GENERAL ARTICLES

Wipe Out All Patronage

A dollar wasted by any Government department is a dollar less for our national war effort

December 15 1939
GENERAL ARTICLES

Wipe Out All Patronage

A dollar wasted by any Government department is a dollar less for our national war effort

December 15 1939

Wipe Out All Patronage

GENERAL ARTICLES

A dollar wasted by any Government department is a dollar less for our national war effort

IN THE House of Commons on September 8, Prime Minister Mackenzie King scathingly condemned both profiteering and political favoritism in connection with Canada’s war effort, and asked that information relating thereto be brought to his attention “in a way that will also bring it to the attention of the country.”

On October 31, the Prime Minister, in a radio address to the Canadian people, said:

“In every respect of Canada’s war effort, my colleagues and I have taken and will continue to take all possible precautions to see that partisanship, personal influence or political patronage provide no avenue to promotion, personal advancement or private or corporate profit.”

On October 2, Honorable Norman Rogers, newly appointed Minister of National Defense, announced orders had been issued to the Dominion’s armed services “that political preference was to have no place in expenditures arising from the mobilization and training of the Canadian forces,” and added: “The Defense Purchasing

Board has followed, and the War Supply Board will follow, the same principle of excluding political or personal preferences from the letting of construction contracts or for the purchase of supplies.”

Mr. Rogers also wrote a letter to the Members of Parliament stating that party patronage would not be tolerated in the giving of war orders.

But the patronage idea dies hard.

On November 19, Finance Minister Ralston found it necessary to issue this statement:

“I am informed that there have been cases where prospective suppliers to the War Supply Board have been interviewed by persons seeking remuneration or subscriptions as consideration for having their names placed on the list of suppliers or contractors with the War Supply Board.

“I need hardly say that persons making such a suggestion should be treated with the indifference and contempt which they deserve, and that, in order to have full consideration, any person or firm in a position to furnish supplies required has only to write to the board, sending in their name and indicating their location, their facilities, and the kind of supplies in which they deal.

“As a matter of fact, purchases by the board are made after public advertisement for tender except in cases where, in the opinion of the board, some other procedvire is advisable in the public interest.

“I have consulted Mr. Campbell, the chairman of the board, and he joins with me in this statement.”

And, on November 20, an Ottawa dispatch to the Toronto Star stated: “Premier King has

instructed all Federal Cabinet Ministers that ‘no patronage of any kind’ is to be exercised in war purchases, appointments or promotions. All departments have had summary warning that they will be held responsible if political influence is shown to have affected awarding of contracts or filling of positions in connection with Canada’s prosecution of the conflict.”

The patronage idea dies hard because it has been part and parcel of party government in this country.

Maclean's has a letter, dated November 11, written by a member of the House of Commons following an extensive trip through the Dominion. It contains this statement:

“Certain phases of Canadian life have pleased

me very greatly and others have dismayed me mightily. Among the latter is to be found a vicious abuse of political patronage that I seem to have found in all provinces, some worse than others, but with it an abiding and militant thought in the minds of the people that it must come to an end if democracy is to survive in Canada. Also I have proved to myself that this is not a creature solely of one party, but is the child of the two old parties and as such must be dealt with.”

Patronage and Defense Contracts

PATRONAGE dies hard because in one form or another it has been practiced by nearly all departments of the Ottawa Government. Political favoritism was practiced to a disgraceful degree even in Canada’s war preparation program by the Department of National Defense under Honorable Ian Mackenzie, who in spite of this fact is still a member of the Dominion Cabinet.

In substantiation of this, during recent weeks The MacLean Publishing Company, through The Financial Post and Maclean's Magazine, has presented details of a series of transactions illustrating the manner in which expenditures under the Dominion’s war preparedness program have been made.

