 reject and it says there: 25 "The City is not obligated to accept the

1 quote with the lowest price." 2 Okay and you mentioned that a little earlier 3 because the -- the fifth bullet point deals with ensuring the 4 best possible price for purchases made by the City and that's 5 bullet point 5 from your job description, job profile, at Tab 6 35. We don't need to go back to it, sir but what percentage 7 of purchasing activity in 1999 was not award to lowest priced 8 bidders -- 9 MADAM COMMISSIONER: In an RFQ -- 10 MR. HUGH MACKENZIE: -- in an RFQ. 11 MADAM COMMISSIONER: -- as opposed to an RFP? 12 MR. HUGH MACKENZIE: Thank you, Commissioner. 13 14 CONTINUED BY MR. HUGH MACKENZIE: 15 Q: In an RFQ? 16 A: I'd have to go back and check our records 17 on that but the reason that sentence is put in there is that 18 bidders realize that it's not just the lowest price. It's 19 the lowest price meeting specifications and requirements when 20 we go through the evaluation process. 21 Q: And those specifications are as set out in 22 the RFQ? 23 A: In the documents, yes. 24 Q: But can you give us an idea with respect 25 to RFQ's in 1999, what proportion or percentage were lowest

1 price acceptances? 2 A: Lowest price meeting specifications? 3 Q: Yeah. 4 A: I don't have that data on me. I would say 5 that the majority would have been to lowest price meeting 6 specification unless there was some other problem. 7 Q: We heard earlier from an MFP 8 representative that 90 percent would be his expectation up -- 9 on RFQ's. That lowest price would win 90 percent of the 10 time. Is that a reasonable assessment? 11 A: I'd say, yeah or maybe even higher. Now, 12 I'm talking about lowest price meeting specifications and 13 requirements. 14 Q: Right. 15 A: If somebody submitted a lowest price and 16 they didn't meet one of the requirements or the policies or 17 the specifications, then they would not be awarded. 18 Q: Okay but generally 90 percent or more? 19 A: I would agree, yes. 20 Q: Okay. Now, sir if you could turn, again. 21 We're still at the same tab, the RFQ. Begdoc 6116 and that's 22 a chart. 23 MADAM COMMISSIONER: I just noticed the time, 24 Mr. MacKenzie. Would it be -- 25 MR. HUGH MACKENZIE: This is --

1 MADAM COMMISSIONER: -- good time to break? 2 MR. HUGH MACKENZIE: -- a perfectly fine -- 3 yes. Thank you, Commissioner. 4 MADAM COMMISSIONER: We'll break until ten 5 (10) to. 6 THE REGISTRAR: The Inquiry will recess until 7 ten (10) to 12:00. 8 9 --- Upon recessing at 11:28 a.m. 10 --- Upon resuming at 11:51 a.m. 11 12 THE REGISTRAR: The Inquiry will now resume, 13 please be seated. 14 15 CONTINUED BY MR. HUGH MACKENZIE: 16 Q: Mr. Pagano, before we broke, we were 17 looking at Begdoc 6116. That contains a chart, it says, 18 "Three City hardware and software 19 configurations (typically new 20 configurations) already purchased or to be 21 purchased in 1999." 22 Now, we know from the KPMG statement found at 23 Tab 36 of your materials, that Mr. Beattie has said that he 24 always thought that this was a sale and leaseback 25 transaction.

1 Do you want to look at that -- that page, sir, 2 it's Tab 36, fourth page in, top of the page, Begdoc 12918. 3 4 (BRIEF PAUSE) 5 6 A: Yes, I see that. 7 Q: Okay. Mr. Beattie, at no time, came to 8 you prior to the -- the circulation of the RFQ with respect 9 to that fact, the fact that it was a sale leaseback? 10 A: That's correct, he did not come to me. 11 Q: Okay. And if he had come to you, that 12 would have raised an issue. If he had explained to you that 13 this was a sale/leaseback transaction, would it? 14 A: It would have raised an issue, if we were 15 looking to sell City property. 16 Q: And is there -- was there, in effect, a 17 guideline or policy with respect to sale leaseback of new 18 equipment in effect, at the City, at that point in time? 19 A: No, there was not. 20 Q: Is there such a guideline or a procedure 21 in effect, at this point in time? 22 A: I'm not aware that there is. 23 Q: Okay. Is that a guideline or a practice 24 or policy that you intend to include in the completed or the 25 next completed purchasing procedure manual?

