Evidence of meeting #33 for Government Operations and Estimates in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was equipment.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Dan Ross  Assistant Deputy Minister, Materiel, Department of National Defence
Liliane saint pierre  Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services
Terry Williston  Director General, Land, Aerospace and Marine Systems and Major Projects Sector, Department of Public Works and Government Services

9 a.m.

Liberal

The Chair Liberal Diane Marleau

I call the meeting to order. My goodness, we're even starting a couple of minutes ahead. That's very unusual. We have a quorum.

We have before us Mr. Ross from the Department of National Defence. He is the assistant deputy minister, matériel. From the Department of Public Works and Government Services we have Liliane Saint Pierre, assistant deputy minister, acquisitions operations; and Mr. Terry Williston, director general, land, aerospace, and marine systems and major projects sector.

I think you've been before committees previously and know how it works. We'll give you a chance to make a statement, and then we'll ask questions.

Go ahead.

9 a.m.

Dan Ross Assistant Deputy Minister, Materiel, Department of National Defence

Thank you, Madam Chair. It's a pleasure to be here this morning to provide information to the committee and to answer your questions.

The Canadian government's past approach to defence procurement was not always effective in either providing the Canadian Forces with the right equipment or ensuring the best economic benefits for the country. The policy and planning environment was uncertain, with sporadic injections of funding for major acquisitions. We had a procurement process in which industry was often told what to do, when to do it, and how to do it, with little warning or consultation.

We produced extremely detailed specifications leading to unique Canadian solutions that often became unaffordable to maintain and had little potential for export sales. Multiple contracts were the norm, with no single entity accountable for overall system performance. That often left the Canadian Forces to struggle with making the end product work.

Industry was frustrated, but they had little opportunity to innovate and the continuous competition/re-tendering cycle made effective investment planning difficult. Similarly, the Industrial and Regional Benefits requirements were often transactional, based on individual contracts, and left little scope for long-term strategic investments that could generate self-sustaining industrial capabilities. In fact, certain project-generated industrial capabilities became drains on scarce financial resources rather than strengthening our industrial infrastructure. In other words, we often created welfare industries.

As a consequence, the government was not effectively leveraging defence investments to achieve long-term economic benefit for Canada. DND often had critical equipment delivered late, and industry worked in a feast-or-famine environment that did little to encourage long-term investment or innovation.

Over the past three years, DND have been working both internally and with our partner departments to reshape the way we do defence procurement, and rebuild our capacity to deliver a growing program of investment in defence capabilities.

We are creating a new procurement environment that emphasizes best value solutions. Wherever possible, we are procuring to high-level performance standards, not detailed technical specifications, in order to encourage more innovative solutions. Off-the-shelf systems are now carefully considered wherever possible.

We are working to ensure that we can pull through government-sponsored research and development successes to acquisition of capability. DND is also moving towards long-term, domestic-based, in-service support contracts in conjunction with system acquisitions, with a single entity being accountable for system performance and availability. These approaches are showing results by more consistently delivering the right capabilities for the Canadian Forces, as well as providing Canadian industry increased opportunity to make and recoup long-term investments and engage in continuous development.

National Defence is also improving its internal processes for determining priorities for investments, including the introduction of more holistic capability-based planning models. As well, after many years of restraint we are rebuilding a strong, professional defence acquisitions team and making significant new investments in the professional development and training of our project management people.

Recent policy announcements by the government have given a significant boost to these efforts. Advantage Canada expresses the goal of linking defence spending to economic sustainability and growth. The “Canada First” defence strategy brings stability to our defence investment plans, and recent budgets have provided the predictable funding required to implement them. Also, the government's adoption of accrual accounting provides investment cash at the right time and gives a clear indication of equipment life cycles and replacement schedules.

While getting the right capabilities for the CF continues to be our primary goal, the conditions are being set to create a new relationship with our defence industry, which will also stimulate investment in research and development, and improve international competitiveness. We are redefining and strengthening our relationship with industry, emphasizing relations that are fair, open and transparent. We will leverage fora such as DND's Defence Industry Advisory Committee to improve mutual understanding and awareness of our goals.

We're also investing in the people dimension through such initiatives as Advantage Canada's promotion of higher-level skill sets in industry and a focused national defence program to enhance project management and procurement skills. In addition, we are exploring increased use of government-industry exchanges.

We believe the payoffs from these initiatives are significant. Having a coherent framework for government science and technology investments will lower the risks and costs in meeting our military requirements and give us a better military capability. At the same time, the economic development goals of the government will be furthered by better positioning industry for success in the international marketplace. By strengthening industry's technology and competitiveness, it will give greater opportunity for long-term involvement in the supply chains of the large global original equipment manufacturers.

The end result will be a much better alignment between our defence requirements, our industrial capabilities and the socio-economic goals of the Government of Canada.

