National Defence Committee on Feb. 9th, 2012

[The Chair, Conservative, James Bezan]

Good morning, everyone.

We're going to continue on with our study on readiness.

For the first hour today we are joined by the Conference of Defence Associations. With us is retired Lieutenant-General Richard Evraire, who is chairman of the CDA. He also has with him retired Colonel Brian MacDonald, who is a senior defence analyst.

I welcome both of you to committee and am looking forward to your opening comments. If you can keep them to ten minutes, I'd appreciate it. You have the floor.

[Lieutenant-General, Retired) Richard Evraire (Chairman, Conference of Defence Associations]

Thank you, Mr. Chairman.

The Conference of Defence Associations, which this year celebrates its 80th year of existence, is very pleased to have been asked to testify before your committee.

Today our 51 associations continue, as have their predecessors since 1932, to consider problems of national defence, to coordinate the activities of our associations on matters of interest to all services of the Canadian Forces, to make such recommendations to the Government of Canada as may appear expedient, and to promote the welfare of the Canadian Forces as a whole.

We are especially delighted to be able to add our voice to the issue of Canadian Forces readiness.

Mr. Chair, my presentation will make the point that recruiting, training and retention of personnel must be very carefully managed if the Canadian Forces are to set and maintain appropriate operational readiness that we define as the timely deployment of the adequate number and type of appropriately trained and equipped military forces to achieve the assigned mission. I will further suggest that appropriate operational readiness will not be achievable if the Canadian Forces do not retain a full and deployable spectrum of military capabilities

My colleague, Col. Brian MacDonald, will then comment on the impact of technology and funding on the Canadian Forces' likelihood of achieving appropriate operational readiness.

The Government of Canada's Canada First defence strategy currently tasks the Canadian Forces with the following six core missions: conduct daily domestic and continental operations, including those in the Arctic and through NORAD; support civilian authorities during a crisis in Canada such as a natural disaster; support a major international event in Canada, such as the 2010 Olympics; lead and/or conduct a major international operation for an extended period; respond to a major terrorist attack; and deploy forces in response to crises elsewhere in the world for shorter periods.

Government-wide fiscal restraint measures may cause the Canadian Forces to consider reducing staffing levels. If this occurs, the government should ensure that any reductions are undertaken strategically, in other words, in a manner that retains key skills and capacity across the defence establishment's demographic profile.

In the 1990s, during a period of considerable fiscal restraint, DND significantly reduced its staffing levels by halting recruitment efforts and providing early retirement or departure incentives to senior personnel. The unfortunate consequence of this measure is that the Canadian Forces and defence civilians now have a skewed demographic profile that features a number of personnel approaching retirement age and a large number of relatively inexperienced recent hires. As a result, the department is short of what should be its largest cohort: personnel with several years of experience but not yet approaching retirement.

Any future changes to defence staffing must ensure that a similar situation does not reoccur. To achieve this, if staffing reductions are required, they must be achieved by a combination of reduced recruiting, natural attrition, and releases that span the department's full experience and age profile. If this is not done, it will be extremely difficult if not impossible to retain adequate readiness targets.

The unforeseen events in the Middle East over the past year highlight the uncertain nature of global developments. Given this unpredictability, the long-standing Canadian policy of maintaining a full spectrum of military capabilities should be maintained. As we can't predict what the future holds, the government would be best served by hedging its bets by preparing for a full range of international and national/continental contingencies.

The government should also maintain its demonstrated commitment to ensuring the deployability of major elements of the Canadian Forces. Recently it has made significant progress on this front by procuring C-17 strategic-lift aircraft and renewing the Canadian Hercules fleet, two measures that facilitate the deployment of Canadian Forces at home and abroad.

To ensure that it can achieve its readiness targets, the deployability of the Canadian Forces must be maintained. It will therefore be necessary for the government to remain committed to renewing the Royal Canadian Navy's fleet, especially its at-sea replenishment capability via the joint support ship project.

Given the core missions assigned to the Canadian Forces in the Canada First defence strategy, will technology advances and funding levels be an impediment to readiness? Chairman, with your permission, my colleague Colonel MacDonald is prepared to respond to that very question.

