Public Accounts Committee on Feb. 13th, 2023

[The Chair, Conservative, John Williamson]

We are now in session.

Good morning, everyone.

Welcome to the 50th meeting of the Standing Committee on Public Accounts of the House of Commons.

Pursuant to Standing Order 108(3)(g), the committee is meeting today to undertake a study of Report 6, Arctic Waters Surveillance, of the 2022 Reports 5 to 8 of the Auditor General of Canada, referred to the committee on Tuesday, November 15, 2022.

I'd now like to welcome our witnesses.

From the Office of the Auditor General, we have Andrew Hayes, the deputy auditor general; Nicholas Swales, principal; and Chantal Thibaudeau, director. It's nice to see you and your team today.

From the Department of Fisheries and Oceans, we have Annette Gibbons, deputy minister, along with Mario Pelletier, commissioner of the Canadian Coast Guard.

From the Department of Public Works and Government Services, we have Paul Thompson, deputy minister, and Simon Page, assistant deputy minister, defence and marine procurement.

Each of our departments will have five minutes. As members know, the last 30 minutes is for committee business. Today, I'll give fair warning that I want to watch the clock closely. Doing so will allow us to get through three rounds and end at 12:30 or thereabouts.

Mr. Hayes, go ahead. You have the floor for five minutes, please, sir.

[Andrew Hayes, Deputy Auditor General, Office of the Auditor General]

Mr. Chair, thank you for this opportunity to discuss our report on the surveillance of Canada's Arctic waters, which was tabled in the House of Commons on November 15.

I would like to acknowledge that this hearing is taking place on the traditional, unceded territory of the Algonquin Anishinabe people.

Joining me today are Nicholas Swales, the principal who is responsible for the audit, and Chantal Thibaudeau, the director who led the audit team.

In recent decades, Canada's Arctic waters have become more accessible as summer sea ice has declined and navigation technologies have improved. This has generated interest and competition in the region, which significantly increases ship traffic and affects local communities. Growing maritime traffic increases the risk of unauthorized access, illegal activities, and safety and pollution incidents.

For this audit, we wanted to know whether key federal organizations built the maritime domain awareness needed to respond to safety and security risks and incidents associated with increasing vessel traffic in Arctic waters.

No federal organization is solely responsible for the surveillance of Arctic waters. In our audit, we included the organizations that are mainly responsible. They are Transport Canada, Fisheries and Oceans Canada, the Canadian Coast Guard, National Defence, and Environment and Climate Change Canada.

We found that over the past decade, these organizations have repeatedly identified gaps in the surveillance of Arctic waters, but they have not taken action to address them. These gaps include limited capabilities to build a complete picture of ship traffic in the Arctic and the inability to track and identify vessels that don't use digital tracking systems, either because they don't have to or because they are not complying with requirements.

Collaboration is important to mitigate gaps in maritime domain awareness. Coastal communities contribute information through direct observation. Federal initiatives such as the marine security operation centre in Halifax also play a key role. However, we found that weaknesses in the mechanisms that support information sharing, decision-making and accountability affected the centre's efficiency.

Arctic water surveillance relies on several types of equipment, such as satellites, aircraft and ships. We found that much of this equipment is old and its renewal has been delayed to the point that some equipment will likely need to be retired before it can be replaced. This is the situation for the Canadian Coast Guard's icebreakers and Transport Canada's single patrol airplane: they are near the end of their service lives and likely to be retired before new equipment is delivered. Satellites are also near the end of their service lives and currently do not meet surveillance needs. Replacements in all cases are many years away.

We also found that infrastructure projects aimed at supporting the surveillance aircraft and offshore patrol ships were delayed. For example, the Nanisivik Naval Facility, intended to support government vessels in Arctic waters, is behind schedule and has been reduced in scope to the point that it will operate only about four weeks per year. As a result, Royal Canadian Navy ships may not be resupplied where and when needed.