1 A: Well, I think it's something that we 2 should look at, yeah. 3 MADAM COMMISSIONER: And this is with respect 4 to what issue, sorry? 5 MR. HUGH MACKENZIE: This is with respect to 6 the sale/leaseback issue. 7 MADAM COMMISSIONER: Okay. 8 9 CONTINUED BY MR. HUGH MACKENZIE: 10 Q: And you, sir, didn't read this particular 11 page prior to the RFQ being sent out? 12 A: No, I didn't read any of the RFQ at all, 13 before it was sent out. 14 Q: Okay. And you didn't have conversation 15 with respect to that page with Mr. Spizarsky, prior to the 16 RFQ being sent out? 17 A: Not to my -- not to my recollection, no. 18 Q: Okay. If you could turn the page to the 19 next page, page 8, Begdoc 6177, point 4, is usage 20 assumptions. 21 And again, this it says: 22 "Approximately nine thousand (9,000) 23 desktops will be installed in the calendar 24 year 1999. It is anticipated that another 25 four thousand (4,000) desktops will be

1 installed during the term of an agreement 2 resulting from this RFQ." 3 Now, Mr. Beattie did not bring that to your 4 attention, sir? 5 A: No. 6 Q: Are there guidelines or -- 7 MADAM COMMISSIONER: Mr. MacKenzie, I'm still 8 on the other Tab and I -- where's the Tab for the RFQ again, 9 I apologize. 10 MR. HUGH MACKENZIE: It's at Tab 12. 11 MADAM COMMISSIONER: Okay. Thank you. 12 MR. HUGH MACKENZIE: My apologies. And it's 13 now at page 8 at the bottom right. 14 MADAM COMMISSIONER: Thank you. 15 16 (BRIEF PAUSE) 17 18 CONTINUED BY MR. HUGH MACKENZIE: 19 Q: Were there guidelines or directives or 20 policies, practices or procedures with respect to when a 21 buyer or a person in the position of Mr. Beattie, ought to 22 bring to -- to the attention of either his direct supervisor, 23 or to the -- to some other senior purchasing representative, 24 a term such as this, where there is anticipated additional 25 purchases or leases, down the road?

1 A: No. 2 Q: And there were no such guidelines et 3 cetera in 1999? 4 A: No, not that I can recall, no. 5 Q: Is that something, sir, that will be 6 included in the next purchasing manual? 7 A: Well, I think we're going to be looking at 8 everything that should be included on the manual. This might 9 be a possibility, yes. 10 Q: Because certainly, sir, this is something 11 that had you read it, or had it been brought to your 12 attention, it would have caused you concern, is that fair? 13 A: I might have questioned it, it's hard to 14 say. 15 Q: Why do you have some uncertainty as to 16 whether or not, that would have caused an issue? 17 A: I guess I would have assumed that if it's 18 a requirement or something that the department is asking for, 19 they must have had a reason for it. 20 And I would have had to been familiar with 21 exactly what they wanted to do with the entire document in 22 order for me to question it properly. 23 And I didn't have that, at the time. 24 Q: So, is it fair then, to conclude sir, that 25 -- that this particular term complied with purchasing

1 guidelines, policies and procedures, in 1999? 2 A: Well, purchasing policies and procedures, 3 again is to ensure that the process is done fairly. This 4 seems to be a requirement, the usage consumptions are -- is a 5 requirement from the department. So, I don't know, you know, 6 we wouldn't have questioned it. 7 Q: My understanding what this contemplates 8 is, right now, we are going to be purchasing nine thousand 9 (9,000) desktops. At some later stage, there will be a 10 purchase of additional desktops. If -- 11 A: Yes. 12 Q: -- does that comply with purchasing 13 guidelines? 14 15 (BRIEF PAUSE) 16 17 A: It's a requirement of this -- it's a 18 requirement of this quotation request, yeah. 19 Q: Is it something that if you had -- had -- 20 had read this, that you would have discussed with somebody 21 from either Information and Technology or Finance? 22 23 (BRIEF PAUSE) 24 25 A: I'm not sure I would have. I -- I would

