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

10:10 a.m.

Liberal

Gerry Byrne Liberal Humber—St. Barbe—Baie Verte, NL

Excuse me. Thank you.

10:10 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

—which came some time after we did our estimates. As I said, we accepted the Auditor General's recommendation on producing appropriate life-cycle costs 60 days after we receive our information from the United States.

I don't have an answer to the question about if we went back and tried to apply the methodology—

10:10 a.m.

Liberal

Gerry Byrne Liberal Humber—St. Barbe—Baie Verte, NL

Mr. Fonberg, that's very important, sir, because in November 2010—I appreciate the correction—the Department of National Defence, the Department of Public Works and Government Services, and the Government of Canada promised Parliament they would do things differently.

I respect and understand, sir, that any analysis or cost description prior to November 2010 could potentially be different, using the 20-year methodology. But after November 2010 a commitment was given to Parliament that we would use a new methodology, and any information that was given after 2010 that differed compared to what you promised you would do results in a contempt of Parliament, in my opinion.

Was any information given to Parliament after November 2010 that was contrary to what you promised to do—not you, sir, but the department and the Government of Canada?

10:10 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

I guess I just need some clarification, Mr. Chairman.

10:10 a.m.

Liberal

Gerry Byrne Liberal Humber—St. Barbe—Baie Verte, NL

I think you do.

10:10 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

Yes, I actually—

10:10 a.m.

NDP

The Chair NDP David Christopherson

We're over time, so I'm going to ask you to briefly respond, Mr. Fonberg.

10:10 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

Okay. In November 2010 we provided a management action plan to respond to the recommendation of the Auditor General's report. We have been working, in a very clear and deliberate manner, on developing the methodologies for life-cycle costing in response to that report.

On the question of whether we have provided alternative estimates since that time, I'd have to go back and look at the record. I actually don't recall, Mr. Chairman.

10:10 a.m.

NDP

The Chair NDP David Christopherson

Okay. We'll have to leave it there for now.

Thank you, Mr. Byrne.

Over to Mr. Hayes, who now has the floor.

10:10 a.m.

Conservative

Bryan Hayes Conservative Sault Ste. Marie, ON

Thank you, Mr. Chair.

This is great that we're doing this level of scrutiny before any money has actually been spent. It's unprecedented, and it's good that we're doing this now, as opposed to afterwards, and finding out for some reason that we have actually overspent.

My first question would be to Mr. Guimont. Can you explain the process that leads to a sole-sourced decision and how it played out in this particular circumstance?

10:10 a.m.

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

François Guimont

I'll say a few words using the one-pager that I appended to my remarks, and I'll let Mr. Ring expand on this.

The technical authority, in this case DND, could be another department. If it were a vaccine, it could be PHAC, Health Canada. Essentially, it comes up with the basic requirements. We refer to them as technical requirements. As they do this, they also carry out analysis. They look to see if there are potential competitive fields at the macro level, so they carry out a number of very in-depth reviews. They start interacting with us, and our responsibility is one of validating that either a competition is to be had, because there is a procurement competitive field, or that a sole-source acquisition is justified.

If we see and validate that the rationale provided, as explained by Mr. Ring before, supports a sole-source acquisition, this is allowed in the Government of Canada contracting regulations. There are a number of exceptions. If I remember, there are four of them: one has to do with value—below $25,000; one has to do with emergencies, which kind of makes sense; one has to do with public interest; and one has to do with it being the sole company that can meet the requirements identified by the technical authority and validated by the contracting authority.

I'll just let Mr. Ring say a few more words about this. It's a very important field.

10:15 a.m.

Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services

Tom Ring

As Mr. Guimont has just outlined, the government policy is for the competitive sourcing of all solicitations, but there are exceptions as noted. The role of Public Works is to work with the client department in making sure that the justification and rationale for an exception to the government contracting regulations is fully justified. The client department must provide that rationale as to why they are seeking an exemption. In fact, there is quite an extensive checklist in our Treasury Board guidelines that must be filled out. The Department of Public Works works with the client department to make sure this justification is extensive, is on file, is available, and can support the rationale for justifying that only one supplier can do the work. That was all done in this particular case.