Our 2021 audit of the National Ship Building Strategy raised concerning delays in the delivery of the combat and non‑combat ships that Canada needs to meet its domestic and international obligations. That audit also noted that further delays could result in several vessels being retired before new vessels are operational.

In the audit we are discussing today, we found that those delays persist. Effective surveillance in the Arctic relies on marine vessels, aircraft, and satellites, all of which are aging. The government urgently needs to address these long‑standing issues and put equipment renewal on a sustainable path to protect Canada's interests in the Arctic.

This concludes my opening remarks. We would be pleased to answer any questions committee members may have.

[The Chair, Conservative, John Williamson]

Thank you very much, Mr. Hayes.

I turn now to Ms. Gibbons.

You have five minutes. Go ahead, please.

[Annette Gibbons, Deputy Minister, Department of Fisheries and Oceans]

Thank you very much, Mr. Chair.

Good morning, committee members.

My colleague Mario Pelletier, commissioner of the Coast Guard, and I are very pleased to appear here. We're also very pleased to be here with our colleagues from other departments.

First of all, I'd like to thank the Auditor General for providing recommendations that respond to safety and security risks and to incidents associated with increased vessel traffic in Arctic waters.

Fisheries and Oceans Canada and the Canadian Coast Guard agree with the audit recommendations. We note that these echo similar recommendations made in the 2014 Auditor General report on marine navigation in the Canadian Arctic. We are committed to working with partners to address gaps in Arctic maritime domain awareness, and increase information‑sharing.

Arctic surveillance in support of sovereignty and security is a whole-of-government endeavour which integrates multiple departments' capabilities. To support Canada's presence, we will continue to collaborate with our federal, provincial and territorial partners, first nations, Inuit and Métis communities, as well as industry, to provide the assets, programs, tools and people needed to support Canada's surveillance, presence and maritime security interests.

We are also committed to developing an Arctic maritime security strategy in collaboration with key security partners to provide risk‑based Arctic marine domain awareness solutions.

Because our physical presence remains so important to maritime domain awareness, strengthening and renewing our fleet are key actions we are taking to support security and sovereignty in the north.

Investments for icebreaking and ice-capable vessels announced through the national shipbuilding strategy include 16 multi-purpose vessels, six program icebreakers, two Arctic offshore patrol ships and two polar icebreakers. These new vessels will be significant contributions to exercising Canada's sovereignty in the Arctic and in supporting Canada's on-water Arctic science capabilities by performing critical icebreaking services, providing vessel escorts and commercial or fishing harbour ice breakouts, and ensuring the safe transport of vital supplies, goods and people in Canadian waters.

Specifically, the program icebreakers will also help provide other essential services to Canadians including search and rescue, environmental response, maritime security, and humanitarian missions. The polar icebreakers will be larger and more powerful than the current heavy icebreakers and will enable the Coast Guard to operate in all areas of the Arctic throughout the year with enhanced capabilities to support a variety of tasks, including supporting our on‑water science program and northern sovereignty.

In order to maintain services to Canadians when our new ships are being built, the Coast Guard has put in place interim measures to mitigate anticipated gaps until the new ships are ready. These interim measures are twofold.

First, they are making important investments to extend the life of our current fleet. Known as vessel life extensions, or VLEs, we safely prolong the life of our fleet to ensure that Coast Guard personnel continue to have the proper equipment to perform their crucial work until new vessels arrive.

Second, we have acquired four interim vessels so that when an existing vessel is taken out of service for vessel life extension, we have replacement assets to maintain uninterrupted service delivery.

The Canadian Coast Guard remains actively engaged with its domestic partners on Arctic security through its contributions to Canada's multi-agency marine security operation centres, known as MSOCs. These centres bring together the Coast Guard, National Defence, Royal Canadian Mounted Police, Canada Border Services Agency, Transport Canada, and Fisheries and Oceans Canada. As an integrated component of the government's security apparatus, MSOCs identify and report on maritime activities that represent a potential threat to the sovereignty, security and safety of Canada.

