Evidence of meeting #24 for National Defence in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was work.
A recording is available from Parliament.
12:35 p.m.
Conservative
12:35 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Thank you, Mr. Chair.
Thank you, witnesses.
Gwynne Dyer is one of my favourite authors. He talks about the next war. He says it's going to be a “come as you are” war. His point is that the war will be over so quickly that whatever you have is operational is what you will use and whatever is in the garage will never get out of the garage. It's the whole issue of not only procurement but that the ongoing maintenance of these assets is extraordinarily as important as procurement itself.
When you say in paragraph 5, “In addition, National Defence has indicated that its long-term investment plan for new equipment has likely allocated insufficient funds for equipment like life-cycle costs”, can you give me an example of that?
12:35 p.m.
Assistant Auditor General, Office of the Auditor General of Canada
I'm sorry, I don't have a specific example. This was a statement that National Defence had made generally about the investment.
12:35 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Then can you explain to me what that statement means? Is DND saying they don't allocate sufficient funds for long-term maintenance costs?
12:35 p.m.
Assistant Auditor General, Office of the Auditor General of Canada
That's correct.
12:35 p.m.
Liberal
12:35 p.m.
Assistant Auditor General, Office of the Auditor General of Canada
Well, in terms of a regular approach to budgeting, the national procurement budget, which funds the maintenance and repair of equipment, allocates about 70% of the express demand, so there is a gap of approximately 30% between the express demand for maintenance and repair among the armed forces and the amount that is actually budgeted.
12:35 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
When Ms. Gallant said they allocate $2 billion a year to maintenance on $30 billion worth of assets, is it your view that they should actually be allocating $3 billion? I'm using raw figures obviously.
12:35 p.m.
Assistant Auditor General, Office of the Auditor General of Canada
Well, it's National Defence's own studies that have indicated there's a 30% gap.
12:35 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
The $2 billion covers 70%, so you need another 30% on top of that $2 billion just to maintain level, if you will.
12:35 p.m.
Assistant Auditor General, Office of the Auditor General of Canada
To meet the express demand. That's correct.
12:35 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Okay. And the way DND handles that is to basically leave maintenance on some assets much longer than it should.
12:35 p.m.
Assistant Auditor General, Office of the Auditor General of Canada
That can happen, yes.
12:35 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
I was talking to some folks today and they mentioned that the military standard of maintenance is far below civilian standards of maintenance. They were specifically referring to helicopters.
Did you make that observation when you were doing your audit?
12:40 p.m.
Assistant Auditor General, Office of the Auditor General of Canada
No, we did not make that observation.
12:40 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
It's a curious observation, to me, because a helicopter is a helicopter is a helicopter, and I would have thought the Department of Transport's standards would be the standards the military would adopt. In fact the argument was that the helicopters were not even maintained to the Department of Transport standards.
That's not an observation you made?
12:40 p.m.
Assistant Auditor General, Office of the Auditor General of Canada
No, we have not had any observations about that. It would strike me as surprising, though.
12:40 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
It struck me as surprising, and I thought that in the course of your audit you might have come across something similar to that.
My final point is about this optimized weapon systems management. You go on, in paragraph 8, to say that it's been slower and more limited than planned and that DND has lost opportunities to derive potential benefits, improve performance, improve accountability, and reduce costs. Then in your final paragraph you wind up by saying that National Defence has agreed with your audit recommendations and made several commitments and they're going to have a formal action plan.
The question is, when do we get it? Have you received anything beyond an agreement that they agree with you?
12:40 p.m.
Assistant Auditor General, Office of the Auditor General of Canada
We have not received a copy of the action plan yet.
12:40 p.m.
Assistant Auditor General, Office of the Auditor General of Canada
This report was tabled November 2011.
12:40 p.m.
Liberal
John McKay Liberal Scarborough—Guildwood, ON
Okay, so it's reasonable to give them a bit more time.
What were the deficiencies of the optimized weapon systems management—only the military could think up these acronyms, for goodness' sake. What does that mean in English, and what do you mean by lost opportunities?
12:40 p.m.
Assistant Auditor General, Office of the Auditor General of Canada
I know members don't have the audit in front of them, but for the record I would refer to paragraph 5.39 of our chapter, on page 17, through to probably paragraph 5.43, where we talk about that in particular. If you want, you could go back and take a look at that.
Historically, National Defence has relied on the private sector to maintain and repair equipment, mostly what they call third- and fourth-line services. This involved hundreds of contracts, as I said previously, for particular fleets, and over the course of the year there were thousands of contracts that had to be managed by National Defence for all of its fleets.
In the 1990s, when National Defence had a reduction in personnel, it identified the risk of not being able to manage all those contracts effectively and efficiently with fewer personnel, so it put in place the optimized weapon systems management program. This aimed to reduce the number of contracts per fleet, from hundreds down to two, three, or four, depending on the nature of the fleet, thereby reducing the need for the number of personnel within the office to manage those contracts, and within those contracts to be clear about the accountability on the part of the contractor for delivery—what is going to delivered, when it's going to delivered, and at what cost—and hold the contractor to those commitments.
The optimized weapon systems management framework provides the opportunity for the department to rigorously manage all of its contracts and effect savings.
12:40 p.m.
Conservative
February 7th, 2012 / 12:40 p.m.
Conservative
Ted Opitz Conservative Etobicoke Centre, ON
Thank you, Mr. Chair.
First of all, in defence of Canadian Forces' maintainers—and I know no slight was intended towards them—there is no group of more inventive, more innovative people anywhere in any industry. The Canadian Forces' maintainers are magicians. They have managed to keep equipment that should never be running, running. They're a tremendous group of individuals, and I would suggest that their standards far exceed most other groups in Canada. So here's one for the maintainers.
Sir, you talked about risk assessment, in terms of the project management process overall, and you mentioned time, technology, and cost. But could you compare that to operational necessity? When you're making some of those decisions, there are times when there's nothing going on and there's not a tremendous amount of pressure to, say, procure or get equipment, but then there are times when, of course, we are in high operational tempo, such as Afghanistan, and then there is the added pressure of operational necessity. Can you make a comment on that, sir?
