National Defence Committee on Feb. 20th, 2007

[Michael Fortier]

Yes.

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

Do you believe that the procurement process for the C-17 planes was competitive?

[Michael Fortier]

Yes.

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

What are you basing yourself on when you say that?

[Michael Fortier]

The Department of Defence established the criteria for the plane, we issued a contract award notice and after that, we determined with them that there was only one manufacturer, to our knowledge, who could manufacture this equipment to the established specifications.

As I said a little earlier, Mr. Bouchard, I doubled the length of time usually given for the contract award notice to make sure that all manufacturers had enough time to respond. Some replied that they did not believe that their equipment met the standards. An interdepartmental committee was struck and assessed the submissions from the other manufacturers. It was concluded that only the Globemaster III C-17 met the criteria outlined in the contract award notice.

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

The process resulted in the government determining that there was only one potential supplier: Boeing. You mentioned an interdepartmental task force. Could this group have possibly concluded that no supplier met the requirements?

[Michael Fortier]

No. Are you talking about new suppliers? As the contract award notice, we announced our intent to negotiate with only one supplier, that we had already identified. That meant that at least one supplier met the criteria. The contract award notice stipulated this. We believed that "X" complied with the criteria. If other manufacturers, after reading these criteria, felt that their equipment met the requirements, they could have indicated this to us.

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

There is only one supplier for the equipment. Under such circumstances, what is the negotiating power? How is the price of this equipment established? How can a country manage to pay 50% more than another country for the same equipment?

[Michael Fortier]

Could you repeat your first question?

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

I am talking about the ability to negotiate when there is only one supplier. Under such circumstances, how can the officials negotiate?

[Michael Fortier]

This matter was already discussed with Mr. Hiebert. You are right. Fortunately, in this case, the officials at Public Works and Government Services Canada did excellent work.

In answer to your third question, we paid approximately 8% less than the price suggested by Boeing. In addition, we believe that we paid less for this equipment than just about every other country. I would say that we were not taken for a ride, quite the opposite. I think that we got a very good deal for the taxpayers and I'm very proud of the team led by Mr. Williston.

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

I have one other question. Does this contract include a termination or cancellation clause?

[Michael Fortier]

A cancellation clause—

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

What are the provisions for cancellation?

[The Chair, Conservative, Rick Casson]

Does anybody have a response?

[Terry Williston]

Yes, I do.

As in most contracts, there's always the opportunity for cancellation. We don't plan, hopefully, to be cancelling a contract, but there is a termination-for-convenience article that will protect the rights of Canada should that situation present itself.

[The Chair, Conservative, Rick Casson]

Thank you.

It is over to the government, and then back over to the official opposition.

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

I'll be sharing my time with Mr. Calkins, if there's any left.

So far, in our study on procurement, the testimony has indicated that there has been no political interference in the contracts for the planes we've been discussing.

I'd like to focus for a minute on an incident in which there were other allegations of political interference, which so far have cost the taxpayers half a billion dollars, and now may cost the taxpayers another billion dollars, and that was the cancellation of the EH-101 contract.

It's no secret that the opposition would prefer to rely on the benevolence of other countries for our strategic lift, and quite possibly pay exorbitant amounts to do so. What I'd like know is exactly what stage of the purchase of the C-17 we are at. If the opposition does trigger another election, is it possible that this contract would be cancelled and we would face hundreds of millions of dollars in fines once again?

[Michael Fortier]

I will tell you--I guess I shouldn't say as a lawyer, because I'm not practising law any more--that this is an enforceable contract. We have agreed to buy and they have agreed to sell. When these aircraft are ready to be delivered, we have to show up with the cheque. If we don't show up with the cheque, and if they don't show up with the aircraft, there are going to be some very strong discussions between the two parties. We expect the planes to be there, and I think they expect us to show up with the cheque.

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

Thank you. I'll share the rest of my time with Mr. Calkins.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

Thank you, Senator, for coming before the committee today. I'm going to hopefully get some questions in the second round.

I'd like to start off with a little bit about the process here. You said that you were moving to a performance-based, best-value, competitive process. Others have argued that perhaps a lowest price should be the preferred method. I'm just wondering, for best value, if that is a points-price ratio you are using, or are you using a weighting system? How is that working?

[Michael Fortier]

I'll let Terry take you through this. But generally, what I was saying earlier was that, particularly with military assets, we need to collapse the number of specs we have in contracts. It was getting out of control. We need to focus on the essentials. I don't think anybody cares if the green light indicating that something's going wrong in the back of the plane is on the right side of the cockpit or on the left side of the cockpit.

[Blaine Calkins, Conservative, Wetaskiwin, AB]

I agree.

[Michael Fortier]

We need to focus on macro issues, which is what we've done, and the C-17 is a good example of bringing it down to fewer than ten specs.

I'll let Terry complement the answer.

[Terry Williston]

Generally, in life, none of us wears the cheapest suit or uses the cheapest pen or lives in the cheapest house available. We've all determined that there's some combination of characteristics that provides us with the best value for the way we purchase the goods and services we buy. In the government, we try to do exactly the same thing. All the methods you've talked about are used--weighting various capabilities that the government is looking for, or perhaps using formulas that weigh that technical evaluation against price--so that at the end of the day we can determine which of the goods or services being offered provides the best value to the taxpayers of Canada.