Minister of Communications Authority to Prescribe Fees Order
P.C. 1981-252 1981-01-29
His Excellency the Governor General in Council, on the recommendation of the Minister of Communications and the Treasury Board, pursuant to paragraph 13(b) of the Financial Administration Act, is pleased hereby to authorize the Minister of Communications to prescribe by order, from time to time, subject to and in accordance with the terms and conditions as set out in the annexed schedule, the fees to be paid by the private sector for the provision of services and goods by the Department of Communications.
In keeping with the Department of Communications’ main objective of fostering the orderly development and operation of communications for Canada in the domestic and international spheres, the Department will be requested to provide services to the Private Sector.
Depreciation — This is calculated by dividing the capital cost of the equipment by the number of expected years of useful life. The expected useful life is to be certified by two departmental employees, one of whom shall be a financial officer employed by financial services.
Direct Costs — All direct labour, direct material, direct expenses and equipment costs incurred by the Department to provide a service which can be identified with and allocated to the provision of a service or goods.
Direct Expenses — Expenses incurred in the provision of a service or goods which can be identified with and allocated to the provision of that service or goods. Examples of this are travel expenses or contracted work, or costs incurred by other government departments in the provision of a service or goods.
Direct Labour Cost — Labour cost which can be identified with and allocated to the provision of a service or goods. The cost components are basic wage/salary rate, shift premiums, fringe benefits and overtime premiums. Fringe benefits are the employer contributions to employee benefit plans, i.e., Superannuation, Canada Pension Plan, Quebec Pension Plan, Supplementary Death Benefits, Unemployment Insurance, Medical and Surgical Insurance and Hospital Insurance.
These components will be calculated on a yearly basis by individual. This total annual labour cost will then be divided by the number of available hours in a year. The available hours in one year are 1650 hours or 220 days (365 days per year less weekends (104), less statutory holidays (11), less annual leave (15), less sick leave (15), times 7.5 hours per day) unless otherwise specified in a collective agreement.
Direct Material Cost — Material cost which can be identified with and allocated to the provision of a service or goods. Material costs represent expected actual usage based on expected actual cost.
Equipment — Equipment cost includes depreciation (including the cost of capital), maintenance, and space where the usage of space for equipment is significant. Maintenance cost on equipment includes labour, material and direct maintenance expense where these costs are identifiable.
Having calculated the yearly cost for depreciation, maintenance and space, these costs will be added together, then divided by the estimated number of hours the equipment will be used during the year to arrive at an hourly rate.
Full Cost — Total of all direct and indirect costs.
Government of Canada — As an accounting entity is defined in the Public Accounts, 1977, Volume 1, 1.3, as the aggregate of all its departments, agencies, boards, commissions, councils, Crown corporations, funds and other bodies, with two exceptions. These exceptions are the “Agencies” and “Proprietary”, Crown corporations listed respectively in Schedules C and D of the Financial Administration Act and those Crown corporations that are not subject to the Financial Administration Act.
Incremental Cost — An incremental cost is the direct cost associated with an activity which is within the mandate of the department but for which funds have not been included in the appropriation for that activity. For example, an appropriation may fund an activity to a level of 100 units. If more than 100 units are required, the incremental cost is the excess cost of producing the additional units.
Indirect Costs — These are the overhead costs of the Department and the Government of Canada. Overhead can be further defined as operating costs which cannot be directly allocated to a service or goods but can be allocated to the service or goods through some intervening basis of allocation such as direct labour cost.
These costs would include statutory expenses plus those costs relating to the Departmental Budget for Administration as per the Main Estimates plus sector overhead plus services provided without charge by other government departments less formula indirect overhead recoveries from the Department of National Defence.
Overhead costs are to be applied as a percentage on direct labour which consists of the basic annual salaries/wages plus shift premium and fringe benefits.
As overhead costs for the next fiscal year will be known at the time of preparing the Operating Budgets and New Year Main Estimates, the overhead rate will be calculated at this time by the Comptroller’s Branch. The total overhead costs derived from the Operating Budgets will be divided by the total direct labour cost as defined above to arrive at the percentage to be applied.
For fee schedule purposes then, this overhead rate will be applied to the direct labour cost associated with any one service.
Interest on the Undepreciated Capital Cost — The interest rate to be used is the current long term borrowing rate as established by the Government Finance — Loans, Investments and Guarantees Section, Economic Programs and Finance Branch, Department of Finance. This rate is to be applied to the undepreciated capital cost of the equipment in question, i.e., annual interest expense = capital cost less accumulated depreciation times the long term borrowing rate.