It's within this wider context of fundamental defence procurement reform that the government received and has largely embraced the recent report of the Standing Committee on National Defence. The committee recommendations in many cases reinforce and validate the direction in which we are headed, and the report as a whole has provided us with useful insights as we continue our reforms. We look forward to further engagement with Parliament on this important issue.

I would be happy to respond to your questions after my colleagues have given their remarks.

Thank you.

9:10 a.m.

Liberal

The Chair Liberal Diane Marleau

Thank you, Mr. Ross.

Ms. saint pierre.

9:10 a.m.

Liliane saint pierre Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services

Madam Chair, thank you for inviting me here today.

I appreciate the opportunity to participate in your study of government procurement and today's panel on military procurement.

As members know, Public Works and Government Services Canada plays a key role in ensuring that the Canadian Forces have the equipment they need to do their job.

In 2007-2008, Public Works awarded contracts totalling $12.5 billion. Of this amount, more than 47% or $5.9 billion was for contracts on behalf of the Department of National Defence.

Madam Chair, it is up to the Department of National Defence to define its needs. Public Works, in conjunction with other departments, develops the procurement strategy, prepares solicitation documents, conducts the tendering process and obtains approval for and signs the contract.

We then have an ongoing role in interpreting contracts and negotiating any necessary amendments.

As we all know, while the Government of Canada is re-equipping the military over the medium and long term, there is also a need to equip as quickly as possible the Canadian Forces in Afghanistan.

We have been working with the Department of National Defence, Industry Canada and the Treasury Board Secretariat to make military procurement more streamlined while also ensuring that Canadian suppliers have a fair chance to compete.

Among the efficiencies that have been introduced are the following. With the Department of National Defence, we seek combined Treasury Board spending and contract approvals, where appropriate. We have been using integrated project teams. We are using instruments such as Solicitation of Interest and Qualification with performance demonstration. We are procuring off-the-shelf equipment and technologies where appropriate. And finally we're focusing on acquiring proven, effective equipment, employing high-level performance specifications, as opposed to detailed technical specifications.

Historically it has taken an average of 107 months from the identification of a need to the award of a contract for a large military project. Our goal is to reduce this period to 48 months or less. And Madame Chair, we are making progress.

For example, the government announced in June 2006 that it would acquire four C-17s. The four aircraft were delivered within 22 months. To meet an urgent requirement for heavy logistic trucks in Afghanistan, Public Works awarded a contract in March 2007, less than six months after cabinet gave us the green light to proceed. We expect the vehicles to be delivered by the end of the summer.

These examples demonstrate that we do have the ability to act quickly. We are working hard to make speed an integral part of the process without compromising integrity or incurring undue risk. Above all, our goal is to ensure timely procurement of military equipment in a fair, open, and transparent fashion, using healthy competition wherever possible to secure best value for Canadians. In all cases we work very hard to adhere to the rules and to ensure Canadian taxpayers are well served.

I will be pleased to answer your questions.

9:10 a.m.

Liberal

The Chair Liberal Diane Marleau

We will begin with Ms. Folco.

9:10 a.m.

Liberal

Raymonde Folco Liberal Laval—Les Îles, QC

Thank you, Madam Chair.

I would like to thank our witnesses for coming to describe the work done by their department.

I am quite new to this committee. There are some things I am not quite clear on in the two presentations. I do not understand why Public Works and Government Services is in charge of having contracts approved and signed for the Department of National Defence. I can guess what that is, but I would like to hear it from you.

What model was used in centralizing this service? Is the Department of National Defence the only department whose procurement is handled by Public Works and Government Services? Do other departments and agencies do the same thing, or is there a different procedure? I am trying to understand why this procedure was introduced, and on what model it is based. Do all government departments and agencies proceed in the same way?

My question is to both Mr. Ross and to Ms. saint-pierre, because they represent the two sides of the story.

9:15 a.m.

Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services

Liliane saint pierre

Ms. Folco, you asked why Public Works and Government Services handles contracts for the Department of National Defence and whether it does so for all federal government departments.

The first question is legislative in nature. Public Works and Government Services was established through legislation. Under this statute, the minister is responsible for procurement. The minister has the exclusive authority to purchase goods for all federal departments. All federal departments that come under the Financial Administration Act deal with Public Works. However, Treasury Board has delegated authority to some departments for service procurement.

9:15 a.m.

Liberal

Raymonde Folco Liberal Laval—Les Îles, QC

Mr. Ross?

9:15 a.m.

Assistant Deputy Minister, Materiel, Department of National Defence

Dan Ross

The model is that of a team, where the Department of National Defence provides the general project management contribution, and articulates the requirements,

the needs of the members of the Canadian Forces.

