Public Accounts Committee on March 30th, 2010

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Shipley.

Mr. Christopherson, five minutes.

[David Christopherson, NDP, Hamilton Centre, ON]

Thanks, Chair.

It's already been raised and commented on, but I'd like to hear a little more so I can understand.

With regard to the LAV RWS project and the doubling of the cost from initially $55 million to over $100 million, my understanding is that there was incomplete information given to the government in terms of the armour kits that had to be done.

I'm assuming there's nothing unique about this, that this sort of thing could happen in other circumstances, so please tell me how we went from a $55 million bill to over $100 million.

[Dan Ross]

Thanks for the question.

The LAV RWS project was based on immediately using 33 brand new vehicles that we had acquired under the LAV III program, which did not have a turret on them because the army had chosen not to put their big anti-armour weapon on the new vehicles. So they had 33 vehicles immediately available.

The United States army had fielded a version of that called a Stryker, with a small weapon station on top. We needed vehicles in Afghanistan that had better side and belly protection quickly, and that could carry the weight. We felt that without the turret, which is two and a half thousand kilograms, we could more rapidly put on more weight in terms of protection and exceed the protection levels that the Americans had achieved with their Stryker.

The challenge was that we had a big hole on the top of the vehicle where the turret normally went and we needed to change the structure of the vehicle--take out all the command and control, radios, etc.--because it was a fighting vehicle, not an administrative vehicle. We had to install a weapon station, and we knew we needed to fundamentally make major improvements to the protection.

The reason we went twice to Treasury Board was that we didn't know the cost of the second part. In our first Treasury Board submission we said we know we need to do the work in terms of remote weapon system design and engineering. We mentioned that we still had the protection part, but we did not have substantive costing information of sufficient rigour and detail to ask Treasury Board for expenditure and contracting authority with the first submission.

We knew the program would be about $100 million. We had to do it in two phases because of the design and costing work on the protection--I could look up the timeframe for you in a second. But before the first one was contracted, we'd gone back to Treasury Board with substantive costing and design work on the armour protection piece. It went from $55 million...and another $55 million. It was slightly over $100 million.

[David Christopherson, NDP, Hamilton Centre, ON]

I thought you just said you knew it would be about $100 million. It's one thing to say that notionally there may be an added cost, but when it's going to double the cost, wasn't there some obligation to give a greater heads-up?

I think there was an $8 million or $9 million added installation kit. You could see that coming. When you have some idea it's already going to be over $100 million, potentially doubling the cost, wasn't there some obligation to let them know this was not just an add-on but almost double again? I believe part of the problem is that this wasn't signalled.

I'm sensing that you may have had enough information to at least give Treasury Board a heads-up that this was the real number we were looking at, or that it was at least in this ballpark.

[Dan Ross]

I'll perhaps let Mr. Ossowski comment as well.

There was a huge amount of communication back and forth with Public Works and the Treasury Board Secretariat as we were trying to manage what proved to more complex and, from an engineering point of view, more difficult than we had expected, while at the same time working with the company that had designed the vehicle, General Dynamics Land Systems, and their partner, an armour design firm, on the design of the side and belly armour. We needed them to give us some better feel for actual cost before we could do the second submission.

I could perhaps ask Mr. Ossowski to comment on the passage of information issue.

[John Ossowski]

Thank you, Mr. Chair.

And thank you for the question.

I would just reiterate that we do have constant communication. And it's important to note that around that time, in the summer of 2006, we started a committee. It's attended by Industry Canada, Public Works, the Privy Council Office, the Departments of Finance and Defence, and us. It's called the major crown project integrated oversight committee. On a monthly basis we have constant dialogue in a very transparent fashion with respect to all of these projects. We don't often get into these detailed technical risks that can happen, and, quite frankly, there are probably dozens of technical risks. Really we're trying to ensure the department has the capacity to manage those risks appropriately. That's really where we're focusing now.

There was no real scope change to the project, but there were technical risks to be managed, and we were confident that the department would be able to manage those risks.

[David Christopherson, NDP, Hamilton Centre, ON]

Do we assume, then, that based on the changes you've made, that kind of discrepancy is not likely in the future? “Discrepancy“ is my word.

[Dan Ross]

The answer to that is clearly yes. We would be more rigorous in making sure that if we had the first preliminary approval, we'd be clear, in the context of what we think the full substantive cost would be. That is actually normal. We're very careful about doing that in the preliminary project approval phase of every project.

Did we do it as well as we should have in this case? No, we didn't.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you very much.

Thanks, Mr. Chair.

[The Chair, Liberal, Shawn Murphy]

I just want to follow up on the one issue that's sort of dangling out there, and I'm going to go to Lieutenant-General Leslie on that very point.

When you read that description on page 27 of the auditor's report, it appears from the documentation and recommendation coming from National Defence--and this is for the LAV vehicle, which I assume is a replacement for the Bison--that this vehicle was the best option. But when the analysis was done by the forces, it wasn't at all.... In fact, it wasn't even one of the preferred options. So there seems to be a discrepancy between what the forces are saying and what the Department of National Defence is saying. Do you have any comment on why that discrepancy is there in the audit?

[LGen A. Leslie]

Sorry, just to make sure I understand the question, it has to do with page 27?