Maintenance — Maintenance costs on equipment include the labour costs of the individuals employed for the express purpose of maintaining the equipment. The amount of yearly maintenance labour to be charged against a given piece of equipment should be pro-rated based on the expected time spent during a one year period. The other two cost components of equipment maintenance are materials and direct expense. Material cost would be such items as the cost of replacement parts for a piece of equipment while an example of direct expense is maintenance contracts. Both these cost components should be estimated for a one-year period.
Money Paid to Canada for Special Purpose — Includes all money that is paid to a public officer under or pursuant to a contract, and is to be disbursed for a purpose specified in or pursuant to such a contract (FAA.2).
Private Sector — All parties and organizations other than those included in the definition of the Government of Canada as an accounting entity. The Private Sector therefore includes those Crown corporations listed respectively in Schedules C and D of the Financial Administration Act, those Crown corporations not subject to the Financial Administration Act, all individuals, corporations, universities, provincial governments, municipal governments, foreign governments, international organizations, etc.
Space — Where certain pieces of equipment occupy a large area, an appropriate portion of the building cost in which it is housed must be allocated to it. Where the buildings are owned by the Department, the yearly expense would be the annual carrying cost which will be calculated annually by the Comptroller’s Branch as follows:
Capital cost of the building × Capital Recovery Factor = annual carrying cost.
The capital recovery factor is used to calculate what the equivalent of a present sum of money would be expressed in terms of equal annual installments over a specific number of years. The formula is:
R = P [((i) (1 + i)n) / (1 + i)n - (1))]
- = annual installment
- = present sum of money
- = interest rate
- = number of years.
The interest rate to be used will be the current long term borrowing rate as established by the Department of Finance. The number of years will be the estimated useful life of the building.
This annual cost will be divided by the square feet of the building multiplied by the square feet the equipment occupies.
(i) DOC will neither solicit, nor compete for, work that can be performed by the Private Sector in Canada.
B COSTS AND FEES
(ii) For a service or good provided to the Private Sector in Canada, the Department shall charge for all direct costs plus indirect costs of the Department.
(iii) Services provided to the Private Sector outside Canada will be total costs plus 200 per cent applied thereon to recover Government of Canada overhead costs.
(iv) Where these charges would clearly detract from the attainment of the objectives of the activity, the Minister of Communications has the authority to alter or waive the established fee structure.
(v) Contracts entered into are not to exceed the duration of the prevailing fee schedule. If a service is to be provided which will exceed this time frame, the written agreement must be amended.
C WRITTEN AGREEMENTS
(i) Every person or company requesting the provision of a service for payment will be required to enter into a written agreement before the service is provided.
(ii) The written agreement will contain statements on, but not limited to, the following:
- The extent of ownership or rights or interest in any products submitted for testing or goods produced by the Department;
- The limited responsibility of the Department for damage or loss of the applicant’s product and for secrecy in respect of an unpatented article;
- The patent rights which could rest with the Department in respect of new discoveries in the absence of a special agreement to the contrary;
- What part, if any, of the information to be supplied by the person or company is confidential. Such information agreed to be proprietary will be safeguarded by DOC.
(iii) Work will be undertaken only after written application has been made and accepted in writing. Work can, however, start in advance of formal acceptance if authorized by the A.D.M.
D JOINT RESEARCH PROJECT
The Department may enter into a contract to perform a joint research project where both parties fund the project.
E AUTHORIZATION OF FEE SCHEDULES
(i) Sector management is responsible for continually monitoring their operations, identifying services or operations for which fee schedules are required, and promptly advising the Comptroller’s Branch of all such instances.
(ii) The sector seeking to provide the service is responsible for developing proposed fee schedules.
(iii) In addition to the above on-going responsibilities, and in the course of preparing the Program Forecast, the Responsibility Centre Manager, in conjunction with the Comptroller’s Branch, will review the costs incurred and the revenue generated in the provision of services to the Private Sector for the current fiscal year.
This review will determine:
(a) whether the specific services or goods provided should be continued or terminated; and
(b) whether any cost elements or their components have increased or decreased.
If required, recommendations will be made to the Minister of Communications to authorize revisions to the fee schedules.
(iv) Proposed schedules or updates to established fee schedules will be forwarded to the Deputy Minister for review. After review, and acceptance at that level, they will be submitted to the Minister of Communications for authorization prior to the implementation thereof.
(v) Upon approval from the Minister, updated fee schedules will replace those schedules currently in existence.
F PROCESSING OF REQUESTS FOR SERVICES
All requests are to be received by the responsibility centre manager, who will:
(a) determine that the Canadian competitive market is not equipped to provide these services or goods due to either lack of specialized expertise or unavailability of equipment and facilities. If it is found that the Canadian market can do the work, the written request is to be returned to the entity requesting the services or goods with the reasons for return stated;
(b) determine that the work requested is within the mandate of the Department and that DOC has the capability and capacity to perform the work. If these conditions are not met, the written request is to be returned as per (a) above.
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