Evidence of meeting #41 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 costs.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Robert Fonberg  Deputy Minister, Department of National Defence
  • André Deschamps  Commander, Royal Canadian Air Force, Department of National Defence
  • François Guimont  Deputy Minister, Deputy Receiver General for Canada, Department of Public Works and Government Services
  • Simon Kennedy  Senior Associate Deputy Minister, Department of Industry
  • Michelle d'Auray  Secretary of the Treasury Board of Canada, Treasury Board Secretariat
  • Kevin Lindsey  Assistant Deputy Minister, Chief Financial Officer, Finance and Corporate Services, Department of National Defence
  • Dan Ross  Assistant Deputy Minister, Materiel, Department of National Defence
  • Tom Ring  Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services

9:10 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

My apologies, Mr. Chair.

9:10 a.m.

NDP

The Chair David Christopherson

Not a problem. Thank you very much.

Hearing no interventions then, we'll begin in the rotation. We will start with Mr. Saxton.

You have the floor now, sir.

9:10 a.m.

Conservative

Andrew Saxton North Vancouver, BC

Thank you, Mr. Chair.

Thanks to our witnesses for being here this morning.

My first questions will be for National Defence. The debate following the Auditor General's spring report has been primarily focused on the difference in accounting between the Department of National Defence and the Parliamentary Budget Officer.

Can you tell the committee how the Department of National Defence and the Parliamentary Budget Officer arrived at two different cost projections?

9:10 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

I can, Mr. Chairman. I will start by telling you that the department's work is based on a bottom-up approach that works through all of the information that's developed by the joint project office and the joint estimating team in Washington. It's very detailed work. My colleague can speak to that issue.

This is our understanding of the Parliamentary Budget Officer's methodology. I would say the Parliamentary Budget Officer was handed a very difficult task, asked to do an independent assessment of the costs, which we took to mean independent of the work of the joint project office and independent of our own work. But he did the best he could. He took a top-down approach. He used what is called parametric analysis, generally deemed to be not appropriate or suitable for a project in this state of development.

I could ask the chief financial officer to elaborate a little bit on those methodologies, if you would like.

9:15 a.m.

Conservative

Andrew Saxton North Vancouver, BC

Yes, please.

9:15 a.m.

Kevin Lindsey Assistant Deputy Minister, Chief Financial Officer, Finance and Corporate Services, Department of National Defence

Thank you, Deputy.

Mr. Chair, as the deputy has pointed out, the PBO used this parametric modelling, which is normally reserved for projects in the conceptual stage of development where there's very little cost data available to do a bottom-up analysis.

In doing so, the PBO estimated the acquisition price of the aircraft at $148.5 million each, and all of his subsequent costs derived from that. Because that acquisition price is significantly inflated above what we understand the cost to be from the joint project office at the time, all of the subsequent data and costs estimated by the PBO are similarly inflated, by significant amounts.

If the PBO had used what we understood the acquisition price of the aircraft to be at the time—that is based on SAR 2009, $75 million—then the PBO's estimate, other things being equal, would have been about $17.2 billion over his 30-year timeframe rather than the $29 billion.That difference is entirely attributable to the PBO's assumption about the acquisition cost of the aircraft.

9:15 a.m.

Conservative

Andrew Saxton North Vancouver, BC

Thank you.

This government, in accordance with the recommendations of the Auditor General in his spring report, is implementing a new secretariat similar to the national shipbuilding procurement strategy. In your opinion, how will establishing this new secretariat bring more transparency and openness to the process of replacing the CF–18 fighter jets?

9:15 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

I would start by saying, Mr. Chairman, that the secretariat will address many of the concerns and gaps that the Auditor General identified in his report.

I would turn to my colleague from Public Works, who will chair that committee, to spend a minute talking about some of the details and work plans of that secretariat.

9:15 a.m.

Deputy Minister, Deputy Receiver General for Canada, Department of Public Works and Government Services

François Guimont

Thank you, Mr. Fonberg and Mr. Chair.

There are two ingredients. First is a structural set of elements, which very much mimics the approach we took for the national shipbuilding strategy. There are three levels: coordination, oversight, and consensus decision-making.

The first level is a top-tier, deputy minister coordinating committee that I will chair. Colleagues here today will be with me on that committee. We also have ex officio members, which is not unusual—Treasury Board, Finance. This top tier will be supported by an ADM committee similar to what we did with the assistant deputy minister committee, similar to what we did for national shipbuilding. Mr. Tom Ring will chair that committee. These are colleagues who will be doing the tasking and pushing forward the agenda.

The actual working-level tier is the secretariat, people co-located from various departments who essentially carry out the work.

There is one point I would make about oversight and transparency. There is one variable, which is new for the secretariat, and that is the inclusion of two external members on the DM coordinating committee. We are in the process of selecting these individuals. This was not the case for the national shipbuilding strategy. I want to be clear, however, that we are going to use third parties throughout the work of that tiered structure. So third parties were used for national shipbuilding, and we will continue doing that, but the difference I'm making is that there will be two independent members on the DM coordinating committee as well.

That is a structure that will be superimposed on the actual seven-point action plan. We are now working at developing the terms of reference, which essentially will be the modus operandi of the committee structure, and from there we will move on to tasking and defining priority elements against the seven-point action plan.

At the macro level, this is where we are right now.

9:15 a.m.

NDP

The Chair David Christopherson

Thank you. Your time has expired.

Over now to Mr. Allen. You have the floor, sir.

9:15 a.m.

NDP

Malcolm Allen Welland, ON

Thank you, Chair.

Mr. Fonberg, how long have you been Deputy Minister of the Department of National Defence?

9:20 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

I think about four years and seven months, Mr. Chairman.

9:20 a.m.

NDP

Malcolm Allen Welland, ON

So sometime in 2008 you would have been appointed, give or take a month or two.

9:20 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

It was 2007, I believe.

9:20 a.m.

NDP

Malcolm Allen Welland, ON

Thank you.

You would have been around in 2010 for the Auditor General's fall report, chapter 6, on the Chinooks and the maritime helicopters. Is that correct?