1
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 31st, 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 ) 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 )Brendan Power 24 Zoran Samac ) 25 Joyce Ihamaki )Registrar
3
1 TABLE OF CONTENTS 2 Page 3 4 Exhibits 4 5 6 Brendan Power, Resumed 7 Continued Cross-Examination by 8 Mr. Gordon Capern 8 9 Cross-Examination by 10 Mr. Bryan McPhadden 13 11 Re-Direct Examination by 12 Mr. Patrick Moore 31 13 14 David Beattie, Sworn 15 Examination In-Chief by 16 Mr. Patrick Moore 83 17 Cross-Examination by 18 Ms. Bay Ryley 147 19 Cross-Examination by 20 Mr. Hugh MacKenzie 174 21 Cross-Examination by 22 Mr. William Anderson 211 23 24 Certificate of Transcript 249 25
4
1 EXHIBITS 2 Exhibit No. Description Page No. 3 4 23 Volume IV Bound document titled 5 "Brendan Power", 6 Additional Tabs 127-128 31 7 8 24 VOLUME I Bound document titled 9 "Dave Beattie" tabs 1-57 10 and affidavit of 11 Mr. Beattie. 54 12 13 14 15 16 17 18 19 20 21 22 23 24 25
5
1 --- Upon commencing at 10:00 a.m. 2 3 MADAM COMMISSIONER: Good morning. 4 Mr. McPhadden? 5 MR. GORDON CAPERN: Commissioner, if I might, 6 just before -- 7 MADAM COMMISSIONER: Oh, sorry -- 8 MR. GORDON CAPERN: -- just before Mr. 9 McPhadden begins, on Thursday afternoon I went back to the 10 office following the completion of my cross-examination. 11 When I got back, it was drawn to my attention 12 that there was one (1) document that may require a bit more 13 review with Mr. Power, prior to his departure. 14 The reason for that is, that I -- is that it 15 deals with some anticipated testimony from Mr. Loreto with 16 respect to matters arising under the comfort letter and 17 certain requests that Mr. Loreto made. 18 I've spoken with Mr. Pat Moore this morning 19 about that. He and I are -- for what it's worth, both 20 satisfied that it's proper re-examination, because it arises 21 from my cross examination. 22 And I think what we wanted to address -- 23 certainly I would like to address, is to give Mr. Power, an 24 opportunity to hear what Mr. Loreto's anticipated evidence 25 may be, so that he's not caught off guard in the same --
6
1 dealing with the same issue that arose with Mr. Hainey's 2 examination. So -- 3 MADAM COMMISSIONER: Okay. 4 MR. GORDON CAPERN: -- I intend just to leave 5 it with the re-examination for Mr. Pat Moore, unless there's 6 any strong objection to that. 7 MADAM COMMISSIONER: Mr. McPhadden, I assume 8 you don't have an objection to that? 9 MR. BRYAN McPHADDEN: I'm just wondering what 10 document that is? 11 MR. GORDON CAPERN: It's the document found at 12 Mr. Power's Tab 33, which is an e-mail sent in February 2001. 13 It's actually a memo to file from Mr. Loreto. 14 15 (BRIEF PAUSE) 16 17 MR. BRYAN McPHADDEN: Tab 33, Volume 1, is 18 that it? 19 MR. GORDON CAPERN: Yes. 20 MADAM COMMISSIONER: I guess, Mr. McPhadden, 21 the other option is to deal with it right now, to deem Mr. 22 Capern as not having finished his cross examination. 23 I take it, the way that Mr. Capern is putting 24 it, is that rather than do that right now, which would have 25 Mr. Power in the situation where he hasn't actually had the
7
1 Loreto document put to him, if it comes up in re-examination 2 then that will give him a bit more time. 3 So -- but, I'm -- it doesn't matter to me 4 which way it goes, whether we -- whether we just have Mr. 5 Capern deal with it now, or whether it goes in re- 6 examination. 7 MR. BRYAN McPHADDEN: My preference is -- 8 MADAM COMMISSIONER: Do you care? 9 MR. BRYAN McPHADDEN: -- I do. 10 MADAM COMMISSIONER: Okay. 11 MR. BRYAN McPHADDEN: My preference is that he 12 deal with it now, because in the event that there are any 13 questions arising out of that I'll -- 14 MADAM COMMISSIONER: Actually, that's a very 15 good idea. That's a very good idea. 16 MR. GORDON CAPERN: Thank you, Commissioner. 17 I'm sorry for the interruption. 18 MADAM COMMISSIONER: No problem. 19 MR. BRYAN McPHADDEN: I understand -- I'm told 20 by a reporter that you suffered a personal loss over the 21 weekend? 22 MADAM COMMISSIONER: Yes, I did. 23 MR. BRYAN McPHADDEN: On behalf of all 24 present, I'd like to pass on our condolences. 25 MADAM COMMISSIONER: Thank you very much.
8
1 That's very kind of you all. 2 Thank you. 3 MR. GORDON CAPERN: Thank you. 4 5 CONTINUED CROSS-EXAMINATION BY MR. GORDON CAPERN: 6 Q: Mr. Power, if I can get you to turn up Tab 7 33, if you have it in front of you? 8 A: Yes. 9 Q: This at least on its face, appears to me 10 to be a memo to file, from Mr. Loreto to himself, on or about 11 February the 15th of 2000, which I think it times closely 12 with the provision by the City of the comfort letter that was 13 ultimately address to Canada Life and to MFP. So, you're 14 familiar with that letter? 15 A: Yes. 16 Q: All right and ca -- you've now had an 17 opportunity to review this memo to file? 18 A: Yes. 19 Q: And can you help me, sir, d -- the -- Mr. 20 Loreto seems to suggest in here that you and he spoke at 21 approximately 4:30 p.m. on February the 15th, 2000. Do you 22 recall that conversation, sir? 23 A: No, I -- no. 24 Q: Do you recall having a conversation with 25 Mr. Loreto about the information set out in this memo to
9
1 file? 2 A: I can't recall. It wouldn't seem 3 unreasonable. I wouldn't -- that I would have a conversation 4 but I don't recall this particular one, no. 5 Q: Okay and just so that I'm clear, it 6 appears to me that Mr. Loreto sought from you confirmation 7 about the amounts that were to be spent on the equipment 8 schedules. Do you see that, sir, in the bottom half. It's 9 the -- I guess the large paragraph that appears in that memo 10 to file? 11 A: Yes. 12 Q: All right and he suggests that he 13 confirmed with you that the amounts to be spent contemplated 14 by the equipment schedules to be signed were not in excess of 15 the amounts approved by Council for that equipment. Do you 16 see that, sir? Now, did Mr. Loreto say to you or at least 17 did you understand from any discussions you had with him that 18 Mr. Loreto was operating under the apprehension that there 19 was a limit to what Council had authorized and it's -- the 20 amounts to be put on lease with MFP? 21 A: No. 22 Q: All right. So are you saying, sir, that 23 that conversation -- that you never had any conversation with 24 Mr. Loreto where you would have gained that understanding? 25 A: I don't recall any discussions with Brian
10
1 about that. 2 Q: Are you saying they didn't happen or that 3 you don't remember them? 4 A: I don't remember them. 5 Q: So it's possible that they did happen and 6 you just don't remember? 7 A: That's possible. 8 Q: And there's reference here where it says: 9 "Brendan said Council $43 million" 10 And I anticipate that Mr. Loreto will testify, 11 sir, that when he wrote that, what he meant was that you 12 confirmed for him that the Council authorization was $43 13 million. Do you recall confirming that with Mr. Loreto? 14 A: No, I don't. 15 Q: Is it possible that you told him that, 16 sir, and you just don't remember? 17 A: I don't think I would have told him that, 18 no. 19 Q: Why is that? 20 A: Because I didn't think that the limit was 21 $43 million. 22 Q: As far as you were concerned at that point 23 in time, you were operating under the understanding that 24 there was no maximum amount, no cap that Council had imposed 25 on the leasing -- amount of the assets that could be put on
11
1 lease with MFP? 2 A: That's correct. 3 Q: And he says -- suggests in the next 4 sentence. He said -- in the memo he says: 5 "He said these schedules total $33 million" 6 From which I understand Mr. Loreto will say 7 that you told him that at least up to that point in time, $33 8 million had been commit -- worth of assets had been committed 9 to schedules with MFP. 10 A: Yeah, that sounds reasonable, yeah. 11 Q: So you do recall telling him that? 12 A: Well, I don't recall the conversation at 13 all but at that point, $33 million seems like a reasonable 14 amount that had been put on schedule. 15 Q: No, I understand that, sir, but what I'm 16 interested in understanding is your communication of that 17 point to Mr. Loreto. You agree with me, sir, that he would 18 have needed to go to someone in IT and most likely you in 19 order to get that -- 20 A: Yes. 21 Q: -- information? 22 A: That's correct. 23 Q: So it's probable, sir, that he did get 24 that information from you? 25 A: Yes.
12
1 Q: So then I suggest to you, sir, that it's 2 also probable that the other information that's contained in 3 this memo came from you. Do you agree that that's at least a 4 possibility? 5 MADAM COMMISSIONER: You're asking him if it's 6 a possibility that it's probable that -- 7 MR. GORDON CAPERN: -- that it's possible -- 8 that it's at least a possibility that the rest of the 9 information that's contained in that paragraph came from you? 10 MR. BRYAN McPHADDEN: Initially you said the 11 letter. Do you mean the paragraph or the letter? 12 MR. GORDON CAPERN: I mean the paragraph. 13 THE WITNESS: Yes, except as I mentioned about 14 the $43 million, yeah. 15 16 CONTINUED BY MR. GORDON CAPERN: 17 Q: You -- you just say that you have no 18 knowledge of where Mr. Loreto would have got that information 19 from? 20 A: I'm just saying, I don't think he got it 21 from me. 22 Q: Okay. So, when I said, Brendan said, 23 Counsel $43 million, you're suggesting that that wasn't him 24 saying that he got that information from you? 25 A: Well, as I said, I don't think that
13
1 Counsel approved the $43 million, I -- I don't -- I wouldn't 2 have said it that way. 3 Q: All right, sir. I'm -- I'm going to 4 suggest, sir, that you did have that conversation with Mr. 5 Loreto, and in fact, you did tell him that it's $43 million. 6 Is that -- you're going to tell me that that 7 did not happen? 8 A: That's -- I -- I don't recall, but I can't 9 imagine I would say that, no, that way. 10 Q: All right. 11 12 MR. GORDON CAPERN: That's the extent of my 13 questions on that, Commissioner. 14 MADAM COMMISSIONER: Thank you Mr. Capern. 15 Mr. McPhadden? 16 17 (BRIEF PAUSE) 18 19 CROSS-EXAMINATION BY MR. BRYAN McPHADDEN: 20 Q: Mr. Power, in the course of being 21 questioned by other Counsel, you were taken to the 22 reasonableness of the guarantee period of ninety (90) days. 23 At the time that you were preparing the RFQ, did you have any 24 reason to believe that a ninety (90) day guarantee period 25 would be too short?
