Government Operations Committee on March 29th, 2022

[The Chair (Mr. Robert Kitchen (Souris—Moose Mountain, CPC)), Conservative, Robert Gordon Kitchen]

I call the meeting to order.

Welcome to meeting number 11 of the House of Commons Standing Committee on Government Operations and Estimates.

Today, the committee will be continuing its studies of air defence procurement projects and the national shipbuilding strategy. The committee will be considering each study separately. In order to keep the studies separate, we have asked each witness to make two statements.

To the witnesses, please remember we're asking for a three-minute statement, and then we'll go to questions.

In the first hour, the committee will be studying air defence procurement projects. Each witness will make an opening statement at the start of the first hour, followed by questions. In the second hour, the committee will be studying the national shipbuilding strategy, and the same witnesses will make another opening statement at the start of the second hour. After that, the rest of the time will be taken up by members' questions.

Today’s meeting is taking place in a hybrid format, pursuant to the House order of November 25, 2021. Members are attending in person in the room and remotely via Zoom.

Regarding the speaking list, the committee clerk and I will do the best we can to maintain a consolidated order of speaking for all members, whether participating virtually or in person. I would like to take this opportunity to remind all participants at this meeting that screenshots or taking photos of your screen is not permitted.

Given the ongoing pandemic situation and in light of the recommendations from public health authorities, as well as the directive of the Board of Internal Economy on October 19, 2021, to remain healthy and safe, the following is recommended. Anyone with symptoms should participate by Zoom, and not attend the meeting in person. Everyone must maintain two-metre physical distancing, whether seated or standing. Everyone must wear a non-medical mask when circulating in the room, and it is recommended in the strongest possible terms that members wear their masks at all times, including when seated. Non-medical masks, which provide better clarity over cloth masks, are available in the room. Everyone present must maintain proper hand hygiene by using the hand sanitizer at the room entrance. Committee rooms are cleaned before and after each meeting. To maintain this, everyone is encouraged to clean the surfaces of their desk, their chair and their microphone with the provided disinfectant wipes when vacating or taking a seat.

As the chair, I will be enforcing these measures for the duration of the meeting, and I thank members in advance for their co-operation.

I would like to welcome the witnesses here today and invite them to make their first opening statements.

We will start with Mr. Leuprecht.

[Dr. Christian Leuprecht, Professor, Royal Military College, Queen’s University, As an Individual]

Good afternoon. Thank you for your invitation.

I will speak in both official languages.

My remarks will be in English.

My opening remarks on defence procurement highlight the myriad needlessly onerous rules that err exceedingly on the side of transparency and accountability instead of making good on getting the military the equipment that it needs. There is a trade-off between effects—that is, getting the troops the infrastructure and equipment they need—and the transparency to risk-manage the procurement process, assert political control and avoid an aggrieved bidder crying foul.

Without a new significant influx of money and with no immediate prospect for more staff, Parliament and government must look seriously at reducing the exceptionally onerous procedures that plague procurement and staffing processes. There are two options: either generate more staff and money, or simplify procedures that consume vast amounts of time and staff resources.

Both the Liberal government under Chrétien and the Conservative government under Harper tried to tackle the bureaucratic hurdles, but the red tape action teams got bogged down in red tape and never accomplished anything.

The CAF maintains 25 bases, wings and stations across the country. It has the largest real estate portfolio in the Government of Canada, with 10 million square metres of floor space, 21,000 buildings, 2.2 million hectares of land and 13,500 works that include roads, sewers and so forth. Due to the persistent lack of staff and financial resources, there's a consistent risk of failure. As a result, DND is responding to crises that cause costs to increase exponentially over what it would have cost to do proactive maintenance had DND been allocated the money to do so.

These are constraints imposed by central agencies, often at the behest of Parliament. DND returned $1.2 billion last fiscal year, which was about 5% of its overall budget allocation. That is an indication of the mismatch between funding and procedures. In other words, an increase in funding will not necessarily fix the CAF's procurement woes.

This committee should study in depth the copious and onerous procurement requirements imposed on DND and the CAF, to examine how these can be streamlined and aligned to ensure that the procedures that enable funding allocations are more optimally matched with the effects that Parliament and government intend to generate.

The committee might also look at alternative procurement models. One is to have a dedicated minister of defence industry, as in Australia, to ensure better political attention and expertise. It is necessarily spread thin for a single minister who is responsible for the single largest organizational employer in Canada, which makes up about a quarter of the federal government's direct spending.

The committee should also examine alternative procurement models, such as the Swiss approach of voting a budget envelope for defence on a particular issue, to that particular effect, but then defer to defence and government procedural mechanisms to decide on what effect to procure with that envelope.

Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Leuprecht.

We'll go to Mr. Perry.

[David Perry, President, Canadian Global Affairs Institute, As an Individual]

Thank you very much, Mr. Chair and members, for the invitation to appear today to talk about some of Canada's air defence procurements.

I want to start by noting that we've made some good and noticeable progress lately on several of these. Most recently, yesterday, for the second time in 12 years, we announced that we'll buy the F-35. I hope that this time the announcement actually results in the purchase of new fighter aircraft.

