National Defence Committee on Feb. 20th, 2007

[The Chair, Conservative, Rick Casson]

I call the meeting to order.

We're continuing our study of the procurement process, including the tendering process and the establishment of capability requirements. Today we're pleased to have before us the Honourable Michael Fortier, Minister of Public Works and Government Services.

Sir, I'll let you introduce your support people here. As usual, we'll turn it over to you for your opening comments, and then we'll start with a round of questions.

The floor is yours.

[Michael Fortier, Minister of Public Works and Government Services]

Thank you, Mr. Chair. I'm happy to be here this morning.

My deputy minister, David Marshall, is here with me. So is Terry Williston, who basically runs procurement for us with respect to military matters within PWGSC.

Mr. Chairman, members of the committee, thank you for inviting me to be here. I welcome the opportunity to participate in your study of defence procurement.

First, because it is consistent with the new Government of Canada's commitment to accountability; and second, because the Department of National Defence is one of our most important clients. I am proud to say that meeting the needs of our men and women in uniform is the government's first priority when it comes to procurement.

Let me begin by stating very clearly that our government is committed to fairness, openness, and transparency in the procurement process. These principles are now enshrined in the Federal Accountability Act and are applied to all of my department's procurements, military and otherwise. The application of these principles, together with other measures in the FAA, such as the appointment of an independent procurement ombudsman and the mandatory use of integrity provisions in all contracts, are cornerstones of our efforts to clean up government contracting.

I'm sure the committee is familiar with my department's role as the main procurement arm of the government, so I will not go into detail on that topic. Suffice it to say that we provide contracting and procurement services to more than 100 federal departments and agencies. Our volume of business makes Public Works the largest purchasing agent in the country.

As I have already noted, the Department of National Defence is our biggest client, accounting for approximately half of our business every year. In 2005-2006, for example, PWGSC managed some 24,000 new contracts and contract amendments for DND, with a total value of $7.6 billion. These transactions involved everything from extremely complex contracts for sophisticated weapon systems to purchases of off-the-shelf items. They also included service contracts for everything from operation and maintenance of offshore installations and equipment to basic custodial services at Canadian Forces bases across Canada.

DND's job is to define its needs for military equipment and services, to propose a procurement strategy, and to develop the technical specifications for bidding and bid evaluation. DND also acts as the technical authority for the contract, manages contract expenditures, accepts the goods and services being purchased, and authorizes payment.

My department's role is also well defined, Mr. Chair. Under the Defence Production Act, the Minister of Public Works has exclusive authority to procure military goods. It is our job to develop the final procurement strategy, to prepare solicitation documents, to conduct the tendering process, to do the corporate and financial evaluation and contract negotiation, and to seek approval for and sign the contract. Once this has been done, we have an ongoing role in interpreting contracts and negotiating any amendments that may be required.

In short, while DND has the authority to decide what it needs, the responsibility for contracting for those needs rests with Public Works.

As the committee may know, Canada is one of only a few countries where this separation of roles exists. In both the United States and the United Kingdom, for example, the military does its own procurement.

In Canada, this separation has existed for nearly 70 years. We believe that it is crucial to help ensure not only that the process is fair, but also that it is seen to be fair. By keeping the needs identification and contracting functions separate, the Canadian approach allows for civilian oversight throughout the procurement process. This is key to the way we do business in Canada.

I understand the committee has already heard from other witnesses about some of the major procurement projects that are underway to re-equip the Canadian Forces. So rather than revisit those specific projects, I would like to focus the remainder of my remarks today on efforts that are being made to streamline defence procurement processes.

Historically, it has taken on average more than 15 years from the time an operational deficiency is identified by DND to the contract close-out. Although much of this time is spent deciding what is needed, as opposed to actually procuring the product or service, there is significant room for improvement at all stages of the process.

We have worked in concert with the Department of National Defence to implement a number of initiatives aimed at streamlining the process. Some of these are, for example, moving to a performance-based, best-value, competitive process, wherein industry is provided broad, high-level, mandatory performance criteria and invited to propose solutions; adopting a single point of accountability concept within performance-based procurement, where a single prime contractor is responsible not only for the acquisition of the equipment, but also the long-term, in-service support of that same equipment; and finally, wherever possible, procuring proven off-the-shelf equipment, as opposed to riskier developmental technologies.

