Government Operations Committee on June 14th, 2011

[Dan Ross]

It's very unlikely that they'll go up.

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

It's very unlikely?

[Dan Ross]

As the supply chain becomes more mature, as the production facilities in Europe and in Fort Worth, Texas, become faster and more efficient, and with the scales of quantity—as you start getting up to the point where you're delivering an aircraft every 1.5 days with a moving production line--clearly it will be more efficient, and those estimates of unit price will continue to come down to some point where they will bottom out.

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

And is there a regular schedule for those estimates that comes from the Pentagon?

[Dan Ross]

There is an annual schedule for a selected acquisition report. Our current numbers are based on what's called SAR 09. The SAR 10 figures came out recently, but they will be revised later this year based on what I referred to as the detailed technical baseline review that my counterpart in the Pentagon did in 2010. It will sharpen the accuracy of the SAR 10 numbers. There will be a SAR 11 and a SAR 12, etc.

[The Chair, NDP, Pat Martin]

Thank you very much.

Mike Wallace.

[Mike Wallace, Conservative, Burlington, ON]

With respect to page 244, I need a little bit of a clarification. The one big number that did pop out--and I think the New Democrats pointed it out--was the 134% increase for recruiting of personnel and initial training.

Last year, in the main estimates you had $604 million. It looks as though it's up to $1.4 billion this year. If I look in the priorities and planning document for your department, which I don't have with me, unfortunately—I have the year before, but not last year—does it show that you're doing something different, or were there changes in supplementary estimates that we don't have here because these books compare only main estimates to main estimates, and there were supplementary estimates last year? Or in terms of recruiting are we doing something different this coming year from what we have done in the past number of years?

Or is there an error?

[Vice-Admiral Bruce Donaldson, Vice-Chief of the Defence Staff, Department of National Defence]

Thank you for the question.

I can't give you a great explanation for that, so we'll have to get back to you on that. What I can tell you is that recruiting has been ramped up significantly in the last four years or so. The intake has been much greater. The volumes of people coming through basic training and then into trades training have gone up significantly. New investments have been made in that area, but I'll have to get back to you on a detailed explanation on that.

[Mike Wallace, Conservative, Burlington, ON]

My message to the deputy minister who's looking at this is that I'm encouraging my colleagues to look more carefully at these numbers, whether we change anything or not, but a 134% increase is something you should have an answer for in case a member asks in the future, and I know he'll give that message to other deputy ministers at his Wednesday meeting.

I have a question for you regarding page 246. The security and defence forum class grant is not included in this budget. There's a little asterisk saying it would be included in the future. Did you mean in supplementary estimates A, B, and C—well, not in A, because we're doing A today, but in B and C of this year? Is that what that little asterisk is telling me at the bottom of page 246?

[Kevin Lindsey]

It actually is in supplementary estimates A.

[Mike Wallace, Conservative, Burlington, ON]

It is in supplementary estimates A already.

[Kevin Lindsey]

It is in supplementary estimates A.

[Mike Wallace, Conservative, Burlington, ON]

It's in supplementary estimates A. All right. So we've already added that.

My final question is on the Canadian Forces Grievance Board. They have a potential increase of 25% for review of Canadian Forces grievances. The operating costs went up 25%, but the internal services went down 27%. What's happening there? Can you tell me?

[Kevin Lindsey]

Bearing in mind, Mr. Chair, the member's admonishment with respect to the 134%, I did in fact go to the grievance board to ask that very question, but did not get an answer in time for today's meeting, so we beg your indulgence and will follow up.

[Mike Wallace, Conservative, Burlington, ON]

Sure, no problem.

[Kevin Lindsey]

Thank you.

[Mike Wallace, Conservative, Burlington, ON]

Those were my questions.

[The Chair, NDP, Pat Martin]

That was an interesting point you raised. That figure, the 134% increase, represents an $812 million increase to the budget. It's a pretty staggering figure.