The Coast Guard's contribution to MSOCs includes its expertise and information on maritime vessel traffic. With the tremendous number of vessels travelling within a few kilometres of our coastlines, it's imperative, for reasons of security and safety, that these vessels be identified and monitored. Our marine communications and traffic services, or MCTS, centres monitor and liaise with all marine traffic and provide crucial information to MSOCs to help ensure the safety and security of Canada's waterways, including in the Arctic.

In collaboration with our MSOC partners, current efforts focus on information sharing and the upcoming MSOC third party review. This review will focus on analyzing current MSOC functions and outputs, in order to identify and mitigate gaps in providing maritime domain awareness.

In closing, DFO is keenly aware that maritime domain awareness in Canada's Arctic is critical to ensuring that we can decisively respond to incidents that threaten our safety, security, environment and economy. That is why DFO and the Canadian Coast Guard will continue to work closely with all of our partners to improve safety and security in Canadian waters.

Thank you. We look forward to your questions.

[The Chair, Conservative, John Williamson]

Thank you very much.

Mr. Thompson, you have the floor for five minutes.

[Paul Thompson, Deputy Minister, Department of Public Works and Government Services]

Thank you very much, Mr. Chair.

As my colleague noted, Public Services and Procurement Canada also welcomes the Auditor General's report and is committed to working with its partners to ensure that Canada's Arctic waters are safe and secure. We are in full agreement with the Office of the Auditor General that such equipment must be acquired in a timely manner.

For Public Services and Procurement Canada, that means supporting our federal partners with the procurement of equipment and capabilities needed for effective Arctic water surveillance, which is being done through Canada's national shipbuilding strategy.

The national shipbuilding strategy is one of the largest and most significant endeavours undertaken by Canada. It focuses on not just equipping the Royal Canadian Navy and the Canadian Coast Guard with much-needed vessels, but also strengthening Canada's shipyards and rebuilding Canada's marine industry, which is an important source of high-skilled jobs.

That includes small‑ and medium‑sized businesses which make up some 90% of Canadian marine industry firms.

The shipyards that are awarded contracts under the national shipbuilding strategy are responsible for sourcing things like materials and technology for their respective shipbuilding projects.

Through the provisions of the government's industrial and technological benefits policy, which focuses on generating economic benefits here at home, hundreds of Canadian businesses are securing that work. Those businesses are growing, investing in innovation and getting traction in export markets.

While acting as an economic driver and successfully delivering a number of vessels, as well as completing repair and refit work, the strategy is also facing significant challenges. Due to the pandemic and other global events, we have several new factors to deal with, such as inflation, commodity pricing and supply chain disruptions, which have all affected the cost and availability of materials. This is on top of increasing labour shortages. The report from the Office of the Auditor General is quite valuable as we work to counter the impacts of these challenges.

I would like to give an update on the action plan to address the recommendations provided to our department.

Part of our management action plan to address the report's findings outlines ways to make sure that delivery schedules are more accurate, including by making improvements to how we monitor and report on the progress of the projects. The goal is to identify potential delays and cost overruns earlier in the process.

The action plan maps out continued efforts to ensure that we are properly and effectively integrating schedule, costs, and scope in how we measure performance.

In addition to the implementation of this management action plan, the government's efforts to acquire equipment in a timely manner are also supported by the integration of a third shipyard into the national shipbuilding strategy. Bringing on a third shipyard is a significant factor in addressing the concerns raised in the AG's report that are under discussion today.

Specifically, the third yard will be responsible for building one of the two polar icebreakers and six program icebreakers for the Canadian Coast Guard. In June of last year, the Government of Canada announced the beginning of negotiations with Chantier Davie of Lévis, Quebec to become the third strategic shipbuilding partner under the NSS. That process is in the very final stages of completion. Contracts for each polar and program icebreaker will be negotiated following the signature of an umbrella agreement with the third shipyard. Of course, the lessons we learned from the revised approach to project management, costing and scheduling will be applied as we draw up and manage these new contracts.

