Government Operations Committee on June 14th, 2011

[The Chair, NDP, Pat Martin]

I'm reluctant to interrupt you, but I know you're here for a limited time, and a lot of members would like an opportunity to question you personally.

Next is Denis Blanchette.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Good afternoon, minister.

In 2006, one of your predecessors announced the intention to acquire new military support vehicles. The invitation to tender was made last fall and, in the meantime, a company complained that the document was not available in French. They were told that it may take up to six months for the translation to be ready. That's a long time—since 2006—to acquire trucks our forces need. That also raises questions about the department's acquisition process.

Do the department and the minister intend to improve the acquisition process in order to accelerate the acquisition of the necessary products?

[Julian Fantino, Conservative, Vaughan, ON]

Thank you for the question.

This is all a work in progress. Certainly I think we have taken notice of the importance of respecting the duality of languages in our country, and if there are improvements to be made, this being a lesson for us, we'll certainly undertake to do those.

We're especially respectful of making sure that the process is fair, transparent--as I indicated earlier--and certainly equitably available to everyone who wishes to enter. We will work through these issues. We will strive for improvements, as there have been all along historically in regard to procurement. We'll continue to do that.

Thank you for raising that.

[Denis Blanchette, NDP, Louis-Hébert, QC]

Beyond that, the acquisition process itself takes a very long time from the intent to the completion of the invitation to tender. The forces really need those tools.

Does the minister anticipate reviewing the procedures in order to accelerate the acquisition process?

[Julian Fantino, Conservative, Vaughan, ON]

Mr. Chairman, in the interest of saving time, the answer is yes.

[The Chair, NDP, Pat Martin]

There are still two and a half minutes.

Nycole Turmel.

[Nycole Turmel, NDP, Hull—Aylmer, QC]

Thank you, Mr. Chair. I appreciate the opportunity to ask the minister another question.

With regard to the backlog in the administration of the reservist pension fund, you said that you intend to prioritize that file. You also talked about the possibility of providing additional resources.

I would like to know exactly how many people the minister intends to add.

Priority-wise, how long should resolving these issues take?

I also want to add that the minister mentioned that Canadians would be very happy to know that he returned money to the main fund.

Don't you think that part of that money could have been used to solve this problem?

[Peter MacKay, Conservative, Central Nova, NS]

Thank you, Mr. Chair.

I'll let Mr. Lindsey answer that question. Still, I want to summarize things by saying that our department is very proud of the opportunity to introduce a new pension plan for the first time in 40 years.

Mr. Lindsey, go ahead.

[Kevin Lindsey, Assistant Deputy Minister, Finance and Corporate Services, Department of National Defence]

Thank you, Mr. Chair.

The department has acknowledged the observations that the Auditor General made on that plan. The fact I would point out is that in 2007 the department was faced with a choice. It could have deferred the implementation of that pension plan until the new IT systems were built, until all of the staff were perfectly trained, and until everything was perfectly set to implement that plan, which would have taken some time, or it could have implemented the plan at the time, giving reservists the comfort that the plan was in place but recognizing that there would be growing pains. In fact, there have been, and the department has acknowledged that.

Over the last year the department has in fact increased by over 50% the number of people in the administration who are charged with administering that plan. It has developed a remediation plan, in fact, to speed up the processing of reservists' files and is doing what it can on a very old legacy IT system to expedite the movement of those files.

[The Chair, NDP, Pat Martin]

Thank you, Mr. Lindsey.

I'm afraid that's the end of our time for that segment.

Peter Braid.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you, Mr. Chair.

Thank you to the ministers and their officials for being here this afternoon.

Minister MacKay, there was a question a little earlier about the F-35 project, and I just wanted to follow up on that. It's a two-part question, in fact. First, are there any F-35 project-related costs reflected in the 2011-12 estimates? Second, at what point will the majority of the costs relating to that important project be reflected?

[Peter MacKay, Conservative, Central Nova, NS]

Those are two very good questions.

There certainly will be some costs, depending upon the progress we make in the memorandum of understanding with Lockheed Martin.

To answer your second question, we are proceeding towards taking ownership of these aircraft, these F-35s, in approximately the year 2016-2017. That is when the majority of the costs will in fact kick in. While the $9 billion sounds like a significant amount of money--and it is--keep in mind that it is amortized over a 25-plus-year period of time. We are still approximately four to five years away from making the major investments that will be involved in the purchase of this aircraft. When one examines the utility we are seeing even today in Libya with the existing fleet of F-18s and the fact that those aircraft are now approaching 30 years of service, the per-aircraft investment for the F-35 procurement, when one includes the all-up in-service support, the spares, the simulators, and the training package that came with that initial purchase, is in rough order of magnitude on par with what the Department of National Defence paid for our existing fleet of aircraft.

To put it in that perspective, I would simply add, Mr. Braid, that this is an eye-watering aircraft in terms of its technological advances. It's the only fifth-generation aircraft on the market available to Canada. It is inter-operable with other fleets, including those of NORAD and other countries that are purchasing the same aircraft. It will allow us, first and foremost, to protect our own sovereignty and that of continental North America and to be able to participate in missions similar to those we're seeing to protect civilians in places like Libya well into the future.

I stand behind this procurement. Mr. Fantino, of course, will be very involved as we move forward with Lockheed Martin.

