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 March 5th, 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    (np)    )
  9  Gordon Capern           )
 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               )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         )Brendan Power
 24  
 25  Joyce Ihamaki           )Registrar

1 TABLE OF CONTENTS 2 Page 3 4 Lou Pagano, Resumed 5 Cross-Examination by 6 Ms. Lily Harmer 6 7 Re-Direct Examination by 8 Mr. Patrick Moore 90 9 10 Brendan Power, Sworn 11 Examination In-Chief by 12 Mr. Patrick Moore 134 13 14 Certificate of Transcript 208 15 16 17 18 19 20 21 22 23 24 25

1 EXHIBITS 2 Exhibit No. Description Page No. 3 4 20 VOLUME III Bound book of documents 5 entitled "Lou Pagano" 6 Addition, Tab 32 84 7 8 23 VOLUME I Bound document titled 9 "Brendan Power" 10 Tabs 1-125. 139 11 12 23 VOLUME II Bound document titled 13 "Brendan Power: 14 Tabs 1-32. 139 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 session, 4 please be seated. 5 MADAM COMMISSIONER: Good morning, Ms. Harmer. 6 MS. LILY HARMER: Good morning. 7 MR. BRYAN MCPHADDEN: Madam Commissioner, 8 before we get started, I'm going to spend the morning with 9 Mr. Power until such time as he's to be called. 10 MADAM COMMISSIONER: Okay. 11 MR. BRYAN McPHADDEN: If someone can come to 12 my office and let me know when you've taken the morning break 13 then -- 14 MADAM COMMISSIONER: All right. We will then 15 take the morning break after we finish with Mr. Pagano and 16 make sure that you're notified. 17 MR. BRYAN McPHADDEN: If I could have fifteen 18 (15) minutes notice, that would be great. 19 MADAM COMMISSIONER: They know where you are, 20 do they? 21 MR. BRYAN McPHADDEN: Several do, yes. 22 MADAM COMMISSIONER: Okay. 23 MR. BRYAN McPHADDEN: Thank you. 24 MADAM COMMISSIONER: Thank you. 25 MR. BRYAN McPHADDEN: If I may be excused.

1 MADAM COMMISSIONER: Good morning, Mr. Anand. 2 MR. RAJ ANAND: Good morning, Commissioner. 3 MADAM COMMISSIONER: Nice to see you again. 4 All right. Ms. Harmer? 5 MS. LILY HARMER: Thank you. 6 7 CROSS-EXAMINATION BY MS. LILY HARMER: 8 Q: Mr. Pagano, you have described your -- the 9 purchasing division in some detail and the volume of business 10 that goes through that department or the division, pardon me. 11 And as I understand it, your division is 12 actually one (1) of the largest single purchasers of 13 materials, supplies, goods services in the Province, am I 14 right about that? 15 A: Yes, that's correct. 16 Q: And you have some very significant volumes 17 and you've shown that through the statistics that you 18 provided. I'd ask if you could turn up Volume 2. I just 19 want to get some sense of the scope of the types of things 20 that you're purchasing and the numbers of bids and things 21 that you're involved in. 22 If you go to Volume 2, Tab 81 and I don't 23 believe there's a Begdoc for this. Do you have that -- 24 A: Yes. 25 Q: -- it says, City of Toronto, print out of

1 the website? 2 A: Yes, I have it in front of me, yes. 3 Q: And this is a print out as of February, if 4 you look at the bottom right hand corner, February 23rd of 5 this year, do you see that? 6 A: Yes, that's right, yes. 7 Q: Now, if I -- if I go to your website and I 8 go -- I can go to the Purchasing division and I can, if I'm a 9 bidder or even a member of the public, as I understand it, I 10 can go online and see what is open, in terms of tenders, 11 RFQ's and RFP's at any point in time, is that right? 12 A: Yes, do you mean what is available? 13 Q: What is open to a bidder to enter a bid? 14 A: That's right. Yes, what a bidder can bid 15 on -- what the business opportunities are at the time, to 16 quotations, quotation calls, tender calls and proposal calls, 17 yes. 18 Q: And when I say, open, what I mean is it's 19 -- it's within that open period where the RFQ or P or tender 20 has been issued, and before the closing date, right? 21 A: That's correct, yes. 22 Q: Okay. So, if I look at this first Tab 81 23 and this is to do with tender calls and I'm not going to ask 24 you to add them up, but, I went through this document and if 25 you look through the pages it shows a variety of things.

1 There are a total of nineteen (19) open tender 2 calls as of that date, February 23, 2003? Does that seem 3 fair? 4 A: Yes, that's fair, yes. 5 Q: And I also note that all of them closed on 6 or before March 12, 2003? 7 A: Yes, that's right. 8 Q: So, that's nineteen (19) within a period 9 of time of about two (2) and a half to three (3) weeks? 10 A: That's correct. 11 Q: Okay. And I note that they deal with a 12 variety of things. They deal with construction, road 13 maintenance, water and sewer repairs, that kind of thing? 14 A: Yes. 15 Q: Okay, if we then turn to Tab 82 of Volume 16 2, the next Tab, this deals with RFP's, same date, February 17 23, 2003. 18 And again this is what is open and available 19 to bidders during this time period? 20 A: Yes, that's correct. 21 Q: And if I add all those up, in fact, I see 22 that there are twenty-one (21) open RFP's, at that particular 23 point in time? 24 A: Yes. 25 Q: Does that seem fair?

1 A: Yes. 2 Q: And in this instance, the last -- the 3 latest closing date that I saw was March 28th, so there's a 4 slightly longer open period, but, it's within -- it's within 5 about a month window? 6 A: Yes, depending on the RFP or quotation 7 call or tender call, they all have different closing dates. 8 Q: Right. And again, there's a whole range 9 of issues that are dealt with by these RFP's? 10 A: That's correct, yes. 11 Q: And I take it, although the list changes 12 throughout the year, I mean there are different things that 13 are available on the website, are -- is the volume relatively 14 the same throughout the year? 15 A: I'd say its consistent. There are certain 16 times of the year where we might have a little less, a little 17 more, you know, generally around year end, we might have a 18 little more, if the time lines are getting close, where 19 departments have to meet certain deadlines. 20 Q: Okay. And then if I turn to Tab 83, we 21 have again the same date, Feb. 23, 2003, these are RFQ's that 22 are on the website on that date, do you see that? 23 A: Yes, that's right. 24 Q: Now, there are -- by my count, there are 25 fifty-four (54) open RFQ's at that date. So there are quite

1 a few of those? 2 A: Yes, there are. 3 Q: And does that split make sense? So around 4 nineteen (19) or twenty (20) tenders and RFP's and then a 5 significantly larger number of RFQ's? 6 A: That's correct, yes. 7 Q: And these ones all close, as I note, by 8 March 19, so again it's within slightly under a month's time 9 period. You've got that many on the go? 10 A: Yes, yeah. 11 Q: And again they deal with a wide range of 12 issues, as we can see, if we look at the -- under the scope 13 of work column? There's rental of a car, there's back yard 14 composting, there are all kinds of things, roof replacement? 15 A: Yes. 16 Q: And it goes on and on. 17 A: Hmm hmm. 18 19 (BRIEF PAUSE) 20 21 Q: Now, for each -- if I then add those up, 22 if I take Tabs 81, 2 and 3 and I add up the numbers, it comes 23 to a total of ninety-four different bid processes, if I can 24 them that, that are open as of a particular date? 25 A: Yes, that's right.

1 Q: And just remind me, how many buyers in the 2 department would be dealing with those ninety-four (94) bids? 3 A: I believe total buyers that we have on the 4 establishment right now, I believe it's twenty-four point 5 five (24.5), somewhere around that area. I'd have to check 6 the number to be sure. 7 Q: But, that's -- all I need is a -- 8 A: Yes -- 9 Q: -- that's an estimate. So twenty-four 10 (24), twenty-five (25) somewhere in that area? 11 A: Yes, yeah. 12 Q: Okay. And for each of those ninety-four 13 (94) bids -- what do I call them, tenders or bids or -- 14 A: Calls. 15 Q: -- calls. Thank you. For each of those 16 ninety-four (94) calls, there will be a buyer who will be 17 responsible for dealing with that, is that right? 18 A: Yes, but, a buyer could be responsible for 19 more than one of those calls. 20 Q: Right and that makes sense, you don't have 21 ninety-four (94) buyers? 22 A: Yes. 23 Q: And they -- at the closing, once they've 24 gone through the process you've described and had open bids 25 and that kind of thing, then they will be the -- they will be

1 summarizing those bids and they will be forwarding them on to 2 whatever department has initiated it, right? 3 A: Yes, that's correct. 4 Q: And I take it, some of those are going to 5 be quite straightforward and some of them may be more 6 complex, there's a whole range -- 7 A: That's right. 8 Q: -- of complexity? 9 A: Yes, that's right. 10 Q: And when there is a report generated for 11 those that require reporting -- do they all require 12 reporting? 13 A: No, only purchases about 500,000 require 14 reporting. 15 Q: Right. And so of those -- when that is 16 the case, when you have those reports, do you review each and 17 every one (1) of those, as you've described you reviewed the 18 RFQ leasing report in June or July of 1999? 19 A: Yes, I would review the final draft. 20 Q: Right. But, are you reviewing each of 21 those reports that's over 500,000? 22 A: Yes, the final drafts of each of the 23 reports over 500,000, I would review before they're signed, 24 yes. 25 Q: Okay. So, as I -- as I see, there is some

1 volume that's going through your department at any one point 2 in time. Is that fair? 3 A: Yes. 4 Q: There's a large volume? 5 A: Yes, there is. Yeah. 6 Q: And is it realistic that to expect that 7 your staff and your managers and yourself would have a 8 detailed knowledge of each of the items that's going through 9 in those call processes? 10 A: No, I don't believe it is realistic at 11 all. If they were to review each one in detail there would 12 be quite a backlog of work. 13 Q: Would you -- is it realistic, do you 14 think, do expect them to know and understand all of the 15 details in the responses received to each of those calls? 16 A: I don't think it would be fair that they 17 would understand the details of the responses. They don't 18 have the actual expertise in those areas. Their -- their 19 main concern is with the process. 20 Q: And similarly, would you expect people in 21 your department to maintain a detailed -- or to maintain a 22 memory or knowledge for a period of time -- for a 23 considerable period of time after a call has closed and after 24 Purchasing has completed his portion of that process and it's 25 moved on.