14
1 A: No, given the -- the approval process and 2 the Counsel schedule, I think ninety (90) days was a 3 reasonable time, yeah. 4 Q: Did you have any specific reason for 5 believing that, in fact, approval would be obtained within 6 ninety (90) days? 7 A: Yeah, well, working backwards from the 8 last Counsel of that session, I think they -- they take a 9 break at the end of the summer, so we're working towards that 10 -- that Counsel session. 11 Q: Where you aware, at that time, of other 12 entities using a longer than ninety (90) day guarantee 13 period? 14 A: Well in the past, when I was with the 15 Provincial Government, we had asked for prices to be held for 16 longer than ninety (90) days, sometimes a hundred and twenty 17 (120) days. 18 Q: All right. And why were you doing that, 19 in those circumstances? 20 A: Well, just understanding of the length of 21 time it takes things to get approved in Public Sector 22 organizations. 23 Q: All right. Well, we know that, in fact, 24 no equipment was put on lease prior to the expiry of the 25 ninety (90) day guarantee period, and we know that -- or the
15
1 evidence would suggest that, that was first done on October 2 1st, 1999. 3 Do you know, or have any idea, as to how much 4 was put on lease on October 1st, 1999? 5 A: Well, I don't recall exactly, I think it 6 was about $20 million. 7 Q: Now, are you aware of any reason why at 8 least some of that $20 million could not have been put on 9 lease prior to September 11th, 1999? 10 A: In my view, there's no reason why it 11 couldn't have happened. They had been purchasing equipment, 12 I think, going back to January of that year, so they had the 13 equipment in place and presumably the invoices and other 14 documentation, so a schedule could have been completed within 15 -- well within the ninety (90) days, in my view. 16 Q: In fact, are you aware of any reason why 17 the whole, say $20 million, could not have been put on lease 18 by September 11, 1999? 19 A: I'm not sure of all the details of what 20 was all in the first least, or the first schedule. In my 21 view, a lot of it could have been done. 22 Q: All right. And were you the cause of any 23 delay with respect to equipment being put on lease, or not 24 being put on lease, until October 1? 25 A: No.
16
1 Q: In the course of questioning by City -- 2 the City Solicitor's Office, a suggestion that was put to, 3 that there would be a problem if the RFQ process resulted in 4 only having two (2) qualified bidders. 5 And this was in particular reference to the 6 buy/lease back, in terms of the RFQ. How important was -- 7 was the buy-lease back term of the RFQ to the City? 8 A: It was very important to the City because 9 they had been purchasing this equipment and looking to lease 10 it, rather than spend capital money on it. 11 MADAM COMMISSIONER: When they bought it, were 12 they thinking of leasing it right at that time, or was it 13 just after that they decided to lease it? 14 THE WITNESS: No, the intent was all along to 15 finance the -- at least the equipment being purchased for the 16 Year 2000 project through leasing. 17 MADAM COMMISSIONER: Okay. 18 19 CONTINUED BY MR. BRYAN McPHADDEN: 20 Q: Now it was your evidence that everyone 21 involved in the process was aware that this was to be a 22 buy/leaseback situation. 23 To the extent that only two (2) of the bidders 24 actually specifically addressed that aspect, is there a 25 problem -- inherent problem with only two (2) qualified
17
1 bidders coming out of a RFQ? 2 A: No, not at all. That's part of the 3 process. 4 Q: In the course of examination by other 5 Counsel, questions were put to you with respect to the merits 6 of a single supplier approach versus a multi-supplier 7 approach. 8 As of 1999, were you aware of any entity of 9 the size of Toronto, that was using or using a multi-supplier 10 arrangement? 11 A: No, I was not. 12 Q: All right. Have you since become aware 13 that Ontario uses some form of a multi-supplier arrangement? 14 A: Well, they have an arrangement, as I 15 understand it, it isn't necessarily a multiple supplier, they 16 have qualified at the government level, a list of I believe, 17 five (5) leasing companies that they will do business with. 18 But, the individual ministries or the 19 clusters, as they're set up now for IT, if they wish to have 20 -- to choose a leasing company, they have to go back out and 21 do an RFP, to these five (5) specific companies and choose 22 one (1). 23 MADAM COMMISSIONER: And RFP? 24 THE WITNESS: An RFP, yeah. It's kind of 25 secondary sourcing.
18
1 CONTINUED BY MR. BRYAN McPHADDEN: 2 Q: Given that an entity the size of Toronto, 3 or even larger, is now using a multi-supplier approach, and 4 knowing what you know about that now, in 1999 would you have 5 recommended to the City of Toronto that it use a multi- 6 supplier approach? 7 A: No, I would not. I didn't see any reason 8 for it and I think they had enough difficulty putting 9 together a one (1) supplier process, given it was the first 10 time they were -- they were taking on this type of work in 11 this magnitude. 12 Q: And, in fact, subsequent events 13 demonstrated that a single supplier was difficult enough, as 14 it was, for the City? 15 A: That's correct. 16 Q: I'd like to take you to Volume 1, Tab 47. 17 18 (BRIEF PAUSE) 19 20 Q: This is an e-mail from Mr. Rabadi, and 21 it's Begdoc 14114. 22 A: Yes. 23 Q: All right. And in this e-mail, Mr. Rabadi 24 expresses some gratitude to you, for checking the numbers and 25 the formulas, do you see that?
19
1 A: Yes. 2 Q: All right. Did you check any formulas 3 with respect to the RFQ or the response to the RFQ? 4 A: I checked the numbers to make sure the 5 numbers you were using were the ones that were in the 6 response. 7 Q: Now, when you say the numbers, are you 8 referring to the inputs? 9 A: Yes. 10 Q: All right. Did you review his calculation 11 or his use of any formulae? 12 A: No. 13 Q: You were just asked questions by Mr. 14 Capern with respect to Council's approval of $43 million. 15 According to the report, did a recommendation 16 go to City Council that this sum of $43 million be approved? 17 A: To my knowledge, the report to City 18 Council did not have any numbers like $43 million in it. 19 Q: All right. Did it have any number in that 20 regard, as to an upper limit of what could be spent under the 21 master lease? 22 A: No. 23 24 (BRIEF PAUSE) 25
20
1 Q: Now, later when you were working on the 2 CMO -- 3 A: Yes. 4 Q: Right. Your evidence was that you 5 anticipated that departments in seeking to put equipment on 6 lease under the master lease would indicate their budgetary 7 approval. Do you recall that being your evidence? 8 A: Yes, I think so. 9 Q: And in fact, we -- if we can go to Tab 34, 10 Volume 3. 11 12 (BRIEF PAUSE) 13 14 Q: This is Begdoc 29387. 15 MADAM COMMISSIONER: Tab -- On Volume 3? 16 MR. BRYAN McPHADDEN: I'm sorry. If I said 43 17 I meant 34. 34 in Volume 3. 18 MADAM COMMISSIONER: 34? 19 MR. BRYAN McPHADDEN: Yes. 20 MADAM COMMISSIONER: Okay. 21 22 23 CONTINUED BY MR. BRYAN McPHADDEN: 24 Q: And according -- this is your outline and 25 proposal of draft of the documentation relating to the CMO,
21
1 is it? 2 A: Yes. 3 Q: All right and where in here do you 4 indicate that approval -- or the source of the budget 5 approval of each department should be stated with respect to 6 anything that's to go on the master lease? 7 A: I guess on the document numbered 29390 and 8 it's a list of steps, here. The first one -- the department 9 initiates the -- the request and approves the expenditure at 10 that first step. 11 Q: All right and you also prepared a form, 12 Begdoc 29395? 13 A: Yes. 14 Q: And is there any significance in terms of 15 what we're talking about to the approval signatures and one 16 of them being the requesting department manager. 17 A: Yeah. That's -- that's the approval by 18 the department head to approve the expenditure of the value 19 that's at the top of the form. 20 Q: All right. Now, I understand you weren't 21 involved in the operation of the CMO subsequently? 22 A: That's correct. 23 Q: You were involved in setting it up but to 24 your knowledge with respect to any amounts that were put on 25 lease by the City of Toronto pursuant to this MFP, to your
22
1 knowledge were any of the amounts not authorized by some form 2 of budgetary approval. 3 A: To my knowledge they were all approved. 4 Q: In the course of examination by Mr. 5 Andrew's solicitor, there's some suggestion that Mr. 6 Wilkinson, who was negotiating the contract with you on 7 behalf of MFP, was an expert and that perhaps your level of 8 knowledge did not achieve or was not the same of his. In the 9 course of your associations with Mr. Wilkinson, did you 10 believe that you were in any form of a disadvantage? 11 A: No. 12 Q: All right. Did you make any compromises 13 on behalf of the City in your negotiations with Mr. Wilkinson 14 arising from any difference in your levels of knowledge or 15 expertise? 16 A: No. 17 Q: Some of the questions that were put to you 18 related to the schedules to the master lease agreement and 19 there was some hint or suggestion that perhaps a lawyer be 20 involved in that process. Do you have any views in that 21 respect in terms of the need or advisability of having a 22 solicitor involved in negotiating the schedules. 23 A: Well, schedules are basically just an 24 inventory of what is going to be put on lease for that 25 particular schedule or period.
23
1 The people typically involved in that, are the 2 IT people who own or manage the assets, make sure that 3 they're identified properly, serial numbers are correct and 4 that kind of thing. 5 Q: All right. And in terms of moving forward 6 and the negotiation of future lease schedules, who would you 7 recommend participate on behalf of the City in that regard? 8 A: I would think the appropriate manager in 9 the IT department. 10 MADAM COMMISSIONER: So, you're saying it 11 doesn't need to be a lawyer is that -- 12 THE WITNESS: That's correct. 13 14 (BRIEF PAUSE) 15 16 CONTINUED BY MR. BRYAN McPHADDEN: 17 Q: I want to turn briefly back to the ninety 18 (90) day guarantee period. As at September 11th, that being 19 the expiry of the ninety (90) day guarantee period? 20 A: Yes. 21 Q: Were you aware of any decision or concrete 22 decision to put equipment on a sixty (60) month lease? 23 A: I wasn't aware of any concrete decision to 24 do that, no. 25 Q: All right. You were asked subsequently to
24
1 obtain sixty (60) month lease rates, correct? 2 A: Yes. 3 Q: All right. And, in fact, we've seen that 4 the City proceeded to put the -- you say, $20 million 5 thereabouts on a lease. And that was a sixty (60) month term 6 was it? 7 A: Yes. 8 Q: In those circumstances, what difference 9 would it have made had you obtained the lease rates as at 10 September 11th from MFP? 11 A: Well, it wouldn't have matter, because the 12 lease rate for the sixty (60) month period was a whole 13 different direction. 14 Q: According to the request -- 15 MADAM COMMISSIONER: I'm not understanding 16 what you're saying, sorry. 17 MR. BRYAN McPHADDEN: All right. 18 19 CONTINUED BY MR. BRYAN McPHADDEN: 20 Q: According to the -- the proposal from MFP, 21 the lease rates were to be for thirty six (36) months, 22 correct? 23 A: Yes. 24 Q: All right. And the rates for sixty (60) 25 months are different?