Thank you.

[Colonel, Retired) Brian MacDonald (Senior Defence Analyst, Conference of Defence Associations]

Thank you, General Evraire.

Recent RAND Corporation studies done for the United States Navy and United States Air Force have suggested that increases in combat systems capabilities have led to defence cost increases in the order of 9% to 12% annually.

On the air side, these increases in costs have generated new capabilities, such as those found in fifth-generation fighter aircraft—for example, the F-22 and F-35 in the United States; the Russian T-5O, sometimes referred as the PAK FA; and finally the F-20, which is a Chinese aircraft. These increases in capability can lead to extraordinarily high kill rates against fourth-generation fighters such as the F-15, the F-16, and either our or the Super Hornet F-18 classes.

Now, we saw this in an exercise that took place in 2007. An article in the U.S. Air Force news reported that the F-22's debut in combat exercises was at Exercise Northern Edge in 2006. According to U.S. Air Force data, the dozen F-22s involved achieved an unprecedented kill record of 144 to zero the first week alone, and suffered no losses overall.

On the naval side, the U.S. government accounting office reported in January of 2010 on a U.S. Navy proposal to stop production of the DDG-1000 class destroyers and to restart the older DDG-51 Flight IIA destroyers as a cost-saving measure. However, the new version of DDG-51 would require a redesign to incorporate a new air and missile defence radar, which is necessary to cope with the threat of terminal-guidance ballistic missiles travelling at speeds of up to Mach 10.

What are the costs of the new DDG-51 Flight IIIs? Well, the following table provides procurement costs for the various U.S. options. It does not include, of course, life-cycle costs.

The Flight IIA, the older model, the last-built ship of that series, costs $1.93 billion for each ship. The estimates for the new Flight III destroyers ranged from a low cost of $2.3 billion to $2.95 billion, in comparison with the DDG-1000s, whose costs range from $3.2 billion to $3.37 billion.

Now, Canada too needs to replace our three aging destroyers, and will also have to consider the need to project a naval task force against ballistic missiles or high-speed cruise missiles. The government will have to deal with their cost impact upon the Canada First defence budget.

The next question that comes into view is what is the funding for the Canada First defence strategy like? When we've looked at the rate of technological growth taking place in the potential combat sphere and at the sharply rising costs associated with deploying that technology, we've had increasing concerns about the funding level of the Canada First defence strategy and its ability to deal with the costs of capital renewal. These concerns are driven by the ongoing increases in defence costs, which in turn are driven by the technological increases in combat systems capabilities.

The original plan for funding increases in the Canada First defence strategy budget was for an annual 2% growth to cover inflation—the figure that's consistent with the Bank of Canada's inflation model—plus a 0.6% increment to cover the increases in defence costs. Together they would amount to an annual figure of 2.6%.

Now, more recent comments and testimony by senior defence officials have suggested that a more appropriate figure for defence costs would be in the range from 5.3% to 7% annually instead of the 2.6%. We believe, however, that even these increased estimates may be low given the 9% to 12% defence cost increase estimated in the RAND studies.

Seemingly the defence department has agreed with us, as defence budgets handily exceeded the 2.6% inflation-plus-growth figure, and had grown to the $22-billion range by fiscal year 2010-11. This may be seen in the table that is attached to the text of this document. The table is drawn from the report on plans and priorities for fiscal year 2011-12.

This also included extra funding for the international peace and security operations, in Afghanistan primarily, which reached $2.7 billion in that year. In the following years, the extra funding turned downward with the change from a combat to a training mission. The funding projections suggest a plateau of around $21.3 billion had been established at that point for the defence budget. In addition, capital funding increased substantially, and was projected to reach the $5-billion range in fiscal year 2013-14, which is shown in table 2.

The defence reviews, then, have as well had an impact upon defence funding. The defence budget had been earlier cut by approximately $1.5 billion in the 2010 strategic review, and now we are to have the 2012 strategic and operating review, with the stated objective of further budget cuts of either 5% or 10%.