1 Would you expect your staff to maintain some 2 kind of memory about the details that they do -- were aware 3 of at the time? For any -- 4 A: No. 5 Q: -- length of time? 6 A: I would expect that once the purchase 7 order is issued, that would end our involvement unless for 8 some reason there's some dispute that's between the supplier 9 and the department where we would need to get involved to try 10 and get them to resolve the dispute. Then we would get 11 involved. 12 Q: Right but I'm really talking about the mem 13 -- what the information -- for instance, for you, speaking 14 for yourself. You read a number of reports because you read 15 everything in their final form, as you said, before it goes 16 on. 17 Do you, yourself, maintain a detailed memory 18 or a memory of the details of each of those reports that 19 you've reviewed four (4) or say six (6) months after the 20 fact? 21 A: No, I do not. 22 Q: And are you -- would you think it -- I 23 mean, is that -- why is that? 24 A: Well, because there's so many reports that 25 for me to remember the detail of each report I think would be

1 very difficult. Once the approval is obtained to issue the 2 purchase order, we don't really have to remember the details 3 unless there's some issue that comes up and we have to go 4 back to the file. I think it would be ve -- very difficult 5 for myself or any of the buyers to remember details of all 6 the reports that they -- they handle and every call that's 7 issued considering the volumes. 8 Q: Okay. Can you turn to Tab 85 in the same 9 volume, Volume 2. Again, there's no Begdoc number. This is 10 just a two (2) page document from the Finance Department, 11 Purchasing and Materials Management and it lists key 12 personnel in the Purchasing and Materials Management 13 division. 14 Is this a document that's available on the web 15 or where does this come from? 16 A: It's not available on the web. It's 17 attached to the bidders application forms that are supplied 18 to the bidders so that they can have the names of the 19 contacts if they need to call one of the managers in the area 20 if they have any questions. 21 Q: And as I understand, this is a -- this is 22 a current document. This shows the key personnel today or at 23 a date very close to today, not back in 1999. Am I right? 24 A: That's correct. However, it -- it isn't 25 up to date as Mr. McNamara had left the -- the City in

1 December. So I guess it's -- it doesn't show that recent 2 change. 3 Q: Mr. McNamara is one of the man -- 4 A: One of the managers, yes. Yeah and I bel 5 -- there's also been some changes in the buying staff. Mr. 6 Malone is not there. Anyway -- 7 Q: Okay. 8 A: -- if -- if -- 9 Q: This isn't -- this wasn't in place in 10 1999 -- 11 A: No. 12 Q: -- but this is a more recent -- 13 A: Yes, yes. Yeah. 14 Q: More re -- contains more recent 15 information? 16 A: Yes, we had a similar list in 1999 but 17 this information here is more up to date than -- 18 Q: Okay. 19 A: -- than 1999. 20 Q: But it gives us a flavour of the 21 department still, does it not? 22 A: Yes, it -- yes. 23 Q: And if I just look at the Purchasing 24 services, there are three (3) managers listed there. You've 25 got construction, which you've talked about and then there

1 are two (2) goods and services groups, right and if I want to 2 know what's in a goods and services group, can I -- I -- as I 3 und -- read this document, if I look at the bottom of that 4 first page, there is a listing under groups -- group -- goods 5 and services group 2, John McNamara being the manager at the 6 time? 7 A: That's correct, yes. Yeah, just to 8 correct, there's actually four (4) groups. 9 Q: Right. 10 A: Four (4) purchasing groups. 11 Q: But I -- I will -- 12 A: Yeah. 13 Q: Right. Okay. There's construction, 14 there's the professional services and there are the two (2) 15 goods and services -- 16 A: Yes. 17 Q: -- right? 18 A: Purchasing services, yes. 19 Q: Okay and I just want to focus for a moment 20 on the goods and services groups. 21 A: Hmm hmm. 22 Q: You've got two (2) of them. Is there any 23 -- is there any rea -- I understand that you've got two (2) 24 groups of buyers. So you've got one (1) group of buyers 25 reporting to Mr. McNamara in Goods and Services 2?

1 A: Yes, that's correct. 2 Q: And you've got a different group of buyers 3 reporting to a different manager in Goods and Services 1? 4 A: That's correct, yes. 5 Q: And in 1999, at the time of the relevant 6 RFQ it was Goods and Services group 1, who was dealing with 7 that matter, is that right? 8 A: It was -- 9 Q: Or sorry, Goods and Services group 2. 10 A: -- group two (2), yes, it was. 11 Q: And I see, if I look at the list at the 12 bottom of the page, the first page where it's got "Purchasing 13 services group, Goods and Services group 2", there's a whole 14 list of what I'll call commodities listed there. 15 Is that the -- those are the areas that that 16 group is responsible for? 17 A: Yes, that's correct. 18 Q: And that contains computer supplies and 19 equipment, right? 20 A: Yes, correct. 21 Q: And I note from looking at the list, that 22 there are quite a few different kinds of things that that 23 group is involved in purchasing? 24 A: That's correct, yes. 25 Q: So whenever anybody in the City wants to

1 buy an automobile or a truck or lease it or do whatever with 2 it -- acquire it in some way, they would come to this group? 3 A: That's correct, yes. 4 Q: And similarly with respect to each of the 5 items listed there? 6 A: Yes, that's right. 7 Q: And they would then, as I understand it, 8 deal with one (1) of the five (5) buyers who are listed just 9 above that list? 10 A: That's right. 11 Q: And all of those buyers would be dealing 12 with the one (1) manager? 13 A: That's right, yes. 14 Q: It's -- when I look at this list there are 15 quite a variety of things here. There's paper, there's 16 petroleum products, there's computers, there's furniture, 17 there's a lot of stuff. 18 Is there any -- sorry -- and if I look at the 19 next page, Goods and Services group 1, again there's a whole 20 range of items, see that? 21 A: Yes, that's right. 22 Q: Would you expect any of your buyers 23 within, let's just take Goods and Services group 2, and or 24 the manager, to have a detailed knowledge, technical 25 knowledge about all of these areas that are listed here?

1 A: No, I would not expect that. 2 Q: Of either of your staff or your managers? 3 A: That's correct, yes. 4 Q: All right. And I ask that question 5 because I note that I think it was in response to a request 6 for information from one of the other Counsel with standing 7 in asking you questions, additional documents were produced. 8 And if you just turn to Volume 3 for a moment, 9 and I just want to clear one (1) question up that I had about 10 that, is turn to Volume 3, Tab 27. There's a -- what looks 11 to be a job posting for Manager of Purchasing, do you have 12 that? 13 A: Yes -- 14 Q: Again there's no Begdoc number, this 15 hasn't been scanned yet. And this was a posting back in June 16 of 1998. So I take it this was at the time that you were 17 initially staffing the department, is that right? 18 A: That's correct, yes. 19 Q: And you were hiring various managers of 20 purchasing? 21 A: Yes, that's right, yes. 22 Q: And I note that on the second page, one 23 (1) of the key qualifications that is set out there, is -- 24 number four (4), 25 "technical knowledge and understanding of

1 products and services purchased". 2 And I just want to make sure I understand what 3 was meant by that, because I don't -- it suggests to me there 4 be some level of knowledge that was expected of managers when 5 they were being hired. 6 And I wonder if you can help me with that? 7 A: Well, technical knowledge and 8 understanding would refer to their knowledge of, let's say a 9 difference between the size of a truck, what the GBW rating 10 meant, as far as the payload rating of the truck. 11 But, not into the detail design as to what -- 12 you know, what you know the actual function was, how to 13 construct the truck, you know, the same with you know, with 14 knowledge on any construction project. 15 You know, they would have knowledge on the 16 different types of jobs and what they meant, but, not the 17 actual technical knowledge as to how to do the design or the 18 construction themselves. 19 Q: Right. But, in terms of purchasing of 20 acquiring these products, if I hear what you're saying, the 21 -- you wouldn't expect them to -- to be able to assess 22 whether a particular product would meet the needs of a user 23 department, am I -- is that fair? 24 A: Yes, that's right, yes -- 25 Q: Is that sort of how -- the distinction

1 that you're trying to make there? 2 A: That's right, yeah, I would expect that 3 they had enough knowledge to know how to source the product, 4 to ensure that -- that bidders -- the list that they're using 5 are the appropriate bidders, when they're asking for quotes. 6 Q: Right. 7 A: If they have to advertise in any 8 publications, I mean those things there I would expect, but, 9 not you know, the details as to determining the need or you 10 know, the intricate details of a product or a service. 11 Q: Right. Okay, thank you. Just very 12 quickly then to sum up. In terms of the -- of the personnel 13 and the buyers themselves, can any buyer that we look at -- 14 there were five (5), for instance, with Goods and Services 15 group 2. Can any buyer then -- are they assigned to 16 particular items within the list? I'm looking now, again, at 17 Tab 85 of Volume 2. The one we had open before with a 18 listing of the various commodities. 19 A: Yes, they can. Sometimes a buyer is 20 assigned to specific commodities, one (1) or two (2) but we 21 do interchange them depending on -- on the volumes at the 22 time during the year. 23 Q: Now, when you hire a buyer, what kind of 24 qualifications are you looking for? 25 A: The qualifications are that they -- they

1 -- they have knowledge of purchasing procedures and 2 practices. We don't ask for specific knowledge in any of the 3 groups or any of the commodities from what I can recall. 4 Q: Okay. Do they have -- do they have -- are 5 they required to have any particular kind of accreditation? 6 A: We -- we ask -- I'm just going by memory 7 from our job calls, but we do ask that they either have 8 accreditation or are working on an accreditation. 9 Q: So if they don't have it, you expect them 10 to be doing it while they're working at the City? 11 A: Yes, yeah. 12 Q: Okay. I want to turn now to talk about 13 some of the Purchasing policies and try and clear up, at 14 least for myself, some of the basic concepts that we've heard 15 talked about. 16 First of all, as I understand it, most of the 17 City's purchasing is done through your division? Most but 18 not all, is that fair? 19 A: That's correct. Anything above seventy- 20 five hundred dollars ($7,500) comes through my division. 21 Q: And anything below seventy-five hundred 22 dollars ($7,500) is handled by the departments individually? 23 A: That's correct. 24 Q: And if I can put dollar numbers to that, I 25 think you showed us that there was over a billion dollars