In conclusion, Mr. Chair, I think it is also worth noting that we have seen, around the world, how shipyards typically increase their efficiency over time as they mature. Canadian shipyards are no exception. This is particularly true for longer production runs of ships. For example, Canada has seen good progress in the Arctic and offshore patrol ships program, with three ships delivered so far and the cost per ship decreasing. As we continue to deliver on the NSS, and as the Canadian industry continues to gain more experience along the way, we expect to see even more efficiencies.

Mr. Chair, I can tell you that PSPC will continue to work with its partners to mitigate the project delivery risks for the NSS, so the Royal Canadian Navy and the Canadian Coast Guard get the vessels they need to do the job.

Thank you. I'll be happy to take your questions.

[The Chair, Conservative, John Williamson]

Thank you all very much.

We'll now turn to our first round. Each of the four members will have six minutes. I'm sorry to repeat this, but I will be watching the clock very closely. I will have to cut witnesses off if you don't leave them ample time to answer your questions.

On that note, Mr. McCauley, you have the floor for six minutes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thanks, Mr. Chair.

Witnesses, thank you for this.

Mr. Hayes and Mr. Swales, thank you for another depressing report. I think you could have titled it “A Whole-of-Government Failure”. We have a failure to buy equipment on time, a failure to retain our pilots or even train new pilots, and a clear failure to secure the north. This is an absolutely abysmal report. I don't think I have a different word for it.

We have a government and bureaucracy that.... We actually saw them, with opening statements, appear to think that making announcements is actually going to get ships built. We have delay after delay after delay on the ships. The icebreakers are a decade late. The AOPS are delayed. Everything is delayed.

We're running out of pilots to fly the few planes we have left. We have, basically, what turns out to be a politically motivated purchase of the Kingfisher search and rescue plane that cannot fly in Canada and that the RCAF doesn't want. We have the AOPS that the navy doesn't want and can't actually patrol with for a large part of the year, and that's when these ships are actually working. We know there are diesel issues and water issues.

You read in this report that we have committees that repeatedly identified issues, but the government refused to act on them. There are departments that can't share information with each other. Work plans are developed with no implementation plans or timelines to go with them, and then there is no monitoring of those implementation plans. Then there are plans to develop an Arctic security strategy that never got completed.

You think it just cannot get worse and worse and worse, yet along comes the government to say, “Hold my beer,” and it sits back as the Chinese float 99 red balloons into our territory.

Mr. Hayes, Mr. Swales, is there any redeeming information from the government's performance that you can share with us out of this report, besides that the government recognizes that it's an issue? I've read through it. I don't see the action. I don't see anything but announcements and witnesses around a table patting themselves on the back for what a great job they're doing, but nothing's getting done. We have Russia being aggressive. Obviously, the Chinese are aggressive. However, we're a decade or two decades away from being able to secure the north.

Is there anything good in this report?

[Andrew Hayes]

I'll start with reiterating the fact that we identified that long-standing issues hadn't been addressed in our report. However, I would say that the efforts taken to extend the life of some of the equipment so that time is available for the new equipment to be purchased are a good step. Mind you, there's not a lot of time to spare if there are further delays.

In terms of other positives, I would say that, at this point in time, the work that's being done by the departments to consider contingencies—the bringing on of a third shipyard—is a positive development. However, again, we've seen that with the previous shipyards it took seven years after the agreements were negotiated for a ship to be produced, so time is running out.

[Kelly McCauley, Conservative, Edmonton West, AB]

I guess that's the crux of it. I mean, the biggest accomplishment we can state is that we're going to extend the life of our already old equipment.

How long can the Aurora be extended? I think it's serviced to 2030, isn't it?

