Evidence of meeting #40 for Public Accounts in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was f-35.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Michael Ferguson  Auditor General of Canada, Office of the Auditor General of Canada
  • John Reed  Principal, Office of the Auditor General of Canada
  • Jerome Berthelette  Assistant Auditor General, Office of the Auditor General of Canada

9:30 a.m.

NDP

The Chair David Christopherson

Very good. Thank you, Mr. Aspin.

We will now move to Mr. Kellway.

You, sir, now have the floor.

April 26th, 2012 / 9:30 a.m.

NDP

Matthew Kellway Beaches—East York, ON

Thank you very much, Mr. Chair. To Mr. Reed, Mr. Ferguson, Mr. Berthelette, thank you for being with us today.

Mr. Ferguson, unlike you and Mr. Shipley, I just buy vehicles in the hope that they last as long as possible. I'm not optimistic about these things. I'm thinking 10 or 12 years. I know some of my colleagues haven't even ever purchased a vehicle, which leads to my question.

Wouldn't it be a problem if the government decided to purchase fighter jets in the same way that it buys its vehicles, since everybody approaches these things differently? Secondary to that, aren't there well-established processes already in existence that governments are supposed to follow for these purposes?

9:35 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

Michael Ferguson

Thank you.

Again, I think this particular purchase is a very large purchase for assets that are going to last for a very long time. It's a very large financial commitment. Therefore, it's very important that the right financial analysis be done so that it's clear that the government understands the cost of the assets and the cost of maintaining those assets, including the types of costs that we said should have been included.

I would rather not get into the discussion about analogies, because quite frankly, in this chapter we are talking about acquiring fighter jets. That's unique. They need to make sure that the right processes, the right management practices, are applied to that acquisition.

9:35 a.m.

NDP

Matthew Kellway Beaches—East York, ON

Thank you, Mr. Ferguson.

In your report you are critical of the life cycle assumption that was put forward by the department—the $25 billion life cycle cost, a 20-year life cycle cost—and you noted in your report that, in fact, the government is planning on flying these planes for at least 36 years.

I notice also in the report that the joint strike fighter program office in the United States provides the department annually with Canadianized costing figures based on a 36-year life cycle cost.

Do you have an explanation for us, from your audit, for why a 20-year life cycle cost was chosen by the department instead of a 36-year life cycle cost?

9:35 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

Michael Ferguson

As I said in response to a previous question, my understanding is that 20 years was the normal practice for the Department of National Defence. However, again, I can't speak for the department and I think the question is best asked of the department.

9:35 a.m.

NDP

Matthew Kellway Beaches—East York, ON

Can you tell me this, then, sir? When these documents are received, they're based on the select acquisition reports that the U.S. Department of Defense provides for the U.S. Congress. I'm sure you've seen these. They're very comprehensive. The 2011 document is 85 pages and full of facts, figures, tables, and so on, supporting the 36-year life cycle cost.

When these are received by the department, where do they go? Who receives these?

9:35 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

Michael Ferguson

Again, I think it's best if the question is directed to the department to give the specifics of what happens. My understanding is that the department receives the information that's related to the expected acquisition in Canada of our jets. Again, just to make sure the question is answered fulsomely, I think the department can best explain what they receive and what they do with it.

9:35 a.m.

NDP

Matthew Kellway Beaches—East York, ON

Thank you, Mr. Ferguson.

I have one very quick question. In paragraph 2.76 you wrote that, “cost data provided by US authorities had been validated by US experts and partner countries, which was not accurate at the time.” Which cost data are you referring to? Is this the cost data that formed the basis of the government's $15 billion life cycle cost?

9:40 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

Michael Ferguson

Thank you.

I will ask Mr. Reed to answer that question.

9:40 a.m.

NDP

The Chair David Christopherson

Very well.

Mr. Reed, briefly, please, sir.

9:40 a.m.

John Reed Principal, Office of the Auditor General of Canada

Thank you, Mr. Chair.

That was specific to the $75 million figure that was used in calculating the acquisition cost—$75 million per aircraft—and not related to the sustainment costs.

9:40 a.m.

NDP

Matthew Kellway Beaches—East York, ON

Okay. Thank you.

9:40 a.m.

NDP

The Chair David Christopherson

Thank you very much.

Moving along, Madam Bateman, you now have the floor, ma'am.

9:40 a.m.

Conservative

Joyce Bateman Winnipeg South Centre, MB

Thank you very much, Mr. Chair.

Thank you very much for being here with your colleagues. We certainly appreciate the work you do.

You will note, sir, that the moment the report findings came out, the Government of Canada took action. We absolutely want to have due diligence, oversight, and transparency in the work we do. That's why the work you do is so very valuable to us, so that we can better serve the citizens of Canada.

And I thank you for that.

I don't want to belabour the point, but you have referenced, on a few occasions, “substantive” costs and “indicative” costs. Could you give a thumbnail sketch that somebody over the fence, when I'm talking back home, will understand? What are substantive costs? What are indicative costs, as you've used them in this context?

9:40 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

Michael Ferguson

Thank you.

I don't think we actually used those terms in this particular audit. I think we used them in perhaps one other.

Mr. Reed can give an explanation, I think.