1 that went through your division each year? 2 A: Yes, that's correct. The original 3 estimate at amalgamation was that that number would have been 4 around the seven hundred thousand (700,000) mark -- 5 Q: Right. 6 A: -- and we're actually at a billion or 7 more. 8 Q: Right and with respect to the volume, and 9 I don't know whether you know this number or not, but I'm 10 going to suggest that the volume of departmental purchase 11 orders is about in the $75 million range? Do you -- is 12 that -- 13 A: I believe that's -- that's a good 14 estimate, again just going by memory, yes. 15 Q: And so that's the total of all of the -- 16 of the purchases under seventy-five hundred dollars ($7,500) 17 that would have been done by departments when you add them 18 all together for a year? 19 A: That's correct, yes. 20 Q: Okay and I take it that the departmental 21 purchase order system is in place, in part at least, just for 22 practical reasons? To make it easier for departments to 23 purchase things that aren't of a significant dollar value on 24 a one-off kind of basis? 25 A: Yes, that's correct. It's intended for

1 one-time small dollar purchase and it's for practical reasons 2 where they need it right away and it's only going to be 3 purchased once, then they can obtain their own quotations and 4 issue the order themselves. 5 Q: And so they don't need to go through the 6 same more rigorous process that one would find with over 7 seventy five hundred dollars ($7,500)? 8 A: That's correct, yes. 9 Q: Okay and I take it out of the balancing of 10 convenience versus whatever risks you might entail in 11 bypassing the normal procedures? 12 A: Yes. 13 Q: Is that right? 14 A: Yeah, that's correct and it's also in the 15 bylaw that the departments are allowed to do that, yes. 16 Q: Okay, good. Now, I want to ask you some 17 questions about sole source purchases but I just want to go 18 back to basics and make sure I understand what they are and 19 what the rules are that govern them, or the policies that 20 govern them at the City. 21 And I know that there is a definition of sole 22 source in the purchasing bylaw but it didn't exist in the 23 interim bylaw that was pu -- published in -- or that was 24 passed in March of 1998? 25 A: Yes, that --

1 Q: If you want me to take you to it, I can -- 2 A: Yeah. 3 Q: -- but is that your recollection? 4 A: Yeah, I believe that's my recollection. 5 It was not in the previous bylaw. 6 Q: So there was no formal definition? 7 A: No, no. 8 Q: Did the concept exist at that time? 9 A: Yes, it did and I believe it also existed 10 in the former City. 11 Q: I see. 12 A: Yes. 13 Q: All right and I -- as I -- when I look at 14 the purchasing bylaw, the first time that it seems to appear 15 formally defined is in March of 2000 when you replaced the 16 interim purchasing bylaw with a new bylaw? Is that -- 17 A: Yes, that's correct. 18 Q: -- accordant with -- 19 A: That's correct. 20 Q: Okay. Now, that bylaw only appears in Mr. 21 Garrett's volume of documents so I wonder if you could look 22 at Volume 2 of the Michael Garrett documents? 23 24 (BRIEF PAUSE) 25

1 Q: And, in particular, at Tab -- I believe 2 it's at Tab 75, I may have this wrong. 3 4 (BRIEF PAUSE) 5 6 Q: No, I'm going to ask -- sorry -- I think I 7 may have that one (1) -- that's a report dealing with 8 purchasing bylaws, but, I actually think that I may have 9 given you the wrong information. 10 Bear with me for one (1) minute. Sorry, go to 11 Tab 50 of that same Volume please. 12 13 (BRIEF PAUSE) 14 15 Q: Now, that's bylaw 151-2000. Do you have 16 that? 17 A: Yes, I've got that. 18 Q: And as I understand it, this replaced the 19 March 1998 interim purchasing bylaw, right? 20 A: Yes, that's correct. 21 Q: Okay. And if we go to page -- page 4 of 22 that -- the Begdoc number I don't have I'm afraid on my -- 23 MADAM COMMISSIONER: I don't have it on mine 24 either. 25 MS. LILY HARMER: -- document.

1 MADAM COMMISSIONER: Okay, page 4? 2 MS. LILY HARMER: Yes, page 4. 3 4 CONTINUED BY MS. LILY HARMER: 5 Q: The bottom, paragraph three (3), that -- 6 this is where you're authorized, Mr. Pagano, to enter into 7 certain commitments without having to go through a call 8 process, right? 9 A: That's correct, yes. 10 Q: And if I -- if I -- and so there are 11 certain things that are set out -- certain circumstances 12 where you don't have to do that. And if we go over the page 13 to page 5, at the very top, sub (b), this is as I understand 14 it, what I will call the definition of a sole source 15 purchase. 16 It says: 17 "When competition in respect of the goods 18 and services is precluded because of the 19 existence of a sole source, patent rights, 20 copy rights, secret processes controls, 21 basic raw materials or similar 22 restrictions." 23 Is that -- does that fairly -- that is what a 24 sole source purchase -- 25 A: Yes --

1 Q: -- is at the City? 2 A: Yes. 3 Q: Okay. And it's not -- nothing more than 4 that? 5 A: Yes. 6 Q: And just following on in paragraph four 7 (4), where any of those exceptions to the general call 8 process, including sole source and I'm paraphrasing here, it 9 is when we're dealing with one (1) of those exceptions, and 10 it's not within the maximum dollar amount of any commitment 11 authority delegated to staff, under the financial control 12 bylaw, then you must report to Council? 13 A: That's right. 14 Q: Through committee? 15 A: Yes. 16 Q: Through the Admin Committee? 17 A: Yes. 18 Q: So, if it's -- as I understand it, just to 19 put a number on that, if it's more than $500,000? 20 A: That's correct. 21 Q: And so up to $500,000, you yourself, could 22 authorize a sole source purchase? 23 A: Right. What we do, is we do get the 24 information from the department. We do have a form now, 25 where the department gives an explanation as to why they

1 require the purchase as a sole source, that's reviewed and 2 signed off and a purchase order is issued, if we feel that 3 the explanation is appropriate. 4 If we see that the amounts are above 500,000, 5 we recommend to the department that it should be reported to 6 Committee and Council for approval, prior to the issuance of 7 the contract. 8 Q: Now, you say, you recommend to the 9 department that it should be reported, what do you mean by 10 that? Do you -- do you tell them they have to do it? Or do 11 you just tell them it would be a good idea for them to do it? 12 A: Well, the reason I say recommend, is 13 because I don't -- I don't believe that we -- that I have the 14 authority to tell the departments what to do. But, if the 15 information isn't there and the approval isn't there, I do 16 have the authority not to issue the purchase order until the 17 approvals are -- are in place. 18 Now, there are situations, in an emergency 19 where they need it in an emergency and the bylaw allows that 20 the department head report after the fact. 21 So, we do at those times, issue the purchase 22 order based on the -- the department head approval and you 23 know, ask that they report after the fact. 24 Q: And that emergency situation that you've 25 described, if I understand you correctly, is actually set out

1 on page 4 of this bylaw, in paragraph 3(a), is that what 2 you're referring to? 3 A: Yes, that's correct. 4 Q: And so that's things like, threat to 5 public health, essential City services, welfare of person's 6 property, et cetera? 7 A: That's correct. 8 Q: Okay. So, in that instance, a department 9 might act unilaterally and then tell you about it after the 10 fact? 11 A: Correct or they might -- they might have 12 us issue the purchase order right away because they don't 13 have time to report because they're bound by the -- the 14 schedules of Committees and Council. 15 So they could also before the fact ask us to 16 issue a purchase order right away so that work can be started 17 or can be done and then they would report after the fact. 18 Q: And is there some approval process at that 19 point -- at that after the fact point? 20 A: It would have to go to Committee or 21 Council -- 22 Q: Okay. 23 A: -- if it's above the reporting limit, of 24 course. 25 Q: And so -- right. So if it's above the

1 reporting, when somebody says it's an emergency, I have to do 2 this now and you issue the purchase order, what if when 3 somebody's taking a colder, harder look at it at Committee or 4 Council and they take issue with what's been done. 5 Do you know what happens then? 6 A: They would question the department as to 7 -- as to the -- the -- why that action had to be taken. 8 Q: So it's the department who would be 9 accountable for -- 10 A: Yes. 11 Q: -- appointing that decision? 12 A: Yes, they would. 13 Q: Okay. So when you get a sole source 14 request from a department, they have to send you something in 15 writing? You said there was a form -- you said we now have a 16 form. Do you know when that process began? 17 A: The form itself was implemented, I believe 18 it was last April. 19 Q: And what did you do before that? 20 A: Before that we would accept a memo from 21 the department explaining the department, why they needed it 22 and the reason behind it and we would approve it based on the 23 memo. 24 Q: I see. Okay. Okay, now -- so that's sole 25 source. Now, I want to just talk to you about vendor of

1 record. We've heard that term used, we've seen that term 2 used in documents and I want to explore with you what you 3 understand that to mean. 4 As I understand it, one of the ways that 5 something can be -- someone can be a vendor of record, we 6 heard from another witness -- at least, I believe, Mr. 7 Pessione from MFP talked about how the Province of Ontario 8 handled a ven -- what they called their vendor of record 9 status. So let me just tell you the two (2) ways in which I 10 understood he -- the province dealt with those and then you 11 can -- we can talk about how the City views those things. 12 At the province, as I understood Mr. 13 Pessione's evidence, when the -- when, I think it was 14 Management Board, it may have been one of the ministries, 15 went out and did a call for leasing, an RFP or RFQ for 16 leasing, they vetted, if I can say that, a number of 17 suppliers through that process came -- determined that they 18 were going to use MFP and I'm just using MFP because that's 19 what we know about. It could have been anybody. 20 Then they allowed -- they -- either -- either 21 -- ministries, when they wished to purchase or lease -- 22 acquire computer equipment and lease it, could either go 23 through the approved vendors of record or vendor of record 24 that management board had approved or they could say, well, 25 we're not going to go through that -- use that vendor but

1 we're going to do our own tender process. 2 So there was a non-exclusive, if I could say, 3 vendor of record status but one that Management Board had 4 pre-vetted departments could use without having to go through 5 the whole rigamarole. Are you familiar with that concept? 6 A: I'm not familiar with that concept, no. 7 Q: All right. Do -- what is it that you say 8 -- can you tell me what -- how the City -- does the City use 9 a vendor of record idea? First of all, is it something 10 that's familiar with you at -- 11 A: I -- 12 Q: -- City's -- 13 A: I -- 14 Q: -- purchasing? 15 A: Yeah, I've heard the term used. We don't 16 use it very much, not in Purchasing anyway. 17 Q: Why is that? 18 A: Because I guess it gets confusing as to 19 how other organizations use that term. With us, in my mind, 20 if I were to hear that term I would think of what the City 21 does and what we do is we would set up a blanket contract 22 with the vendor and that purchases are made against that 23 blanket contract. 24 Now, if for some reason those requirements -- 25 the -- the item being purchased under that contract is not

1 suitable for one of the departments, then it would be 2 purchased separately, going through a separate quotation 3 process -- quotation call process or tender call or proposal 4 call process. 5 Q: Okay. So if I understand what you said, 6 from your perspective at the City a vendor of record is 7 somebody that is covered by a blanket order. So as we know, 8 the process is that that pers -- that there's been a 9 competitive call. 10 There's been somebody, a supplier, who's been 11 awarded the commitment, shall I -- if I can call it that, as 12 through Council or through whatever process depending on the 13 amount of the dollars and there's a blank -- just say you're 14 buying paper for the year for the City and you go through the 15 RFP or RFQ process. 16 You get your vendor, you set up a blanket 17 order, and does that blanket order -- as I understand it, it 18 covers a set dollar amount, right? 19 A: Yes, yes it does. 20 Q: And that dollar amount is no more than 21 what has been authorized or approved? 22 A: That's correct, yes. 23 Q: And does it also set up a time frame, a 24 period of time, in which that contract will run, that blanket 25 order will run?