We might as well have an OGGO meeting here at the same time.

[Paul Thompson]

I'll take that. Thank you, Mr. Chair.

PSPC, of course, is the contracting agent for activities like the maintenance and sustaining of the Aurora. DND would be better positioned to speak about the long-term plans for it, but we do have some measures in place. Simon could elaborate on the work they're doing in support.

[Kelly McCauley, Conservative, Edmonton West, AB]

We finished the upgrade on the Aurora. Is that correct?

[Paul Thompson]

There's ongoing work, as well.

[Simon Page, Assistant Deputy Minister, Defence and Marine Procurement, Department of Public Works and Government Services]

We do have a specific project called the Aurora incremental modernization project, and that's still ongoing. We're putting the final touches on this project as we speak, with the OEMs that are concerned, and the target date for that is 2024.

[Kelly McCauley, Conservative, Edmonton West, AB]

How long will the life cycle be extended?

[Simon Page]

As my deputy said, that's more a question for DND when they come to this venue, but—

[Kelly McCauley, Conservative, Edmonton West, AB]

Is PSPC involved yet in the P-8 acquisition? Is there a working group set up or a project group set up yet?

[Paul Thompson]

I can speak to that.

We're in the options, analysis and requirements definition phase, and the P-8 is an active option that's under consideration, as ministers have noted.

[Kelly McCauley, Conservative, Edmonton West, AB]

For the sake of argument, if we signed it tomorrow, would we get it in time before the Auroras time out?

[Paul Thompson]

I don't know if we have a potential timeline. That's all part of the options analysis. I think it's hard to say at this point exactly what the relative timelines would be for the P-8 versus for other options.

[Kelly McCauley, Conservative, Edmonton West, AB]

I'll cede my second and a half to the Liberals.

[The Chair, Conservative, John Williamson]

Very good. Thank you, Mr. McCauley.

Ms. Yip, you have the floor for five minutes. Go ahead, please.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Thank you.

The Arctic waters surveillance report is, I think, really timely right now. Given recent developments and the warming climate, it's important that we draw attention to what we can do to increase our Canadian security, economic impact and environmental vigilance.

I want to thank you, Deputy Auditor General, along with the Auditor General and your team, for bringing forth such important recommendations in this report.

My first question is for Ms. Gibbons.

How are you addressing the report's findings that there's a lack of adequate infrastructure in the Arctic?

[Annette Gibbons]

I will ask Commissioner Pelletier to elaborate a bit more on this.

We've been doing a number of things to improve infrastructure. Certainly, the creation of an Arctic region within Fisheries and Oceans and the Coast Guard is a major step to having a greater presence.

We have a site in Rankin Inlet that we are transitioning to be a larger, more functional site than it is at present. Mario can speak to this. We have been doing a lot with indigenous communities in the north and expanding the Coast Guard Auxiliary. With that, we provide funding to purchase community boats so communities can have more of an on-sea presence. That, of course, is expanding the eyes and ears on activity in the north.

I'll ask Mario to expand a little bit on that.

[Mario Pelletier, Commissioner, Canadian Coast Guard, Department of Fisheries and Oceans]

Thanks for the question.

On that last point, we went from nine Coast Guard Auxiliary units up north five or six years ago to 33 as of last year. This is key for us in being able to rely on a community to quickly respond to a local call, as opposed to our having to deploy ships that will have to go hundreds of miles to get to that point, taking them away from the business of supporting the resupply. Those are the kinds of investments we're looking at.

From a marine awareness perspective, the Arctic is not well served by technology right now. The Internet is extremely slow and so on. We're really looking forward to the low-earth orbit satellite constellation being deployed a few years from now, at which point we're going to be able to use more technology. We're not going to be able to recreate in the Arctic the navigation system we have down south. It would take decades to do that. Technology and things like virtual aids to navigation and so on will be much more accessible. That's what the team is focusing on right now.