[The Chair, Liberal, Shawn Murphy]

It's on page 27.

[LGen A. Leslie]

It's the third paragraph from the bottom. Is that it?

[The Chair, Liberal, Shawn Murphy]

It's the third paragraph:

The Canadian Force’s options analysis for the Bison replacement recommended several options, and the LAV RWS was not one of the preferred options.

But previously in that paragraph, the Department of National Defence said it was really the only option.

[LGen A. Leslie]

Right, sir.

So in the context of running an army that's fighting a war, in a perfect world, I'd like everything today. As for the process and finances, I'd much prefer that other people resolve those. This has to be tempered with common sense, due diligence, Treasury Board regulations, Government of Canada priorities, and all the normal constraints.

At the time, trying to enhance the protection of the light armoured vehicle fleet, which led to the developmental work on the RWS and its eventual very successful fielding, there were some technical issues, as Mr. Ross has already explained, that dragged that project out. That's perhaps not the best choice of words, but it took longer than what we were hoping for. It still ended up being very quick, but I think the total time was around 32 months.

In the interim, our casualty rates for the G-Wagons--and casualties are always unacceptable--were soaring astronomically, and the number of Bisons that had been hit was quite high. In the course of our current stage of the war, we've had hundreds of vehicles damaged, or worse, by enemy action, so our fleets are starting to get depleted. Replacements are online.

If I understand the nuance of the way in which this paragraph is articulated, we started out thinking the RWS would replace the G-Wagon. As time progressed, we had to come up with other alternatives. So although they're not actually mentioned in the Auditor General's work on these four projects, other projects were rushed into service. The mobile tracked vehicle system, which is an upgrade to an existing fleet, acted as an interim or as a bridge.

I don't know if this adequately answers your question. But there were changing circumstances and availability of vehicles.

[The Chair, Liberal, Shawn Murphy]

Do you have a comment, Mr. Ross?

[Dan Ross]

Thank you, Mr. Chairman.

Just to reinforce what Lieutenant-General Leslie said, at the time there was opinion and views and analysis by a large number of staff. Every Friday morning I chaired a meeting that managed sort of minute-to-minute execution of these 30-plus projects. That went to every two weeks for about a two-year period.

There was no time during those reviews of these projects that it wasn't clear to the senior officers and the senior managers I have—the brigadier-general and above—that we really had any other choice but to continue with the 33 vehicles we already owned. To start all over again with something else, a completely new family of armoured fighting vehicle, was really not a viable choice for us.

So we felt it was really—and it was clear to senior leadership—the only feasible, rapid option. And we already had those 33. Did it prove to be more technically difficult than we had expected? Yes, it did. The armour package design was particularly hard. We felt that the Armatec company did an outstanding job of giving us that design at a reasonable price, but it did take longer, and we did have to go back to Treasury Board the second time.

[The Chair, Liberal, Shawn Murphy]

I understand you have a comment too, Madam Auditor.

[Sheila Fraser]

Chair, I think the issue is actually quite simple.

We're not questioning whether that was the best option or not. The issue is that we saw indication that the department told the government that an analysis had been done that showed this vehicle was the best option. We asked to see that analysis, and the analysis that was given to us did not indicate that.

It's simply a question that in the documentation there was inconsistency between what was told to government and the analysis that we were provided with. That is the issue that we are raising in the report, with which the department has agreed the facts are correct.

[The Chair, Liberal, Shawn Murphy]

Thank you very much for that clarification, Madam Auditor.

Mr. Kramp, you have five minutes.

[Terence Young, Conservative, Oakville, ON]

Mr. Chair, on that I have a point of clarification.

What I forgot to ask Lieutenant-General Leslie was, were those vehicles being destroyed because the IEDs were increasingly getting larger, or was the situation in the field getting worse?

[LGen A. Leslie]

Yes, sir, the situation was getting worse. The IEDs continued to become more effective. Some of the increased effect is because of the increased size; otherwise it's a variety of technical issues, which I don't think I'm going to talk about right now, if you'll forgive me here.

But yes, overall, they are getting more effective.

[The Chair, Liberal, Shawn Murphy]

You have five minutes.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Chair.

The reality is people were dying, and as a result, I can tell you that I appreciate the tone taken by all my colleagues here today, on all sides of the House, certainly by the Auditor General's department and the various ministries, in dealing with what obviously is just not a normal situation. The urgency is clearly identified.

Accept in reality that we had to invest in new military vehicles, that those vehicles could and quite frankly have saved lives. That reality demonstrates clearly, in each and every case, a need for speed. In this particular case, that was clearly defined.

As such, though, we have to be accountable. This is public accounts, and as such, I have a question for the Auditor General based on a clarification on a statement made by Mr. Fonberg. He states, “...we all understood that Canadian lives were at stake.” Decisions were made regarding risk:

But we assumed the risks of working this way because the risks to our troops in delay or non-action were far greater. However, we never looked at the urgency as a licence to be sloppy in our processes. We never looked at the urgency as a reason to withhold information.

To the Auditor General, at any time did you feel that information was either held back or you were given measured responses or due diligence was not performed?

[Sheila Fraser]

Chair, we received excellent cooperation from all of the departments involved in this. If we had had any issue with receiving information, we certainly would have raised it as a significant issue in the report itself.