Government Operations Committee on June 9th, 2016

[Lisa Campbell]

These are all things that I have learned and my colleagues that are there put it in place at the time because, for the reasons Mr. Finn stated, the nature of the build in Vancouver was complex, small runs of different kinds of ships for two government departments over time.

The recommendation at the time was to pull standard processes in all of those builds, develop them at the outset, and make sure that they reappeared in all of those builds, so that things wouldn't be reinvented, so there wouldn't be variances. We would find the most efficient way of doing this work at the outset of the program of build.

As Mr. Hutchinson has said very eloquently, and many of his organization's ships are being built on the west coast, it represents the government approaching this as a program of work rather than project by project.

We have learned from shipbuilding programs around the world that one of the risks, when they treat it as a different, disparate project, is that it creates a mini boom-bust cycle in the yard. We are trying very hard to avoid that, to ensure that we are one client for this yard as much as possible.

Mr. Hutchinson, is there anything you would like to add?

[Jeffery Hutchinson]

The boom-bust cycle exists in both the private and public sectors when you're building ships. Perhaps it's more likely to be exaggerated in the public sector because we do build specialty vessels. We may be looking for military off the shelf, but military off the shelf is not commercial off the shelf. When you build a science vessel for Canadian waters, the requirements for that vessel are going to be different from a science vessel that's plying Caribbean waters, just to take an extreme example.

In a very real example, our science requirements are actually quite different even from the American vessels that are built. When you have all of that upfront engineering work to be done, the challenge is to know your requirements, ensure your engineering achieves those requirements, and that you don't let your requirements creep up. You don't let your ship become bespoke rather than the workhorse that you need.

The HEPP contract helps us smooth out the bumps and drops that all that engineering work would naturally create when you go from a small run of offshore fisheries to oceanographic ships to JSS to a polar. You could have a big spike in work and a big drop because of the front end work that has to be done. This is meant to smooth that out.

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

Based on task-based contracts they report each stage to you and then you sign off on task one and task two. Which task are we at right now?

[RAdm Patrick Finn]

Coming back to your original question, the nature of a task-based contract means that it's not a contract for $40 million of work. It's a ceiling. Every bit of work that's done in there is negotiated on a task-by-task basis and it's the crown saying they want us to do this work. For example, the joint support ship is a mature design that we took off the shelf.

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

Okay.

[RAdm Patrick Finn]

What this allows us to do, because of the horizontal nature, because we're not in contract to build a joint support ship yet as they learn lessons on the offshore fisheries science vessel about certain design components, we can task them right away to look at the joint support ship design in the same area. We can reduce costs and advance some of that work. If any number of tasks are open and they're not consecutive, they can be opened in parallel but they are things that the crown wants done. They're not things that the shipyard says we should give them work to do.

[Lisa Campbell]

Forgive me, to your point, the task formula or way of doing things allows us to control costs. As Mr. Finn said, there's not an infinite amount of money out there. The contract is put in place, and we only use it when we've negotiated and agreed on the work to be done.

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

When was the last time the crown signed off on a task?

[Lisa Campbell]

It would have been in October 2015.

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

That's when Mr. Blaney was in cabinet, I believe. You had the opportunity to ask questions back then and you didn't?

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

Trust me, I did.

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

How much time do I have, Mr. Chair?

[The Chair, Conservative, Tom Lukiwski]

You have about two minutes.

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

I have more questions if you give me your time, Mr. Drouin.

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

I want to jump on the independent review panel for defence acquisition. Why was this created in the first place?

[RAdm Patrick Finn]

Thank you very much for the question.

Through a number of projects, what we were finding—and a bit of perception, a bit of reality here about the nature of some of the military requirements as they were stated and whether they were specifying a specific product, whether they were overstated—at times we would get feedback from industry indicating that what we're asking for in a combined set of requirements is not achievable. One of the difficulties about industry feedback...to be candid, we call it almost like an amorphous mass of industry; a number of players are competing against each other for work. Sometimes they will take on requirements that perhaps don't suit them and their product. We were looking for a means of an arm's-length, upfront look at the military requirements and struck a panel. It's quite a cross-section of people from industry, a former associate deputy minister from PSPC, an ex naval officer and deputy minister, an academic who could take on the role on behalf of our minister of challenging all the high-level mandatory requirements to ensure they were realistic, achievable, defendable, that they stood in policy, that it wasn't the military making policy of its own by just looking at what our allies had.

It is one of the best practices. Before when we talked about reforming defence procurement, it's one of the things that came to the fore in talking to our allies. It's already proven to be very effective for us. Again they report directly to our minister and write exclusively to him about the requirements for all the larger projects, and already we're seeing the benefits and the dividends of an early challenge, which could otherwise happen much later on. It could be at the time of an RFP when all of a sudden industry is pushing back on us, and we've moved forward. That's why it was created and why we're finding it effective today.

[The Chair, Conservative, Tom Lukiwski]

Thank you, Mr. Finn.

Dare I say it? Mr. Blaney, we're into round two. You have seven minutes, please.

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

Thank you very much, Mr. Chair.

I would like to thank my colleague Mr. Drouin. He has given me the opportunity to clarify that the marine strategy is evolving.

When we realized that there was a problem with the timelines for the ships, we decided to increase production capacity, including a third shipyard, in order to meet the needs of National Defence, in this case. Urgent action is needed with respect to these two supply ships since we know that one of them was damaged by fire and the other one has a split hull.

Our fleet is an worrisome state. I invite you, dear members of the government, to act responsibly and to take the necessary steps to use the Canadian Coast Guard and the Royal Canadian Navy to protect our sovereignty in the Arctic.

So the marine strategy is evolving. That is exactly what we are hearing this afternoon. But the initial rules of the game still have to be followed. I would argue that your horizontal engineering plan and the management of the program created a bias in the strategy. So you weren't comparing apples with apples and the shipyards were not on an equal footing when the contract was awarded.

I would like to go back to the timeframes. Ms. Campbell, I would like to focus on non-combat vessels. I have here an impressive list of ships. It mentions the construction of three offshore fisheries science vessels. Can you tell me what progress has been made on the offshore fisheries science vessels?

In our jargon they are the OFSVs, if I'm correct.

[Lisa Campbell]

I see them often when I'm in the shipyard.

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

They are the ones under construction.

[Lisa Campbell]

I will ask my colleague Mr. Hutchinson to answer though because it is his responsibility.

[Jeffery Hutchinson]

The first OFSV, offshore fisheries science vessel, was started in June 2015. It's a ship comprising 37 different blocks—

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

Yes, I know.

When will the first one be ready?

[Jeffery Hutchinson]

The current projected receipt is October 2017.

[Steven Blaney, Conservative, Bellechasse—Les Etchemins—Lévis, QC]

It will be in 2017.

This is the first series of ships. Then we have the OOSVs, which are the Canadian Coast Guard ships. Is that correct?