Evidence of meeting #42 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

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

9:50 a.m.

NDP

The Chair David Christopherson

I now declare the 42nd meeting of the Standing Committee on Public Accounts back in order for the second hour of our meeting.

I will welcome our deputies and staff here from our previous meeting. I know they've just been waiting and waiting to come back and continue the exciting discussions we've been having. Thank you all very much. We do appreciate it.

I believe every single person returned. I'm not sure whether that says a lot about how good you're doing or how ineffective some people here are, in leaving you still being able to walk. However, you're all here and we do appreciate it.

Colleagues, if you are ready, we will begin. As I mentioned at the beginning, we will do a fresh rotation and start from the beginning and again we will continue until such time as our committee time expires.

With that, unless there are any interventions from colleagues—I see none—we will then proceed with Mr. Saxton.

Mr. Saxton, you will kick off the rotation. You now have the floor, sir.

9:50 a.m.

Conservative

Andrew Saxton North Vancouver, BC

Thank you, Mr. Chair.

My first question is for the Treasury Board secretary.

In his remarks to our committee just before you arrived, the Parliamentary Budget Officer stated that he followed Treasury Board guidelines when he decided to choose a 30-year life cycle, and he implied that DND may not have followed Treasury Board guidelines when they chose a 20-year life cycle.

Could you please clarify what the Treasury Board guidelines are for the life cycle?

9:50 a.m.

Michelle d'Auray Secretary of the Treasury Board of Canada, Treasury Board Secretariat

Thank you, Mr. Chair.

The Treasury Board guidelines are applied in different circumstances. When you are providing information for approval for a project, the life cycle refers to the life cycle cost of the materiel or the asset to be acquired. In the context of an aircraft or air weapons system or the air materiel that the Department of National Defence has procured even in the very recent years, the Treasury Board submission has always looked at a 20-year life cycle costing, especially with regard to maintenance, because beyond a 20-year timeframe, as I indicated in my previous testimony, it becomes very difficult. We consider it high risk to go beyond that timeframe for the purposes of costing for an acquisition.

9:55 a.m.

Conservative

Andrew Saxton North Vancouver, BC

Thank you very much, Madam Secretary.

My next question is for the Department of National Defence. Can you describe what the 2006 memorandum of understanding has meant for Canada's involvement in this program?

9:55 a.m.

Robert Fonberg Deputy Minister, Department of National Defence

Thank you.

Mr. Chairman, I would ask Dan Ross, ADM Materiel, to speak to that question, as he has been intimately involved in the MOU.

May 3rd, 2012 / 9:55 a.m.

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

Thank you.

The MOU was key to provide the opportunity for Canada to continue to have access to critical and detailed and highly classified information on the joint strike fighter program. We had verified prior to renewing that MOU that the F-35 remained a valid option going forward, even though there was no SOR and the air force had not stated any detailed requirement at that time. So that's one aspect.

The other aspect was that it kept the door open for Canadian industry to have opportunities in both design and early production industrial opportunities, contract opportunities.

Thank you, sir.

9:55 a.m.

Conservative

Andrew Saxton North Vancouver, BC

Thank you.

My next question is for the Department of Public Works. Can you explain how the new secretariat will increase the communication between the Department of Public Works and the Department of National Defence?

9:55 a.m.

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

Thank you for the question.

Mr. Chairman, the OAG noted that the file up to this point had characteristics of a department working in a silo. So the first point I would make is that the secretariat would adhere to the structure that I described earlier and will bring people together. That's the first observation I would make.

Second, we will focus on the seven-point action plan. That is the mandate given to us by the government, quite clearly.

Third, we will draw from the experience we have gained through the national shipbuilding strategy. Interestingly enough, pretty much all the people around this table were involved in the national shipbuilding strategy, so I think we have a very good footing to cooperatively work together in coordinating, providing oversight, and working on a consensus basis.

9:55 a.m.

Conservative

Andrew Saxton North Vancouver, BC

Thank you.

My next question is for the Department of National Defence. The Parliamentary Budget Officer debated whether this process was unique. Would you clarify how this is different from previous processes in the past?

9:55 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

Just to clarify, is that in terms of actually acquiring, being in part of the development process, and then leading ultimately to the acquisition?

9:55 a.m.

Conservative

Andrew Saxton North Vancouver, BC

Yes.

9:55 a.m.

Deputy Minister, Department of National Defence

Robert Fonberg

Perhaps Dan Ross could answer that question.

9:55 a.m.

Assistant Deputy Minister, Materiel, Department of National Defence

Dan Ross

Thanks for the question.

The vast majority of our acquisitions, because of cost, have been military, off-the-shelf, proven solutions that are already in existence and normally in service with another nation. That reduces our risks enormously. Costs are very specific, and there's proven in-service support performance there.

So this approach is very much different from that. In 1997 this was a blank sheet of paper. There was nothing. Four years later, Lockheed Martin, in competition with Boeing, demonstrated a prototype that took off in 500 feet, flew supersonic, and landed vertically. That was in 2011. We had joined that, for a $10 million contribution, in 1997, and then continued to monitor that over the past 15 years. That was obviously very early in any process of considering replacements for a CF-18, but the other alternatives out there, Eurofighters or Super Hornets, were also, even at that time, ten-year-old technology.

So the program is truly unique. Today there are 1,700 people in a joint project office supported by thousands in industry, supported by the nine partner countries. The aircraft is in production. There are large numbers flying, or about to be added to the fleet. Most of the technology issues are behind us. Costs for acquisition are stabilizing. We're gaining more and more specific insight into what it will cost to run the aircraft.

Thank you, sir.

10 a.m.

NDP

The Chair David Christopherson

Time has well expired. Thank you.

Moving on, Mr. Allen, you now have the floor, sir.

10 a.m.

NDP

Malcolm Allen Welland, ON

Thank you, Chair.

It's nice to see you back, gentlemen and madam.

Mr. Fonberg, a document—actually, it was a Treasury Board Secretariat report—went to Parliament last year that talked about the F-35 and the $25 billion as being in “definitions” phase. So looking at the chart, on pages 12 and 13 of the AG's report in chapter 2, I noticed that just this year, that actual wording got changed to “options analysis”.

When I look at the chart, sir, under 2006, it says that “National Defence completed a preliminary options analysis of five...aircraft”. It goes through a series of steps, and then, when it comes to 2010, “National Defence provided letter to PWGSC to justify procuring F-35 without competition”.

Can you explain to me, sir, how “definitions” phase became “options analysis” phase eight months after it was reported to Parliament, when indeed you had decided to buy an F-35, or at least that was the letter you sent to Public Works?