Newspapers of all shades of political opinion have found these exhibits convincing. For example, the Winnipeg Free Press, probably the strongest supporter of Liberalism in the Dominion, in an editorial commenting on Dr. Manion’s charges of patronage, says:

“The references made by Dr. Manion to the situation that existed in the Department of Defense up to the outbreak of war are not of a nature that will surprise readers of the Free Press. But one may wonder why Dr. Manion should only now make up his mind to take determined action in these matters. For almost eighteen months this newspaper criticized and protested many of the steps taken by the late Minister of Defense, Mr. Ian Mackenzie, but it cannot be said that the Federal Conservative party appeared too greatly concerned about them. The Bren Gun controversy petered out in the House of Commons last session due solely to the failure of the opposition led by Dr. Manion to pursue the fight. We do not propose to recapitulate these events at this time, though it must be said that the additional evidence secured and published of recent weeks by The Financial Post has been of a nature fully to reinforce the conclusions reached by the Free Press long ago.

“It was a matter of deep regret to many people across Canada —and not least to the Free Press— that the revelations regarding the Bren Gun contract were not immediately followed by a reorganization on sweeping lines of the Department of Defense. That reorganization took place only after the outbreak of war, and the decision then taken to replace the Minister and the Deputy Minister with men who had the confidence of the country were steps which were hailed as a token of the honesty and sincerity of purpose of the Government.

“The legacy of the past, however, remains, and the Government would act with wisdom if it did not wait until Parliament met to institute the most sweeping investigation into the contracts and arrangements made by the Department of Defense under its former administrators. There

is no particular need to set up a Royal Commission, or to ventilate in public over a period of months the nature and circumstances of the small contracts signed before the outbreak of war. Their total amount, compared with the vast war expenditures now being made, is trifling. Important though the principle involved is, it would probably facilitate our war effort and at the same time satisfy public opinion, if the announcement were made that every contract made from 1935 to the fall of 1939 was to be re-examined and overhauled in the light of the present facts; and that prompt action would be taken to deal with any unfairness or incompetence that was uncovered. We venture the guess that it would be found worth while.”

The Cases Presented

THE CASES presented by The Financial Post and Maclean's dealt with:

(1) The placing of an order for an article used in the training of one of the Dominion’s fighting services, with a firm of insurance brokers who had no manufacturing plant and one of whom was the former president of a Liberal party association.

(2) The leasing by the Government of a building in Montreal now used as the headquarters of a military unit. The company owning the building bought it for an amount reported to be $62,500. Two months later it leased the building to the Government at an annual rental of $23,700; for a ten-year period, $237,000. The company undertook to make certain alterations and repairs. On the day the building was leased to the Government, the company obtained a tenyear mortgage loan for $90,000, secured by both the property and the rentals. The final payment ($42,000) by the company on the purchase price was not made until after both the Government Jease and the loan for $90,000 had been obtained.

(3) Purchase by the Defense Department of a Vancouver residence for use as an officers’ mess at a cost to the taxpayers of $94,440. The property, assessed at $49,150, was in the name of the wife of a prominent citizen associated with a business group known to be “close to” Honorable Ian Mackenzie.

(4) Three companies hold, or have held during the past three years, at least sixteen Defense Department Pacific Coast construction contracts to a value of approximately $2,000,000.

At least five of the contracts held by these three companies were awarded on a cost-plus basis without competitive bids. The terms of these contracts provided no incentive to keep costs down, their effects being: The greater the cost the greater the profit. The value of these five cost-plus contracts exceeds $1,000,000.

By the terms of certain of the contracts the rental “day” for machinery used by the contractors on the job was defined at eight hours. For two shifts a day double rentals were to be charged; for three shifts a day, three times the “daily” rental. This was a most extraordinary provision.

In a statement to Maclean's, the Department of National Defense admitted that double-shift and triple-shift rentals were actually paid in some cases.

The statement admitted that payment of rentals on this unusual basis was questioned by officers of Military District No. 11, by the

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auditor-general and by the Chairman of the Defense Purchasing Board.

It said, moreover, that the question of whether this basis of rental payment for machinery will be used on subsequent contracts is now under review at Ottawa.

The department’s statement also brough t out the fact that while Maclean’s and The. Financial Post had referred to five costplus contracts on these jobs, there were in reality eight cost-plus contracts.