25
1 A: That's correct. 2 Q: All right. The obligation, if you will, 3 of MFP as regards rates and guaranteeing those rates, only 4 pertain to the thirty six (36) month term, correct? 5 A: Correct. 6 Q: All right. So, to the extent that, as at 7 September 11th, you were going to go to seek an extension of 8 the ninety (90) day guarantee, in light of what you knew at 9 the time, and in light of MFP's obligation, that would only 10 have related to a thirty six (36) month term? 11 A: Yes. 12 13 (BRIEF PAUSE) 14 15 Q: Now, in terms of the change from thirty 16 six (36) months to sixty (60) months, did you see it as your 17 role to give advice in that regard, in terms of that change? 18 A: I wasn't asked for advice on that change. 19 Q: Now, you indicated in your earlier 20 testimony that Ms. Viinamae came to you and instructed you to 21 obtain a rate from MFP for a sixty (60) month term, do you 22 recall that? 23 A: Yes. 24 Q: All right. Was there anything in that 25 instruction to you, that suggested that Ms. Viinamae was
26
1 seeking your input or advice, as to the advisability of the 2 sixty (60) month term? 3 A: No. 4 Q: At the time that, Ms. Viinamae, gave you 5 those instructions, were you aware that there had already 6 been discussions between IT and MFP and others at the City 7 with respect to the sixty (60) month term and related rates? 8 A: No. 9 10 (BRIEF PAUSE) 11 12 Q: I want to take you now to your dealings 13 with Mr. Fecenko. And, in particular, the precedence issue, 14 this is whether or not the RFQ and MFP's response takes 15 priority or precedence over the master -- master agreement? 16 A: Yes. 17 Q: All right. Now, did Mr. Fecenko ever ask 18 you for a copy of the RFQ and the MFP -- or MFP's response? 19 A: No. 20 Q: Did you tell Mr. Fecenko that they 21 contained only business terms? This is the RFQ and the RFQ 22 response from MFP? 23 MADAM COMMISSIONER: That they contain only 24 what? 25 MR. BRYAN McPHADDEN: Business terms.
27
1 MADAM COMMISSIONER: Terms. 2 THE WITNESS: I believe so, yes. 3 4 CONTINUED BY MR. BRYAN McPHADDEN: 5 Q: You believe you told him that? 6 A: Yes. 7 Q: Based on your knowledge and experience, 8 did Mr. -- was Mr. Fecenko familiar with the City's bidding 9 process? 10 A: I -- yes, I think he is or was at the 11 time. 12 Q: Now, in terms of the alleged recorded 13 difficulties experienced by the City, that is the cost under 14 this MFP agreement being 80 or 85 million as opposed to some 15 say 43 million, is there anything in terms of the priority of 16 the RFQ or MFP's response to the RFQ that gives rise to that 17 purported problem? 18 A: I wouldn't say so, no. 19 Q: Okay. Tab 69 of Volume 3. 20 21 22 (BRIEF PAUSE) 23 24 A: Thank you. 25 Q: Now, this letter was drawn to your
28
1 attention which is back to ten (10) meetings with Mr. Andrew 2 said to have been attending with Oracle? 3 MADAM COMMISSIONER: Can I have the Begdoc 4 number? 5 MR. BRYAN McPHADDEN: I'm sorry. 40460. 6 MADAM COMMISSIONER: Thank you. 7 8 CONTINUED BY MR. BRYAN McPHADDEN: 9 Q: And of course that questioning, it didn't 10 appear clear to me whether or not you were aware of this, 11 rather, in 1998 or in 1999? 12 A: No, I wasn't. 13 Q: Did the first that this letter came to 14 your attention, was that in the course of this Inquiry? 15 A: Yes. 16 Q: And I'd like to turn to Tabs 96 and 97 of 17 Volume 1. These are two (2) e-mails from Mr. Fecenko. One 18 dated January 19th and bearing Begdoc 16187 and the other is 19 at Tab 98. 20 A: Okay. 21 Q: Sorry, Tab 97 bearing Begdoc 16189 and in 22 the course -- the course of being questioned about these two 23 (2) e-mails, you were asked whether or not you responded to 24 one or either of them and your evidence was that you couldn't 25 recall.
29
1 A: Right. 2 Q: Now, with respect to the January 19th 3 e-mail, we see that Mr. Fecenko is asking you: 4 "Have matters proceeded with Oracle?" 5 And he doesn't seem to know or be aware of the 6 fact that the City had entered into a contract with Oracle as 7 of that time. 8 A: Right. 9 Q: You agree with that and yet if we take a 10 look at his next e-mail, being the February 1 e-mail, he is 11 saying: 12 "Can I please get a copy of the Oracle 13 agreement for my files?" 14 It would appear, would you agree, that between 15 January 19th and February 1st that Mr. Fecenko has learned 16 that, in fact, that two (2) parties have entered into an 17 agreement? 18 A: Yes. 19 Q: Okay. To your knowledge, was anyone else 20 dealing with Mr. Fecenko during that time relative to this 21 matter? 22 A: No, there wasn't. 23 Q: Is it reasonable, therefore, to surmise 24 that you had, perhaps not by way of e-mail, in fact responded 25 to Mr. Fecenko's January 19th e-mail?
30
1 A: Yes. 2 Q: All right. 3 MR. BRYAN McPHADDEN: Thank you. Those are 4 all my questions. 5 6 (BRIEF PAUSE) 7 8 MADAM COMMISSIONER: I told you the questions 9 from your lawyer would be easier than what you've gone 10 through. 11 Mr. Moore, re-examination? 12 13 (BRIEF PAUSE) 14 15 MR. PATRICK MOORE: Commissioner, the -- Madam 16 Registrar tells me that the documents at Tabs 127 and 128 of 17 Volume 4, have not yet formally been stated on the record to 18 have been included in that Volume. 19 And so at some stage before we let Mr. Power 20 go, I'd ask that that be attended to. 21 MADAM COMMISSIONER: Who are you wanting to 22 have attend to that? 23 MR. PATRICK MOORE: Just that -- 24 MADAM COMMISSIONER: Wouldn't that be you? 25 MR. PATRICK MOORE: -- well, I would think
31
1 that it would be well if you were to confirm that these have 2 been received and included in the Volume. 3 MADAM COMMISSIONER: Okay. That's 127, Begdoc 4 12765, a -- I gather it's a draft. I'd written the word, 5 draft, on it although it doesn't say that it's draft, but, 6 the evidence has been that it's a draft, dated January 24th, 7 1999, to Policy and Finance Committee from the Chief 8 Financial Officer and Treasurer and the Executive Director of 9 Information and Technology, regarding leasing of computer 10 equipment and software. 11 And the next one (1) is Tab 128, Begdoc 06447, 12 a letter from Mr. Fecenko to Mr. Garrett. 13 MR. GORDON CAPERN: Commissioner, 127 should 14 be noted as June 24, 1999, not January. 15 MADAM COMMISSIONER: Did I say January? 16 MR. GORDON CAPERN: You did, sorry. 17 MADAM COMMISSIONER: I -- 18 MR. GORDON CAPERN: Just so the record is 19 clear. 20 MADAM COMMISSIONER: It says very plainly here 21 June. Okay. I guess I'm not firing on all cylinders. 22 Thank you. 23 MR. PATRICK MOORE: Thank you, Commissioner. 24 25 RE-DIRECT EXAMINATION BY MR. PATRICK MOORE:
32
1 Q: Mr. Power, I wonder if I might just -- 2 before we leave the conversation that you had with Mr. 3 Loreto, which may or may not be accurately recorded, but, 4 there is the file memo at Tab 33, Volume 1. 5 If I might just talk to you briefly about 6 that. That's the conversation in which, as My Friend Mr. 7 Capern read to you, says in part: 8 "Brendan said Council $43 million." 9 Now, I recall that when you and I spoke some 10 time ago, in the earlier part of your evidence, that we 11 talked about the Council resolution and that you told me that 12 you were not present at the time that the resolution was 13 adopted in July of 1999. 14 Do you recall that? 15 A: Yes. 16 Q: And I thought you had said that you did 17 not, at least not at that time, read the Council resolution? 18 Did I have that right? 19 A: At the time? 20 Q: Yes? 21 A: Correct. 22 Q: Now, the time that this document at Tab 23 33, Volume 1, the memo to file with Begdoc 12586, the time 24 that that document appears to have been created is February 25 of 2000?
