Public Accounts Committee on May 3rd, 2012
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 costs.
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
9:30 a.m.
Conservative
Jay Aspin Nipissing—Timiskaming, ON
Okay, that's fine. I'd like to transfer my remaining time to Ms. Bateman.
Thank you.
9:30 a.m.
NDP
9:30 a.m.
Conservative
9:30 a.m.
NDP
9:30 a.m.
Conservative
Joyce Bateman Winnipeg South Centre, MB
Fine, thank you.
First, thank you for providing this clarification and bringing us these figures. It is really necessary for all committee members.
My question is for Mr. Page.
I heard you in response to Monsieur Ravignat say that with a shorter life cycle you have lower costs. I'm not asking you to respond right now, but I am asking that we as a committee review the context of your comments. Perhaps you would like to clarify or if necessary correct your comments. My understanding is that the longer the life of an asset, the lower the cost.
In preparing your report, you reviewed the MOU that Canada signed as a member country. Can you tell us if Canada is on the hook for increases in development costs?
9:30 a.m.
Parliamentary Budget Officer, Library of Parliament
No, we excluded all development costs.
9:30 a.m.
Conservative
Joyce Bateman Winnipeg South Centre, MB
No? Okay, we're not on the hook. Under that MOU, do member countries get a lower price for the plane than non-member countries?
9:30 a.m.
Parliamentary Budget Officer, Library of Parliament
Yes, I think we—
9:30 a.m.
NDP
9:30 a.m.
Parliamentary Budget Officer, Library of Parliament
Yes.
9:30 a.m.
NDP
The Chair David Christopherson
That's as brief as it gets.
Thank you, Madam Bateman.
In rotation now, we'll move over to Mr. Allen.
May 3rd, 2012 / 9:30 a.m.
NDP
Malcolm Allen Welland, ON
Thank you, Chair.
My thanks to our guests for being here.
Mr. Kahn, you were telling us why we looked at U.S. numbers and why we didn't look at Canadian numbers. Walk us down that path a bit more. Give us a decent overview of how that unfolds, why it's important, and why we end up basically at the same stop at the end of the day.
9:30 a.m.
Assistant Parliamentary Budget Officer, Expenditure and Revenue Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
The program has had well-publicized cost overruns and delays. But one of the advantages is that we now have some useful reference points. We've recommended that parliamentarians at least consider that figures coming out of the selected acquisition report, plus reports from the U.S. Government Accountability Office, begin to illuminate the subject—providing estimates on both acquisition costs and O and S, long-term sustainment--in effect, life cycle costs.
There are now good reference points. A year ago when we did our report, there was not an independent estimate that you could pull out for the F-35A or for sustainment, of which operating support is the largest component. A year later now, you're seeing these numbers on a selected acquisition report and through the U.S. Department of Defense's CAPE unit. You're seeing average procurement unit cost numbers that are also important, because this is the basis of budgeting in the United States and appropriations, not recurring fly-away.
You'll see in the selective acquisition report that the same figures used here will be part of the defence department's submission for the budget process.
9:30 a.m.
NDP
Malcolm Allen Welland, ON
Since we will buy this plane, if we buy it, from the U.S. government, not actually from Lockheed Martin—that's the way it will be eventually, if we decide to buy this plane—we get the same price they get for that particular model, according to the MOU.
Is it safe to assume that the cost to operate here would be plus or minus 5%, say, of what the costs are to operate in the U.S.?
9:35 a.m.
Assistant Parliamentary Budget Officer, Expenditure and Revenue Analysis, Office of the Parliamentary Budget Officer, Library of Parliament
Sir, at this point that would be speculative. I think we can refer you to the fact that they've now done an estimate of the cost difference—their belief in the cost difference—using parametric models to look at the O-and-S cost, operating and support, per flying hour for the F-35. You'll see on page 84 that they actually give you the flying hours for the F-35A versus the other variant. We've provided a kind of illustrative calculation of that, and you can now start to see those indications.
To your first question, it is useful now to start using these reference points to look at what's reasonable. I think it's the same point about parametric modelling and the use of it: what's reasonable.
If points start to converge, then at least, from a parliamentary point of view, there's a richer planning environment. You can have a little more confidence going forward.
We caution that they're all estimates at this point. But to your first question, it becomes interesting when they start to converge. That's why we think the latest report published just five weeks ago from the U.S. Department of Defense is very handy in that regard.