National Defence Committee on Oct. 7th, 2010

[Claude Bachand, Bloc, Saint-Jean, QC]

Thank you, Mr. Chair.

I would like to welcome Mr. Williams, with whom I have had epic discussions at this committee. Mr. Williams is very competent and capable of defending himself. I think that is why he likes appearing before this committee. To him, facing off with parliamentarians is a great challenge.

Mr. Williams, I am just about to start proceedings against you on a copyright issue. When you made your presentation earlier, you skipped over some sections of your text. That was probably because you wanted to stay within the time limits. You skipped a paragraph that I think is very important, I will read it to you in French:

It is like going to a car dealership to lease a car for 5 years. The salesman says there is a $1,000 down payment and a monthly charge that he cannot reveal. Would any of us lease that car without that information? I doubt it. Yet, this is exactly what we are now doing with billions of dollars of taxpayers' money.

I have also read what you have said in several magazines and I have noticed that you often made that analogy, about car dealerships. I would like you to acknowledge today, before the committee, that I am the one who put the car image in your head, a few years ago. You would have to admit that I hold the copyright on that.

Are you prepared to do that?

[Alan Williams]

Next time.

[Claude Bachand, Bloc, Saint-Jean, QC]

Okay, next time. It's on the record. Now we will move on to serious matters. I think I have wasted two minutes.

[Voices]

Oh, oh!

[Claude Bachand, Bloc, Saint-Jean, QC]

I want to talk to you about the specifics, because I know you would like there to be essentially a single body within the Department of National Defence and you would also like responsibility to be assigned to a minister. I know that. I have read your book, and it's obvious that that's what you want. But that is not what happens under the current system.

How do you answer that? You know that at present, three rather important ministers each have their own responsibility, the first one being the Minister of National Defence. Once we acknowledge that the Department of National Defence has to lay out the requirements and it asks for a fifth-generation plane and a stealth plane, one that is virtually invisible to radar, how can you say it should be any plane other than the Lockheed Martin F-35? How can we talk about competition when Lockheed Martin is the only one that can do it? I would like you to answer that question first.

[Alan Williams]

Thank you.

First, the reason I didn't mention all my points was that the clerk gave me only 10 minutes. So I had to eliminate a few points.

[Claude Bachand, Bloc, Saint-Jean, QC]

Including some important ones.

[Alan Williams]

It is all important. But the question is very important.

Let me answer as best I can.

It is very important, in my estimation, for the public to understand why the requirements we select are necessary. To continue--and here I'm going to give you the credit--if I went to a car dealership again and wanted to buy a mode of transportation, I would first have to decide if this mode of transportation was for myself; my wife; myself, my wife, and my ten kids; or whether I need to transport furniture and equipment. The requirements are very specific to the role and the need.

It may be that we need a fifth generation. If so, let's be able to articulate why we need a fifth generation, how that fits into the defence policy we have, and how that fits into the role we see our military performing in the future. If it gets by that hurdle and it turns out that's the only one, that's fine. But we can do that openly. Having someone sitting behind closed doors and saying this is what we need because they say so is frankly not acceptable when you're spending $16 billion of our money. That's the key point you want to make.

Secondly--and this is another point I didn't mention in my oral presentation, but it's in the notes--if after I chose my requirements and went to the dealers that had what I wanted to meet those requirements someone said to me, “Monsieur Williams, it's going to be $1,000 down now, but I'm not going to tell you what the monthly payment will be”, would I buy the car? Of course I wouldn't buy the car. To buy something, commit to something right now when you don't even know the costs, to me is the height of absurdity.

I think the Joint Strike Fighter is a great program and it may turn out to be the perfect aircraft. But we're sole-sourcing a product that right now is four years late in development, its cost has escalated dramatically, and it's under the Nunn-McCurdy compliance review test in the States, where the Senate is cutting back on the numbers it is producing year over year right now because they're missing all the deadlines. It seems to me that we're getting ahead of ourselves. Why are we committing to something now when there are so many risks with this program? I really don't understand it. It may turn out to be the perfect aircraft for us, but I don't think there's any evidence for that today.

[Claude Bachand, Bloc, Saint-Jean, QC]

Since I have only a minute left, I'm going to start by talking about economic benefits. I believe it was Mr. Lagueux who signed the 2006 memorandum of understanding. I asked the researchers earlier to look at—

[Alan Williams]

No, no.

[Claude Bachand, Bloc, Saint-Jean, QC]

No, it was you.

[Alan Williams]

No, I signed the 2002 memorandum of understanding, and the Deputy Minister, Ward Elcock, signed the documents on December 11, 2006.

[Claude Bachand, Bloc, Saint-Jean, QC]

Are you familiar with that document, the memorandum of understanding?