This would cut the defence budget by another $1 billion to $2 billion. If the new cuts were applied equally across all program activities, funding for readiness would drop by $500 million to $1 billion annually, and funding for capital renewal would drop by somewhere between $250 million to $500 million annually.

We have had, as we say, increasing concerns, even before the 2010 defence budget cuts, that the funding of the Canada First defence strategy might not be adequate to deal with the costs of capital renewal. Our concerns then were driven by this pattern of ongoing sharp increases in defence costs driven by technological increases in combat systems capabilities.

We now have, too, on top of this, the lapsed funding, which, in conjunction with the cuts to capital budgeting and the strategic and operational requirements, leads to further potential cuts in the overall budget.

So potentially, now, we then are about to ask the question of whether or not we have re-entered the period of the “decade of darkness”, the budgetary zero-sum game in which defence funding will be increasingly incapable of maintaining the readiness of both the current and future defence forces.

I think I shall stop it there.

[The Chair, Conservative, James Bezan]

Thank you, Colonel, and thank you, General.

We're going to open up the floor to questions. We'll have a seven-minute round to start off.

Mr. Kellway, you have the floor.

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

Thank you very much, Mr. Chair.

Thank you very much, gentlemen, for appearing today. Congratulations on your 80th year of existence. That's quite an achievement.

I'm a bit shocked, actually, by the numbers you propose here, the 9% to 12% increase year over year to keep up with technological changes to provide readiness. Cumulatively, 9% to 12% year over year gets you into some phenomenal numbers in a very short time.

I'm wondering whether it is in fact your advice or recommendation to this committee that to achieve readiness, Canada have a defence budget that increases at that kind of rate.

[LGen Richard Evraire]

There are two answers to the question. First of all, of course, yes, that would require an increase of that magnitude. The alternative, of course, would be a change in the Canada First defence strategy to stay within whatever limitations are set by the budget.

Brian, would you care to add anything?

[Col Brian MacDonald]

If you examine the pattern of defence expenditure growth during the period of the Canada First defence strategy, we've seen some very substantial increases that were made through the supplementary estimates rather than through the main estimates. So they were not immediately as apparent as main estimates figures. As a consequence of that extra flow of funding, we were able to move to the recapitalization of a number of significant platforms and to have new ones. I would say, for example, that the C-17 has had an enormous impact on the logistics capabilities of the forces, as have the other aircraft that have been bought over that period.

Our feeling is that were that pattern of capitalization continued, we would have a good chance of staying in sight of what's going on in technology. But if that is stopped, or even worse, reversed, we will be in a position that some major platforms are going to be very expensive to replace. This, then, drives the question of what we do now.

I would cite, for example, the F-35, whose numbers have been all over the map and are looking more frightening, depending on who is the latest person to comment. Even greater than that is going to be the problem of dealing with the replacement of the destroyers and frigates. There we are seeing some extremely large numbers. For example, the last Canadian patrol frigate built came in at a price of about $850 million. Now, the figure the accounting office cites for equivalent American destroyers, at this point, is over $2 billion per copy. We are looking at sticker shock problems that are going to be pretty horrendous.

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

Going back to the original statement, then, you either follow with these increases or you go back and re-examine the strategy. I guess the suggestion is that it's a matter of, in a sense, prioritization or of what you focus on.

I have two questions. First, can you advise us on what you would change in the strategy? And where would you focus?

Second, maybe your suggestions about strategic changes play into the following issue. We had a contingent from Norway come before us. They talked about having a smaller but more nimble and more effective military. We've recently heard coming out of the United States the same sounds about downsizing and becoming more effective and more nimble. Would your adjustments to the strategy be along those lines: be smaller but more nimble and with more focus?

[Col Brian MacDonald]

The question is always what is meant by the term “more nimble”. In my experience, “more nimble” is usually the phrase used for “weakly armed and not very effective”. If you are looking at, then, withdrawing, essentially, from the world and withdrawing our expeditionary activities, this leads you to a change in the overall strategy, which can perhaps be dealt with through the limited and decreased amount of capital funding.