33
1 A: Yes. 2 Q: Taking your mind back to that time, can 3 you tell us whether you had read the Council resolution by 4 February 15, 2000? 5 A: Yes. 6 Q: And so, if Mr. Loreto had asked you a 7 question about the content of the Council resolution, you 8 would have been in a position then, to tell him from your own 9 knowledge, what the resolution said? 10 A: Yes. 11 Q: And if you were then of the view that you 12 are now, that there was no cap of $43 million, stated in that 13 resolution, you were in a position to tell Mr. Loreto that, 14 if the conversation had gone in that direction? 15 A: Yes. 16 Q: And similarly, as the result of the 17 inquiries you made, you appear to have been in a position to 18 tell him that $33 million or so, of assets, had been placed 19 on lease by the time of this conversation in February 2000? 20 A: Yes. 21 Q: And you've told us that you had the view 22 in mind, at the time you drafted the RFQ, that the asset 23 acquisition involved in that RFQ, would have been 24 substantially in excess of $43 million. 25 So, with that in mind, if Mr. Loreto had asked
34
1 you something like, well, Mr. Power, 33 million is on lease 2 now, how much is it going to grow to eventually, you would 3 have been in a position, to give him the benefit of your 4 wisdom on that, as well? 5 A: Yes. 6 Q: And is it your recollection now that he 7 did or did not ask you that question? 8 A: I don't think he did. He -- this is -- 9 this is to do with the letter that was going to MFP? 10 Q: Yes, sir. 11 A: I provided Brian with quite a few pieces 12 of information about that. As a matter of fact, I think I 13 went and got a certified copy of the -- of the Council 14 resolution from the Clerk's office as part of the 15 documentation I was giving him. So I -- I can't understand 16 the conversation being as described here. 17 Q: But in addition to being in a position to 18 tell him your views on what the size and shape of the 19 transaction could turn out to be, is it fair to say that at 20 that time there was no reason why you wouldn't have told him 21 that it would have been substantially in excess of $43 22 million had he taken you to that subject? 23 A: That's correct. 24 Q: And there was no reason for you to 25 volunteer it in the context of the direction of this -- the
35
1 purpose of this conversation, that is the letter for the 2 lenders? 3 A: Correct. 4 Q: All right. Mr. Anderson took you to a 30 5 June draft and to the fact that the reference in early drafts 6 to a $43.15 million cap, if we will, on the expenditure as 7 set out in the first recommendation was in subsequent drafts 8 taken out. You remember that conversation? 9 A: Yes. 10 Q: And in terms of expectations, was it your 11 expectation at that time that the two (2) people who were 12 shown to be -- intended to be signatories of the draft 13 agreement going to Policy and Finance would read and 14 understand the document before it went forward? 15 A: That would be my understanding, yes. 16 Q: And based on your experience, if somebody 17 you prepare a document for doesn't fully understand it, when 18 you're shown as a contact person would you be contacted by 19 the person whose name would appear in the document? 20 A: That has happened, yes. 21 Q: Mr. Berrill took you to one part of a 22 document. It was the 7 October Steering Committee meeting at 23 Volume 3, Tab 59 and I wonder if we can turn that up 24 together. 25
36
1 (BRIEF PAUSE) 2 3 Q: That, for the record, is a document with 4 number 15210 and you remember that Mr. Berrill took you to 5 the portion on Page 1 which suggested that an additional $2 6 million might be a cost incurred by the City to dispose of 7 assets? 8 Just so that we're clear on the point, I 9 wonder if I might also point you to the provision in that 10 same paragraph which is the one numbered 3 towards the bottom 11 of the page which reads: 12 "There is a possibility of using a 13 recycling firm free of charge." 14 And in the next paragraph: 15 "The Steering Committee approved the 16 strategy of removal of obsolete 17 decommissioned computers by a recycling 18 firm." 19 Do you see that, sir? 20 A: Yes. 21 Q: And on the basis of your experience at the 22 province and elsewhere, at that time, and that time would be 23 back in the fall of 1999, there were recycling firms who 24 would take assets such as computers and dispose of them free 25 of charge?
37
1 A: Yes, yeah. 2 MR. DAVID MOORE: Well, I guess I have -- My 3 Friend has read that sentence but it's immediately followed 4 by a sentence referring to a cost of removing the information 5 on the discarded computers, which I take to be a different 6 matter than simply picking them up and putting them in a 7 landfill site. 8 MADAM COMMISSIONER: Considering that the hard 9 drive, for example, would have to be removed, is that what 10 you're saying? 11 MR. DAVID MOORE: Well, that's what -- that's 12 how I read this. I mean, I expect we may hear from someone 13 who was actually at this meeting who might be able to 14 explain, I don't know if My Friend was intending to suggest 15 anything differently. 16 MR. PATRICK MOORE: No, no I wasn't. 17 MADAM COMMISSIONER: Okay. 18 MR. PATRICK MOORE: I may have misunderstood, 19 Mr. Berrill, but I took his point to be, when he was cross- 20 examining Mr. Power, that there would be a cost -- that there 21 would be costs associated with disposition of obsolete end of 22 lease term assets. 23 My Friend, Mr. Moore, is quite right, that 24 among those costs may well be the cost of decommissioning, 25 but, to the extent that the costs would go further and
38
1 include the actual disposition costs, if I understood the 2 cross-examination correctly, then it is well to look at this 3 part of that document to confirm that that cost may be 4 negotiated down to zero, that's the only point. 5 MADAM COMMISSIONER: Okay. Thank you. 6 7 CONTINUED BY MR. PATRICK MOORE: 8 Q: And then later in his cross-examination, 9 Mr. Berrill took you to the question of whether re-tendering 10 would have been wise upon the decision to move from a thirty 11 six (36) to a sixty (60) month term. 12 And you recall that he suggested several 13 reasons, which -- all of which you agreed to, why that might 14 not have been a wise decision to make. 15 For instance, he pointed you to the 16 flexibility provision in -- in the policy and finance 17 decision and report going forward to Counsel, and he asked 18 you about whether the fact that MFP was a Vendor of Record 19 defacto under this process might have made it inappropriate 20 or unnecessary, and he pointed to the fact that you were 21 running out of time. 22 And on that point, I'm wondering if I might 23 ask you this, you remember that when the Councillor's 24 computers were -- when that transaction was going forward in 25 the -- in the late part of 1997, and early '98, I know you
39
1 weren't involved, but you now know about that, that was done 2 by way of verbal quotation, and I'm wondering whether, in 3 your experience, in the Fall of 1999, it would have been 4 feasible to obtain verbal quotes from MFP and its competitors 5 on sixty (60) month rates? 6 A: First of all, I don't know if verbal 7 quotes is an appropriate way of doing business. Secondly, we 8 would have to give something more formal to them, in terms of 9 the amount of the equipment there -- what our expectations 10 are, so, I -- I don't see a verbal quote as being a 11 reasonable thing to -- to do at that time. 12 Q: But if you were running the department, 13 and this decision was made under your watch, is it fair for 14 us to conclude that you would have considered all of these 15 alternatives that Mr. Berrill put to you, you would have made 16 an informed decision, and you would have recorded it for 17 future reference? 18 A: Yes. 19 Q: And in addition to that, keeping in mind 20 the provision in the Counsel resolution of reporting back 21 from time to time, would it be reasonable to conclude that 22 you would have reported back to Counsel on this decision 23 having been made and the reasons for it? 24 A: Yes. 25 Q: Mr. Berrill also took you to the Section
40
1 1.1.17, a provision in the RFQ, and -- and your conclusion, 2 having seen the MFP response that that was response was 3 acceptable, do you recall that? 4 A: Yes. 5 Q: Just talking about -- about the mechanism 6 for a moment, if I may, and -- and the wisdom or feasibility 7 of tying to an external marker. 8 Is it fair to say that one (1) of the reasons 9 for requesting a mechanism for future changes in the lease 10 rate is to know, with some degree of certainty what the lease 11 rate will be in the future? 12 A: With some degree of certainty, I suppose, 13 if it's tied to some future benchmark that a major part of 14 the rates, I would think, would depend on the type of 15 equipment that you're going to put on lease and that would 16 influence the rate. 17 Q: And your point also was, I think, if I 18 have it correctly in my mind, that it's difficult to predict 19 the money markets, and therefore it's difficult to say, that 20 even if you tie it to a bond rate or an interest rate, that 21 you will have comfort of an accurate prediction on a going 22 forward basis. Is that your point? 23 A: That's right, yes. 24 Q: But, to that point, can I ask you this? 25 At the time that the RFQ is being responded to, if you
41
1 request and require that bidders come up with a formula that 2 pegs future changes to, let's say a bond rate, is it not the 3 case, and one (1) of the advantages of doing that, that 4 you'll be able to compare the bidders between and among 5 themselves? 6 For instance, one might be three hundred (300) 7 points over the bond rates, while another one (1) is a 8 hundred and fifty (150) over? That gives you a basis for 9 comparison of the bidders? 10 A: Without the variable regarding the 11 residual they would take on the equipment, yes. 12 Q: And the other advantage of having a 13 mechanism pegged to an external marker is that it takes away 14 the opportunity, not that anyone would take advantage of it, 15 but, it takes away the opportunity of a bidder arbitrarily or 16 changing rates on a going forward basis over time? 17 A: If that's built into the contract, there's 18 a possibility, yes. 19 Q: Thank you. In Volume 1, Tab 102, which is 20 document 20598, Mr. Berrill took you to Section 16 of the -- 21 of the master lease agreement. 22 And he used the term, that you negotiated this 23 provision in the -- in the agreement. And so on thinking of 24 that, I wonder if you could hold that in one (1) hand and 25 turn back to Tab 27, with the other, which is the draft of
42
1 the master lease agreement, document 11126. 2 MADAM COMMISSIONER: And where is that? 3 MR. PATRICK MOORE: And that is at Tab 27 of 4 Volume 1, 11126, at page 11129. 5 6 CONTINUED BY MR. PATRICK MOORE: 7 Q: And it looks to me, Mr. Power, and my 8 point is, will you agree with me on this, that the draft of 9 Section 16, return of equipment, is identical to the final 10 version of Section 16 at Tab 102? 11 12 (BRIEF PAUSE) 13 14 A: Yes. 15 Q: And can we conclude, therefore, that there 16 was no negotiation on the content of that provision? 17 A: That's correct. 18 Q: When Ms. Ryley was asking you questions, 19 Mr. Power, about the Oracle transaction, she referred you to 20 Volume 3, Tab 58, can we go there together? 21 22 (BRIEF PAUSE) 23 24 Q: And that is Document 40456 and I'm 25 wondering, we may have others come and speak to us about the
43
1 Oracle transaction, but because of your familiarity with 2 Oracle, I wonder if I could direct you to the top three (3) 3 paragraphs on Page 2 which appear to tell us something about 4 what Oracle is and why Oracle licenses had been acquired by 5 the City and why it might be a useful thing going forward to 6 acquire more and different ones and can I ask you whether, 7 after you've considered that, whether those first three (3) 8 paragraphs might be a useful starting point for the 9 Commissioner and all of us toward an understanding of Oracle? 10 11 (BRIEF PAUSE) 12 13 A: Yes, I would think so. 14 Q: It was during the cross-examination by Mr. 15 Capern that the announcement of the sixty (60) month term was 16 discussed and I wrote down, I hope I get it -- got it right, 17 but I wrote down that came as a big surprise to you? Do you 18 remember that? 19 A: Yes. 20 Q: And that was in connection with his 21 reference to you of Volume 1, Tab 70 document. Let's have a 22 look at that. That was the document bearing number 14232. 23 The 1 October 1999 e-mail from Ms. Viinamae to Mr. Andrew and 24 others, including yourself -- at least yourself by way of cc 25 and that, I think you told us, was your first knowledge of