10:15 a.m.

Conservative

Bryan Hayes Conservative Sault Ste. Marie, ON

Thank you.

Mr. Guimont, again, the Auditor General has made a number of findings on this process. Now that you've had time to reflect on his report, what would you have done differently on this file?

10:15 a.m.

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

François Guimont

I would like to note, Mr. Chairman, that we didn't really have a problem with the findings, the facts put forward by the OAG, so this is something that's important. There was really no recommendation directed at Public Works; it was directed at DND. I'll just mention that.

The bone of contention, I guess you would say in English....

We have a difference of opinion precisely on recommendation 2.8.1

As I said before, we feel we took commensurate due diligence measures, because this procurement process is far from being over, so due diligence will continue as per the seven-point action plan. The statement made was more one of an absolute “did not exercise”, and that was like....

What we would do differently, frankly, is captured largely in the seven-point action plan. This is a big procurement. We look back at shipbuilding, which Mr. Ring and colleagues around the table managed, and it is a very good framework to apply to a major procurement of that style, which is unusual. I'm not saying that the identical shipbuilding governance structure would have to be applied to all procurement, but if there is a very unique procurement, this is a good fit. Mr. Ring spoke about the attributes of the national shipbuilding strategy, to make a difference between that and structure. These attributes are fully applicable to that procurement.

The lesson learned here is one of looking back. Earlier on we could have said that we should better define roles and responsibilities. This is going to be a different procurement, developmental in nature, very long—15 years—so let's put in place a structure that will carefully monitor and create the necessary oversight and transparency vis-à-vis parliamentarians and citizens. To me, that's a big lesson, but that's water under the bridge. We are putting it in now. No decision has been made in the context of an acquisition/purchase, so the time is right for the action plan to deliver on those commitments.

10:20 a.m.

NDP

The Chair NDP David Christopherson

Thank you. Your time has expired, Mr. Hayes.

Now we'll go to Mr. Allen.

10:20 a.m.

NDP

Malcolm Allen NDP Welland, ON

Thank you, Chair.

Mr. Fonberg, I'm referring to the AG's report on page 27. I recognize that you don't have it in front of you. It's exhibit 2.6, a chart. The source, according to the Auditor General's report, is indeed National Defence.

The title at the top of the column says, “National Defence's estimates used for decision making June 2010”. It shows $6 billion. It shows the capital acquisition costs for aircraft. It shows additional acquisition costs of $8.9 billion. It goes through the different pieces. It shows personnel, operating, and maintenance costs of $16.14 billion. That gives me a total of $25.120 billion.

Is that a fair assessment of what the department did at that time?

10:20 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

I believe it is.

10:20 a.m.

NDP

Malcolm Allen NDP Welland, ON

In that chart there's an additional column on National Defence's public response to the PBO's report of March 2011. It shows $6 billion, $9 billion, and then $5.7 billion for contracted sustainment. It gives us a total of $14.7 billion.

You said earlier to Mr. Hawn that you didn't have two books. What exactly are those two estimates?

10:20 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

One is acquisition sustainment, which is the way we have reported on each of our acquisitions over the last four major airframe assets. The other one includes operating costs, which we haven't reported on publicly because it's included in the base budget of the Department of National Defence.

10:20 a.m.

NDP

Malcolm Allen NDP Welland, ON

On the first one I quoted to you—the $25.1 billion—was that reported to the minister in cabinet?

10:20 a.m.

Deputy Minister, Department of National Defence

10:20 a.m.

NDP

Malcolm Allen NDP Welland, ON

Was that reported publicly?

10:20 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

Was what reported publicly?

10:20 a.m.

NDP

Malcolm Allen NDP Welland, ON

The $25.1 billion—did you ever report it publicly?

10:20 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

No. In June 2010 we reported the right-hand column. The left-hand column was for decision-making.