National Defence Committee on Dec. 1st, 2011

[Ted Opitz, Conservative, Etobicoke Centre, ON]

Thank you, Mr. Norlock.

I think I should point out that my colleague, Madame Moore, has also served in the Canadian Forces in a medical capacity.

My question on the supplementary estimates (B) is to the deputy minister. There is an item to transfer funds to the Canadian Institutes of Health Research for an epidemiological study of the optimal plasma and platelet to red blood cells ratio. Why is DND funding this study?

[Robert Fonberg, Deputy Minister, Department of National Defence]

Mr. Chairman, thank you for the question.

Actually, this is related to severe trauma injuries on the combat field. Let me ask the vice-chief, who oversees the chief military personnel and is the source of this transfer, to respond.

[VAdm Bruce Donaldson]

Thank you, Mr. Chair.

We're funding it to keep people alive. It is through loss of blood that wounded soldiers on the battlefield face the greatest risk of death. To protect our people, it's very much in our interest to fund research on different ways of replacing blood and different ways of stopping bleeding.This is one of the avenues of research we're encouraging so that we can keep our soldiers alive on the battlefield.

[Ted Opitz, Conservative, Etobicoke Centre, ON]

To follow up, then, on the transfers to the Canadian Institutes of Health Research from the department, does DND often fund external medical research?

[Robert Fonberg]

We fund external research when there is a requirement to build capacity or build an understanding that we don't have. Either the knowledge is not available or the research is not being done by others. We will actually go out and fund external research, yes.

Go ahead, Bruce.

[VAdm Bruce Donaldson]

If I may, Mr. Chair, in a number of areas we have cooperated with Defence Research and Development Canada in reaching out to other research areas. We've looked at sleep loss. Years ago we did a lot of research on functioning in a sleep-deprived environment--which I'm sure you are used to. We've gone from that right through to medical research on the effects of trauma on the body, and these types of things. Clearly there is expertise in Canadian society, and in fact there is international medical research that can lead us much more quickly to solutions to problems that we have or foresee. It's in that vein that we frequently cooperate with others.

[Peter MacKay, Conservative, Central Nova, NS]

Mr. Chair, if I might briefly add to the previous comments by the deputy and the vice-chief, some Canadians may be unaware that the Department of National Defence maintains a separate health system and conducts research into areas specific to soldiers, their families, and their service.

Mr. Opitz mentioned this, and I should also have complimented Ms. Moore for her previous military service in the field of health. It is a component of the Canadian health care system that's quite unique. It's meant to serve and meet the needs of Canadian military personnel, and it will be extremely important as we go forward. I would take the opportunity to point out that this is an area in which we have been investing quite significantly, in addition to the issue of mental health and psychological injury, which is also associated with service in combat and sometimes even in training.

This is an extremely important part of our budget. There is research associated with it. To quote Vice-Admiral Donaldson, this is something that literally saves lives.

[The Chair, Conservative, James Bezan]

Thank you.

It's my understanding that both Minister MacKay and Mr. Fantino have 9:30 cabinet meetings that they need to at. We appreciate your taking time out of your busy schedules to come to appear on supplementary estimates (B). We had a good discussion.

We're going to suspend to allow Minister MacKay and Mr. Fantino to leave. We'll allow the table at the end to shift around a bit so we can continue with our hearing for the rest of the morning.

[Peter MacKay, Conservative, Central Nova, NS]

Mr. Chair, if I might, on behalf of Mr. Fantino and all of our witnesses here, we very much appreciate this opportunity and the work the committee does in support of the Department of National Defence and our troops.

I would also undertake to follow up on some of the questions—the list with respect to the contaminated sites, and any other questions arising from supplementary estimates (B). We'd be glad to follow up.

[The Chair, Conservative, James Bezan]

We'd appreciate that.

Thank you. We will suspend for a few minutes.

[The Chair, Conservative, James Bezan]

We're back in session.

We have about 45 minutes left. We're starting off at the top again, but instead of having a seven-minute round I think we'll just stick with five minutes. We'll try to get background to everybody.

To kick us off we have Mr. Kellway.