44
1 the sixty (60) month term and I'm wondering whether in terms 2 of after the surprise you took it -- you were reasonably 3 calm, I think, in your exchange with the Commissioner. 4 There was reasonable calm, at least in your 5 end, perhaps in IT generally, about the decision to move to 6 sixty (60) month term and I'm wondering whether that was in 7 part because you expected changed in this transaction over 8 time, in any event? And my reason for saying that is that 9 you had, at Paragraph 6, of course, of the RFQ specifically 10 put in reference for the reader and the bidders that there 11 was an intention to upgrade equipment throughout the term of 12 the lease. 13 A: Yes. 14 Q: And in your experience, lease transactions 15 often, perhaps almost always, did change during the term of 16 the lease? 17 A: Yes. 18 Q: Is that fair? 19 A: Correct. 20 Q: So while this was an unexpected change, it 21 was a change and therefore one that you just had to deal with 22 and did? 23 A: Yes. 24 Q: Book 4, Tab 128. That is the Document 25 6447. The 10 March 1999 retainer letter which as we see at
45
1 the fourth page is apparently signed by Mr. Fecenko of the 2 law firm and by Mr. Garrett and by Mr. Doyle, for the City? 3 A: Yes. 4 Q: And I'm wondering, is that a document that 5 you would have seen around the 10th of March of 1999? 6 A: Yes. 7 Q: And when you saw it then, did you read in 8 the first paragraph the reference and I'll just read it for 9 you: 10 "This letter will set out the retainer 11 agreement between our law firm and the City of 12 Toronto entered into pursuant to your request 13 for external legal services in respect of Year 14 2000 issues, dated January 20, 1999 and our 15 firms response to same." 16 And the purpose of the retainer follows on 17 page one (1): 18 "Our firm is being retained to provide 19 legal services in relation to Year 2000 20 issues as requested from time to time." 21 You would have read that, Mr. Power? 22 A: Yes. 23 Q: And you would have been familiar, as 24 you've told us you were, with your ability as Ms. Viinamae's 25 designate to retain Mr. Fecenko and others at his firm, for
46
1 carrying out the purpose of this retainer? 2 A: Yes. 3 Q: Now, what I'm wondering is, did you ever 4 sit down with Mr. Doyle or others at City Legal and talk 5 about what exactly the City had in mind in terms of what was, 6 and what was not a Year 2000 issue? 7 A: No, I don't think we did. 8 Q: And so no one ever told you, I take it, 9 Mr. Power, that where you had a transaction which was partly 10 Y2K or Year 2000 related and partly not, that you could or 11 could not retain Mr. Fecenko and others at his firm to 12 provide outside legal services? 13 A: Correct. 14 15 (BRIEF PAUSE) 16 17 MR. PATRICK MOORE: Thank you. 18 Those are my questions. 19 MADAM COMMISSIONER: I just have a few 20 questions. 21 Are you still a consultant? 22 THE WITNESS: I still do some consulting work, 23 yes. 24 MADAM COMMISSIONER: Okay. And I just wanted 25 to ask you about something that you said, this was on the
47
1 first day, when Mr. Pat Moore was asking you some questions 2 about the sale and leaseback. 3 He was -- you said that with respect to 4 technology some companies are very careful about leasing 5 equipment that is not tier one (1) or tier two (2) equipment? 6 THE WITNESS: Yes. 7 MADAM COMMISSIONER: And so, I'm just curious 8 as to why then with respect to the sale and leaseback 9 equipment that you wouldn't have said specifically whether it 10 was tier one (1) or tier two (2) equipment? 11 THE WITNESS: In the RFQ? 12 MADAM COMMISSIONER: In the RFQ, yes? 13 THE WITNESS: I thought that -- 14 MADAM COMMISSIONER: It's your view that it 15 does say that? 16 THE WITNESS: I thought it does say that. 17 MADAM COMMISSIONER: Okay, maybe somebody 18 could take me -- 19 20 (BRIEF PAUSE) 21 22 MADAM COMMISSIONER: It may very well say 23 that. I just can't recall it saying that. 24 MR. BRYAN McPHADDEN: It's at Tab 19, Volume 25 1.
48
1 MADAM COMMISSIONER: Thank you. 2 3 (BRIEF PAUSE) 4 5 MR. PATRICK MOORE: In the opening paragraph 6 on page 1, this may not be the only reference, but, there is 7 a reference there Commissioner. That's at page -- document 8 6105, under the heading introduction, which reads: 9 "In this request for quotes, RFQ, the City 10 of Toronto, the City, is requesting 11 respondents to proposal options to lease, 12 to the City, tier one (1) servers, 13 desktops, notebooks, et cetera." 14 MADAM COMMISSIONER: Okay. 15 MR. PATRICK MOORE: That's one (1) reference. 16 Perhaps Mr. Power can find us others. 17 18 (BRIEF PAUSE) 19 20 MR. PATRICK MOORE: Yes, there's another one 21 at paragraph 6, document page number 06118, and that's a 22 reference to the upgrades that we just spoke of. 23 "The City will ensure that it will acquire 24 only tier 1 equipment." 25 MADAM COMMISSIONER: Okay, I guess I was
49
1 looking at 6116, and that is the already purchased or to be 2 purchased in 1999. And was wondering in the already 3 purchased or to be purchased, was there any reason that you 4 didn't put in that there were tier 1, or is it just because 5 it was in various other spots and there was no need? 6 THE WITNESS: That could be, but also the 7 listing of the manufacturer's equipment they're typically 8 described as tier 1. 9 MADAM COMMISSIONER: Okay. Okay, so one (1) 10 last question and you're done after this last question, okay. 11 As you probably know, at the very end I tend to ask witnesses 12 who have been here, if there is anything that they would like 13 to put in to assist me in making my recommendations. 14 At the end of the Inquiries I have to make 15 recommendations to City Council and you have a certain 16 expertise, if there's anything that you would like to say now 17 that would assist me in making my recommendations, I'd 18 certainly be happy to hear it? 19 THE WITNESS: One (1) of the things I found 20 curious working at the City, and I think it's still the same 21 today, is their decision and approval process, and just take 22 this -- this item we're dealing with here. By the time it 23 gets to the final approval, which is City Council, that is 24 sometimes the first time that they have seen the document or 25 anything to do with it.
50
1 And in my view, it's way too late, because the 2 expectations have been created, the vendors have been 3 engaged, and other things are under way. So, they end up 4 asking all of the basic business case questions after the 5 fact, after everything has been committed, though not 6 necessarily approved. 7 So, I think if they could look at some way of 8 doing an approval process up front, while not necessarily 9 giving anybody, you know, unleashed authority to go and do 10 whatever they want to do, but approve these things in advance 11 with certain parameters, and then the City officials can come 12 back to them with the approval to contract for the service. 13 MADAM COMMISSIONER: So, for example, in this 14 one (1), if it had gone to City Council in the end of July 15 '99, and if they hadn't approved it, then it would have gone 16 back to staff and there would have been no other Council 17 mechanism to have this approved until maybe September -- 18 THE WITNESS: That's right. 19 MADAM COMMISSIONER: -- is that one (1) of 20 your concerns? 21 THE WITNESS: Yes. I also think that it could 22 have gone to Council as an approval in principle, for lack of 23 a better term, in the winter or the Spring, you know, before 24 the document even went on the street, like permission to -- 25 MADAM COMMISSIONER: So approval in principle
51
1 for leasing, for example? 2 THE WITNESS: Yeah. 3 MADAM COMMISSIONER: Hmm hmm. And then 4 approval in principle for purchasing -- for having an RFQ? 5 THE WITNESS: Yes. 6 MADAM COMMISSIONER: And then only come to 7 them in the final analysis when they actually had a 8 successful bidder? 9 THE WITNESS: Yes, with the details, the cost 10 and -- 11 MADAM COMMISSIONER: All right. 12 THE WITNESS: -- the authority to contract. 13 MADAM COMMISSIONER: Okay. 14 THE WITNESS: With the bidder. 15 MADAM COMMISSIONER: Okay, thank you, anything 16 else? 17 THE WITNESS: No. 18 MADAM COMMISSIONER: All right. Any questions 19 arising out of mine? Well, have a very happy holiday and 20 thank you for coming in today. 21 THE WITNESS: Thank you very much. 22 MADAM COMMISSIONER: All right. 23 24 (WITNESS STANDS DOWN) 25
52
1 MADAM COMMISSIONER: Mr. Moore, the next 2 witness is Mr. Beattie, I gather? 3 MR. PATRICK MOORE: Yes, Commissioner. 4 MADAM COMMISSIONER: Or would it make sense to 5 take the morning recess now, before Mr. Beattie gets here, 6 and then -- 7 MR. PATRICK MOORE: Yes. 8 MADAM COMMISSIONER: All right, well, why 9 don't we take the break now and we'll come back at 11:30. 10 THE REGISTRAR: Order. The Inquiry will 11 recess until 11:30. 12 13 --- Upon recessing at 11:07 a.m. 14 --- Upon resuming at 11:30 a.m. 15 16 THE REGISTRAR: The Inquiry will resume, 17 please be seated. 18 19 (BRIEF PAUSE) 20 21 MR. PATRICK MOORE: Commissioner, we now have 22 with us Mr. Dave Beattie, who I'd ask be sworn. 23 MADAM COMMISSIONER: Thank you. 24 25 DAVID BEATTIE, Sworn;
53
1 MADAM COMMISSIONER: Good morning. 2 THE WITNESS: Good morning. 3 MADAM COMMISSIONER: It's not usually quite 4 this cold in here. 5 MR. BRYAN McPHADDEN: Just before Commission 6 Counsel begins, I -- it's necessary for me to leave, I have a 7 cross-examination to conduct on another matter, that's been 8 ordered to be conducted today. 9 MADAM COMMISSIONER: Okay. 10 MR. BRYAN McPHADDEN: So, I'll take my leave 11 at this time, but I may be joined later by Mr. Zoran Samac of 12 my office. 13 MADAM COMMISSIONER: Okay, thank you -- 14 MR. BRYAN McPHADDEN: Okay. 15 MADAM COMMISSIONER: -- Mr. McPhadden. 16 MR. BRYAN McPHADDEN: Thanks. 17 MR. PATRICK MOORE: Commissioner, as you may 18 know, Mr. Beattie swore an affidavit in this matter on the 19 27th of March, 2003, and that affidavit should be in a 20 binder, which I would ask be made Exhibit 24 in these 21 Proceedings. 22 MADAM COMMISSIONER: Okay. 23 MR. PATRICK MOORE: The binder will contain 24 the affidavit and the first fifty-two (52) tabs, will refer 25 to documents that some reference may be made to in the
54
1 affidavit or in cross-examinations by counsel. 2 There are fifty-seven (57) tabs now in the 3 binder, by reason of some additions having been made to it 4 between Friday and today. So, if we are to deal with the 5 tabs, we will do that and give you the Begdoc number as we 6 do. 7 MADAM COMMISSIONER: Thank you. 8 9 --- EXHIBIT NO. 24 VOLUME I: Bound document titled "Dave 10 Beattie" tabs 1-57 and 11 affidavit of Mr. Beattie. 12 13 IN THE MATTER OF THE TORONTO COMPUTER LEASING INQUIRY 14 15 AFFIDAVIT OF DAVE BEATTIE 16 17 I, Dave Beattie, of the City of Toronto, in 18 the Province of Ontario, MAKE OATH AND SAY: 19 20 1. Attached to this affidavit, and marked as 21 Exhibit A, is a Binder of documents containing 22 52 Tabs. 23 2. I have been employed in the procurement field 24 for virtually all of my working life. I was 25 employed as a retail buyer by Beaver Lumber
55
1 for 10 years. I have worked as a site buyer on 2 the construction of the Darlington generating 3 facility. 4 3. I accepted employment at the City of Toronto, 5 as a buyer, in 1985. Following amalgamation, I 6 became a buyer at the new City of Toronto. In 7 September of 1999 I was promoted to the 8 position of Supervisor, Client Services, a 9 position which I still hold today. 10 4. In May and June of 1999, I reported to Frank 11 Spizarsky. 12 5. Frank Spizarsky was away from the office, on 13 sick leave, extensively in 1999 and has since 14 retired from the position of Manager in the 15 Purchasing and Materials Management Division 16 (PMMD) of the City. 17 6. In Mr. Spizarsky's absence, I reported to Ms. 18 Anne Corbett, who was an Acting Manager in Mr. 19 Spizarsky's absence. Ms. Corbett has also 20 retired. Mr. Spizarsky reported directly to 21 Mr. Lou Pagano, the Director of PMMD. 22 7. As PMMD is a Division within the Department of 23 Finance, Mr. Pagano reported to the Chief 24 Financial Officer and Treasurer, a position 25 held by Ms. Wanda Liczyk following
