May 28, 1940

LIB

James Layton Ralston (Minister of Finance and Receiver General)

Liberal

Mr. RALSTON:

All I desire to say is

that, as the order in council indicates, there are certain commodities which it may be desirable to acquire, and that it is considered in the public interest that they be not acquired, ostensibly at least, for government purposes. Then we have the formation of a corporation, all the shares of which are owned by the Minister of Munitions and Supply, who in turn has to come to the Minister of Finance

before he gets any guarantee. That is the safeguard, if hon. members consider it such: two ministers of the crown have to concur in the giving of the guarantee. One of them holds, in his official capacity, all the shares of the company as agent for the crown.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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CCF

Thomas Clement (Tommy) Douglas

Co-operative Commonwealth Federation (C.C.F.)

Mr. DOUGLAS (Weyburn):

In paragraph (c) it is provided that the governor in council may prescribe administrative practices with respect to contracts. I wonder if the minister who is acting as Minister of Munitions and Supply would give us some outline of what the administrative practices are with reference to the letting of contracts. As I understood the minister the other evening, there are three classes of contracts; those let by general tender, those let to a select group of contractors, and those which it is found necessary to give to preferred contractors because of some special, secret design or something of the kind, where tenders cannot be called for. Could the minister give the committee any idea, in terms of total value, how the contracts let so far would be divided as among those three categories; and, in the case of the latter category, the basis used for determining the price to be paid? That is, are we still operating on the cost-plus basis with reference to the preferred contractors or, as the minister said the other evening, is there the general margin in that industry? How is that margin arrived at and on what basis?

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply; Minister of Transport)

Liberal

Mr. HOWE:

The method of placing a contract depends somewhat on the time at our disposal. Certain orders are earmarked as necessary for a certain date, as may be determined by the departure of a battalion or the sailing of a ship. In general, I may say that we exercise all the business precautions that time will permit. I should think that probably at least seventy per cent of all our purchases is made by open tender.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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CCF

Thomas Clement (Tommy) Douglas

Co-operative Commonwealth Federation (C.C.F.)

Mr. DOUGLAS (Weyburn):

Is that in terms of value or in terms of the number of contracts?

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply; Minister of Transport)

Liberal

Mr. HOWE:

I should think in terms of value, at a very rough estimate. I should think perhaps ninety per cent of the transactions are by open tender. Then we may have a contract to let for something in which we know certain people are interested. For instance, we know that certain firms are interested in particular textiles, and when an invitation to tender is sent out, it goes to certain firms that are interested. That is all our list means to us, that there are certain people qualified to make certain goods, and they have indicated their interest in contracts of this kind.

War Appropriation Bill

That is the way we try to proceed; that is the way we like to proceed. Sometimes, however, the state of an industry is such that it is impossible to get a reasonably competitive tender. In other words, we need the entire capacity of that industry, and in that event there is not much chance of getting a tender. In that situation it is our policy to put in an auditor to determine the position of the firm before the order is taken and the position after the order is completed, and to establish a price which allows the cost of turning out the article plus a modest profit. I can say that five per cent is the usual profit for that sort of work. I think the textiles, the rubber goods and much of the mechanical transport have been priced on a five per cent margin.

Then there is the question of fortifications. The Department of National Defence have pointed out to us, very reasonably, that it is not in the public interest to send out forty or fifty sets of plans for coastal defence fortifications. They would very much prefer that only one contractor be called in. We have compromised with them, and they have agreed that three contractors shall be asked to tender, those three to be very carefully selected, reputable firms which will proceed with reasonable discretion in handling these secret plans.

In reading Hansard, I noticed that a reference was made to one of these contracts, and I think I know the particular contract to which reference was made. In that case we called in three of the largest firms doing that class of work and awarded the contract to the firm submitting the lowest tender. The work was in a rather remote section, and I understand that part of the job was sublet. The statement in Hansard says the entire job was sublet, but that is not at all permissible. We never allow a contractor to assign a contract in toto to another contractor, and we never deal with an agent. We always deal with firms that we believe will be able to do the work, and the contracts are given to firms that in fact do the work. It is not unusual, however, for a contractor to sublet a certain part of a construction job. For example, another contractor may have concrete equipment much closer to the scene than the firm that has the whole contract. The contractor may sublet the concrete work or the sheet metal work. Part of the contract referred to was sublet, and I am making inquiries to ascertain just what was the extent of that subletting. Without having obtained the full facts, however, I feel sure that only a portion of the contract was sublet to a local contractor nearer the scene than the Montreal firm that had the contract.

I can say that where it is possible to call for tenders we do so, and that practice is followed as fully as the circumstances permit. Where time does not allow us to follow that system, we sometimes use established prices; that is, prices that have been established by recent tenders. Where there is no time to call for tenders, we may renew a contract at the price we last paid for the commodity. If we are using the entire output of an industry, we put in auditors to fix a price that will return a reasonable profit; and where secret work is done, we try to get at least three contractors to tender and award the contract to the company with the lowest tender.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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CCF

Thomas Clement (Tommy) Douglas

Co-operative Commonwealth Federation (C.C.F.)

Mr. DOUGLAS (Weyburn):

I thank the minister for the information. Is the principle of the cost-plus contract still being used in cases where we are taking all the output of an industry? The minister will remember a certain cost-plus contract which came before the last parliament. In that instance the government was responsible for the purchase of certain tools, jigs, dies and so on, and placing them at the disposal of the firm concerned. Is that principle being carried over into contracts?