[Alan Williams]

Yes, absolutely.

[Claude Bachand, Bloc, Saint-Jean, QC]

Section 7 talks about participation, economic benefits. Do you think that agreement prevents Canada from requiring economic benefits?

[Alan Williams]

Absolutely not.

[Claude Bachand, Bloc, Saint-Jean, QC]

No?

[Alan Williams]

Absolutely not.

Let me talk about section 7, in particular, sections 7.3 and 7.4, which are the two dominant ones.

When you sign this agreement you sign it because the drafters weren't stupid, and it certainly makes it easier for our Canadian industry.

[The Chair, Conservative, Maxime Bernier]

Thank you, Mr. Williams.

You may come back to that later.

I have to give the floor to Mr. Harris for seven minutes.

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

You can finish your statement.

[Alan Williams]

For the companies that are in this program today, and we've achieved up to 85 now, for sure, absolutely you want this program to continue. There is no guarantee, but basically what section 7.3 says is that if you signed the 2006 MOU, which we did, tick; and if you have a contract and you're still continuing to produce the good for which you were contracted in the best value mode, tick; and if you agreed to buy these jets, question mark at the moment, then normally, not always, but normally, you would be entitled to continue to produce this good for the full production numbers of aircraft, the thousands that are coming down the road. That's where the big money is.

So that's an incentive. But keep in mind two things. One is it says “normally”. There is no guarantee that any of the companies that in fact won contracts would automatically be given anything, especially as we've all read there's so much pressure under it that it considered retracting and doing things in a less costly kind of way.

So there's no guarantee, but beyond that, section 7.4 says, what happens if in fact Canada doesn't buy? Section 7.4 then comes in, because those same contracts would then be open for re-bid. Section 7.4 basically says that it's up to each participant country to make sure that the primes give their industries the same due diligence and same opportunity to bid for that again. So either way, there's still an opportunity for IRBs, industrial and regional benefits policy.

I'll just close with one other point, which I probably will make more often. We should never think that the IRBs are the reason we're in this program. It should never take first place over the need to make sure that our military is getting the right aircraft. Sometimes I get the impression.... Okay, I'm done.

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

We can visit that again, but I only have a few minutes here. I wanted you to finish your point.

Mr. Williams, we had a story in the Ottawa Citizen on September 20, the day that Pugliese suggested he had documents from the defence department indicating that there was a plan for a competitive process for both the aircraft and long-term maintenance that was developed in summer 2009. The scheduled plan for the competition was to be run in 2010; the contract was to be awarded by 2012. We also had the Minister of National Defence state in the House of Commons on May 27 that there would be a competitive process, and he made sure that this was totally clear.

What would have happened between May 27 and six weeks later, in July, when we're told it's a sole-sourced contract, etc.? What would have to happen? How do we get from there to that?

Secondly, tell me about the process of a statement of requirements. Are you aware that there would have been a statement of Canada's requirements for a fighter jet to replace the F-18? When would that have been prepared, and would that be normally available to a committee like this?

[Alan Williams]

I have no idea what happened in that brief period of time. I wasn't there.

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

From your experience in procurement—you've been there and you see what goes on—what would have had to happen to go from the plan to have a competition and a statement in the House, to a decision in the House on July 16? What changes would have had to take place?

[Alan Williams]

The only thing I could envision is the minister would call me into his office and say he wanted to sole-source these things. I'd say there was no need, that wasn't the intent, we have no reason or rationale to do it. He'd say he wanted to do it anyway. I'd say if he wanted to do it anyway I couldn't stop him. I'd have two choices, either go along or resign. The fact is, he's not doing anything illegal. There is nothing at all outside his authority to do it this way.

I think it's a stupid way of doing business, and I would have advised him that way. In fact, I would point out that I would have said to him, if you're going to do it this way, you're going to undermine all the good. The government would look great if you simply said you're authorizing the Department of National Defence to replace their F-18s. That's a great news story. You get all the kudos and everybody is very proud of what you're doing. I said you're undermining all of that by stepping into a procurement process and predetermining the winner, for which there is no validity. I would have advised him or her strongly against it, depending on who the minister was.

In terms of the statement of requirements, it is typically the basic document for which the military and the military alone is accountable. Certainly when I was there the military in any major procurement had to produce a statement of requirements that would be reviewed and vetted and challenged within the department, get the sign-off of the senior military officials and the Chief of the Defence Staff before it was then made public as part of the overall defence procurement process provided to industry, have discussions, start the whole requirements process with industry in terms of product availability, develop the contractual terms and that kind of stuff. It is fundamentally at the base of any procurement process and nothing typically should proceed without it. Whether it's open to this committee is something I wouldn't be able to comment on factually.