[Matthew Kellway, NDP, Beaches—East York, ON]

Thank you, Mr. Chair.

Through you, to the witnesses, very much for being here today.

As Mr. Strahl said, I'm one of the mere citizens around the table and to boot, one without any financial background. I'm going to take advantage of restrictions on the chair to censor my questions and ask a few different questions.

With all due respect to the supplementary estimates (B), what struck me as a new MP in the House is not the millions we're talking about in those supplements but in fact the billions that get bandied about in discussions of defence matters. To give you some of the examples that have popping up on my BlackBerry in the last couple of weeks, there's been a military satellite that costs about half a billion dollars, which the associate minister of defence said in the House could be accommodated under current budgets. There's been a re-issuing of an RFP for military trucks, about 1,500 of them, a contract estimated at about $800 million. There have been further delays to the Cyclone helicopter. I see that as of last year, the Auditor General suggested that the cost of that procurement went up by over half a billion dollars. Of course, there are the F-35s. I guess it's possible that the associate minister and the minister have the estimates right on that one. But it's against all odds in just about every other estimate that I've seen in the world.

Can you take me through those examples and let me know how these kinds of billion dollar issues get accommodated within the budgetary process?

[The Chair, Conservative, James Bezan]

I'll just interject for a minute.

As has already been pointed out by Mr. Valeriote regarding page 870 of O'Brien and Bosc, the parliamentary tradition has been that because vote 1 deals with most of the general operations and administration of a department, there is some latitude given by the chair for very wide-ranging questions.

For the benefit of our witnesses I want to go to pages 1068 and 1069 in Chapter 20 of O'Brien & Bosc, which says:

In addition, committees ordinarily accept the reasons that a public servant gives for declining to answer a specific question or series of questions which involve the giving of a legal opinion, which may be perceived as a conflict with the witnesses' responsibilities to the Minister, which are outside of their own area of responsibility, or which might affect business transactions.

I'll leave it to the discretion of the witnesses to answer questions that they're comfortable with.

I'll turn it back to whomever wants to tackle the comments by Mr. Kellway.

[Robert Fonberg]

Thank you for the questions, Mr. Chairman.

We did not come prepared to talk to a number of those issues. There are good responses to each of them. I would say they are outside the context for which we came.

I would turn to the CFO for one second to talk about how we establish and manage a $20 billion a year organization, which has about a $5 billion capital vote in it, within which we accommodate this. If that would be worthwhile, Mr. Chairman, the CFO would be happy to speak to that issue for a minute.

[Kevin Lindsey]

Thank you, Mr. Chair.

It is indeed an expensive business and the numbers are big. We actually manage a supply line coming out of the Canada First defence strategy that spans 20 years. When we look at our procurements, we look at them in the context of that timeline. The fact that in many cases we're talking about leading-edge technology means it takes a long time to develop and a long time to build. We have very long lead times. I'll speak to two complexities associated with that.

First is foreign exchange. We do our best to estimate the costs of materiel that might be delivered five or seven years hence. We make assumptions about what exchange rates will be, because we spend as much as $2 billion to $3 billion a year in transactions denominated in U.S. dollars. To give you an example of the complexity, this summer, over a three-month period, the Canadian dollar appreciated about 13% against the U.S.

[Matthew Kellway, NDP, Beaches—East York, ON]

Mr. Lindsey, I do appreciate, as per the chair's remarks, that you can decline to answer the questions. I'm not trying to politicize anything. Take it out of the Cyclone itself. Let's say you have a procurement delayed by such and such a time, a couple years, whatever the case may be, and suddenly there's an extra $600 million attached to it.

My question is really about scenarios like these, taking them out of the specific context. How do you deal with an additional $600 million that arises suddenly? How do you deal with a procurement delayed six years and then it's another $800 million that has to be accounted for? Again, with the F-35s.... Actually, forget about the F-35s, but let's say there's a procurement whose costs are vastly underestimated, for whatever reason, by billions of dollars. How would you deal with something like that? I don't know that exchange rates really get to the kinds of scenarios I'm trying to deal with, real-life scenarios that have just come up over the last two weeks.