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply; Minister of Transport)

Liberal

Mr. HOWE:

So far as I know, no cost-plus contract has been awarded in the last eight months. Sometimes when we have had no previous production of an article, we have used what is known as a target-price contract, which is somewhat different from a cost-plus contract. A price is arrived at which is considered reasonable, and a certain margin of profit is fixed. If the contractor can do better, his margin of profit is slightly increased; and if he is not able to do as well as the established price, his margin of profit drops. That is a contract which is widely used. It has a profit incentive in it, and is the next best thing to a fixed-price contract. The target-price contract is the nearest thing we have to what my hon. friend has described as a cost-plus contract.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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NAT

Alan Cockeram

National Government

Mr. COCKERAM:

Would the minister inform the committee whether the Lindsay arsenal is working to capacity, and how many men are employed there at the present time.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply; Minister of Transport)

Liberal

Mr. HOWE:

Lindsay arsenal is in process of installing machinery. So far as I know, it has not started actual production. I presume the number of men there is the number connected with the installation of the machinery, and the building of auxiliary plant. It is scheduled to start operation on June 15, I am informed.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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NAT

Alan Cockeram

National Government

Mr. COCKERAM:

I see the Minister of National Defence is now in his seat, and I should like to direct a question to him

War Appropriation Bill

respecting the tank problem, which has been discussed to-night. I direct his attention to a statement made by Brigadier Schmidlin in Toronto last fall regarding the Polish campaign. Would the minister consider whether that statement was the kind of statement one would expect from an officer at headquarters responsible for the mechanized forces of Canada. After all, Germany had been very successful in her campaign in Poland, and it does seem to me that the general staff should have gone into the matter more fully than would seem to be indicated by Brigadier Schmidlia's talk in Toronto. If Brigadier Schmidlin could throw the question of tanks so lightly to one side, does the minister not think it is time for a reorganization of the general staff of the militia? I ask that because it must be realized we have a big job to do and responsible men are needed to head the general staff. Those of us who served in the militia right up to date know what that job is. If an officer, responsible for the mechanization of our army, can view events in Poland so lightly, I do not think he is fitted for the position he now holds in the Department of National Defence.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

Norman McLeod Rogers (Minister of National Defence)

Liberal

Mr. ROGERS:

I shall answer first the question respecting the Lindsay arsenal. I can only assure the committee that the Department of National Defence has realized fully the productive possibilities of that arsenal, and the importance of making the greatest possible use of it during the course of this war. Plans are under way to that end, and they will be carried forward without delay.

With respect to the second question raised by the hon. member, I would say that the particular statement attributed to Brigadier Schmidlin was brought to my attention to-day. I find the speech he made w'as given at a meeting of a local association of electrical engineers in Toronto. He has stated to me that the portions of his speech quoted were in fact actual parts of it, but that without the full context they do not give a full picture of his argument, which was based on the hypothesis that both sides were approximately equal in tank and air power.

May I say to the hon. member that Brigadier Schmidlin was at that time director of engineering services. He was not actually in control of the organization of the tank training depot at Camp Borden. It is quite evident that in the course of his remarks at the meeting of the engineering society he did make certain comments respecting the Polish campaign, and that when taken out of their context those comments do not appear to have been borne out by the events of more

recent weeks. But I would remind the hon. member that if all those whose military prophecies of six months ago were to be censured at the present time, they would constitute a very large number. Military officers of very high rank in the armies of all the allied powers would be included. With respect to this matter I would say that so far as the information before me is concerned, I have the distinct impression that the portion of Brigadier Schmidlin's speech which was quoted does not fully reveal the actual tenor of his remarks on that occasion.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

Thomas Bruce McNevin

Liberal

Mr. McNEVIN (Victoria, Ont.):

With

respect to the Lindsay arsenal may I say that one hundred men are being employed on production at this plant which has been operating since May 1, 1939.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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NAT

John Ritchie MacNicol

National Government

Mr. MacNICOL:

Producing what?

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

Thomas Bruce McNevin

Liberal

Mr. McNEVIN (Victoria, Ont.):

Producing [DOT]303 cups, and discs for the production of heavy shells. The installations under way are for the production of heavy shells, and I am most anxious that that development be completed with the least possible delay. However, it would not be correct to say that the plant is not in production.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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CCF

Angus MacInnis

Co-operative Commonwealth Federation (C.C.F.)

Mr. MacINNIS:

Is there a fair wage

clause in the various contracts being let, and has the government taken precautions to see that fair wages are paid and that decent working conditions are provided in connection with all contracts let by the government?

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply; Minister of Transport)

Liberal

Mr. HOWE:

The fair wage clause is included in all government contracts for munitions, and the Department of Labour has the same control over those contracts as it has over all others.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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CCF

Angus MacInnis

Co-operative Commonwealth Federation (C.C.F.)

Mr. MacINNIS:

Is that the case in connection with other supplies, too? I have in mind contracts let to the textile industry. I believe there is a great deal of textiles being purchased now. As indicated by a royal commission which reported to this House of Commons, wages in the textile industry are extremely low. Is the government taking precautions to see that men and women working on government supplies are not being sweated in that industry.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply; Minister of Transport)

Liberal

Mr. HOWE:

The rates in textile wages

are covered by contracts and prevailing rates in the industry. May I point out that they are considerably higher now than they were when that royal commission reported, as my hon. friend must know.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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SC

Charles Edward Johnston

Social Credit

Mr. JOHNSTON (Bow River):

Does that same wage requirement apply to manufacturers of aeroplanes and aeroplane parts, too? I understand that it does not.

War Appropriation Bill

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
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LIB

Clarence Decatur Howe (Minister of Munitions and Supply; Minister of Transport)

Liberal

Mr. HOWE:

I feel quite sure it applies in the aeroplane industry, as well as in all other industries.

Topic:   WAR APPROPRIATION BILL
Subtopic:   PROVISION FOR GRANTING TO HIS MAJESTY AID FOR NATIONAL DEFENCE AND SECURITY
Permalink

May 28, 1940