1 A: Yes, it would. 2 Q: Is there any set time, or is that 3 dependent on -- 4 A: It depends on the contract. It can be a 5 year, it can be two (2) years. It depends on what was 6 requested in the call. And, of course, the Authority that it 7 was approved, so -- 8 Q: All right. 9 A: -- it would depend. 10 Q: So the vendor of record, is the vendor 11 that is -- to whom that contract is made out? 12 A: That's right, yes. 13 Q: So, as far as that concept goes, the 14 vendor of record, is only a vendor of record, so long as -- 15 tell me if I have this right, so long as the dollar spent 16 with that particular supplier, are no more than the limit in 17 the blanket order? 18 A: That's correct. And also that you're 19 purchasing what is on the contract. Nothing outside the 20 contract. 21 Q: So, the contract would -- 22 A: The blanket contract. 23 Q: -- would contain specific items that can 24 be purchased? 25 A: Yes.

1 Q: All right. And is that something that is 2 specified in detail or is that a more general kind of 3 description? I think if we -- we recall the blanket order 4 that was set up in this case, it was a fairly general 5 description about computer equipment, if I'm -- computer 6 hardware? 7 A: Yeah, it can be a general description. 8 And sometimes it's a general description that references a 9 quotation call that was issued, or that Council approval. 10 And the -- you know, the more complete description would be 11 in those documents. 12 So, instead of having to re-type the whole 13 documents, they will call up those documents on the purchase 14 order on the blanket contract. 15 Q: So there's a reference on the blanket 16 contract order and when you say: 17 "They will call up." 18 Who do you mean? 19 A: The buyer would ensure that that's on the 20 blanket contract when it's set up. 21 Q: All right. So, just to summarize then, 22 vendor of record as you understand it, at the City has a 23 dollar limit, which is the upset limit on the blanket order? 24 A: That's right. 25 Q: There's a time frame that has been

38
  1  specified on that order?
  2                 A:  Yes, that's right.
  3                 Q:  And there are specific items that can be
  4  purchased under that order?
  5                 A:  That's correct. 
  6                 Q:  That's how it's --
  7                 A:  Yes --
  8                 Q:  -- it's set up?
  9                 A:  I think that describes it accurately.
 10                 Q:  All right.  So, any other concept of
 11  vendor of record that -- does that apply at the City or is
 12  that really the way it works?
 13                 A:  Not that I'm aware of, that's how
 14  generally it works.
 15                 Q:  Are you -- so you're not aware of any
 16  other kind of arrangement with respect to any purchases that
 17  you've been involved in?
 18                 A:  I don't think I have -- 
 19                 Q:  Well, let me just --
 20                 A:  -- I don't think I am.
 21                 Q:  All right, let me just you this.  Other --
 22  leaving aside the RFQ the MFP blanket order, and just leave
 23  that aside, because there are all sorts of issues that you've
 24  heard about.
 25                 Are you aware of any other situation or any

1 situation at the City, where a vendor has been authorized by 2 Council with no upset limit? 3 4 (BRIEF PAUSE) 5 6 A: I'm going by memory. I believe the 7 vendors for computer equipment which was authorized, I don't 8 recall if it had an upset limit in there, because they 9 weren't sure of the volumes that were required. 10 Q: All right. So -- 11 A: But, I believe the intent there was that 12 they were the -- they were the vendors that were selected 13 through an RFP process, and in purchasing the equipment, the 14 department in consultation with Purchasing, would look at the 15 price each vendor had, the delivery and the availability of 16 the equipment, because it had to be rolled out in a very 17 short time frame. 18 So that's -- I believe that that's how that 19 worked. I'd have to go back through the files. 20 MADAM COMMISSIONER: Is this computer 21 equipment other than the MFP one (1) that we're talking 22 about? 23 THE WITNESS: No, that is the -- 24 MADAM COMMISSIONER: That is the MFP one. 25 THE WITNESS: -- yes, that is that one, yes.

1 2 CONTINUED BY MS. LILY HARMER: 3 Q: So, let's just -- let me see if I 4 understand that. You're talking about the RFP in November of 5 1998 that was approved by Council in 1998? 6 A: I believe that's the one (1). I don't 7 know if those are the exact dates, but, yes. 8 Q: Okay. In the fall of 1998. And that was 9 the purchase -- that was for the acquisition of the actual 10 hardware and software? 11 A: That's correct, yes. 12 Q: Right. Now, that RFP selected three (3) 13 different vendors? 14 A: That's correct. 15 Q: That resulted in the -- and ultimately 16 Dell was added as a fourth, right? 17 A: Yes. 18 Q: Now, when you have three (3), how does 19 that work? When you've designated three (3) different or 20 four (4) different vendors, how does it work in terms of how 21 you're going to then decide which vendor you're going to use 22 in a particular circumstance? 23 A: Yeah. Just going back to what I recall 24 and what I learned from staff was that -- that prices would 25 be requested from the three (3) on the equipment that was

1 required. 2 Q: At what point in time? 3 A: Whenever -- whenever IT had a requirement 4 for equipment. 5 Q: So this is after the vendors have been 6 approved? 7 A: Yes, after they've been aprroved. 8 Q: And when they now know a specific amount 9 that they want to buy? 10 A: Yes, and then once they knew the specific 11 amount and the delivery required, then prices would be 12 solicited from the three (3) and my recollection of that was 13 that the vendor who supplied the best price meeting the 14 delivery requirement would be the one that would be chosen, I 15 believe. 16 Q: All right. Now, normally, you look for 17 lowest price meeting specifications? 18 A: Yes. 19 Q: You don't need to do that in this case 20 because you've done that already through the RFQ, RFP or -- 21 why don't you have to do that? 22 A: Well, they -- they'd already determined 23 that the vendors met the specifications through the RFP 24 process -- or met the requirements of -- for the equipment 25 that they needed.

1 Q: All right. 2 A: The RFP process was supposed to do that. 3 What the further process was going to those vendors and 4 getting prices for the quantities that they needed at the 5 time and ensuring that they would be delivered. 6 MR. DAVID MOORE: Commissioner, I don't object 7 to this narrative going in but I have made inquiries of City 8 Council for documentation relating to what happened. You 9 recall, I did try to explore this area in terms of whethere 10 there was a blanket purchase order with respect to that 11 computer equipment when I questioned this witness. 12 To the best of my knowledge, no such blanket 13 order has been produced. We're now hearing anecdotally that 14 there doesn't appear to have been any limit to that 15 particular order because the City wasn't sure how much 16 equipment they were going to need. All of which I do think 17 has some importance to the sequence of events that we're 18 interested in. 19 So I don't object, but I do -- certainly 20 before Mr. Beattie comes, the next Purchasing witness, I 21 would like to get some further clarification or documentation 22 from the City on this so there'll be an opportunity to ask 23 someone from Purchasing a little more detail with references 24 to back up documents about these issues. 25 MS. LILY HARMER: And I don't intend to go

1 into this any further. It really arose because of our 2 discussion about the concept of vendor of record and I 3 understand what Mr. Moore's concerns are and we'll certainly 4 attempt to address them and I'm happy to talk to him about it 5 at a break. 6 MADAM COMMISSIONER: Fair enough. Thank you. 7 MR. DAVID MOORE: Thank you. 8 9 CONTINUED BY MS. LILY HARMER: 10 Q: So in terms of the decision about what 11 kind of outcome you want -- either you want this -- the 12 outcome that you just described where you end up with the 13 three (3) vendors and then -- who have been pre-qualified 14 with respect to the qualifications or you're going to just 15 end up with one vendor -- excuse me -- in the parameters of 16 that. Who makes that decision? 17 A: It would be -- it would be a joint 18 decision. It would depend on the department's needs and what 19 -- you know, what they're looking to do and -- 20 Q: A joint -- so a joint decision of whom? 21 A: Well, the -- the need would come from the 22 department. Purchasing would review it and issue the -- the 23 documents accordingly based on the departments needs. Now, 24 in this case it was reported to Committee and Council. 25 Q: Which case? The --

1 A: In the computer case that I just mentioned 2 to you. 3 Q: The one from -- 4 A: Yes. 5 Q: -- '98 -- 6 A: Yeah. 7 Q: November '98? 8 A: Yeah. 9 Q: Okay. 10 A: Yeah. 11 Q: And so -- 12 A: So -- 13 Q: If -- if the department comes to 14 Purchasing and says here's what we're trying to do, 15 Purchasing will assist in trying to figure out what the best 16 way to address those needs are? In terms of the -- the out 17 -- the purchasing outcome? 18 A: Yeah, as far as the purchasing outcome -- 19 Q: Outcome. 20 A: -- yes. Yeah. They would -- they would 21 assist in finding out the best way in trying to get quotes to 22 address those needs. 23 Q: All right but ultimately, you say, if it's 24 over a certain dollar amount that has to be reported? 25 A: Then it has to be reported, yes.