1 have -- I would have had to know exactly what they were 2 trying to do. 3 Q: Okay. You talked yesterday about a 4 screening of -- of prospective suppliers, what if any, 5 screening was done by Purchasing of MFP? 6 A: The -- the screening, so to speak, is 7 only when a -- a firm wants to be added onto the bidders 8 list. If a firm comes and picks up a document, there is no 9 screening involved. And as I mentioned, if it's a known 10 company, it's a known established company, they're simply 11 added to the list, there is no screening, we just take the 12 information as to what they say they want to bid on, and 13 they're put on the appropriate lists. 14 Q: There were no issues with respect to 15 whether or not MFP was an appropriate bidder? 16 A: There were none that were brought to my 17 attention. 18 Q: Okay. 19 20 (BRIEF PAUSE) 21 22 Q: Sir, at Tab 74 of your second volume, 23 Begdoc 5765. 24 A: Yes, I have it. 25 Q: Okay. This is the memorandum to Brendan

1 Power from Frank Spizarsky, June 11th, 1999. And at this 2 point in time, sir, to the best of your knowledge, 3 information or belief, had there been any inconsistencies 4 between the process of the RFQ and purchasing guidelines? 5 A: Not to my knowledge. 6 Q: Okay. Now, this document, you have 7 received these six (6) bids, this memorandum is then drafted. 8 Are there any intervening steps between the -- the receipt of 9 the bids, brought them back to Purchasing, this memorandum is 10 then sent to -- to Mr. Power, with copies of each of these 11 bids, or the originals. Are there any steps involved in that 12 time period? 13 A: I'm not sure what you mean by steps, but I 14 don't believe they are. 15 Q: Okay, so does Purchasing do anything after 16 they bring back the six (6) bids, to -- to Purchasing and 17 Material Management, to your Division, and then drafting and 18 sending out this -- this memo, is there anything else done 19 then, by Purchasing? 20 A: I don't believe so, they would summarize 21 the results, and they would forward it to the department, as 22 they've done. 23 Q: Okay, so that results have been -- been 24 read out, they would summarize them, how long would that 25 take, if you can estimate, sir, or do you know?

1 A: Well, normally it's done by the next day 2 or next couple of days, but having this done the same day, it 3 would appear to me that the department was in a hurry to get 4 the results. It's probably because they were trying to meet 5 the short deadlines to report. 6 Q: Okay and -- and -- and how do you know 7 that, sir? Wh -- is there something here that would direct 8 you to conclude that -- that this was an expedited process? 9 A: The fact that it closed on June the 11th 10 and the memo was also prepared on June 11th. 11 Q: Okay. So the fact that there had been a 12 short, i.e., twelve (12) day, period between May 31st and 13 June 11th, '99 and the fact that this was prepared and sent 14 to Mr. Power on the same day that bids closed. Is that -- 15 A: That's correct. 16 MADAM COMMISSIONER: I just want to make 17 sure, Mr. Pagano, does the fact that it was May 29th to June 18 11th, does that have anything to do with why you think that 19 this letter was expedited? 20 THE WITNESS: No, no. 21 MADAM COMMISSIONER: No, I didn't think so. 22 THE WITNESS: No. 23 MADAM COMMISSIONER: But Mr. MacKenzie's 24 question incorporated that. 25 THE WITNESS: Yeah. No.

1 MADAM COMMISSIONER: Okay. So it was just 2 the fact that the bid closed at noon on June 11th and 3 sometime between noon and whenever this is done -- 4 THE WITNESS: Yes. 5 MADAM COMMISSIONER: -- it's all done -- 6 THE WITNESS: The letter was -- 7 MADAM COMMISSIONER: -- on June the 11th? 8 THE WITNESS: Yeah. It was prepared the same 9 day. 10 MADAM COMMISSIONER: Okay. 11 12 CONTINUED BY MR. HUGH MACKENZIE: 13 Q: It then sets out in -- in the last 14 paragraph it says: 15 "Any questions on this request should be 16 directed to Mr. Beattie" 17 And then a telephone number or -- or two (2) 18 for Mr. Beattie. Would Mr. Beattie have been followed up 19 with Mr. Power or do you know? 20 A: Followed up in as far as what? 21 Q: Well, this document goes to Mr. Power. 22 It sets out what the next step is for the purchasing 23 procedure and it says if you need any assistance or 24 information, call Mr. Beattie. Would Mr. Beattie have -- 25 have also contacted Mr. Power sometime after this memo was