All of these initiatives seek to improve the existing procurement process; they do not circumvent it. Our oversight and challenge function remains the same. The basic tenets of fairness, openness, and transparency are, and will continue to be, the cornerstone of our military procurement practices.

As a result of these many improvements, the timeline for major projects, from identification of the need to contract close-out, has been reduced from the historic average of more than fifteen years to under seven years for some of the major procurement projects that are now underway.

We have demonstrated that urgent equipment can be procured quickly and competitively. For example, last summer 50 new armoured patrol vehicles were procured in record time, and these helped improve the safety of our Canadian Forces. An experienced integrated project team conducted a competitive bid solicitation and evaluation process, and awarded the $60 million contract in eight weeks. The vehicles were delivered 75% sooner than it would regularly take, while achieving a savings of $7.2 million over two years.

But more can and must be done to improve military procurement and it is our task to do so. Last year, Prime Minister Harper directed a number of ministers involved with military procurement, including myself, to find ways to streamline the process.

At the official level, an interdepartmental ADM steering committee, chaired by the Treasury Board Secretariat and with representation from key stakeholder departments, has also been working to improve how military needs are defined, how they are contracted, and how the government interacts with industry to deliver goods and services.

Concerted efforts are being deployed by PWGSC and DND to develop and implement an integrated strategy that addresses the recruitment, retention and training challenges facing the federal procurement and project management of communities involved in military procurement.

The rapid action taken in the past year to support our troops in Afghanistan and to acquire major new assets for the Canadian Forces demonstrates that we do have the ability to act quickly. Our challenge is to make speed an integral part of the military procurement process, without compromising the integrity of the process or incurring unacceptable levels of risk.

I want to assure the committee that I am personally committed to developing a stronger, more effective approach to military procurement. Such an approach would ensure continued planning and coordination between the major departments involved in procurement. It would mean continuing our efforts to know the supplier base and supplier capabilities, particularly in Canada. And it would require flexibility, to allow for ongoing adjustments to reflect changes in needs, knowledge and procurement approaches.

In conclusion, Mr. Chair, the bottom line is that we need to find faster, more efficient ways to ensure that the Canadian Forces have the tools they need to do their difficult and often dangerous work, while also achieving value for taxpayers' dollars.

I welcome any suggestions your committee, Mr. Chair, might have on the subject, and I look forward to your questions.

Thank you.

[The Chair, Conservative, Rick Casson]

Thank you, Minister.

We'll begin the opening round with ten minute slots, and we'll start with Mr. Coderre.

[Denis Coderre, Liberal, Bourassa, QC]

Mr. Minister, I am glad to see you, especially as we do not see you often in the House of Commons. It is good to have an opportunity to meet you once in a while.

I have many questions for you. There are two specific points that I want to discuss with you. Of course, I want to discuss standards. Secondly, I want to make sure that you clearly understand what ITAR stands for. In your statements, there seems to be a contradiction between what you said and what is really happening on the ground.

I would like to know whether you participated in the process as the Minister in charge of Public Works and Government Services. Apparently, the Department of National Defence has improved its procurement standards. Did you or one of your representatives participate in the meeting with the Minister of National Defence that was held last year on May 1 to make sure that you have the standards required for purchasing C-17s, for instance?

[Michael Fortier]

I cannot tell you this morning where I was on May 1. We will give you my agenda for that day later on.

[Denis Coderre, Liberal, Bourassa, QC]

Did you have a representative?

[Michael Fortier]

Where were you on May 1?

[Denis Coderre, Liberal, Bourassa, QC]

On May 1, I was preparing questions for you in the House of Commons.

[Michael Fortier]

Certainly, you were not here at 8 o'clock this morning.

[Denis Coderre, Liberal, Bourassa, QC]

I get up at 5:30 every morning, Minister.

This is important because, basically—

I'll say that in English.

