Government Operations Committee on June 9th, 2016

[The Chair, Conservative, Tom Lukiwski]

Thank you, Mr. Blaney. I can assure you that we have almost an hour left with these witnesses, so you'll have ample opportunity to ask further questions, perhaps in a different way.

Now we'll go to Mr. Whalen.

[Nick Whalen, Liberal, St. John's East, NL]

Thank you very much, Mr. Chair.

Thanks to all of you for coming here today.

We have seen both in our Shared Services Canada report and now possibly in respect to this horizontal engineering program plan that the previous government felt, erroneously, that it could contract out of its ability to contract manage within its department, perhaps through not adequately staffing at the different levels within government and the ability to communicate with engineers and other professionals in the supply chain.

I'm wondering if you could explain to me a bit about the horizontal engineering program plan, how your departments interface with the suppliers in respect of that program, whether or not you were adequately staffed and funded from your side, and what you may have done to correct that error since.

[Lisa Campbell]

Thank you for the question, Mr. Chair.

As I said at the outset, it had been 30 years since Canada had built ships, so the yards had to upgrade their infrastructure at their own cost, and government, both PSPC and client departments, had to grow and build internal expertise. We have a really impressive workforce that specializes in complex procurement.

Complex procurement in the marine context, especially where you're trying to avoid boom and bust, and this is an important principle, is really what's at the heart of a national shipbuilding strategy, trying to ensure continuity of work, the efficiencies, and implementation over time of the learnings you achieve. That means you have a robust supply chain and you have a strong industrial base. A lot of it is situated in Canada, and much of it you're also sourcing from around the world for value reasons.

What's interesting is that we've seen that capacity grow more and more and we're actually now having other countries come to learn from us. They now know we've been at this for a couple of years. They're asking about our challenges and opportunities.

Perhaps it could have been better explained at the outset that there would be a period of growth and learning, and that needed to be communicated: here are the challenges when you're building from scratch; here are the challenges of recruiting, training, and hiring professionals who do this work; here is the marine context; here is how it operates; and the reality of having to buy long-lead items before a ship is even built so that you have it in time to have continuous production processes in the yard.

[Nick Whalen, Liberal, St. John's East, NL]

Further to that, what sorts of measures have you put in place in the last six months since the ships have started to be built to ensure that there are appropriate levels of communication between your organization and the suppliers to ensure that not only are they accountable and meet the performance standards that you've set for them, but also that internally within your own organizations you know that your own employees are able to meet their performance and accountability metrics?

[Lisa Campbell]

We are present in the yard. We are integrated with them, overseeing the build program, and working with suppliers. There is robust governance. I can assure you, the three of us meet very regularly with the shipyards. We look at the program of work, the progress. We talk about risk areas, and we are continually planning years into the future because that's how shipbuilding programs have to be run. It is really down to the month that we look at it, and we look at costs as well.

Mr. Hutchinson, do you want to add anything?

[Jeffery Hutchinson]

I do, thank you.

Talking about the presence in the yard I think is really important, and I'm going to be really specific about it. We have a guy who spent 30 years at sea with the Coast Guard as a chief engineer. He knows what we do and how we do it. He knows how those ships have to function. He knows what environments they function in, and he knows how they have to be built to achieve those missions.

I talked earlier about the yard being able to incorporate lessons learned. I'll give you a very specific example that's a direct result of our having eyes on. When they started cutting steel on the first ship, we wanted some things done differently to improve the quality of some cuts. The second ship is now moving through those same stages. We see a vast jump forward, and we know that it came from the conversations with our eyes on the yard. That presence has played all the way through the build, actually. We see the process getting smoothed out. We see the pieces coming together as a result of our expertise that is able to say, “That's not what the Coast Guard needs; this is what the Coast Guard needs.”

[Nick Whalen, Liberal, St. John's East, NL]

I'm glad to learn about this continuous improvement. I hope it keeps going.

Thank you.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

Mr. Weir, it's your turn, but unfortunately, for only three minutes.

[Erin Weir, NDP, Regina—Lewvan, SK]

Thank you.

Although I'm not quite as excited about shipbuilding as Mr. Blaney is, I do have some questions about it.

Defence procurement has been rather opaque. We have a new government promising greater transparency. In that context, I'm wondering if you could explain the decision to stop providing initial cost estimates for shipbuilding processes.

[Lisa Campbell]

That's an excellent question. Thank you very much.

It's interesting. We hired a gentleman to give the government advice. His name is Mr. Steve Brunton. He is from the U.K. He asked, “Why does Canada do this to itself?” He said, “You're putting out budget estimates before you have any data on what it will actually cost, before you have some early indication of the risks, what will materialize, and efficiencies you might achieve, and you might also be affecting your negotiating position.” In his view it was actually irresponsible to do that, and a much more responsible approach is, once you are into a contract with the company with which you're going to be doing business, then you can disclose the budgets for it.

I will turn also to Mr. Finn and to Mr. Hutchinson, if they want to say something about that.

[RAdm Patrick Finn]

Thank you very much.

Very specifically, as indicated, these would be estimates for purchases that are very much in the future. If you look at most of our projects, the Arctic offshore patrol ship that's in build, the joint support ship, and the interim AOR work being done in Davie, all that information is in the public domain. We continue to do that.

Where we have things that we continue to develop, we're re-establishing some real expertise around that area, trying to make sure that we avoid the pitfall of putting what are very rough order of magnitude numbers out too early.

[Erin Weir, NDP, Regina—Lewvan, SK]

Sure, but from the point of view of transparency, wouldn't it be better to provide imperfect information than no information at all?

[RAdm Patrick Finn]

Again, perhaps, but it really becomes an issue of what we're trying to do which is really to wait until we have a degree of information that is reflective of what it is we're actually doing and acquiring.

If you look at Canadian surface combatants, we have a prime contractor, the yard that is going to do it, a set of requirements. Really, as far as what that product is going to be, we still have work to do there. We're rapidly closing in on it.

It's just ensuring we have a bit more concrete information such that we can put that out.

[Erin Weir, NDP, Regina—Lewvan, SK]

Even if it is the right policy, can you offer any comment on the minister's decision to announce it to the industry at the CANSEC trade show rather than during her appearance at this committee or before Parliament?

[Lisa Campbell]

It's an interesting evolution as Canada is learning from early budget estimates that may have to be adjusted over time what the best way is to conduct this kind of work, as Mr. Finn said, for long complex projects. The view is becoming that it's better when you have a robust dataset. It's based on actual experience. You have a better sense of costs and the estimates are just more robust.

Plus, the point that I mention is an important one. As the person responsible for federal procurement, I'd rather that industry didn't know exactly what the amount of money was that we had available for something. We may set ceilings to incentivize them to give us their best offer, but really it is more responsible to do it once you're in contract.

[The Chair, Conservative, Tom Lukiwski]

Thank you very much.

We'll go back now to seven-minute rounds.

Mr. Drouin.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you Mr. Chair.

I know the ship's been taking on some water for the past few years, but we're plugging the holes. To get back to the horizontal engineering program plan, when was the contract signed for the HEPP?

[Lisa Campbell]

In 2014.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

It was signed in 2014.

[Lisa Campbell]

Yes.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Is this a task-based contract?

[Lisa Campbell]

That's right.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Can you explain that to us?

[Lisa Campbell]

It was signed in 2014. I should mention that I was in a different job at that time.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Okay.