John, it's your turn for three or four minutes, and then we need to vote on these estimates. So if you can, truncate things as much as possible.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you, Mr. Chair.

Perhaps I could just follow up on my previous line of questioning, for Mr. Ross this time.

The gross money that has lapsed, if you want to use that term, is $1.2 billion in 2009-10. I understand that it's significantly more this coming year. Much of that is from procurement, I understand.

It seems that the department consistently looks on the rosy side as to the timing of when various procurements will happen. So I guess my question is.... If you took a more realistic view of when the equipment would arrive, then effectively you could reduce the department's budget by a billion dollars and nothing material would change at all.

You probably don't like that suggestion, but I believe it's true. But you would have to be assuming that the billion-dollar lapse would be continuous at that level in future years, which may not be the case.

[Dan Ross]

Yes, which may not be the case.

Thank you for the question.

Deliveries are rarely early. Often in our business it's complex, difficult material that we need to take, which we put through vigorous testing. I will give the example of our truck project right now. We are buying the baseline shelters that go on the back of the trucks. The testing of that hasn't been passed, so we don't accept it and we don't pay for it until it passes our testing.

We don't know whether it's going to pass testing in the summer of 2011, but I'm contractually required to budget for having to pay for it because I have to estimate that six months in advance, prior to the main estimates being produced and consolidated by Mr. Lindsey and presented to Parliament. I have to estimate and commit to my contractual obligations for the year.

Now, as the year progresses and companies deliver stuff, and it fails testing and technical air-worthiness reports are not certifiable and signed off on, there is a natural slippage. Historically that slippage has varied between 5% and 10% sometimes. What we're seeing now is that we're spending a lot more money on recapitalization in the Canadian Forces.

The other comment I would make--and I think Mr. Lindsey is of this view--is that a lot of our money now is not traditional baseline vote 5 within our appropriations. It is accrual cash provided by the department as we require to pay for deliveries. If the deliveries occur this fiscal year, that's fine. If they occur next fiscal year, that's fine. We only get it in the fiscal year in which we actually take deliveries and need to pay for it. I think that's a smart flexibility.

Is there absolute predictability, let's say within a per cent of what those deliveries will be annually, as we get into a figure well north of $3 billion annually? No, there isn't. It's a hard business to manage with great accuracy, and I don't control the levers.

[The Chair, NDP, Pat Martin]

Okay. We do need some time left to actually undertake the votes on the main estimates and the supplementaries, so I'm going to thank all the witnesses: Mr. Lindsey, Mr. Fonberg, Mr. Donaldson, and Mr. Ross. It has been very helpful and very useful. Thank you for being here.

I'm going to suspend for about 30 seconds while the witnesses leave. Then we will jump right into the votes.

[The Chair, NDP, Pat Martin]

I will reconvene the meeting.

We're still televised, and we want to go through the process of the votes, first of all on the main estimates. These are massive amounts of money, so they shouldn't be entered into lightly. We have to acknowledge that vote 1 is $14 billion in and of itself, so there is a certain gravity associated with playing with that kind of money. I'll ask the questions and you tell me whether the votes go or not.

Shall vote 1 under National Defence carry?

National Defence Vote 1--Operating expenditures..........$14,964,971,000

(Vote 1 agreed to on division)

[The Chair, NDP, Pat Martin]

We'll proceed to the other votes.

Vote 5--Capital expenditures..........$4,663,663,000

Vote 10--Grants and contributions.......... $241,678,000

Canadian Forces Grievance Board

Vote 15--Program expenditures..........$6,060,000

Military Police Complaints Commission

Vote 20--Program expenditures..........$3,209,000

Office of the Communications Security Establishment Commissioner Vote 25--Program expenditures..........$1,971,000

(Votes 5, 10, 15, 20, and 25 agreed to on division)

Shall the chair report the main estimates 2011-12 to the House?

[Some hon. members]

Agreed.

[A voice]

Immediately.