National Defence Committee on Feb. 8th, 2007

[The Chair, Conservative, Rick Casson]

Mr. Blaney, we're out of time.

Moving on, we go over to Mr. Bouchard now for five minutes, then to the government, and then to Mr. Cannis.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chairman.

Deputy Minister, Generals, welcome.

As I listened to you speak, it became clear to me that procurement is a critical activity for the Department of National Defence.

My first question relates to the procurement process. You talked about the whole process as basically being complex and costly, adding that it results in long delays. The new procurement process is efficient, effective, streamlined and quicker.

Could you give us some examples of procurement turnaround times? For example, under the old system, it seems the process would take five years for one type of equipment and two years for another. I even heard the Minister say, when he appeared before the Committee, that it took 15 years. Under the new system, how much time will you be saving compared to the old one?

[Dan Ross]

Yes, I will try. Let me give you a very old example that actually ended in a performance-based process.

In the 1980s, we were trying to buy a low-level air defence system for our forces in Germany. Our engineers had tried to write a specification on how to build an air defence system of missiles, guns, command and control, and communications--with no success.

There were many firms in the world that delivered air defence missiles, guns, and so on.

In 1985, a new project manager said, let's just ask industry to propose how they would defend a brigade in Germany. We went out for the first time ever—and I was a very young major, posted for the first time to international defence headquarters—and stated the operational requirement: to shoot down how many aircraft in how many minutes, day and night, in the German brigade area.

We received 13 comprehensive proposals from industry. They evaluated those primarily on their operational effectiveness, on their industrial regional benefits, on price, and on in-service support. The operational effect was weighted higher than anything else.

That entire process, from the point when we left the technical base and the stage when we'd tried to design it ourselves, which had gone on for about eight years, to the performance-based one, happened in two years, and we had deliveries a year after that.

In my view, that system is still today one of the best in the world. We have maintenance problems now after 20 years, but it does work.

We didn't do it again after the low-level defence in the intervening 20 years. We are doing it now for tactical airlift.

We did it with Nyala to buy the armoured vehicles for Afghanistan, for example. We went out and said, these are our high-level requirements; we do need them urgently.

So the delivery schedule was a key performance requirement. In fact, we only had one company, the South African company, that had any in production. There was just nothing else in production.

We delivered 75 Nyala in one year, and we saved our soldiers' lives.

There are lots of examples. There is one good old example, and I think there are lots of good new examples coming.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you.

In your opening statement, you did not refer to the “Canada First” initiative. But I have a document in front of me that talks about the “Canada First” defence strategy. In fact, that is the process we are currently reviewing.

What kind of weight do you give to Canadian suppliers in your studies and analyses? Do they figure prominently?

[MGen M.J. Ward]

Perhaps I could correct a misperception. The “Canada first” defence strategy actually talks more about Canada's defence and security needs than it does about industry requirements.

Certainly we see in the discussion of the policy base the requirement to look for opportunities that enable Canadians to benefit.

So part of the rationale that supports capabilities, which we would see modernizing and replacing in coming years, would offer opportunities for Canadian companies to bid. It's not that we're directing it that way. It's really just a combination of understanding that we do have a defence and security partnership with our industries, where we see advantages to keeping that at home.

[The Chair, Conservative, Rick Casson]

Thank you.

Thank you, Mr. Bouchard.

I'm going to move over to Mr. Calkins now. I know he is just burning to ask a question about the Nyalas. Hopefully he'll pursue that.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

My thunder has been stolen a bit already.

[Voices]

Oh, oh!

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Nothing creates efficiency like necessity. I know that in the early part of the Canadian Forces deployment in Afghanistan there were some issues regarding the troops using the Iltis jeep. We had a few incidents that were unfortunate. I don't want to belabour those, but all of a sudden it seemed like out of nowhere the Canadian Forces could acquire the Nyala vehicle and deploy it in relatively short order, which was contrary to the discussions of the day that military procurement took 15 years. Frankly, I found this a little interesting.

I go back to your testimony, Mr. Ross. There was a lot of focus on the process and not on the result, and it seems like we're having processes just for the sake of having processes. Could you please elaborate a bit more on how quickly we could turn around that Nyala purchase and get it in theatre?

I'd like to know, was the capability plan already there? Were the definitional requirements already there, and was it simply a matter of departmental approval? Or did we have to go back and reassess the capabilities and needs? Could you just elaborate on what the differences might have been?

[MGen M.J. Ward]

What I'd like to help clarify is that in fact it wasn't just the Iltis to the Nyala. We also went through an intermediate round with the Mercedes-Benz G wagon.

For some years, the army had identified as one of its requirements the ability to increase the soldier's survivability, increase the protection for the vehicles that our troops had been using in a succession of operations.

We first got the Nyala in Kosovo, when I was in command there, and that was because the mine threat was very high. Certainly current operations have much more significant directed threats against troops in softer vehicles.

We did not have the ability to replace the Iltis quickly enough, as we met the first operational requirement in Afghanistan. When we lost our first two soldiers in the IED strike in 2002, we took a very quick look at how we could up-armour the G wagon, which was coming into service, and we thought that would be sufficient for the time being.

We then began to find, certainly as a result of the IED strike on January 15, 2006, that the G wagon was not sufficient for the types of threats we were facing, and we had been looking at the Nyala as a longer-term solution.

So we already had significant experience with the Nyala in a previous operation in Kosovo. We realized it was in the spectrum of the type of protection that we would need for this particular generation of adversaries.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

I'd like you to expand further on something else here.