Central figure in one of the companies holding certain of these cost-plus conv tracts is Brigadier W. W. Foster, chief of police of Vancouver (now on leave), president of the Canadian Legion, and recently appointed director of Auxiliary Services under the Defense Department.

A central figure in another of the companies was the late General J. W. Stewart, a former close personal friend of Hon. Ian Mackenzie.

Details of these Pacific Coast contracts, and the reply of the Department of Defense, were published in the December 1 issue of Maclean’s.

(5) On August 16, 1937, the Defense Department bought a building in the Montreal area, from Maurice Shulman, “advocate,” for $18,000. Mr. Shulman bought the building from the original owner on January 4 of the same year, for $12,000. The profit on this transaction was fifty per cent in little more than seven months.

(6) Between June, 1937, and April. 1938, the Defense Department entered into six “cost-plus” contracts with three firms, for the manufacture of sixty-three airplanes. Basis of payment was cost, plus ten per cent profit. Ño “ceiling” to costs was provided in any of the contracts. Total payments on the six contracts will exceed $4,300.000.

These contracts authorized payments of ten per cent profits not only on direct costs but on: audit fees, travelling expenses.

executive salaries, legal fees, premiums on insurance, municipal taxes, on depreciation paid by the Government, and on the cost of additions to buildings paid for by the Government.

The licenses for the manufacture of these planes were granted on terms which indicated the selection of the license fees by the Defense Department.

Initial deliveries of planes under these contracts were made from five to fourteen months late.

One type of plane being built under two of these contracts is obsolescent as a firstline service plane, though production has not yet been completed.

Some of the initial units of a second type could not be placed in service for some time after delivery, because the Department had failed to supply a sufficient number of propellers.

According to copies of the contracts tabled in the House of Commons by the then responsible Minister, payment was to be made by the Government on the basis of seventy-five per cent of the costs plus seventy-five per cent of the profit per month. Actually, payments have been made on the basis of ninety per cent of the costs and profits per month. The House of Commons was thus grossly misinformed on a matter involving the expenditure of millions of public money.

Eliminate All Patronage

IT IS true that a strong and independent War Supply Board has taken over defense buying; that immediately war was declared a new Minister of Defense and two able acting deputies were appointed.

Credit must be given the Prime Minister for this, although the changes were long overdue. And Hon. Ian Mackenzie still remains in the Cabinet. MajorGeneral LaFleche, former Deputy Minister, is on sick leave and thus, at the time of

writing, still technically connected with the department. In the statements of the Prime Minister, the present Minister of Defense and the Minister of Finance, reference is made to the elimination of patronage and political or personal favoritism in connection with Canada’s war effort. Patronage and ixjlitical or personal favoritism must be eliminated from all endeavors of the Government, whether directly connected with the war departments or not. For a dollar wasted anywhere is a dollar less for that war effort. When a man enlists in the Canadian Active Service Force he is not asked whether he is a Liberal or a Conservative. Income and other tax forms include no such question. And no such question should be raised when orders for national supplies are being given by any department of the Government—any government for that matter. Patronage and favoritism work in many different ways. They are responsible for “middle men” who, without plants of their own, secure a contract and sublet it, assumably making a profit for themselves. They are responsible for “selected contractors” who are not required to submit tenders in competition with other firms. They are responsible for cost-plus con-

tracts with no “ceiling”—which means that the more a job costs the greater the profit.

They are responsible for waste. And waste is sabotage.

So far as Maclean's is concerned, its objectives beai repeating. They are:

1. The elimination of patronage or favoritism in the awarding of contracts by all Government departments.

2. Businesslike methods in all departments of Government. This involves personnel, the most important thing in any business. If you haven’t good men, you have nothing.

3. Elimination of unnecessary middlemen in government transactions.

4. Elimination of waste or any unnecessary expense.

5. Cost-plus contracts should be avoided by the Government wherever possible.

There should be no cost-plus contracts without any ceiling.

Cost-plus contracts should not be checked by the department which placed them.

6. Public officials who have been guilty of improvidence, carelessness, negligence, or who are under the slightest suspicion of being unduly influenced by friends or by political party considerations, should be removed from office.