Some of the criticisms that have been levelled at the aircraft don't pertain to the CTOL--that is, the conventional takeoff variant of this aircraft that Canada is buying. We're not purchasing other variants of the aircraft, the vertical takeoff model for the Marine Corps, which is similar to a Harrier jet, or the aircraft carrier model. Of course we don't have aircraft carriers. We're purchasing a different variant, which is on time and on budget according to Lockheed and the Pentagon.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you.

You mentioned our current mission in Libya as well today. In fact, in Parliament today we are debating the proposal to continue that important mission--a mission, I might add, that's commanded by a Canadian general, Lieutenant-General Bouchard. Could you explain to the committee the progress we've been able to make in Libya and why it's important to continue that progress?

[Peter MacKay, Conservative, Central Nova, NS]

Thank you, Mr. Braid.

That was the subject of a very important debate that happened in the House of Commons, as was the initial decision to participate. Yes, progress is being made. First and foremost, civilian lives are being spared as a result of the efforts of NATO, of which Canada is a very active participant in the no-fly zone. That is preventing Gaddafi from using his own air assets to wreak havoc on his own population. He expressed in no uncertain terms a very murderous intent to do just that and was in the process of doing so when the mission began.

You mentioned Lieutenant-General Charlie Bouchard. He is doing an outstanding job. I heard about it recently at NATO meetings in Brussels. Everyone from the Secretary General to other participant countries in their leadership were full of praise for General Bouchard and for Canada for what we're doing and for the leadership demonstrated. We're doing all of this work, as you know, very much within the parameters of the UN Security Council resolutions 1970 and 1973. We're there to protect civilian life, to further humanitarian efforts, and in simple terms to force Gaddafi's regime to retract their military forces back to the barracks and to stop wreaking havoc on their civilian population.

We are furthering those efforts. Progress has been made, in that prevention has occurred. We also have the HMCS Charlottetown in the region providing support as well. She was initially a forward deployment in case there was a need for civilian evacuation.

[The Chair, NDP, Pat Martin]

Sir, we're having a bit of a mission creep in our answers here. They're creeping into the next round.

This is probably the last round for the time you have to spend with us, and it's for Mr. Matthew Kellway.

[Matthew Kellway, NDP, Beaches—East York, ON]

Thank you, Mr. Chair.

Minister MacKay, you alluded in your opening comments to some wildly divergent estimates for the cost of the F-35s. That gives rise to considerable uncertainty over the price and to a lack of confidence in the government's estimates. Do you continue to maintain the accuracy of the government's cost estimates for the F-35s, or are the estimates under reconsideration, or do you have revised estimates that you can share with us today?

[Peter MacKay, Conservative, Central Nova, NS]

Nine billion dollars is the budgeted cost for the F-35s--

[Matthew Kellway, NDP, Beaches—East York, ON]

I'm sorry, but I couldn't hear you.

[Peter MacKay, Conservative, Central Nova, NS]

Nine billion dollars is the money that we have budgeted for the purchase of the F-35s, which includes the spares, the training, and the avionics, the on-board equipment.

[Matthew Kellway, NDP, Beaches—East York, ON]

Okay. Are those estimates under constant review, or are you concluding that this is going to be the final cost?

[Peter MacKay, Conservative, Central Nova, NS]

That's the budgeted amount we have for the purchase of new aircraft.

[Matthew Kellway, NDP, Beaches—East York, ON]

It's the budgeted amount, Minister, but what if the costs diverge from the budgeted amount? I presume that might happen. You've budgeted $9 billion, but what are you estimating for the actual costs?

[Peter MacKay, Conservative, Central Nova, NS]

Nine billion.

[Matthew Kellway, NDP, Beaches—East York, ON]

Nine billion? Okay.

Second, Minister, for the last two years the Department of National Defence has returned billions in unused revenue, which raises questions about the department's ability to manage its budget. Have you been able to identify the reasons for or the sources of the department's budgeting difficulties? Could you share your findings with us?

[Peter MacKay, Conservative, Central Nova, NS]

I've already mentioned some of those causes. The causality was due in some part to procurements that did not proceed on time through circumstances that I would describe as being beyond the control of the Department of National Defence.

However, just to put it in perspective, this is an aberration, because in the last fiscal year, 2009-10, the residual lapse was $123.5 million, which was well within the carry-over that is permitted under the Treasury Board guidelines.

Sir, the restrictions placed upon the Department of National Defence are quite unlike those of any other department of government, in that--and Mr. McCallum would be aware--the carry-over permitted at the Department of National Defence is 2%. With a budget now in excess of $21 billion, it is a large challenge, to say the least, to ensure that your annual spending is within that 2% for carry-over.

Every other department of government is at 5%, and the Department of National Defence actually just went to 2.5% in the last fiscal year, I believe. Someone with much more fiscal acumen than I have described this as the equivalent of trying to land a 747 on an aircraft carrier. It is a very challenging undertaking to budget your amount for the fiscal year within that 2%--now 2.5%--carry-over.

Our accounting officers, our deputy minister, and certainly Mr. Lindsey are working very hard within those parameters, and they're working hard to ensure that the Auditor General and others we have brought in to look at this situation, including independent auditors from Deloitte and Touche...to see that we are transparent, that we are open, and that we are complying with the Treasury Board guidelines.

Thank you, Mr. Chair.