At what point during a procurement process do the Canadian Forces decide that we're going to start training our personnel to be ready, should we receive the equipment? Is it done after departmental approval and the funding has been allocated? Do we take the chance and start working with our allies or the supplier? Do we bring in prototypes or versions of the vehicle we're looking at to start training people up for the equipment we're thinking of? How does that happen?

[Dan Ross]

It really can't start until the procurement process has determined a winner.

For example, there are six major bidders on our heavy armoured vehicle for Afghanistan, and that request for proposal is on the street. I can't go and have our maintainers start training on one of those six trucks. We'll have to see the results of the evaluation, which will be done in March.

When that has been announced, we can start dealing with it, both on the terms and conditions of the contract. And because it's so urgent for Afghanistan, in the next rotation to Afghanistan, maintainers and drivers would probably be deployed at that point to start training for it. For example, if it's a 'J' model Hercules, and there was no other compliant respondent to the SOIQ process, we are now in discussions with Lockheed Martin on C-130Js. The air force has deployed exchange officers and loadmasters to the United States Air Force to work on C-130Js. Mind you, we already have exchange officers who fly C-130Js, so we have a link for it already, because we have exchange officers in air forces around the world.

But normally you have to have selected the winning solution, in whatever appropriate process, before you can start that.

[The Chair, Conservative, Rick Casson]

Thanks very much, Mr. Calkins.

We move over to Mr. Cannis and then back to Ms. Gallant.

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you, Mr. Chair.

Mr. Ross, General Ward, and General Hincke, thank you for coming before the committee and sharing your experience, your knowledge, and your suggestions.

I would like to pick up on what my colleague, Mr. Coderre, asked about ITAR earlier.

As you said, Mr. Ross, there are negotiations unfolding as we speak with respect to ITAR. Could you briefly elaborate? Is that strictly with respect to DND, or are there negotiations that would help alleviate other industries? Just briefly give us whatever you can.

[Dan Ross]

Yes. Obviously it is still not approved by government, nor by the State Department. We are working with the Department of Foreign Affairs on the whole broader requirement.

From a defence point of view, it is critical that our key in-service support companies have that dual national issue resolved. Most specifically to me, I need my project management offices to access that key data, because I can't write a specification to put in the contract. So there are ITAR issues there with our dual nationals.

We are focusing on DND's requirements internally. Our next layer out with in-service support service providers is really critical to us. And the Department of Foreign Affairs is looking at the dimension of how.

If we come to a set of criteria that is acceptable to the State Department, how can that be applied to industries who want to participate in arms trade with the United States? My sense is that if we come to a set of criteria, I probably will be able to do that faster within my own military and civilian staff. If we reach this agreement, eventually industry will have to reach those same standards as well. I believe it is achievable, and I believe we are making progress.

[John Cannis, Liberal, Scarborough Centre, ON]

I'm sure we'll be following that closely in the future.

I believe, Mr. Ross, that you mentioned earlier—and I know General Hillier also confirmed this the other day before committee—that the process to put specs together really is a two- or three-year period. I believe—and correct me if I'm wrong—the spec writing commenced post-2005 budget and that indeed these funds are available. Now they've increased a little because the needs have changed or increased. Am I correct in assuming that?

[Dan Ross]

I'm not sure what spec writing you are referring to.

[John Cannis, Liberal, Scarborough Centre, ON]

Oh, I shouldn't say spec writing; it's the requirement to upgrade, improve, purchase new equipment, etc., which commenced about two and a half years ago.

[Dan Ross]

It would be fair to say that the requirements process has been ongoing for many years for Hercules and other projects.

[John Cannis, Liberal, Scarborough Centre, ON]

But we did have the ability budget-wise to....

I see General Hincke nodding his head and I see General Ward nodding his head, so I assume the response is yes.

[Dan Ross]

That's right.

[John Cannis, Liberal, Scarborough Centre, ON]

Thank you for saying that. I want to go back, for the sake of transparency.

I want to thank you personally, Mr. Ross, for your candid responses. This is not a political issue. As General Hincke, General Ward, and you, as a former military man...this is an issue of making sure the right equipment is available. Were there obstacles in the past in how procurement was brought forth? As you said earlier, of course there were. Now, we're changing.

General Hillier was also kind enough...and I appreciate your candid response. You were asked a question by a member of the committee earlier and you rebutted very honestly in saying no, that is not the case.

If you recall, the start of a review on procurement—and I want to state this for the record, Mr. Chair, because what we are trying to do here is very important—really commenced post-2005 budget.

The previous Liberal government was more than receptive. So the statement made earlier, that there is some suspicion, some investigation, etc., I think we have to take totally off the record. That being the case, the moneys that first came forward in the 2005 budget have now very much appreciated, and they have also increased under this new government. So what would be the case? What we really want to do, as my colleague Mr. Martin said, looking at other models and how we make it more effective, more efficient, and streamlined, nobody here wants to question.

I want to just close by asking this question. You mentioned the Department of Public Works and CDS. Yesterday, the response from the minister--and we don't want to waste the minister's time--was to ask Public Works, ask Industry. Really, it is the Department of Public Works.

Would you just say yes or no, because the buzzer is going?

[Dan Ross]

It's a team. We do everything very closely together, working with our colleagues in industry and in the secretariat as well. It is not just that they look after the contracting and we look after the parts of the process. They clearly are the contracting authority for the Government of Canada. They are, but it is a team every day.

[The Chair, Conservative, Rick Casson]

Thank you very much. We'll go to Ms. Gallant and then over to Mr. McGuire to finish the second round.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you, Mr. Chair, and, through you, the witnesses.

Are there any policies in place on the part of the military to dispel the appearance that contracts can be made for any other reason than that the product was best suited for the military's requirement? Is there no way that an individual can influence the procurement process so much that that individual would get the product from the company that he or she wanted?