56
1 amalgamation and now held by Mr. Joe 2 Pennachetti. 3 4 The Procurement Process at the City of Toronto in 1998 and 5 1999 6 8. I have read the cross examination of Mr. 7 Michael Garrett by Ms. Rothstein on December 8 10, 2002, (Transcript pages 74-101), and I 9 agree that Mr. Garrett has accurately 10 described how City By-Laws govern the 11 purchasing process at the City, with one 12 exception. At page 97, line 12, Mr. Garrett 13 should have said "under" a million dollars, 14 not "over" a million dollars. 15 9. While I was a buyer at the amalgamated City of 16 Toronto, I was primarily responsible for 17 processing the acquisition of computer 18 supplies and equipment, office equipment, 19 communications and sound equipment, signage, 20 periodicals and books, and police supplies. I 21 could be, and from time to time was, assigned 22 responsibility for processing the acquisition 23 of other goods or services. 24 10. Where a department wished to acquire goods 25 and/or services valued at $7500 or more, it
57
1 would initiate the acquisition process by 2 notifying PMMD. Most often, the department 3 would send a Purchase Requisition to PMMD. 4 Sometimes the department would initiate this 5 request by way of telephone call, memo, 6 letter, or e-mail to PMMD. 7 11. A PMMD manager would review these Purchase 8 Requisitions and notices to determine what the 9 initiating Department wished to acquire. This 10 manager would then assign the Purchase 11 Requisition or notice to the appropriate 12 manager, based on the goods and/or services to 13 be acquired. The assigned manager would in 14 turn assign it to one of their buyers. 15 12. I am not an expert on the goods and services 16 that Departments want to acquire or the 17 business needs or requirements that they seek 18 to fill. PMMD expects Departments to identify 19 their needs and the requirements of the goods 20 and services necessary to fulfill these needs. 21 The Department determines whether there are to 22 be any mandatory requirements that must be 23 communicated to bidders in the RFQ. As a 24 result, it is the Department that provides all 25 of the necessary detail in the quotation
58
1 document to explain its needs and technical 2 requirements to bidders. The Buyer would 3 review the specifics as drafted by the 4 initiating Department, but only to ensure that 5 the Call is not obviously deficient or 6 otherwise in breach of PMMD requirements. More 7 particularly, I would review the material 8 provided by the department for the following 9 things: 10 a. to ensure that whatever was being 11 requested is described in a sufficiently 12 non-restrictive manner to allow for as many 13 bidders as possible to respond; 14 b. to ensure that the language used 15 reflects proper purchasing concepts, such 16 as the use of the words "quotation" and 17 "respondents" when using an RFQ, and the 18 use of "proposal" and "proponents" in the 19 case of an RFP; 20 c. in certain circumstances, where I had 21 prior experience with acquiring goods or 22 services, I could anticipate what questions 23 bidders may ask. In such circumstances I 24 ensured the bid document contains 25 sufficient detail to avoid such questions;
59
1 13. Certain standard purchasing documents are used 2 with every bid document. These documents are 3 commonly referred to as "boilerplate." I 4 attached the "boilerplate" provisions to the 5 computer leasing RFQ. To help explain this, 6 Tab 22 contains what PMMD staff refer to as 7 the "front-end boilerplate." Tab 23 also 8 contains the following boilerplate documents: 9 a. the first page of the document 10 "Quotation Request" 11 b. "Supplier Name File Update" 12 c. "Notice of No-bid" 13 d. "Canadian Content", 14 e. "Workers' Rights Summary Sheet" 15 f. "Workers Rights" 16 g. "Year 2000 Compliance Representation and 17 Warranty" (2 pages) 18 h. "List of Sub-Contractors" 19 i. "Address Label" page 20 14. I note that the document appearing at Tab 23 21 does not appear to be in the usual order. 22 Normally, the boilerplate documents listed 23 above in sub-paragraphs (a) to (i) would 24 appear at the end of the bid document. 25 15. Once the initiating Department and PMMD have
60
1 agreed on the form of the Quotation Call, the 2 Buyer would issue it by: 3 a. immediately sending the Quotation Call 4 to companies listed on the City's bidder's 5 mailing list (found at Tab 5 COT003908); 6 b. listing the Quotation Call on the City 7 of Toronto web site; and 8 c. where appropriate, publishing the 9 Quotation Call in newspapers; 10 16. Other companies could also contact the Buyer 11 directly to obtain the Quotation Call 12 documents. 13 17. Requests for Quotation contain a specific date 14 and time of closing and clearly states that 15 responses must be completed, properly signed, 16 and received on or before the date and time 17 specified or the quotation will not be 18 considered. See Tab 22, COT006102. 19 18. At the appointed time for closing, a buyer 20 (and not necessarily the Buyer assigned to the 21 Call) and one other PMMD staff person would 22 publicly open all bids received and read out 23 the identity of the bidders. In most 24 circumstances prices would be read out. In 25 some circumstances, where it is anticipated
61
1 that a large volume of prices would be 2 involved, the Quotation Request boilerplate 3 document would state that prices would not be 4 read aloud at the public opening. Bidders 5 would be given the opportunity to make an 6 appointment with the responsible Buyer to 7 arrange to view the prices after opening or to 8 have the prices provided to them. 9 19. Nevertheless, in 1998 and 1999, when I 10 conducted a public opening, I occasionally 11 read out prices when the Quotation Request 12 document indicated that this would not happen. 13 This would have typically happened where a 14 bidder attended the public opening and time or 15 circumstances permitted me to do so. 16 20. I did not attend the public opening on June11, 17 1999, regarding Quotation Request No. 18 3406-99-01735, and have no specific knowledge 19 of what occurred at that opening. 20 21. Upon opening, the Buyer and the other PMMD 21 staff person would initial the first page of 22 each Quotation Response using different 23 colours of ink to confirm timely receipt of an 24 appropriately signed bid. They would also 25 initial every page of each Quotation Response
62
1 that contains a price quote or dollar value. 2 22. Once the Quotation Responses were opened, the 3 responsible manager sent the original 4 Quotation Responses to the initiating 5 department, along with a cover memo or summary 6 document: 7 a. listing the names of the bidders; 8 b. identifying the need to give 9 consideration, where appropriate to 10 occupational health and safety issues; 11 c. highlighting the need to maintain the 12 integrity and confidentiality of the 13 original documents; 14 d. requesting the initiating Department to 15 examine only these Quotation Responses; and 16 e. where the lowest price is not 17 recommended, to provide detailed reasons 18 for the Department's recommendation. 19 23. PMMD would not have been involved in the 20 actual evaluation process. PMMD did not review 21 responses to determine whether or not a 22 particular response met the business 23 requirements set out in the RFQ. The 24 Department was responsible for carefully 25 analyzing the responses to determine whether
63
1 or not they comply with the terms of the RFQ. 2 As a result, PMMD would not know whether or 3 not a response did or did not meet the RFQ 4 requirements. 5 24. The initiating Department would send its 6 recommendation and analysis to PMMD. PMMD 7 looked only to ensure that the process is 8 fair, complete and done pursuant to the City's 9 purchasing policies and guidelines. PMMD did 10 not scrutinize the initiating Department's 11 analysis or recommendation. 12 25. Depending upon the value of the acquisition 13 proposed, the initiating Department would 14 prepare a report to the appropriate Committee 15 for decision or for recommendation to City 16 Council. Council must approve a recommended 17 acquisition when a department is not 18 recommending the lowest bid, regardless of 19 value. 20 21 1997 Councillors' Computer Lease (Master Lease 784) 22 26. In December 1997 I worked as a Buyer at the 23 old City of Toronto. At that time, someone 24 working in information technology telephoned 25 me to put me on notice that the new City of
64
1 Toronto would be acquiring computers for the 2 offices of the new Mayor and Councillors 3 post-amalgamation. My best recollection is 4 that this call came from Kathryn Bulko. She 5 told me that this would need to be done on an 6 urgent basis. 7 27. Shortly thereafter, I received a letter from 8 Wanda Liczyk dated December 20, 1997, 9 attaching purchase requisitions and 10 authorizing the acquisition of certain 11 computers for the new Mayor and Councillors of 12 the City of Toronto. According to the PMMD 13 date stamp on this letter, I received this 14 letter on December 22, 1997. This letter and 15 the requisitions are found at Tabs 42 to 45 of 16 my Book of Documents (respectively, COT032271 17 to COT032274). 18 28. Ms. Liczyk's letter stated that: 19 The acquisitions are being made through the 20 existing vendors of record, SHL and 21 Compugen Ltd. It is the intent to lease the 22 software and desktop computers. The vendors 23 will be providing leasing quotations as 24 part of their invoicing. 25 29. I was aware that SHL and Compugen had
65
1 previously been approved through a competitive 2 process as successful bidders to provide IT 3 equipment for the old City of Toronto and 4 Metro Toronto. 5 30. Prior to this request, I had limited 6 experience with lease financing. I had worked 7 on bid documents for the leasing of a small 8 number of Apple computers for City 9 communications staff and for the rental of 10 photocopier equipment. I knew that the old 11 City of Toronto maintained a list of potential 12 bidders interested in providing lease 13 financing for equipment, including computer 14 equipment. I do not recall whether or not MFP 15 was on this list of potential bidders in 16 December 1997. 17 31. Immediately after receiving Ms. Liczyk's 18 letter, I discussed with my manager, Frank 19 Spizarsky, how to obtain competitive quotes in 20 a short period of time, during the holiday 21 season. I understand that Mr. Spizarsky 22 discussed this matter with Mr. Pagano. Given 23 these circumstances, we agreed that we would 24 obtain competitive lease quotes by telephone 25 using the "Phone Card" system that was in
66
1 place at that time. 2 32. I believe that I then telephoned 3 representatives of the larger leasing 4 companies to request leasing quotes on the 5 equipment to be provided by SHL Systemhouse 6 and Compugen. The Compugen list of equipment 7 and purchase price is contained in documents 8 COT025472 (Tab 34) and COT025473 (Tab 35). The 9 SHL list of equipment is contained in document 10 COTO25480 (Tab 37). 11 33. It was my practice when telephoning bidders to 12 obtain quotes to request that those companies 13 fax me written confirmation of their quotes. I 14 would attach those confirmations to a written 15 "Phone Card" summarizing the information I 16 received in the phone calls. I do recall 17 faxing information received from this phone 18 quote to the IT department for its review, 19 evaluation and decision. I have conducted a 20 diligent search of files available to me at 21 the City of Toronto but have not been able to 22 locate the Phone Card or confirmations related 23 to this phone quote. I believe that I did 24 obtain competitive bids and that MFP was the 25 lowest bidder.