In spring 2005 the Canadian Institute of Strategic Studies published a paper called “Implementing Canada’s Defence Policy Statement”. General Hillier says the following:

As to the question of material resources, before I criticize anybody outside the department I'd like to look inside and sort ourselves out. First, there is responsibility for me, as Chief of Defence Staff, and with the advice of the Armed Forces Council, to define for those big transformational equipments what the requirements are. I'm not talking about 15,000 pages of specification. I'm saying when we need a helicopter or aircraft or a fighting vehicle or a ship I am going to articulate four to six key principles--lines in the sand,

—He said “lines in the sand”—

if you will, that will become the driving force in the acquisition process.

Then he said, at a certain point:

I need advice to help shape it, but I'm going to do that. So for a helicopter, I'll say that I need to lift this much, at this altitude, this temperature, over this distance.

Ultimately, this means that you are not doing much as Minister of Public Works and Government Services to improve the transparency of the process. The Defence Chief of Staff, Gen. Hillier, tells you what he wants. Basically, your role is confined to making sure that he gets the equipment he wants.

Is this how you would define your role?

[Michael Fortier]

No, absolutely not. This does not exclude having a client, because the Department of National Defence, Mr. Coderre, is a client of Public Works and Government Services in the same way that Health Canada or Foreign Affairs and International Trade are. My department's role does not consist in determining the client's needs. The best qualified person for determining needs is, of course, the one who is soliciting our services.

You missed my introduction. I introduced Mr. Williston, who is in charge of the military sector at Public Works and Government Services. More than 350 of our public servants work for the Department of National Defence. Both groups are interconnected, but clearly, it is perfectly normal that the client should determine his needs first.

[Denis Coderre, Liberal, Bourassa, QC]

The Defence Chief of Staff, Gen. Hillier, said:

“I am reluctant to buy a paper anything.”

If your role consists in protecting the taxpayer, you are responsible for the transparency of the process and for making sure that funds are properly spent. You have to satisfy the needs of National Defence, but you must also make sure that the funds are properly spent and that the clients have really been consulted to make sure that the process is competitive.

Regardless of the fact that the Liberal Party said that the planes could have been rented rather than purchased, the procurement process exists, because you have had the Airbus A400Ms and the Boeing C-17s for six years. But if you draw a line in the sand during the process, you are, in a way, eliminating competition.

How can a process be competitive if the cards are stacked and we know what the chief wants? Therefore, your role is confined to meeting the client's needs.

[Michael Fortier]

As I said earlier, it makes sense to ask the Department of National Defence to define its needs. Once the needs have been recognized, we establish the procurement process in cooperation with the department.

Mr. Coderre, according to my past working experience with large organizations, I can tell you that this is how the procurement process works.

[Denis Coderre, Liberal, Bourassa, QC]

Mr. Williston came back to testify before the committee, and we remember him. Do you investigate the standards, or do you give the client what he wants?

[Michael Fortier]

Are you speaking to me personally?

[Denis Coderre, Liberal, Bourassa, QC]

No, I'm speaking to the minister.

[Michael Fortier]

Absolutely not. When the minister receives the standards, they have already been set. This is a healthy policy. The people in National Defence determine their needs, and Public Works and Government Services is called into play. As I said in my presentation, Treasury Board also participates in the process.

[Denis Coderre, Liberal, Bourassa, QC]

Mr. Minister, have you ever met companies that want to participate in this competitive process?

[Michael Fortier]

No, never.

[Denis Coderre, Liberal, Bourassa, QC]

Do you make any distinction between your role as a minister for the Montreal region and your roles as the Minister of Public Works and Government Services?

[Michael Fortier]

Yes, I do.

[Denis Coderre, Liberal, Bourassa, QC]

Would it be possible for you to tell these companies that you cannot speak to them as Minister of Public Works and Government Services, but that you can meet them as the minister responsible for the Montreal region?

[Michael Fortier]

First, I would never meet any companies from the military sector, nor any other companies. As I am in charge of procurement, all kinds of companies want to meet me. I never meet them. As the minister for the Montreal region, I would only meet them outside the procurement process, when a contract is awarded or is about to be awarded.

[Denis Coderre, Liberal, Bourassa, QC]

You never met with Airbus?

[Michael Fortier]

I have met with Airbus.