1 Q: So ultimately -- when -- when you have a 2 uni -- a rather unique thing. You've described what the 3 normal vendor of record idea is, where you've got a blanket 4 order. 5 A: Yes. 6 Q: Would you expect those kinds of details to 7 be reported to the Committee and Council after you've 8 determined what the best fit is? 9 A: Yes, yeah. 10 Q: Would you expect Council -- is it up to -- 11 who would make that decision as to what gets reported to 12 Council in that situation? 13 A: What do you mean as to what gets recorded? 14 The outcome -- 15 Q: Well -- 16 A: -- of the process -- 17 Q: Well, let -- 18 A: -- or -- 19 Q: Well, let's just use it as for the 20 example, the computer situation you described in November of 21 '98. 22 When you end up with the three (3) vendors -- 23 A: That's right. 24 Q: -- and the idea that there's going to be 25 no upset limit at this point, because you don't know what

1 you're buying -- 2 A: Hmm hmm. 3 Q: -- but, there will be a mini-quote, I 4 guess, for price and delivery date, within these three (3) 5 buyers -- or three (3) bidder sorry -- 6 A: Right -- 7 Q: -- vendors. Once that's been decided, who 8 makes sure -- first of all, does that level of detail get 9 reported to Council? Or would you expect it to? 10 A: I would expect it to, yes. I would expect 11 it to. 12 Q: And would you expect Council then to -- 13 when they're making their decision, be approving that 14 particular set up? Is that part of what Council has to 15 approve? 16 A: Yes, I try to make sure that if -- that as 17 much information as possible be in the reports, or at least 18 as much that I'm aware of be in the reports. 19 MADAM COMMISSIONER: Okay. I'm not quite sure 20 I understand, Mr. Pagano, if committee and Council have 21 already approved having the three (3) or four (4) companies 22 as vendors or record and then individual departments want to 23 go and purchase whatever from these four (4) -- one (1) of 24 these four (4), and they get their bids, why does that have 25 to go to the committee and Council?

1 THE WITNESS: Well, no, I'm not saying it has 2 to go back to Committee and Council. 3 MADAM COMMISSIONER: Oh, I see -- 4 THE WITNESS: I'm talking about the process. 5 MS. LILY HARMER: You're talking about up 6 front before anybody goes out to get any price bids. 7 THE WITNESS: Right, yeah. 8 MADAM COMMISSIONER: Even after you have the 9 four (4)? 10 MS. LILY HARMER: Well, in order to get the 11 four (4), as I understand what, Mr. Pagano, saying -- 12 MADAM COMMISSIONER: I have no difficulty with 13 -- obviously in order to get the four (4), you have to go to 14 Committee and Council. 15 MS. LILY HARMER: Right and I think that's all 16 he's saying, I don't -- 17 THE WITNESS: Yes -- 18 MS. LILY HARMER: -- I don't think it's 19 anything beyond that. 20 THE WITNESS: -- that's all I'm saying. 21 MADAM COMMISSIONER: Okay. 22 THE WITNESS: That Council should be made 23 aware of who the product is coming from and how it is going 24 to be obtained. 25 MR. DAVID MOORE: Well, that may be clear to

1 people here, certainly it's not clear to me. 2 MADAM COMMISSIONER: It's not clear to me, 3 either, let's see if we can go back. 4 If we have the four (4), let's say there are 5 four (4). 6 THE WITNESS: Yes. I believe that report 7 mentioned three (3), but, anyway. 8 MADAM COMMISSIONER: Whatever. Let's say 9 three (3), so -- 10 THE WITNESS: Yes -- 11 MADAM COMMISSIONER: -- that you'll be 12 comfortable with that level of detail. If there are three 13 (3) and there has been first of all an RFQ in advance, or an 14 RFP in advance -- 15 THE WITNESS: It was an RFP, yes. 16 MADAM COMMISSIONER: -- RFP, whatever. These 17 three (3) won, okay? 18 THE WITNESS: Yes. 19 MADAM COMMISSIONER: That gets reported to the 20 City Council -- 21 THE WITNESS: That's right. 22 MADAM COMMISSIONER: -- through Committee and 23 Council? 24 THE WITNESS: Right. 25 MADAM COMMISSIONER: Right. Now, if I'm the

1 head of one (1) department and I want to lease fifty (50) 2 computers, from one (1) of those three (3), do I have to go 3 to Committee and Council or not? 4 THE WITNESS: No, once the approval to use 5 those suppliers is there, no, you would not. 6 However, the process is that, if a department 7 does want computer equipment they would go to IT, who in 8 turn, would arrange to lease that equipment for them. 9 MADAM COMMISSIONER: Right. 10 THE WITNESS: But, they would not have to go 11 back, no. 12 MADAM COMMISSIONER: So, is that -- just 13 getting to maybe the photocopier and the Mr. Balkissoon 14 issue, remember that had come up? 15 THE WITNESS: Yes. 16 MADAM COMMISSIONER: And in that one (1), it 17 had said in the report that went to City Council, that they 18 were getting the photocopiers from the existing vendor of 19 record. 20 So, why would they -- I know that it turned 21 out that there was no vendor of record. But, if there had 22 been a vendor of record, why would they have to go anyway 23 then? 24 THE WITNESS: Because there was no contract in 25 place to purchase the photocopiers that was what was being

1 reported on and it mentioned in there, that they would be 2 leased through the vendor of record. 3 But, there was no contract in place. Whereas 4 the computers there had been an RFP issued and the suppliers 5 been determined; for the photocopiers that hadn't happened. 6 7 CONTINUED BY MS. LILY HARMER: 8 Q: So, are you saying, because there was no 9 blanket order in place for that? 10 A: For the photocopiers? 11 Q: Yes? 12 A: Yes. 13 Q: Okay. Let's -- can we -- maybe I can -- 14 MR. WILLIAM ANDERSON: By the photocopiers, 15 are we talking about the hard assets, the actual photocopiers 16 being supplied by a Cannon or a Xerox? 17 THE WITNESS: That's correct, yes. 18 MR. WILLIAM ANDERSON: All right. 19 MADAM COMMISSIONER: Right. Okay. 20 21 CONTINUED BY MS. LILY HARMER: 22 Q: So just to try and close out this whole 23 area about vendor of record. When we do look at the -- the 24 MFP leasing arrangement, as I understand when we looked at 25 the purchase or the blanket order for that, there was an

1 upset limit of $40 million, right? 2 A: That's correct, yes. 3 Q: And so -- and there was a time limit, 4 although it was a rather long one, there was -- I think it 5 went to December 31, 2005. Right? 6 A: That's correct, yes. 7 Q: And there was reference to the RFQ in 8 terms of and to the nature of the items to be purchased, 9 right? 10 A: Leased, yes. 11 Q: Thank you. Now, when we think about that, 12 in terms of the concept you've described, your understanding 13 of how the City uses the vendor of record concept. Where 14 does this kind of lease fall? Is this -- or this kind of 15 arrangement with MFP? Would you say that MFP was a vendor of 16 record that was open ended in any way or some way? 17 A: No, I wouldn't say it was open ended. The 18 -- the purchase order had an upset limit and it had a time 19 specified. 20 Q: All right. So then when we refer -- when 21 you hear MFP referred to as a vendor of record in that 22 context, what do you understand that to mean? 23 A: I would take that to mean that there has 24 been a bank -- blanket contract to set up that has an upset 25 limit, a time frame and some description of what is supposed

1 to be provided under that contract. 2 Q: Now, let's just take the concept of an 3 upset limit again for a moment. The upset limit is set how? 4 A: It's set by the department. They would 5 tell us what their requirements would be and that's how it's 6 determined. 7 Q: And do I understand that the only limit on 8 what an upset limit could be is the level -- is the authority 9 from whatever level, Council or Committee or yourself? 10 A: Yes. 11 Q: So could I have an upset limit that is 12 less than the amount that's been approved by Council? 13 A: The limit could be less, especially in 14 cases where the amount approved is an estimate and you know, 15 at a later time the department can come up with an exact 16 number which would be lower than what the approval is but 17 generally it's what's approved by Council. 18 Q: Okay but it could be lower if the 19 department tells you they don't need as much -- 20 A: Yes. 21 Q: -- as they initially thought they needed? 22 A: Yes, yeah. 23 Q: And that information as to what they need 24 comes to you by way of a purchase requisition, right? 25 A: That's correct, yes?

1 Q: And that's how you set up the order? 2 A: That's correct. 3 Q: Could the amount of the blanket order be 4 more than what was approved by Council? 5 A: No. If the department is asking for more 6 than what was approved by Council, we could not issue that 7 purchase order unless we have Council approval to revise that 8 amount. 9 Q: So in that case -- 10 A: Increased -- 11 Q: -- if somebody -- if I came to you as a 12 department with a purchase requisition for an amount greater 13 than what had been approved, what would you -- what would 14 have to be done? Take me through the steps. 15 A: What would have to be done is a report 16 would have to be prepared to Council requesting that the 17 approval limit be increased. 18 Q: And if that approval is obtained then you 19 can issue the pur -- the blanket order for that amount? 20 A: Yes, then we'd be -- make an amendment to 21 the blanket order increasing the amount and in that 22 amendment, we would include the authority by Council to 23 increase it. 24 Q: Okay. Now once you have a blanket order 25 in place, I understand then, the departments use a contract

1 release order? 2 A: That's correct. 3 Q: And I just want to talk to you quickly 4 about that. There's a policy, I believe, that's at Volume 2 5 of your documents, you can't put Mr. Garrett's documents 6 away, at Tab 25 and this is Begdoc 36899. 7 A: I'm sorry, what tab was that? 8 Q: Tab 25 of Volume 2. 9 A: That's right, yes. 10 Q: And this is what, as I understand it, what 11 departments use against blanket orders. To release funds 12 against blanket orders, correct? 13 A: Yes, that's what they should be using. 14 Yes. 15 Q: All right and this is a Finance department 16 policy statement. There is no date on this. Do you know 17 whether this policy would have been in place back in June, 18 July of 1999? Did you use contract release orders at that 19 time? 20 A: Contract release orders were started when 21 the SAP system was implemented. It would have -- more than 22 likely it would have been in place. I don't remember when 23 this format was produced but we were able to issue contract 24 release orders at the time that the SAP system was 25 implemented, which would have been the end of August.