67
1 34. I cannot recall which companies I called. I 2 clearly did seek and obtain leasing quotes 3 from Mr. Rob Ashbourne of MFP Financial 4 Services (MFP). Mr. Ashbourne confirmed these 5 quotes in a letter dated December 23, 1997, 6 found at Tab 38 of my Book of Documents, 7 COT025486. Mr. Ashbourne wrote a subsequent 8 letter dated December 29,1997, confirming and 9 leaving open the MFP offer for acceptance by 10 the City until January 5,1998. See Tab 36, 11 COT025475. 12 35. Staff from the Information Technology division 13 advised me that they had selected MFP as the 14 successful bidder. I then prepared two 15 Purchase Orders to cover the three year lease 16 of computer equipment: 17 a. Purchase Order #MP94806 to MFP re: 18 Compugen goods in the amount of $367,461.36 19 to be delivered to Toronto City Hall, 20 COT011919; and 21 b. Purchase Order #MP94810 to MFP re: SHL 22 Systemhouse goods in the amount of 23 $579,444.84 to be delivered to Metro Hall, 24 COT011921 25 36. I therefore believe that a competitive process
68
1 was followed in December 1997. Despite the 2 short time frame, computers were in the 3 Mayor's and Councillors' offices for the start 4 of the new City in January 1998. 5 37. I was not involved in or aware of any 6 additional acquisitions subsequently added to 7 this lease with MFP. To the best of my 8 knowledge any such acquisitions would not have 9 been authorized by the quotation process and 10 the Purchase Orders I have referred to above. 11 12 1999 Leasing RFQ - No. 3406-99-01735 13 38. Part of my role as a Buyer involved regular 14 meetings with sales people to listen to their 15 sales pitch in order to become more familiar 16 with the various goods and services they have 17 to offer. In preparing for this Inquiry it 18 has come to my attention that Rob Ashbourne 19 scheduled such a meeting with me for April 7, 20 1998 to present information about leasing with 21 MFP, Tab 32, COTO25137. Although I recall 22 attending that meeting, I cannot remember the 23 details of that meeting or any of the 24 information contained in the presentation 25 located at Tab 33 of my Book of Documents,
69
1 COT025387. 2 39. I do not recall any other meetings, 3 information sessions or seminars put on by 4 MFP. 5 40. It has always been my practice, consistent 6 with City policy for staff in the Purchasing 7 Division, to refuse to accept gifts or 8 entertainment from any suppliers of goods or 9 services to the City. MFP has never attempted 10 to give me a gift or entertain me. 11 41. As of May 1999, my experience with leasing was 12 limited, as described above. I have never 13 received formal training in leasing principles 14 or practice. 15 16 Issuing the RFQ 17 42. On Thursday, May 27, 1999, Mr. Spizarsky sent 18 me an e-mail, which attached a draft quotation 19 document for Leasing Services from Brendan 20 Power ("Draft RFQ"). See Tab 20, COT005800, 21 attaching Tab 21 COT005801. This document was 22 drafted in the form of an RFQ, although some 23 of its language was imprecise. If a Department 24 intended to utilize an RFP to obtain 25 responses, the Department would have to
70
1 provide more detail together with scoring 2 criteria and an invitation for bidders to 3 provide solutions to a stated need. 4 43. Mr. Spizarsky's e-mail instructed me that this 5 RFQ was to be issued as soon as possible. In 6 fact, the RFQ was issued within two business 7 days on Monday, May 31, 1999. 8 44. I understand that the request from Brendan 9 Power came to the PMMD by way of a letter, 10 probably dated May 19, 1999. To the best of my 11 knowledge there was no Purchase Requisition 12 accompanying the Draft RFQ. I note that the 13 header of the Quotation Request does not 14 contain a Requisition Number, as one would 15 expect if there was a Purchase Requisition, 16 but instead references a "Letter" (see Tab 22 17 and 23, first page of COT006102 and 18 COT006104). In my experience, this is not 19 unusual, particularly when the issuing 20 Department is under time pressure. 21 45. I understood the IT Division had hired Mr. 22 Power as a consultant, that he dealt with Year 23 2000 related issues, and that he had 24 previously worked for the provincial 25 government. It was not my job to question
71
1 Brendan Power's knowledge, training or 2 experience in leasing or acquisition of 3 information and technology assets, or that of 4 any consultant hired by the City. 5 46. I reviewed the Draft RFQ provided by Mr. Power 6 to ensure that it was not obviously deficient 7 or otherwise in breach of PMMD requirements. 8 More particularly, I reviewed it to ensure 9 that: 10 a. it described the leasing services for 11 information technology products for the 12 Corporate Services Department in a 13 sufficiently non-restrictive manner to 14 allow as many bidders as possible to 15 respond; and 16 b. the language used reflected proper 17 purchasing concepts, such as the use of the 18 words "quotation" and "respondents" when 19 using an RFQ, instead of the words 20 "proposal" and "proponents", which were 21 inappropriate for an RFQ. 22 47. I have now compared the Draft RFQ (see Tab 21 23 COT005801) to the issued RFQ (Tab 22 and 23, 24 COT006102 and COT006104). 25 a. I am certain that I changed the word
72
1 "proposal" to "quote" throughout the 2 document. 3 b. I may also have added the word "City" 4 ahead of the phrases "corporate contracting 5 authority" (fourth paragraph of section 1.1 6 on image COT005801, and again at fourth 7 paragraph of image COT005802), "ordering 8 department" (fourth paragraph of image 9 COT005802), and the words "to the City" 10 (seventh paragraph of image COT005802). 11 c. I am not certain who deleted section 12 2.13 "Questions/Inquiries" (image 13 COT005804). 14 d. I am certain that I did not delete 15 section 4 "Estimated Leasing Volumes". 16 e. I am certain that I did not make any of 17 the other changes that I have identified 18 between the Draft RFQ and the issued RFQ. 19 48. I also added the "boilerplate" sections to the 20 front and back of the Draft RFQ provided by 21 Mr. Power. 22 49. I did not focus on the paragraph in the Draft 23 RFQ that became paragraph 1.1.21 of the RFQ, 24 which referred to major software acquisitions. 25 I was not aware of the implications of that
73
1 paragraph for the cost or the timing of lease 2 acquisitions. See Tab 23, image COT006107. 3 50. I did not focus on the paragraph in the Draft 4 RFQ that became paragraph 1.1.17 of the RFQ. I 5 did not consider whether or not 90 days would 6 be enough time to complete this Quotation 7 Call, report to Committee and then to Council, 8 put lease contracts in place and acquire 9 assets on lease. The "90-day window" is a 10 business issue, not an issue for PMMD 11 scrutiny. Whether or not 90 days is sufficient 12 to achieve the Department's objectives is for 13 them to determine. See Tab 23, image 14 COT006107. 15 51. I did not understand that the Information and 16 Technology wanted to select a Vendor of Record 17 for leasing all information and technology 18 acquisitions. I did not read the RFQ to mean 19 that the City intended to select a Vendor of 20 Record for leasing all information and 21 technology acquisitions through this RFQ. I 22 understood that the City intended to enter 23 into a 36-month lease in respect of up to 24 $43.15 million in computer hardware and 25 software.
74
1 52. On October 11, 2001, KPMG interviewed me as 2 part of its work for the City of Toronto. KPMG 3 did not show me their notes from this meeting 4 or their summary of the meeting ("Interview 5 Summary") or ask me whether or not I agreed 6 with their version of events. See Tab 47, 7 COT012918. 8 53. I first saw the Interview Summary in the 9 summer of 2002, when preparing for this 10 Inquiry. The Interview Summary states that I 11 had the "understanding, as the buyer for the 12 RFQ, that this transaction was always designed 13 to be a sale-leaseback transaction". That 14 statement is incorrect. In June of 1999, I did 15 not even know what a "sale-leaseback" 16 transaction was, much less its potential 17 implications for the City. In May and June of 18 1999 I did not appreciate that certain terms 19 in the RFQ indicated that the Department 20 wished to engage in a "sale-leaseback" 21 transaction. See Tab 23, COT006116. 22 23 Issuing the RFQ and the addendum 24 54. The RFQ was issued on Monday, May 31, 1999, 25 (see Tabs 22 and 23, COT006102-06122). The RFQ
75
1 was posted on the city website and was sent to 2 the suppliers on the City's bidders' mailing 3 list for computer lease proposals. See Tab 5, 4 COT003908. I recall that MFP and GE Capital 5 each picked up a copy of the RFQ from PMMD. 6 55. After the RFQ was issued and before it closed, 7 I received calls from prospective bidders with 8 questions about technology configurations and 9 estimated leasing volumes. As I was listed on 10 the RFQ as the Contact Person for inquiries of 11 this sort, this was not unusual. To respond to 12 these inquiries, I sought information from Mr. 13 Power. 14 56. By e-mail dated Friday, June 4, 1999, Mr. 15 Power sent me the City's standard hardware and 16 software configurations to answer these 17 inquiries. See Tab 6 COT003914. 18 57. On Monday, June 7, 1999, I issued an addendum 19 to the RFQ, which contained the information 20 sent to me by Mr. Power on detailed hardware 21 and software configurations and estimated 22 leasing volumes. I sent the addendum by fax to 23 all the companies that received the original 24 RFQ. Mr. Spizarsky signed the addendum. See 25 Tabs 2 to 4, COT003902, COT003903, COT003907.