Beyond that, and some other projects related to remotely piloted air systems, surveillance aircraft and aerial refuelling and transport planes, there's momentum behind some of our procurements. I hope the Minister of National Defence's public statements about the modernization of continental defence, which she says will start shortly, will further enhance our air defences if those move forward.

While this will all strengthen our defence, collectively, I think these initiatives could benefit from three improvements: greater prioritization of defence procurement, an increase in our procurement system’s capacity, and a more rigorous approach to scheduling.

Given the complexity of defence procurement and the multiple competing government objectives that have to be reconciled within it, procurements will move most quickly when governments clearly care about the speed of equipment delivery and make it a high priority. When that has been the case, major procurements have moved quickly, such as when we acquired transport aircraft and equipment for the war in Afghanistan in the late 2000s. Absent clear prioritization from the Prime Minister and cabinet, down into the bureaucracy and military, however, projects will move more slowly than they could otherwise. At present, it does not appear that defence procurement is a key Government of Canada priority.

The capacity of the procurement system also needs to be better calibrated with the volume of procurement projects that Canada is currently pursuing. The procurement workforce was downsized during a program review in the 1990s and has never been fully rebuilt to the same size. To cite one example, the materiel group at DND is only a bit more than half as big as it was at the end of the 1990s, despite working with roughly the same amount of money—adjusted for inflation today—as it did then. This mismatch between capacity and workload will be a key limiting factor in any attempt to accelerate the pace of air defence procurement projects or increase defence spending, including through the modernization of continental defence.

Finally, our procurement efforts could be strengthened by improving the rigour with which defence procurement project schedules are established. Too many of them appear to be set simply by starting from the date a new piece of equipment is desired and then working backwards, without any regard for the actual feasibility of completing the required work in the allotted time frame. Failing to account for the expected complexity and risk involved in a project, and the corresponding time it takes to complete, dooms projects to fail to live up to expectations from the outset and virtually guarantees that their budgets will be eroded by the impact of inflation over time.

Thank you. I look forward to questions.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Perry.

Now we'll go to Mr. Williams for three minutes.

[Alan Williams, President, Williams Group, As an Individual]

Thanks, Mr. Chair. It's a pleasure to be here to talk to you about these matters.

I'd like to begin by making a comment about the tragedy currently unfolding in Ukraine. We have a moral obligation to step forward and do our part in addressing the violence taking place now. In all likelihood, going forward we'll find ourselves in a similar position elsewhere in the world. To do our part, though, we can't continue to squander precious time and resources through abhorrent procurement practices, which are on full display in our attempts to acquire new fighter jets and new ships.

I'd like to talk for a moment or two about how to fix defence procurement, and then give some comments on the recent decision to acquire the F-35s.

For over a decade, I've been a fervent advocate of the need to establish one point of accountability. Christian mentioned this in his comments. Quite simply, there is excessive overlap and duplication between the roles of the Minister of National Defence and the Minister of Public Services and Procurement in Canada. Unless and until one minister is placed in charge of defence procurement, it will never be as efficient or as effective as it could be.

Among our close allies, Canada stands alone with this system of dispersed accountability. The United States Secretary of Defence is accountable for military procurement. In the United Kingdom, the responsibility falls to the Secretary of State for Defence. In Australia, defence procurement is under the authority of the defence materiel organization, which is accountable to the Minister for Defence.

In December 2019, I was encouraged that the government was finally going to act on this recommendation. The mandate letters at the time for the Minister of National Defence and the Minister of Public Services and Procurement included a directive to bring forward options for the creation of a new, single entity, “defence procurement Canada”. Sadly, my hopes were dashed when the December 2021 mandate letters to these two ministers no longer referenced this matter.

I recognize that addressing this governance issue will not solve all the procurement problems, but it is a necessary first step. The benefits of creating a single procurement organization go beyond strengthening accountability. First, the process would also be streamlined. At the present time, the process only moves as fast as the slower of the two organizations permits. The result is that many months can be lost due to briefings and approvals through multiple organizations.

Second, savings will emerge from the elimination of overhead and duplication of functions through the merging of PSPC and DND resources. These savings can help mitigate the impact of the significant staff cutbacks over the past two decades.

Third, until one minister is vested with overall accountability for defence procurement, it will be difficult, if not impossible, to introduce system-wide performance measures.

With respect to performance measures, famed management guru Peter Drucker once said, “Any government, whether that of a company or of a nation, degenerates into mediocrity and malperformance if it is not clearly accountable for results”. Without performance measures open to public scrutiny, performance suffers. We need indicators that, at a minimum, measure cost and timeliness. If costs are rising, why are they rising? If delays are occurring, where in the process are the bottlenecks? It is impossible to make improvements if we don't have a clear understanding as to where the problems lie.

Finally, we need a capital plan with the following attributes. First, it must be a fully costed, long-term plan. The Department of National Defence's defence investment plan is a weak and inadequate attempt to meet this need. It lacks sufficient granularity to be effective. The costing debacle of the CSC proves this point. Unlike the defence investment plan, the full life-cycle costs for each project should be displayed over a 30-year period and mapped against the projected available funds year by year.