1 However, the departments could not enter their 2 own contract release orders until the purchasing function was 3 rolled out to the department, and that happened gradually 4 after August, so -- 5 Q: Right, okay. 6 A: -- that goes back to what I was explaining 7 earlier, is that they would paper forms, send them to 8 Purchasing and we would enter that information. 9 Q: Right, okay. So was this policy then in 10 place or something similar to this policy, once SAP was 11 implemented and was being used? 12 A: Yes, I believe so, yes. 13 Q: Okay. I'm just going to walk through a 14 very simple analogy, just so that I make sure I understand 15 and that we summarize how the process works. Let's use my 16 paper analogy, the City wants to buy paper and they want to 17 buy it for the whole year. 18 They don't know quite how much they're going 19 to -- they don't know how much they're going to need when? 20 A: Hmm hmm. 21 Q: So, whomever's in charge of Purchasing 22 that kind of thing, would -- would -- I take it there would 23 be an RFP or an RFQ probably in this case, for -- to supply 24 -- to purch -- to obtain a vendor to supply the paper for the 25 year?

1 A: That's correct, yes. 2 Q: Okay. And then once that RFQ had been 3 approved, and I -- we're going to -- let's say that it's a 4 large dollar amount, I presume the City uses a lot of paper, 5 so it requires -- 6 A: Hmm hmm. 7 Q: -- the appropriate levels of approval -- 8 A: That's correct. 9 Q: -- authorization through Council. Once 10 that's obtained, I as the user department then send 11 Purchasing a purchase requisition; is that right? 12 A: Well, in cases of paper we would get the 13 approvals, we would issue a blanket contract. 14 Q: Right, but I -- I just want to take that - 15 - I want to break that down. When you get the approval, or 16 when the Department gets the approval of Council, would they 17 attach a dollar amount to get that volume of paper? Would 18 they have an estimate of how much it was going to cost them 19 to buy paper for the year? 20 A: No. Let me just explain to you, paper may 21 not be an example that, where the Department is drawing from 22 a blanket contract that's set up -- 23 Q: Okay. 24 A: -- just for the Department. Paper would 25 be set up by the Corporation as a whole.

1 Q: Okay. 2 A: And that would -- 3 MADAM COMMISSIONER: I don't think -- 4 MS. LILY HARMER: It doesn't matter. 5 MADAM COMMISSIONER: -- you don't care if -- 6 MS. LILY HARMER: No, I don't. 7 MADAM COMMISSIONER: So let's -- 8 MS. LILY HARMER: It could be anything. 9 MADAM COMMISSIONER: -- get from Mr. Pagano, 10 something that isn't going to get him all going off in a -- 11 THE WITNESS: I'm sorry. 12 MADAM COMMISSIONER: -- something that's 13 normal and doesn't have any funny exceptions to it; okay. 14 MS. LILY HARMER: Yeah, maybe paper's a -- 15 MADAM COMMISSIONER: This is not -- 16 MS. LILY HARMER: -- bad example. 17 MADAM COMMISSIONER: -- this is not about 18 paper. 19 THE WITNESS: Okay. 20 MS. LILY HARMER: This is just about how the 21 process works. 22 THE WITNESS: Okay. 23 24 CONTINUED BY MS. LILY HARMER: 25 Q: If you could give me some commodity and

1 we'll work with that. 2 A: Okay, let -- let's say salt. 3 Q: All right. 4 A: Okay. 5 Q: So I want to buy salt -- 6 A: Right. 7 Q: -- and I -- do I have to tell Council when 8 I'm getting approval, the amount of salt that I estimate -- 9 the dollar value of salt that we're going to spend over the 10 year? 11 A: Yes. 12 Q: All right. And so when Council authorizes 13 my purchase of salt, they're -- they're authorizing that with 14 a dollar amount attached -- 15 A: Yes. 16 Q: -- is that right? 17 A: Yes, that's correct. 18 Q: So I then presumably send Purchasing a 19 purchase requisition, citing that dollar amount for let's say 20 this calendar year? 21 A: That's correct, and a blanket contract 22 would be set up. 23 Q: Right, that's my next question. 24 A: Yes. 25 Q: Once you get the purchase requisition, you

1 then set up a blanket order and it would contain that dollar 2 amount, it would contain the -- the year period and it would 3 obtain the reference to Council approval? 4 A: Yes, that's correct. 5 Q: And it would say what was being -- what 6 was supposed to be purchased under that order? 7 A: Yes, that's correct. 8 Q: All right. Then, once that happens, then 9 it's the month of January, I need salt. I need a particular 10 amount of salt, it's a lot less than what the up set limit 11 is, so then what do I do? I issue -- I, as the Department, 12 fill out a contract release order? 13 A: That's right, the contract release order 14 is filled out by the Department, it's entered by the 15 Department on the SAP system. 16 Q: Right. 17 A: And -- and a shipment is delivered, an 18 invoice is received and payments are made. 19 Q: Okay, and that's not through your 20 Department, but -- 21 A: No. 22 Q: -- as I understand it, once the contract 23 release order is in the system, then that will permit payment 24 down the road; right? 25 A: That's correct, yes.

1 Q: Okay. And the -- and again, this isn't 2 necessarily your responsibility, but as I understand it also, 3 the amount that I committed on contract release orders 4 accumulates in the system as I enter these things. 5 So, each month I buy more salt, the dollar 6 amount is going to go up? 7 A: That's correct, yes. 8 Q: Now, what happens when the dollar amount 9 gets to the blanket order limit, do you know? 10 A: Well, my understanding, I don't issue -- I 11 don't -- I've never issued contract release orders, but my 12 understanding and Accounting Services can probably explain 13 this better than I, that when it's getting close to the 14 limit, there is a warning that's issued by the system, 15 telling the person who's entering the contract release order, 16 that they're going to be going over the -- the amount. 17 Q: Right, okay, and I -- and I appreciate 18 that this isn't your area, and we will, I understand, be 19 hearing this evidence in considerably more detail from the 20 financing -- Accounts -- Accounting Services people. 21 So, I don't want to go into detail, I just 22 want to get a general sense -- 23 A: Yes. 24 Q: -- because I think it would be of 25 assistance.

1 So -- so, there's a warning that's sent out? 2 A: Yes. 3 Q: Now -- 4 MADAM COMMISSIONER: Just before the warning 5 gets sent out, is there a difference between a blanket order 6 and a blanket contract? 7 THE WITNESS: No, the words are used 8 interchangeably, because -- 9 MADAM COMMISSIONER: Okay. 10 THE WITNESS: -- they were called something 11 else before -- 12 MADAM COMMISSIONER: Okay, okay, I just -- 13 THE WITNESS: -- SAP was implemented -- 14 MADAM COMMISSIONER: -- need a yes or no. 15 THE WITNESS: -- yeah, I apologize, yes. 16 17 CONTINUED BY MS. LILY HARMER: 18 Q: All right, so, one (1) other piece to 19 this, presumably if I'm buying salt, I also have to have had 20 that in my budget; right? 21 A: Yes. 22 Q: Okay, so that's another whole other side 23 of it, but that doesn't change what we've talked about. I 24 have a budget approval, but we also still have to go through 25 this process we've just described; right?

1 A: That's correct, yes. 2 Q: All right. Now, once I get to the upset 3 limit, and I still need -- let's say it's been a bad winter, 4 I need more salt, what happens then? Then do I have to go 5 back and get additional approval? 6 A: Yes, if -- if you need to increase the 7 amounts, if the Department would need to increase the amount 8 on the order, then we would have to go back and get Council 9 approval to increase that amount. 10 Q: Who has to go back? Who is it that is 11 responsible for doing that? 12 A: The Department is normally responsible for 13 going back and asking for more funds to increase that amount. 14 Q: Right, okay. Can you turn to Tab 45 of 15 that same Volume 2. Oh, I've got the wrong number, sorry, 16 just bear with me for a minute. 17 I believe it's in Volume 1, that's why. 18 19 (BRIEF PAUSE) 20 21 Q: And it's Tab 45 of Volume 1. And this is 22 Mr. Garrett's testimony. 23 That's an excerpt from the transcript, there 24 is no Begdoc number and I want to look specifically at page 25 77, now you've -- you've said it was the Department's

1 responsibility to do that, and I take it that's because it's 2 the Department's responsibility to make commitments, it's up 3 to them to -- to enter into commitments; is that right? 4 A: That's correct, yes. 5 Q: And it's the Department's responsibility, 6 as I understand it, to ensure that the bylaws with respect to 7 financial controls are -- and purchasing are met; is that 8 right? 9 A: Yes, yeah. 10 Q: And if we look at page 77 of this tab, 11 this is Michael Garrett's evidence from the 10th of December, 12 2002, he sets out Section 8 of the interim Financial Control 13 bylaw. Do you see that at line 10, and the question is: 14 "Then if we turn to Section 8 we find there 15 is one (1) more point about this, that 16 bears emphasis." 17 And I'm just going to read -- 18 A: Yes. 19 Q: -- the section to you; okay? 20 "No commitment shall be made, no debt shall 21 be incurred, no expenditures shall be made, 22 no accounts shall be paid by or on behalf 23 of the City, except with the approval of 24 Council, or in accordance with the 25 authority granted in accordance with the

1 provisions of this bylaw." 2 Do you see that? 3 A: yes. 4 Q: And does -- and is that where what you've 5 just said -- is that where that comes from, that it's the 6 Department's responsibility to ensure that this is followed, 7 that no commitment shall be made without going through this? 8 A: Yes. 9 Q: Okay. Now, yesterday you mentioned 10 something called price agreements -- 11 A: Yes. 12 Q: -- and that was in answering some 13 questions about the Y2K purchasing process. 14 What is a price agreement? 15 A: A price agreement was -- it was a blanket 16 contract, but it was a manual form, because at the time the 17 system that we had in place, the blanket contracts could not 18 go on to the system. 19 Q: Okay, so they were similar. They were the 20 equivalent of a blanket order? 21 A: Yes. 22 Q: Prior to the SAP system? 23 A: That's right. 24 Q: All right. Were they used in the same 25 way? Were there -- were there -- was there something