[Kevin Lindsey]

Yes—

[The Chair, Conservative, James Bezan]

The time has expired, Mr. Lindsey, so be very brief.

[Kevin Lindsey]

I'll be very quick.

I welcome the question. We actually have two separate capital budgets within our capital vote that you see in the estimates. One of those capital budgets lets us reprofile the money that goes unspent into future years, with tremendous flexibility, because the liabilities for those assets are out there, and the Department of Finance accommodates us in moving that money to match the delivery schedules.

For the second part of our capital budget, there is far less flexibility. To the extent that we're acquiring assets out of that part of the capital budget, it presents us with serious problems. One of those problems arose in 2010–11, where we lapsed about $950 million—not the $2.4 billion that's been alluded to. About half of that $950 million was associated with projects that slipped. The liabilities for the assets are still out there when they get delivered, and we will have to find that money elsewhere in the budget in the year those assets are delivered.

The member's question is right on, Mr. Chair. It does present problems, and we do have to manage these very difficult cashflow changes occasioned by the slippage in project deliveries.

I won't go on, but currency exchange is a significant contributor to this issue that we have.

[The Chair, Conservative, James Bezan]

Thank you.

Mr. Alexander.

[Chris Alexander, Conservative, Ajax—Pickering, ON]

Thanks very much, Chair.

I have two quick questions, I'm not sure for whom, but our witnesses will know who is best qualified to respond.

I'm of course interested, from my own previous background, in these transfers to Foreign Affairs and International Trade. I know the important role our defence attachés and other defence personnel play in our missions abroad. Could the witnesses tell us which Canadian missions abroad get this funding and for what purposes? Is this transfer something done annually, or has a special case arisen this year?

[VAdm Bruce Donaldson]

Thank you, Mr. Alexander, for the question, through you, Mr. Chair.

This is an annual agreement wherein we transfer money to Foreign Affairs in support of attachés for accommodation, communications, and these sorts of things. Specifically, this transfer deals with the embassies in Serbia, Chile, China, Korea, Afghanistan, and Pakistan; and with Canadian defence liaison staff in Washington; our work with Operation PROTEUS in Jerusalem; the multinational force observers in Egypt; our force in the Golan Heights; Operation ATTENTION, our training mission in Afghanistan, and Operation ATHENA, our close-out mission now.

I can go into more detail about the type of support provided, but it is transferring under an agreement that when they provide a service, we'll pay them for it.

[Chris Alexander, Conservative, Ajax—Pickering, ON]

Thank you.

One other item that relates to the transfers, in this case to the National Capital Commission, is for construction and maintenance of a commemorative naval monument. I'm wondering if our witnesses could tell the committee a bit more about the monument in question. Is it an existing or a new monument? Obviously, not this year but a short while ago, we just had the centenary of the Royal Canadian Navy.

Could we hear more about that? Because it will obviously have visibility.

[VAdm Bruce Donaldson]

Mr. Chair, this was a project to mark the centenary of the now Royal Canadian Navy with a monument, essentially to honour the fallen from the RCN and the Canadian navy. It is located at Richmond Landing, just below Parliament Hill. Construction started about a year and a half ago. It is about two-thirds complete, I think. The last time I went by it on a bicycle, I actually saw a number of the panels in place. It's quite a unique design selected in a competition. Ground was broken about a year ago.

The transfers are really to complete the funding of the project, for a total cost of $2.33 million. I'm not aware of exactly when it will be opened. It may well depend upon the harshness of the winter this year. But I suspect that the navy commander would hope to have a ceremony for the Battle of the Atlantic this Sunday at that site.

Does that answer your question, sir?

[Chris Alexander, Conservative, Ajax—Pickering, ON]

Yes.

I have one more quick question, which none of us got a chance to ask of the ministers, but which I think is relevant for any hearing such as this.

We understand the scale of the budget. We understand the challenge of contracting and contractors who may not perform—and the metaphor of a 747 landing on an aircraft carrier is quite revealing in that respect.

But you could tell us, Deputy Minister, or other witnesses, do these supplementary estimates respond to what the Department of National Defence requires to do its job, as of today, the beginning of December 2011?