1 sent? 2 A: I'm not sure if he would have. 3 Q: Okay. 4 A: I don't know. Normally, the department 5 will do their evaluation and we would get the recommendation 6 back. If there happened to be a reason for Mr. Beattie to 7 contact him, he might have but I'm not aware whether he did 8 or not. 9 Q: Okay. Would somebody who sat and listened 10 to the bids as they were read out, would it be fair to 11 conclude that if they heard that theirs had the lowest price, 12 that it was a reasonable assumption to conclude that they 13 might get some of the business? 14 A: No, I don't think so -- so at all. I 15 think if they would have read that they were the lowest 16 price, all they would have known is that they were the lowest 17 price that was read out. That -- an evaluation is done 18 afterwards to determine who is the lowest bidder. 19 Q: But would you not agree with me that they 20 would also know that if -- if they had complied with the 21 terms and conditions, as well as had the lowest price, that 22 they had a pretty good chance of success based on your 23 earlier statistic of 90 percent or more? 24 A: Well, but that is determined through the 25 evaluation process. I wouldn't assume -- I wouldn't assume

1 that if I were a bidder. 2 Q: Why would you not assume it, sir? 3 A: Because what determines who receives a 4 contract is determined through the evaluation process to 5 determine whether the lowest bidder or any bidder has met the 6 requirements. It's a combination of both price and meeting 7 the requirements. 8 Q: Okay but -- but this is a principally 9 price-driven process for RFQ's, so long as you meet the 10 criteria and if you're satisfied that you've met the criteria 11 and you also know that you have the lowest price, would you 12 agree with me that one might conclude that there's a chance 13 -- a good chance of success? 14 A: Well, I think the bidder can assume what 15 they would like to assume but I believe and I know the fact 16 is that they should not make that assumption. They should 17 wait until the evaluation results are in. 18 19 (BRIEF PAUSE) 20 21 Q: Now, you said that you don't learn how the 22 RFQ was analyzed or evaluation in purchasing, is that -- is 23 that accurate? 24 A: What I said, is that, in purchasing we did 25 not take part in the evaluation.

1 Q: Mr. Beattie, to the best of your 2 knowledge, sir, what if any assistance did he provide, Mr. 3 Power? 4 A: I'm not sure about exactly what assistance 5 he provided. 6 Q: Have you spoken to him with respect to 7 that, sir? 8 A: My understanding is that, Mr. Beattie, 9 forwarded documents to Mr. Power and the evaluation was done 10 by -- conducted by IT and -- and Revenue or Treasury -- 11 Finance Treasury. 12 Q: Okay. 13 MADAM COMMISSIONER: When you say that Mr. 14 Beattie forwarded the documents to Brendan Power, the letter 15 we have here is from Mr. Spizarsky. 16 Is that what you're talking about? 17 THE WITNESS: Yes, that's true. The letter 18 was signed by Mr. Spizarsky, but, I believe it was actually 19 Dave Beattie who prepares the letter, because he's a buyer 20 and Mr. Spizarsky, would have reviewed and signed off. And 21 Mr. Beattie would have made the arrangements to forward them 22 on. 23 24 CONTINUED BY MR. HUGH MACKENZIE: 25 Q: Now, sir, Policy and Finance Committee,

1 met on or about July 20th, 1999, I understand. 2 A: Yes, I don't know the exact dates, but -- 3 Q: Okay. And you didn't attend at that 4 meeting? 5 A: No, I believe what I said was, I wasn't 6 sure if I was in attendance. 7 Q: Do you have a calendar or some kind of 8 DayTimer that would assist you with that? Do you have a 1999 9 DayTimer, sir? 10 A: No, unfortunately, no I've looked for my 11 DayTimers and I normally keep only one (1) year ahead. So, I 12 don't -- or one (1) year behind rather and I don't have that. 13 However, I did mention yesterday that if I 14 would have not have attended, one (1) of my managers more 15 than likely would have been there. 16 I try to -- I always try to make sure that 17 there's representation to committees and Council, when 18 there's a purchasing matter being discussed. 19 Q: Okay. And that manager would likely have 20 been Mr. Spizarsky or do you know, sir? 21 A: It would more than likely have been, Mr. 22 Spizarsky, because it was his group that was responsible for 23 this quotation call, but, I don't know for sure. 24 If Mr. Spizarsky, for some reason was away, 25 and I was not able to attend, I could have asked one (1) of