1 equivalent, for instance, to a contract release order? At 2 that time? 3 A: No, there was not. What the Departments 4 had to do if they wanted to buy against the price agreement, 5 they had to send us a requisition and a purchase order would 6 have been issued by Purchasing, because there was no -- there 7 was no allowance for a contract release order in the system. 8 Q: So, Purchasing took -- it was Purchasing 9 who did what Departments now do with their contract release 10 orders; is that fair? 11 A: That's correct, yeah. 12 Q: Okay, so when we looked at the Y2K 13 approval form, when you look at that document, and you see 14 that there's a -- an area where Purchasing needs to be 15 involved, is that -- can you explain why that is? 16 A: Yeah, well, okay. First of all, let me 17 explain the -- the need for the form. The form was a Y2K 18 approval form, and it was the approval of awarding contracts 19 for goods and services required, because of Y2K. 20 Now, we -- we would have had price agreements 21 in place, and some of those requirements could have been 22 purchased from the price agreements. However, the 23 Departments should not have been purchasing against price 24 agreements that were not approved for the Y2K. 25 Q: So, what you mean is there could have been

1 price agreements in place that didn't have anything to do 2 with Y2K? 3 A: Exactly. 4 Q: But with respect to the same -- 5 A: Yes, type of purchase. 6 Q: -- item? 7 A: For example, if we had a price agreement 8 for -- for computer disks, and it was for a certain amount, 9 but it was not specifically set in place for Y2K, and there 10 was a requirement for those same items that were required 11 under Y2K, well, we didn't want the Departments to blanketly 12 order them from that, we wanted them to go through 13 Purchasing, that way we would make sure that the volumes 14 would be increased on that contract, and that we had proper 15 authority to increase that contract to meet their needs as 16 well as the other requirements that were already there. 17 Q: All right, so was that a situation that 18 was somehow unique to the Y2K scenario? 19 A: Yes, it was. 20 Q: All right. 21 A: Yeah. 22 Q: Now, under SAP, we know that the 23 Departments now take responsibility or have the 24 responsibility to advise the system as to what they're buying 25 through the contract release orders; right?

1 A: Yes, that's correct, yeah. 2 Q: Okay. So they -- so that is that 3 something that is different from what existed prior to SAP? 4 A: Yes, it is. 5 Q: Okay. And so prior to SAP it was -- 6 Purchasing -- 7 A: It was -- 8 Q: -- took care of that function? 9 A: Yes, yeah, a requisition would be sent to 10 Purchasing and Purchasing would issue a purchase order. 11 Q: Okay, thank you. Now, I want to just take 12 you back to amalgamation for a moment, and I'm just changing 13 topics and I'm going to leave those sort of Purchasing 14 concepts. 15 But as -- as I understand it, well we've heard 16 about the challenges posed by amalgamation, but as I 17 understand it, since that time, in fact the City has been 18 engaged in an ongoing review and revision of the procurement 19 process. Is that a fair assessment? 20 A: Yes, that's correct. 21 Q: And you put an interim Purchasing bylaw in 22 place in March of 1998, which was shortly after the new City 23 started; right? 24 A: That's correct. 25 Q: And as I understand it, that was done in

1 somewhat of a hurry, something had to get put in place, as I 2 think you said there were a number of pre-existing purchasing 3 systems, you needed to pull those together and make them 4 consistent? 5 A: Yes, yeah, and more importantly, there 6 were different Purchasing bylaws for the different 7 Municipalities. 8 So, in order to operate under one (1) bylaw, 9 that bylaw as put together fast, and it was an interim bylaw, 10 with the intent that -- that more detailed bylaw would be 11 approved afterwards, or would be produced and approved 12 afterwards. 13 Q: Right, can you turn up Tab 24 of Volume 1 14 of your documents please. Begdoc 31528. 15 16 (BRIEF PAUSE) 17 18 Q: This is a report to Council, as I read it. 19 This is actually -- this is evidence of Council having 20 adopted a report implementing the -- this Interim Purchasing 21 bylaw; is that right? 22 A: That's right, yes. 23 Q: In March of 1998. And on the second page 24 there is -- on the second page under purpose, do you see 25 that? It says:

1 "To provide for the continued efficient 2 operation of the procurement function of 3 the City, pending the development and 4 adoption of comprehensive long term 5 policies and bylaws of the amalgamated 6 City." 7 Do you see that? 8 A: Yes, I see that. 9 Q: So, I take it from reading that, that this 10 was never intended, this interim bylaw, to be comprehensive 11 and long term? 12 A: That's correct, yes. 13 Q: Okay. And if we look at -- under the 14 recommendations, under number 3, we see that in fact the CFO 15 was required to report as soon as possible on uniform 16 procurement policies? 17 A: That's right, yes. 18 Q: So, this interim bylaw, as I read this, 19 was not intended to be there for all time, it wasn't intended 20 to be comprehensive, it was really something done quickly, in 21 order to allow you to be -- to operate; is that fair? 22 A: That's fair, yes. 23 Q: Okay. And in working towards that goal of 24 developing more comprehensive, more long term policies, more 25 uniform policies, I understand that you -- and we've seen

1 these documents, and I'll take them to you. Now, you went 2 through a -- what you called a tender process 3 standardization, sort of consultation with the -- with the 4 Commissioners in Departments -- 5 A: That's correct. 6 Q: -- and -- 7 A: That's correct, yes. 8 Q: -- and that we will find at Tab 35, of -- 9 of Volume 2, can you turn that up? 10 11 (BRIEF PAUSE) 12 13 Q: And this as we saw, was a memo that you 14 sent out on February 25, 1999, to Department Heads, Executive 15 Directors and Directors and you propose a number of things to 16 do with standardizing the tender process. 17 A: That's correct, yes. 18 Q: And then -- 19 MADAM COMMISSIONER: Begdoc number please? 20 MS. LILY HARMER: Begdoc 40335. 21 MADAM COMMISSIONER: Thank you. 22 23 CONTINUED BY MS. LILY HARMER: 24 Q: And then if you just flip back to Tab 34 25 of Volume 2, the one (1) right before it.

1 (BRIEF PAUSE) 2 3 Q: We see that you -- a month later, on March 4 30, 1999, this is Begdoc 40290, you have received some 5 responses, you haven't had any negative feedback, and so 6 you're going to implement the recommendations that you had 7 included in your earlier memo? 8 A: That's right, yes. 9 Q: Now, you say that you're going to 10 implement the recommendations; that's in the second paragraph 11 on the first page, but, I note that when you actually are 12 dealing with things that you say you're going to do and I 13 just -- one second... 14 15 (BRIEF PAUSE) 16 17 Q: I'm going to take you to the tender part 18 because I hadn't appreciated until you told us the other day 19 that the tender part, the first part of this document, as I 20 understood you to say, only applied to tenders. But, I don't 21 think it matters. 22 So, if you look at page 3 of this document, 23 which bears document number or image number 40292, under 24 reports to Bid/Standing Committee, in the second paragraph, 25 you're talking about ensuring that reports are prepared in an

1 acceptable format. 2 You say: 3 "It is recommended that all reports 4 recommending awarding of contracts greater 5 than [I think that's supposed to be 6 $500,000], be reviewed by purchasing before 7 the reports are finalized and signed." 8 Now, I note there you use the word, it is 9 recommended that. Is that how you were implementing or why 10 were you just recommending as opposed to telling people, this 11 is how it was going to be? 12 A: Well, I guess because we can only 13 recommend to the departments that we do, it's never been my 14 understanding that I can -- that I have the authority to 15 actually tell departments what to do. 16 Q: Why is that? 17 A: Well, we are a division and I mean, this 18 document went to Commissioners and Executive Directors and 19 general managers, who are responsible for their own 20 operations and who are responsible to ensure that policies 21 and procedures are followed. 22 And I guess maybe I didn't feel it was my 23 place to tell, you know, these other departments or bodies as 24 to what they must do, but, rather what they should do. 25 Q: All right. And I note similarly, on page

1 4, you make a recommendation in the second paragraph on that 2 page, you say: 3 "It is recommended that the department 4 forward the purchase requisition to 5 purchasing at the same time that the tender 6 documents are forwarded to purchasing for 7 distribution." 8 So, again, you're making a recommendation 9 there? 10 A: Yes, I am. 11 Q: You're telling the departments that would 12 be the -- the best way to do it? 13 A: That correct. 14 Q: As far as you're concerned? 15 A: That's correct. 16 Q: But, you're not requiring them to do that. 17 A: No, I would hope that the departments 18 themselves would require their staff to do that. 19 Q: Okay. And in -- 20 21 (BRIEF PAUSE) 22 23 Q: And if you want to require a department to 24 do something, I take it you'd have to do that by going up and 25 having -- putting in place the bylaws, is that right? Or is

1 there some other way you could do it? 2 A: That's right. The only way that I would 3 know is through a bylaw or a policy approved by Council. 4 Q: Okay. Now, so speaking of bylaws then, so 5 you went through this standardization process, you've got 6 input from the various departments and I understand that 7 ultimately in March of 2000, there as a new purchasing bylaw 8 that replaced the March 1998, interim bylaw? 9 A: That's correct. 10 Q: And we look at that in Mr. Garrett's 11 documents. I won't take you back there. But, that was some 12 time -- that was two (2) years between the interim and the 13 more final or more comprehensive one (1). 14 Were you working towards that throughout that 15 period, or why did it take so long? 16 A: Yes, you know, I started working on that 17 bylaw shortly after I took over as Director, I was appointed 18 Director, keeping in mind, that the City was going through a 19 lot of changes. 20 Some of the staff that I started to work with 21 at the beginning were no longer there. New staff were coming 22 in, which meant that the stakeholders changed. I'd have to 23 have meetings with the new people and update them as to what 24 was happening. I have to get approval from the departments 25 then approval from the senior management team and

1 unfortunately that all took time. 2 Q: Okay and ultimately, you finally -- you 3 did get the purchasing bylaw and just for completeness, I 4 understand that that was again replaced in July of 2000 with 5 another purchasing bylaw that made -- that added some 6 policies and things that had been requested by Council. 7 Is that right? 8 A: That's correct. 9 Q: Okay. 10 A: That's correct. 11 Q: Let's turn now to look at -- I just want 12 to talk briefly about the purchasing process as a whole and 13 as I understand it and maybe you can help me with this and 14 I'm talking about the process not just as it pertains to your 15 department but the procurement process, how the City procures 16 goods and services. 17 And as I understand it, there were really a 18 number of elements or steps to that. I want to see if -- 19 whether I've got this right. The first is defining the scope 20 of the work -- or the -- defining the need. You've got to 21 know what you need before you can go out and acquire it, 22 right? 23 A: That's correct, yes. 24 Q: Second is preparing and circulating a bid 25 document in order to solicit responses --