The Department of Public Works manages and provides a service for the specific contracting piece, the detailed expertise of the request for proposals evaluation, and the management of the contract. The Department of Industry provides services to look at the broader economic impact, regional economic benefits, and the development of certain technology sectors with other industries, etc. It contributes that to the team. We work with the central agencies that provide a challenge function and an oversight function to satisfy the requirements for due diligence and good stewardship, etc.

So in my view it is an effective team approach.

9:15 a.m.

Liberal

Raymonde Folco Liberal Laval—Les Îles, QC

If I understand Ms. saint-pierre's answer correctly, all federal departments and agencies follow the same procedure.

9:15 a.m.

Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services

Liliane saint pierre

Madame Chair, all federal departments are subject to the Financial Administration Act.

9:15 a.m.

Liberal

Raymonde Folco Liberal Laval—Les Îles, QC

How long has that legislation been in place?

9:15 a.m.

Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services

Liliane saint pierre

I could check on that. Some agencies have been established in recent years, and they have some exemptions. For example, the Canada Revenue Agency has the authority to issue its own contracts.

9:15 a.m.

Liberal

Raymonde Folco Liberal Laval—Les Îles, QC

I was going to ask a question, but I do not think I will get an answer to it. I was going to ask you whether this system...

Let me rephrase my question. Do you think there is room for improvement in the procedure, both on the part of PWGSC and that of DND? They work as a team—I do understand what you said, Mr. Ross—but is there some room for improvements in this procedure?

I understand the principle in place at the moment, but it is slow and cumbersome, because all the parties have to agree. I am wondering whether the procurement process should be improved.

9:20 a.m.

Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services

Liliane saint pierre

There is always room for improvement, Madam Chair. That is why many initiatives have been introduced and are still being developed.

9:20 a.m.

Liberal

Raymonde Folco Liberal Laval—Les Îles, QC

Could you be more specific, Ms. saint-pierre?

9:20 a.m.

Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services

Liliane saint pierre

One of the main criticisms we get has to do with the slowness of the process. As I said in my opening remarks, we are working to reduce the time it takes to issue a contract.

We work in military procurement, major purchases, but we are also working hard to put in place instruments that will allow the department to proceed as quickly as possible. For example, we will be establishing standing offers, which have already been authorized, that can be used as soon as a department identifies a need, particularly in the area of professional goods and services.

For example, if a standing offer is in place and a department determines a need for professional services related to a study, right away—

9:20 a.m.

Liberal

Raymonde Folco Liberal Laval—Les Îles, QC

I have to interrupt you, Ms. saint pierre.

You will be using the same model for goods and services as is used by human resources. You would have a data bank that you could use once a need is identified.

9:20 a.m.

Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services

Liliane saint pierre

[For goods and services, particularly predefined-services and goods with specifications—equipment supplies—we have procedures in place that allow the department to make these purchases very quickly. We will be continuing with this approach.

9:20 a.m.

Liberal

The Chair Liberal Diane Marleau

Your time is up.

9:20 a.m.

Liberal

Raymonde Folco Liberal Laval—Les Îles, QC

I will come back in the next round, Mr. Ross.

9:20 a.m.

Liberal

The Chair Liberal Diane Marleau

You have the floor, Ms. Bourgeois.

9:20 a.m.

Bloc

Diane Bourgeois Bloc Terrebonne—Blainville, QC

Thank you, Madam Chair.

Good morning, ladies and gentlemen. My first question is to Mr. Ross.

In your remarks, you talk about the government's national defence policy, or at least you allude to it. I have trouble understanding when you say that you purchase material based on priorities.

As far as I know, Canada still does not have a clear policy on national defence. How can procurement be done according to priorities when we have no policy on foreign affairs or on national defence?

9:20 a.m.

Assistant Deputy Minister, Materiel, Department of National Defence

Dan Ross

Perhaps I should answer in the broader long-term context.

When we procure a fleet of ships and the process to deliver that fleet of ships takes a decade and the fundamental policy upon which we base the requirement and engage industry is not relatively stable for a decade, that has often resulted--in reality, and not just with ships--in uncertainty about whether or not a given government will continue with that procurement of ships. The most important consequence has been inability of a changing policy base to commit the funding to execute a very large and long-term procurement.

Madame Saint Pierre mentioned that 107 months was the average. We did a huge study of everything we had done for almost a decade, and we averaged 107 months from identification to getting to a contract--over seven years. That is not the construction and delivery time. It was due to uncertainty about the policy requirements in some cases, but that uncertainty reflected into uncertainty about whether it was affordable.

9:25 a.m.

Bloc

Diane Bourgeois Bloc Terrebonne—Blainville, QC

I do not want to cut you off, but I am afraid my question is not clear enough.

For about 40 years, Canada always had a rather low profile in the area of national defence. We had our peacekeepers, and for a few years now, Canada has been involved in Afghanistan, in hunting the Taliban. That means that we are at war.

Canada has no policy on defence or foreign affairs. There is no overall planning. How can procurement be done in medium- or long-term without a policy?