76
1 58. I did not scrutinize the addendum documents or 2 compare them to the RFQ. I therefore did not 3 know: 4 a. whether or not the $14,000,000 in the 5 "Estimated Leasing Volumes" portion of the 6 addendum (Tab 4) included the 9000 7 desktops (see chart Tab 23, image 8 COT006116) or the 13,000 desktops and 9 components described in the Usage 10 Assumptions paragraph of the RFQ (see Tab 11 23, at image COT006117). 12 b. that the total value of the Estimated 13 Leasing Volumes at Tab 4 was $43,150,000. 14 See Tab 4, COTO03907. 15 16 The Responses to the RFQ 17 59. The RFQ closed on June 11,1999. Six bidders 18 submitted formal responses. The responses now 19 available are as follows: 20 a. SHL Systemhouse Tabs 15 to 17, 21 COT005767, COT005768, COT005769; 22 b. Compaq, Tab 28, COT018043 ; 23 c. IBM Tab 29, COT018047; 24 d. Dell Financial, Tab 9, COT003979 ; 25 e. Bombardier, Tab 27, COT0018032 ; and
77
1 f. MFP, Tab 31, COT023413. 2 60. After the tender process closed, I forwarded 3 original quotes to Mr. Power under a 4 memorandum in the name of Mr. Spizarsky over 5 my initials. See Tab 14, COTO05765. The 6 memorandum requested Mr. Power to "examine" 7 the quotations and to provide his 8 "recommendation". The memorandum refers to Mr. 9 Power's letter of May 19, 1999. I do not have 10 that letter and do not recall its content. 11 61. I did not read the responses carefully or 12 assess them with a view to participating in 13 their evaluation. I did not compare bidder 14 responses to the questions asked in the RFQ. 15 62. I have never heard of the term "blackout 16 period" in connection with the procurement 17 process. I understand that the following 18 applies: 19 a. After a bid document is issued, bidders 20 should not contact Department 21 representatives or anyone at the city 22 except the Buyer indicated on the bid 23 document; 24 b. After the bid closes, bidders should not 25 contact any City staff person regarding the
78
1 evaluation unless City staff contact the 2 bidder for clarification; and 3 c. After the bids have been evaluated, and 4 the report finalized, bidders should not 5 contact anyone at the City until the 6 approval process is complete. 7 8 Preparing the Report to the Committee 9 63. I received an e-mail on June 29, 1999, from 10 Mr. Rabadi, addresed to Frank Spizrarsky and 11 me. See Tab 19, COT005788. Mr. Rabadi also 12 faxed me copy of a June 29, 1999 draft report. 13 See Tab 25, COTO12716. PMMD took the 14 following steps to respond: 15 a. Frank Spizarsky reviewed this fax from 16 the PMMD perspective. He made a number of 17 handwritten changes to the hard copy of the 18 document as seen at Tab 25. I summarized 19 Frank Spizarsky's changes that I thought 20 might be illegible in a fax cover page to 21 Nadir Rabadi dated June 29, 1999. See Tab 22 18, COT005787. 23 b. Mr. Rabadi had also asked a question 24 about clause 1.1.17. I responded to him on 25 June 29, 1999, as seen at Tab 30,
79
1 COT018124. The handwriting on the bottom 2 left of the document is mine. I wrote "All 3 companies responded same way". By this I 4 meant that all companies had provided lease 5 rates for a period of 90 days. 6 64. I note that the draft report at Tab 25 refers 7 to the total cost of leasing not to exceed 8 $43.15 million for three years. See COT012717. 9 I did not focus on that information when I 10 received this document, as it was not my role 11 to critically assess the financial or other 12 bid responses. 13 65. On June 30, 1999, a new draft report was faxed 14 to me by the Finance Department. See Tab 46, 15 COT005770. I reviewed the draft solely to 16 confirm that Mr. Spizarsky's suggested changes 17 had been incorporated. 18 66. By this time I was satisfied that PMMD 19 concerns had been addressed in the draft 20 report. We left it to others to address their 21 specific concerns with the content of the 22 report. Although I received the following 23 e-mail messages, I did not review them: 24 a. July 2, 1999, Nadir Rabadi sent an 25 e-mail Jim Andrew, Lana Viinamae, and
80
1 Brendan Power attaching another draft of 2 the report. I was one of several people 3 copied on this e-mail, and also received a 4 copy of the report by fax. See Tab 1, 5 COT003887 6 b. July 3, 1999, e-mail from Mr. Jim Andrew 7 to Mr. Nadir Rabadi. See Tab 26 COT014321. 8 c. July 5, 1999, email exchanges between 9 Mr. Rabadi and Ms. Viinamae. See Tab 24, 10 COT012257. 11 67. On July 6,1999, Mr. Spizarsky sent an e-mail 12 out addressing an issue of confidentiality. I 13 was copied on this message, but was not 14 directly involved in the issue and did not 15 respond. See Tab 40, COT031862. 16 68. On July 9,1999, Mr. Rabadi sent a signed 17 version of the report to others and me. The 18 cover e-mail is found at Tab 7, COT003923, and 19 the Report is at Tab 8, COT003924. I did not 20 review the report for content and did not 21 reply to the e-mail. The handwritten note on 22 the cover e-mail refers to preparation of a 23 "back up package". This is a standard package 24 I would prepare for Lou Pagano to assist him 25 to answer questions related to the procurement
81
1 process at Committee and Council. I prepared 2 such a package for Mr. Pagano with respect to 3 this RFQ containing relevant documents from 4 this RFQ. 5 69. That concluded my involvement with this RFQ. 6 70. I did not attend at the Policy and Finance 7 Committee meeting on July 20, 1999, when this 8 report was considered. 9 71. I did not attend at the meeting of Council in 10 July 1999 where the Report, as amended, was 11 adopted. 12 72. I was not involved with the negotiation of 13 leasing contract documents. 14 73. I was not involved in acquisitions of assets 15 placed on to MFP leases after July 1999. 16 74. I was not aware of the change of lease term 17 from 3 to 5 years in October 1999. I was not 18 aware of the re-write of 838-1, PA1-1 and 19 PA1-2 into 838-5 through 9. 20 75. Having left my former job as buyer in 21 September of 1999, I did not see the Purchase 22 Requisition or the Contract Order document 23 when they were issued in September of 2000. 24 See Tabs 11 and 10, COT004161, COT004158. Once 25 Council had approved a quotation, it was not
82
1 PMMD's practice to follow up with a department 2 to see where its requisition for a Purchase 3 Order was. 4 5 Suppliers' Briefing Documents 6 76. In my current job, I am responsible for 7 providing City of Toronto Departments and 8 Divisions and suppliers to the City with 9 information and documentation regarding 10 purchasing procedures and expectations. I also 11 give seminars on these matters. At Tab 52 of 12 my binder is a hand out which I require be 13 made available to all new suppliers and which 14 may assist the Commissioner to understand of 15 the steps now taken by PMMD to alert all new 16 bidders about the City's policies. 17 18 SWORN BEFORE ME at ) 19 the Town of Richmond Hill ) 20 the Province of Ontario on ) 21 March 27, 2003 ) 22 ) DAVE BEATTIE 23 ) 24 A COMMISSIONER, ETC. 25
83
1 MADAM COMMISSIONER: And, Mr. Beattie is our 2 first witness to be testifying with the new affidavit 3 procedure. 4 Yes, Mr. Moore...? 5 6 EXAMINATION-IN-CHIEF BY MR. PATRICK MOORE: 7 Q: Now, Mr. Beattie, you -- do you have in 8 front of you your book of documents and your affidavit? 9 A: Yes, I do. 10 Q: All right, if you could turn up your 11 affidavit, I'm not going to take you through all of it, but 12 just for the assistance of all of us here and the 13 Commissioner, we see that in the first few paragraphs, 14 specifically 2 and 3, you set out something of the -- of your 15 personal background and experience in purchasing and we see 16 there that you've been a buyer at the City -- the old City of 17 Toronto from 1985 forward. 18 And at page 10 at paragraph 41, we see that 19 you had limited experience with leasing and that you never 20 received any formal training in leasing principles or 21 practice? 22 A: That's correct. 23 Q: I'm reading that correctly? 24 A: That's correct. 25 Q: Tell me, Mr. Beattie, I gather that from
84
1 September of 1999 onward, you were no longer a buyer at the 2 City of Toronto, but, you were promoted to a new position, is 3 that right? 4 A: That's correct. 5 Q: What's the -- what was the job function 6 and title that you moved onto at that point? 7 A: Basically it was supervisor, client 8 services. And my position was that -- running the client 9 services department and that was basically the first contact 10 that any departments had with purchasing, they would touch 11 base with us first. 12 Q: And in that regard, was it your role and 13 that of your office to assist the clients to a full and fair 14 understanding of the purchasing process? 15 A: That's correct. 16 Q: And so your office was within the 17 purchasing and materials management division, at the City, 18 was it? 19 A: That's correct. 20 Q: And that's a division of the Department of 21 Finance? 22 A: It's a unit of purchasing, yes. 23 Q: And -- and from September of 1999 onward, 24 did you still have as your Director, Mr. Lou Pagano? 25 A: Yes, we did.
85
1 Q: And from that time of that promotion 2 forward, Mr. Beattie, who was your immediate manager or 3 supervisor? 4 A: My immediate manager was Paul Hewitt and 5 he was manager of client and support services. 6 Q: From the time of amalgamation which is the 7 January of 1998, through until your promotion in September of 8 1999, who was your manager then, sir? 9 A: Frank Spizarsky. 10 Q: Now, returning to this paragraph 41 and 11 the fact that you never did receive any training in leasing 12 principles or practice, tell me, if you were still a buyer, 13 would you think it a good idea to have training and 14 experience in leasing matters? 15 A: Definitely. 16 Q: That's something that you would recommend 17 to your supervisors and to the City? 18 A: Yes, I would. 19 Q: Just so that we're clear on the nature and 20 the limitations of your experience in leasing matters, if you 21 can go with me to page 7, paragraph 30, you set out for us 22 some of your, as you call it, limited experience with lease 23 financing. 24 And you make reference there to having worked 25 on bid documents for the leasing of a number of Apple
86
1 computers. 2 A: That's correct. 3 Q: Can you help us with when that was, sir? 4 A: It was probably prior to amalgamation, our 5 communications division were using extensively the MacIntosh 6 and Apple computers, and they wanted to lease a number of 7 them. 8 Q: Was it a small number or a larger number? 9 A: It was just a small number, probably half 10 a dozen. 11 Q: I see. And what was your involvement then