1 A: That's correct. 2 Q: -- and suppliers? 3 A: That's correct. 4 Q: And then once you've got those, the third 5 element or the third step is evaluating the bids and 6 reporting on them, right? 7 A: That's correct. If the amount is over 8 five hundred thousand (500,000). 9 Q: Right. 10 A: I would say make a recommendation and then 11 report it on that recommendation. 12 Q: Understood. Then the next step, if there 13 is going to be a formal contract, would be negotiating that 14 contract and finally, there's the monitoring the contract, 15 monitoring the purchases. 16 A: That's -- 17 Q: Particularly if you've got a blanket 18 order, I take it there's a lot more involved with that? 19 A: That's correct. 20 Q: Then if you've got one off purchase order? 21 A: That's correct, yes. 22 Q: Okay. Now, you've said that it was the 23 department who defined the business needs -- its own business 24 needs? 25 A: That --

1 Q: You said that a number of times and 2 there's just one thing I want to clarify that when you were 3 talking about Mr. Anderson yesterday and I just want to make 4 sure I understand. When he was taking you through the 5 leasing scenario, you may recall, and he suggested to you 6 that it was atypical. 7 The leasing scenario was atypical in two (2) 8 respects and the first thing was sourcing the commodity. 9 Just to put it context, if you can remember, and secondly, 10 sourcing the funding and then when he asked you about 11 sourcing the commodity, he asked you if Purchasing would make 12 sure it was the right commodity and I just want to make sure 13 I understand that correctly. 14 Would Purchasing make sure that the department 15 was using the right item or looking to buy the right thing? 16 A: No, no. 17 Q: What would Purchasing make sure the 18 department was doing? 19 A: Purchasing would make sure that the 20 department is getting the best price possible through a 21 competitive process. Purchasing staff, or myself for that 22 matter, would not be aware of what the needs or the 23 requirements of the department. 24 Q: Okay. So you're not sourcing a commodity 25 at times, like you're really sourcing the supplier of that --

1 A: That's -- 2 Q: -- commodity. 3 A: -- correct. 4 Q: Is that fair? 5 A: That's correct. 6 Q: Thank you. Now, in terms of when somebody 7 comes to you to purchase something, as I think you've 8 explained, they need to have funding approval for that? 9 A: That's right. 10 Q: Is that right? 11 A: Yeah. 12 Q: And that funding approval, am I right that 13 that would be in place before you would go out and do a call? 14 A: Yes. The department should have obtained 15 that approval before asking us to issue a call, yes. 16 Q: Does Purchasing have any role to play with 17 respect to the obtaining of funding approval for any 18 particular department? 19 A: No. 20 Q: Okay. Now, that -- so that's the first -- 21 the first step is defining the need and ensuring funding 22 approval. The second, as I said, was preparing and 23 circulating the bid document and we've heard evidence about 24 the roles of the various parties. In this case, it seems and 25 we'll hear more evidence about this, I expect, from Mr. Power

1 and others but that the RFQ that came to Purchasing came from 2 the IT department? Right? Or the IT group? 3 A: Yes. 4 Q: All right. 5 A: That document did come to us, yes. 6 Q: And that was provided to Mr. Spizarsky, as 7 best we can tell, by Mr. Power? Brendan Power. 8 A: I believe so, yes. 9 Q: And I think you said you knew Mr. Power 10 but you didn't know him very well? 11 A: That's correct. 12 Q: Did you have any role in hiring Mr. Power? 13 A: No, none. 14 Q: Did you have any say or role in evaluating 15 his ability to draft RFQs? 16 A: No, I did not. 17 Q: Did you have any role in knowing whether 18 or not he had the capability to assess and evaluate an RFQ? 19 A: No, I did not. 20 Q: Did you have any knowledge of his 21 expertise in leasing or dealing with lease rate factors or 22 any of those kinds of things? 23 A: No, I did not. 24 Q: So he didn't work for you? He didn't have 25 any -- he didn't have any involvement in --

1 A: No. 2 Q: -- that? 3 A: No, he worked for our corporate services 4 IT division, and I had no input in his hiring, he did not 5 report to me. 6 Q: Okay. Now, with respect to determining 7 the volume of goods that goes on a -- on a bid, and that's 8 required by Departments, I think you told Mr. David Moore 9 that it was part of Purchasing's -- your Purchasing 10 Division's function, to ensure that an RFQ sets out the 11 volumes of goods to be purchased; do you remember that? 12 Having that conversation? 13 A: Yeah, I believe so, yes. 14 Q: Okay. And so let's use the salt example, 15 just so I understand that. If the RFQ -- first of all it's 16 the department that tells you how much salt they're going to 17 need? 18 A: That's correct, yes. 19 Q: And it's the -- and it's the department 20 who's going to know that in order -- so, somehow that 21 information has to be communicated to Purchasing; right? 22 A: That's correct, yes. 23 Q: Okay. And all that Purchasing can do is I 24 take it, from what you told Mr. Moore, is go through the RFQ 25 document and ensure that there's some clarity there?

1 A: That's right, yeah. 2 Q: Okay. Now, and -- and also then when 3 you're reporting, when -- when that report, if there is a 4 report, goes forward to ensure that there's some clarity with 5 respect to volumes in the reports. I think you mentioned 6 that when you were talking to Mr. Moore as well? 7 A: Yes, yeah. 8 Q: All right. Now, to the extent that the 9 Commissioner may conclude that this particular RFQ and report 10 wasn't as clear as it could have been on the volumes, do you 11 have any explanation as to why that happened, or why that 12 would be, if the RFQ or the report didn't contain as much 13 detail as someone suggests is appropriate? 14 A: No, I really -- I really don't, I really 15 don't. 16 Q: Okay. Now, just to -- I'm going to skip 17 over a number of steps, because I don't believe, as I -- as I 18 heard what you've told us, I don't believe that you were 19 involved, certainly in negotiating a contract, Purchasing had 20 no role in negotiating the contract with MFP? 21 A: No, no. 22 Q: And with respect to monitoring 23 performance, monitoring the contract after the fact, 24 Purchasing, did it have any role in doing that? 25 A: No, we never monitor contracts.

1 Q: Okay. Now, to the extent that it might be 2 decided or suggested here, that Purchasing should be -- have 3 -- take some role in monitoring contracts, would you at this 4 point in time have the ability in your Division to do that? 5 A: No, I don't believe I would have the 6 expertise to do that, not at this point. 7 Q: So you wouldn't -- your division would 8 need to acquire additional expertise in order to be able to 9 address that -- 10 A: Yes, definitely. 11 Q: -- suggestion? 12 A: Yes. 13 Q: Okay. And I take it, would you also need 14 additional information to be provided to you? 15 A: Yes. 16 Q: Okay. 17 A: I would, yeah. 18 MADAM COMMISSIONER: I'm not sure what that 19 means. 20 MS. LILY HARMER: Well, in terms of, if -- if 21 you're monitoring a contract, you would need additional 22 financial information to know what was being put on the 23 contract, for instance? 24 THE WITNESS: Of course, what their budget, 25 their total budget is, what approvals they've gotten for

1 their budget, I mean I would -- I would need somebody to know 2 the complete history, you know, the need, where it's being 3 used, if you want to properly monitor it. 4 5 CONTINUED BY MS. LILY HARMER: 6 Q: Okay. 7 A: I would need all that background 8 information. 9 Q: Which is a lot more than you have now; is 10 that fair? 11 A: That's true, yeah. 12 Q: Okay. 13 A: Yes. 14 Q: So, let me just see if I can summarize 15 briefly then what you've said about the Purchasing Division's 16 role. As I understand it, you act somewhat of an arm's 17 length agent for the City in its procurement; is that fair? 18 A: Yes, that's correct. 19 Q: And you perform -- you recommend things to 20 people, you -- you review things that people have done, and 21 can I characterize that as sort of an advisory role? 22 A: That's correct, yes. 23 Q: And -- and you ensure that due process has 24 been followed? 25 A: Yes, that's right.

1 Q: And you review Purchasing policies and 2 procedures to keep them up to date, we've -- we've talked 3 about how you've gone through that process to now -- 4 A: Yes. 5 Q: -- up to now? As I understand it also, in 6 terms of initiatives in the purchasing and procurement area, 7 there -- are you familiar with the requirement in the new 8 Municipal Act, the one (1) that just came into affect at the 9 beginning of this year, that Municipalities are going to be 10 required to have more specificity with respect to their 11 procurement process? 12 A: Yes, I'm familiar with that, and I've also 13 participated in the working group that was set up by the 14 Province to come up with a guideline for municipalities to 15 implement those requirements. 16 Q: Okay, there wasn't -- a promised the 17 Registrar I would do this and I've forgotten until this 18 point. 19 There was an additional document added to the 20 back of Volume 3, it's a Tab 32. It's Volume 3 of Mr. 21 Pagano's material. 22 23 (BRIEF PAUSE) 24 25 Q: And this is Section 271 of the Municipal

1 Act 2001. What was your role on this Committee? 2 A: I'm a member of the working group that's 3 producing a guideline for municipalities to -- to implement 4 the new requirements of the municipalities. 5 Q: And so if we look at Tab 32, we will see 6 what will be required by -- before January 1, 2005 of 7 municipalities in the Province of Ontario. 8 And they will be required, they shall adopt 9 policies with respect to procurement of goods and services 10 and that will include and then there's a whole list of 11 policies, types of procurement policies that shall be used, 12 goals to be achieved by using each type of procurement 13 process, circumstances under which each type of procurement 14 process shall be used. 15 Circumstances under which a tendering process 16 is not required. Circumstances under which in house bids 17 will be encouraged. How the integrity of the process will be 18 maintained et cetera. And so you're on a working group 19 that's addressing these issues? 20 A: It's addressing how municipalities should 21 go about addressing these issues. 22 Q: And as I understand it, that working group 23 is in the process of coming up with guidelines to assist 24 municipalities to meet this requirement? 25 A: That's correct, yes.

1 Q: And as I understand it, it's the hope of 2 this committee or working group, that those guidelines may be 3 published or available sometime in the new few months by the 4 summer perhaps? 5 A: Yes, if I remember correctly, from the 6 last meeting they were targeting for June, I believe. 7 Q: Of 2003? 8 A: Yes. 9 Q: Okay. So we'll look forward to seeing 10 those. I understand that at the same time, and I don't know 11 whether its