1 the other managers. 2 Q: Okay. And who would have been, if it were 3 not Mr. Spizarsky, who attended that Policy and Finance 4 Committee? 5 A: Well, at the time, it could have been 6 either Mr. McNamara or it could have been Mr. Collett, or I 7 believe, Mr. Mininch, was one (1) of my managers at the time. 8 So, it could have been any one (1) of those 9 three (3). 10 Q: And -- 11 MADAM COMMISSIONER: How do you spell the last 12 person's name? 13 THE WITNESS: Mininch -- M-I-N-I-N-C-H. 14 MADAM COMMISSIONER: Thank you. 15 16 CONTINUED BY MR. HUGH MACKENZIE: 17 Q: Following that meeting of the Policy and 18 Finance Committee, sir, what if any discussion did you have 19 with the -- with your delegate, i.e. likely as you've just 20 told us, Mr. Spizarsky, with respect to what was discussed, 21 what if any issues arose and what if any answers were 22 provided by him? 23 A: I don't recall any specific meetings to 24 discuss the outcome of that Committee. You know, we attend a 25 lot -- I attend a lot of Committees of Council and Council --

1 so it's difficult for me to focus just on one (1). 2 Q: Okay. And to your mind, this wasn't one 3 (1) which your participation was demanded, this was one (1) 4 that you're satisfied Mr. Spizarsky or another manager could 5 handle? 6 A: No, that's not what I said. I attend 7 Committee meetings and Council meetings myself, unless for 8 some reason, I can't be there, then I would ask one (1) of my 9 managers to fill in. 10 And depending on the contract that's being 11 awarded or being requested to award, I would try and assign 12 it to the manager, responsible for that quotation or proposal 13 or tender call. 14 Q: Now, at Council, on the 27th of July, 15 1999, Mr. Spizarsky, attended as well? 16 A: I'm not sure, if it was Mr. Spizarsky or 17 myself. Again, I don't have the calendars. More than likely 18 I would have been there and I -- if I could not have been 19 there, then I would have arranged for Mr. Spizarsky or one 20 (1) of the other managers to be there. 21 Q: Okay. And were your calendars electronic, 22 sir, or were they like mine, just a regular paper calendar? 23 A: It's a regular paper calendar. 24 Q: Okay. What, if any, information do you 25 have, either directly if you attended, or indirectly from Mr.

1 Spizarsky, if he attended, with respect to discussions at -- 2 at the Council meeting? 3 A: I guess if Mr. Spizarsky attend or if I 4 attended, I would have perhaps the motion that was made or 5 the approval motion at Council, and if it was approved, Mr. 6 Spizarsky would have told me, or I would have known if I was 7 there. If it was not approved, and the reason why I would 8 know, I wouldn't get the official Council minutes until some 9 time after that. So, that I guess is the kind of information 10 that -- that we would have. 11 Q: Now, this one (1), as we know, was 12 approved. And what, if any, information, did you get back 13 from -- from that Council meeting? Information from Mr. 14 Spizarsky or whomever attended on your behalf? 15 A: Well, again, I -- 16 MADAM COMMISSIONER: He's also said it might 17 have been him. 18 THE WITNESS: Or -- or -- or he himself, 19 sure. 20 MADAM COMMISSIONER: He wouldn't be giving 21 himself information. 22 THE WITNESS: I think in the end I would have 23 known whether or not it was approved. 24 MR. DAVID MOORE: It's unclear to me, Madam 25 Commissioner, whether we're talking about the July 20th --

1 MADAM COMMISSIONER: No, the Council meeting. 2 MR. DAVID MOORE: -- okay. 3 MR. HUGH MACKENZIE: It's a specific Council 4 meeting, July 27th. 5 MADAM COMMISSIONER: Right. 6 MR. HUGH MACKENZIE: Yeah. 7 MS. LILY HARMER: Madam Commissioner, if I 8 could be of assistance, I believe that it's clear from the 9 minutes of that meeting, that the matter was approved as a -- 10 as a -- a standard practice, there was no discussion or -- or 11 any of that. The matter was not held, in other words. So, 12 that it was approved from -- basically from the agenda 13 without any discussion, questions, anything. So, I don't 14 know if that assists Mr. MacKenzie, but that is how that 15 meeting proceeded. 16 MR. HUGH MACKENZIE: It helps greatly, thank 17 you. 18 MADAM COMMISSIONER: Thank you. I think it's 19 been so long since we've heard that, we've probably all 20 forgot. 21 MR. PATRICK MOORE: Not all, Commissioner, I 22 had notes. 23 MADAM COMMISSIONER: Oh. 24 25 CONTINUED BY MR. HUGH MACKENZIE:

1 Q: Sir, yesterday you were talking about the 2 SAP system, and that system of course is up and operating 3 efficiently now, is it? 4 A: That's correct, yes. 5 Q: Okay. And you can't assist us as to when 6 the Purchasing module of that was operative? 7 A: I believe I mentioned yesterday that it 8 was at the end of August 1999, the Purchasing module was </