Second, it requires cabinet approval. Cabinet approval makes it more difficult for governments to change priorities for partisan political purposes.

Third, it needs to be made public. The benefits of such a public plan would be far-reaching. From a public information standpoint, all Canadians would have a better understanding of what...and how the money is being spent. Parliamentary committees like yours could more readily provide rigorous oversight over these billions of dollars of expenditures.

Lastly, knowing that this plan is less likely to be modified, potential suppliers will more readily take the necessary time to position themselves in an optimum position to compete at the appropriate time.

With regard to the recent announcement, I do have a couple of concerns—

[The Chair, Conservative, Robert Gordon Kitchen]

Excuse me. I apologize for interrupting you, Mr. Williams.

Unfortunately, due to time, perhaps you can get what you're trying to say there in some of your answers.

[Alan Williams]

Yes. Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

We will now start with our first round.

Let's go with Mr. Paul-Hus for six minutes.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you, Mr. Chair.

Good afternoon, gentlemen. Thank you for joining us.

My first question is about the news we heard yesterday on the pre-selection of the F-35. What we understood is that the F-35 has not really been officially selected and that what the government calls “dialogues” must still be held. It is being said that “dialogues” with Lockheed Martin could last up to another seven months.

Mr. Williams, what is your understanding of what those “dialogues” are?

[Alan Williams]

In fact, I was going to comment that I have two big concerns about the announcement.

The first is that simply making statements that it's $19 billion is inadequate. It's important for the committee to know: Is this the acquisition cost? Is this the long-term support cost, the long-term maintenance cost? We have seen over and over again cost estimates that are unbelievably low, which misleads both parliamentary committees and the public.

The second is that I was quite shocked, frankly, to hear that negotiations will be taking seven-plus months. Typically, when you run a competition, all the terms and conditions are specified in that proposal, and to respond you have to have met all of the conditions. Seven months is an awfully long time, and I am concerned when I hear that kind of information.

Interestingly enough, when we purchased the Cormorants, it took three-plus months. When we bought the maritime helicopter, it took about four months. That, in my experience, is typical of the amount of time it takes.

There shouldn't be a lot of nuance, not if they responded favourably and appropriately to all the terms and conditions.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

In yesterday's announcement, assistant deputy minister Mr. Page, who holds your former position, said that, if any sticking points arose in the dialogues, the government would choose Saab's Gripen. So there are two options. If Lockheed Martin's F-35 is not selected, the other model will be.

However, if we open the dialogue with Saab and it does not work out, will we end up with nothing? That is how we currently understand the situation.

Are there any other options we are not seeing?

[Alan Williams]

I don't know if the question is directed to me. I'm having a very difficult time as I'm getting the English translation over the French simultaneously. It's very difficult to disassociate the two to understand the question. I don't know how to turn off the French and hear only the English.

I don't know if that's only my problem or if it's a problem for other people too.

[The Chair, Conservative, Robert Gordon Kitchen]

We're going to check this out, so bear with us for a second, Mr. Williams.

[The Clerk of the Committee, Mr. Paul Cardegna]

Mr. Williams, this is the clerk of the committee.

We are not indicating any problems on our side in terms of the translation. It's coming through the right channels. I wonder what you've selected, if you've selected either the English or the French translation or the floor channel.

[Alan Williams]

Okay. That might be better now, Chair. I think I can hear better, so I apologize.

Perhaps the question could be replayed, if it was directed to me.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Could we start over or do you want us to do a test first? Is it a problem with interpretation?

[Alan Williams]

I can hear the English, but I'm still hearing the French at the same time.

[The Clerk]

As you've logged in through the web, there is nothing we can do. The problem doesn't appear to be coming from our side, Mr. Williams. It appears to be coming from the web side.

[Alan Williams]

Okay.

[The Clerk]

I'm not quite sure how to rectify that, unfortunately.

[Alan Williams]

Okay. If the question is going to be in French, I'll try to hear it in French.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

I will ask the question in English. I will try to help you.

My question is about the dialogue with Lockheed Martin. After six or seven months, if the government is not happy with the answer we receive from them.... Yesterday, assistant deputy minister Page said that he would switch to Saab. What will happen if the dialogue with Saab doesn't work? This is the question.

[Alan Williams]

First of all, I have to tell you, the odds of it not working out are infinitely small. You don't go to this stage, so I wouldn't put a high likelihood of that happening. There is too much money at stake, and the terms and conditions are so specified that I'd be shocked if it wasn't given to Lockheed Martin. Frankly, it should be given a lot sooner, if the thing is done right.

From a process standpoint, you're quite right. The government has the option of going to the other successful bidder, in terms of not being ruled non-compliant. There were two bids, and it can see if it can work out a deal with that company. If it can't, it has to start from scratch.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you. I have another question for you.

In your presentation, you said that we can't continue to waste precious resources and time.

In French, it is a matter of “pratiques d'approvisionnement odieuses”. You used the word “odieuses”, which means abhorrent.

That word in French is very strong.

What do you mean by that?