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 cost.

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

9:20 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

His statement, not in his report itself but to my understanding from his testimony last week, was that he got it wrong on the 2008 issue and the $25 billion.

9:20 a.m.

NDP

Malcolm Allen Welland, ON

I guess we'll have to ask the Auditor General how he got his numbers wrong.

Notwithstanding that, sir, are you saying that your number has always been $15 billion, that you never had a number of $25 billion?

9:20 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

No, in.... I think, actually, that issue has been clarified, Mr. Chairman.

Just to be clear, in 2008, when the Government of Canada approved the Canada First defence strategy, we included at that time—publicly, I believe—a $9 billion acquisition envelope. When the decision documents were prepared for cabinet in 2010, we sought $9 billion for acquisition, $5.7 billion for in-service support over 20 years, and we indicated that we expected that the operating costs of the aircraft over 20 years would be roughly the same as the CF-18 fleet, about—

9:25 a.m.

NDP

Malcolm Allen Welland, ON

Could you tell me the number, sir? I hate to interrupt you, but I don't know what the number for the CF-18 is. Do you know what it is?

9:25 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

Yes. It's basically the same number we used for the F-35. We said we thought the operating costs would be similar, so some $10 billion over 20 years.

9:25 a.m.

NDP

Malcolm Allen Welland, ON

So that number would be—

9:25 a.m.

NDP

The Chair David Christopherson

Mr. Allen, time has expired.

9:25 a.m.

NDP

Malcolm Allen Welland, ON

Thanks, Chair.

9:25 a.m.

NDP

The Chair David Christopherson

Thank you.

We'll go now to Mr. Kramp, vice-chair of the committee.

You now have the floor, sir.

9:25 a.m.

Conservative

Daryl Kramp Prince Edward—Hastings, ON

Thank you, Chair.

Welcome to all of our witnesses here today. It's a pleasure to have you here. We'll try to get some clarity with regard to some of the perceptions or misperceptions that are out there.

The bottom line is that at some point we'll need to know exactly how much this will cost Canadian taxpayers. Treasury Board and/or cabinet will actually make a decision. Of course, there have been no acquisitions to date, and no expenditures for acquisitions, but when that time does come, obviously information is critical.

The Auditor General made it clear that many of the costs are not yet reliably known, or cannot even be fully estimated at this point. That, of course, includes the basic recurring flyaway costs, which of course are debatable in a number of areas. There are the costs of the required Canadian modifications. We're not buying an identical aircraft. I understand there are three models out there. There obviously will be cost differentials. Of course, the different equipment on them will obviously make a significant difference.

Going forward, my question to National Defence would be that at some point in this process.... As a matter of fact, this might even eventually come to the secretariat, but I'm asking for an opinion now from National Defence. When do you anticipate that these cost estimates, as this process becomes more complete, will become available?

9:25 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

Mr. Chairman, I would speak just very briefly to this and then turn it over to the assistant deputy minister of materiel, who has a very close working relationship with the joint project office.

Just on one point you raised, on the issue of the variant, I think there has been a lot of confusion. Of three variants of this aircraft, Canada is buying the one that is most advanced in its flight testing, in the conventional take-off and landing, which is tracking very well in its flight testing and will be the cheapest of the three models.

A lot of people use averages of the three models and various other numbers. The joint project office's number, which they send to Congress and which has been consistent, for the variant we would buy in the years we would buy it, was $75 million, the unit recurring flyaway cost in the SAR 2009, in that report. That number in the latest report, which we'll build our estimates off, is up around $85 million. But I would ask the ADM Materiel—so our acquisition envelope, fixed at $9 billion—to speak to the issue of how the estimates for in-service support and operating will be firmed up as we go forward.

9:25 a.m.

Conservative

Daryl Kramp Prince Edward—Hastings, ON

Go ahead, please, Mr. Ross.

May 1st, 2012 / 9:25 a.m.

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

Thank you, Deputy and Mr. Chair.

I would like to clarify that of the four phases of a project—identification, options analysis, where you identify your high-level requirements, do your preliminary estimates and seek approval in principle to begin a project, and then the definition work, where you've refined those detailed costs and plans for infrastructure and weapons and logistics set-up, etc.—we're still in the options analysis stage. We have not received Treasury Board approval to begin funded definition, in which you do the detailed, refined, uniquely Canadian costing work.

But to answer the question specifically, annually the joint strike fighter program office in Washington provides cost estimates to the partners on two things: the unit flyaway cost—the cost of an actual joint strike fighter, by the years in which those aircraft were produced—and as well, their estimates of what in-service support and sustainment would cost.

We receive those estimates every spring, and we go down to the joint project office, sit down, and have a very detailed formal dialogue with them, to have a detailed understanding of the acquisition piece and the sustainment piece, to which we add anything that would be unique to our fleet of aircraft—our choice of how many simulators, our logistics set-up, etc. That process happens annually and is normally completed by the summer of each year.

9:30 a.m.

Conservative

Daryl Kramp Prince Edward—Hastings, ON

Okay. So you're suggesting, then, that there will be a strong monitoring process in place. Are you comfortable with the process right now, or do you think this will be more fully developed within the new secretariat?

9:30 a.m.

Assistant Deputy Minister, Materiel, Department of National Defence

Dan Ross

The secretariat will assist us in that and provide more rigorous...not necessarily a challenge function, but assistance. The process is as rigorous as it can be for an aircraft that we won't take delivery of for eight years. At this point in time, without funded definition activities ongoing for our own costing, we really are price-takers in the unit flyaway costs and the preliminary estimates of sustainment.