National Defence Committee on April 29th, 2010

[Timothy Page]

We haven't yet seen the government commit at cabinet level to new naval ship production. We're hoping, when they do, that they will have considered not just the shipyard end of the business but also the electronics and the communication and the weapons systems and the real value added that goes into a military vessel as well as the in-service support, because we believe that sourcing parts from onshore domestic suppliers will facilitate your long-term in-service support relationships, reduce costs, and increase predictability.

[Jack Harris, NDP, St. John's East, NL]

On the second question, about a country, is there...?

[David Stapley]

Just briefly, the one we tend to migrate to is Australia. There are many models, but we tend to migrate to Australia. Although their military requirements are somewhat different, living in the South Pacific as opposed to the North Pacific and the North Atlantic, they have many similarities. Their economy is roughly the same size. Their procurement processes, when you get down to contractual terms and conditions, are nearly identical to ours. Their industrial base is very similar to ours in its makeup, which is a combination of domestic companies and subsidiaries of multinationals. And they have an industrial strategy they update regularly to ensure that it's aligned to the needs of the day. That would probably be where we would start, and it's one we looked at very closely when we went through this study.

[Jack Harris, NDP, St. John's East, NL]

Thank you.

Were you talking about policy changes here, or would legislative changes be required?

[David Stapley]

I don't think there's any need for legislative changes whatsoever, sir.

[The Chair, Conservative, Maxime Bernier]

Thank you very much.

Mr. Hawn.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Thank you, Mr. Chair.

Mr. Stapley, I do have to challenge you a little bit on your assessment of our IRB policies. I don't think it's fair to say that it's quantitative only, because every dollar of benefit proposed by somebody is assessed on its value, and there's a formula. Rivets might get a 25¢ on $1 assessed value, and obviously, high tech might get $1 for $1, so it's not strictly $1 of rivets for $1 of airplane or whatever. It is an assessed value. So would you agree that there is a mix of quantity and quality in our IRB program, in fact, in the way the formula is applied?

[David Stapley]

That's a good point. I oversimplified it. We are inching in the right direction. These are relatively recent and positive changes to that policy, but they are positive--banking in multipliers and recognizing that one dollar is worth more than another. I also appreciate that it is harder to measure the qualitative side and that we need to do more.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

That policy has actually been around for quite a long time. I just wanted to clarify that, because it's not quite the same as others, but it is a quantity-quality formula.

The government is considering the establishment of a government industry centre for capability analysis based on Australian and U.K. models. Are you familiar with that? And if that happened, would that go some way to meeting some or part of those recommendations?

[Timothy Page]

Thank you for the question.

Canada's idea for a capability centre is called ACCORD, which is a pre-competitive environment through which they are trying to assess among government, military, and industry where capability exists and where capability will be required in a 10-year to 15-year timeframe.

CADSI has been involved with and encouraging of the government to develop this type of capacity, this type of capability, for the last three years. We were helpful in providing a forum for the Australian and the British models to be exposed to government and CF and industry over the last three years. We think it's a good step in the right direction. We also believe it is part of but not a replacement for a defence industrial strategy.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

We talk about a single agency to do defence procurement. Obviously there is a lot of procurement across all kinds of government departments, and not just the Department of National Defence. If there were a single agency for defence procurement it would require people with the various skill sets that are currently in PWGSC, currently in Industry Canada, and probably in other departments. So it's easy to say that we should have that, but I think it's hard to describe it. And there would be a lot of competition for the same kinds of skill sets, the same kinds of people who would presumably have to come from PWGSC or come from Industry Canada to man whatever that agency looked like. Do you have any sort of conceptual description from the industrial point of view of what that might look like?

[Timothy Page]

We were conscious during the consultation of a few things. First, there was the number of times that industry remarked on how inconsistent the procurement process was. On one program they could be operating by set of rules A, and on a separate procurement of a similar nature they'd be operating on a set of processes B, and with different people with different levels of understanding and different levels of experience. So I appreciate your question as to the melding of that expertise and how best to do that.

And we were trying to accurately reflect the sentiment that we heard on the road. We understand that machinery of government changes are incredibly time-consuming and require a whole lot of energy. We would hate to see all of the government's attention being drawn to a consideration of that recommendation when we believe there is a lot of low-hanging fruit from the report that would make a substantive improvement to the way the system is operating, and the benefits that would accrue to the Canadian economy as a consequence.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

And that's my point. That would be a huge restructuring of the machinery of government, because it's not just defence procurement, unless we have one procurement agency. But I'm not sure how that would work, because other departments procure things, so there would presumably still have to be a PWGSC function for them and an Industry Canada function for them. So we'd be building a monster over here and we'd still have the same monsters over there.

[Timothy Page]

The key for us was that there be a whole-of-government approach to the consideration of defence procurement such that all of the different points of light that are resident within the government--whether it be from an R and D perspective or whether it be from an export support perspective, or whether it be from Advantage Canada, or from S and T strategies within DND or within Industry Canada--that are out there have some connectivity, they're aligned to something, and that there be an accountability for how those are working effectively. And that's where we ended up.

But the key, I repeat, is to look at this challenge of leveraging defence spending in order to not only get the kit, which is primordial, but to do so in a way that builds capability and capacity in key sectors of the Canadian economy.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Yes, I think we certainly all agree on that.

DND is also developing a vendor performance assessment policy and the intention is to complement a revised Public Works policy on vendor assessment. Have you had any input to that? Do you know what I'm talking about?

[David Stapley]

Yes, we're certainly aware of that, and would argue that it's a good thing to do. Any time we--

[Laurie Hawn, Conservative, Edmonton Centre, AB]

As vendors, yes.

[David Stapley]

Any time we can measure performance, either on the customer side or the supplier side, it can only benefit the system as a whole. So yes, it's a--

[Laurie Hawn, Conservative, Edmonton Centre, AB]

And are you having active input into that process as it develops?

[David Stapley]

We have been asked from time to time, through various venues, to comment on the process and the parameters for measuring progress, and so on. One of the challenges is where do you start to measure--before you start the program, when you're complete, when you have a problem, after you have a problem? So it's not an easy model for the government folks to put together. But I think it's a very positive thing to get value for money.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Probably the answer to where you measure is “all of the above”, especially if you have different criteria.

[David Stapley]

I think you're right, at the end of the day, practically speaking.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

You talked about risk-sharing, and that goes to Public Works terms and conditions. This may not be a short answer, or this might be a short answer. How much of a frustration is that, or have the terms and conditions been in terms of risk-sharing between the government and vendors?

[Janet Thorsteinson]

Risk sharing was something I think I heard in the consultations across the country in every location we went to. It is more profound than just the terms and conditions, although people have strong opinions on things like unlimited indemnification, where they are simply unable, unwilling.... I think it is inappropriate that they should risk their whole company in order to get a contract.

In many cases the Canadian government is not getting the competition it could get because people are declining to bid. Secondly, if they do bid, they inevitably have to build the cost of accepting that risk within their price. The government then pays for that risk. If it's in an area where the government might be better positioned to absorb that risk across their whole budget-sharing process, I think the government is wasting money. Things like foreign currency exchange fluctuations might be one area to look at.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Thank you.