Our preference would be, of course, to follow on the Canada First defence strategy, which we believe has a good, sound basis of reason behind it, and be prepared to make the funding contributions that will allow it to be recapitalized, particularly in the face of the changes in the geostrategic environment. Arms races are going on around the world, which then may have an impact on our foreign policy in the future.

The problem here is that the capital budget constrains the future for us. When the Minister of Foreign Affairs or the government as a whole attempts to access it, suddenly you discover that we have something that is weak and that there are a limited number of things we can do to project Canadian interests and make our contribution to the collectivity of the west, shall we say.

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

Thank you.

You commented earlier about the F–35 and the concerns about rising prices, etc. Could you elaborate on those concerns and any recommendations you have?

[Col Brian MacDonald]

Our concern is that the price of that aircraft is still unknown. We have no more access to the internal documents than anybody else in the industry has, but the numbers that are thrown around are ones that give some discomfort to us, in that we may again be looking at a sticker-shock case. The question then is whether we can afford an adequate number of aircraft to meet our requirements. With the purchase of 65 aircraft, with questionable allocation to attrition of aircraft and the depth of Canadian airspace, the ongoing tasks that are before us then may or may not be capable of being achieved. This is of concern.

[The Chair, Conservative, James Bezan]

There's less than ten seconds, so I'll just move on.

Mr. Norlock, you have the floor.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Thank you very much, Mr. Chair.

To the witnesses, thank you for appearing today.

The institute provides research and support to the Conference of Defence Associations to promote debate on national defence and security issues. In your opinion, how have the Canadian Forces evolved over the past five to ten years? I think you talked a bit about that evolution. I'm talking about the meat and potatoes, in talking to the average Canadian. How do you view the CF's growth and development over the past five to ten years vis-à-vis the immediate past and before that? Perhaps give us a little glimpse of the future in the space of time we have.

[Col Brian MacDonald]

The increase in funding started with the Martin administration. Since then, it's been continued by the present government.

The ability to access capital investment money has made an enormous difference. We've had the acquisition of the C–17s—the magnificent, heavy, long-range transport—the acquisition of medium-lift helicopters, the acquisition of modern lightweight titanium howitzers for the army. I can mention quite a number of other things.

That has been very striking in its increases, but the problem is that it's now at the point where other things need to be replaced or repaired or acquired. The concern is that funding continue to allow that recapitalization. So it's well done to this point, but we have a big hill still to climb.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Very good.

I'd like to move on now to the promotion of Canada's interests abroad. Academics and experts, and people like myself, believe that the Canadian armed forces help promote Canada's role worldwide and our foreign policy, as it were. My question is on how the enhanced capabilities over the past five years have enabled Canada to achieve its foreign policy and its role worldwide.

[Col Brian MacDonald]

Let me refer to two scenarios. One is our involvement in Afghanistan, where the Canadian Forces earned a high reputation. It is a view expressed by our partners or other members of our alliances that Canada can now be counted on to deploy well-trained, effective troops who will go in and do the job as well as or better than anybody else.

The other scenario concerns the operations in Libya. I remind you that the major European and North American powers are now willing to have their forces placed under the command of the Canadian lieutenant-general who commanded the operation in Libya. I don't think I can point to anything more strongly expressed than that, in terms of our good reputation. It's been earned by the forces.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Would you agree that that's the kind of reputation this country had, let's say, during the First and Second World Wars, and we could extrapolate that to Korea—that we now have the capability of building on that reputation? Would that be a relatively accurate analogy?

[Col Brian MacDonald]

I would agree with that.

I would add that during the period of the Cold War, certainly at the front end of the Cold War, the Canadian reputation continued at a very high standard. Even later on, when the capital equipment was beginning to erode, the European forces viewed the Canadian Forces as particularly well trained and effective and posed the question: isn't it too bad they are not better equipped? But fortunately now that second reservation is no longer there.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Thank you.

To continue in that vein, let's say that Canada were to make a decided change, an about-face, or halt its current spending trends. We've gone through one of the worst recessions since the Great Depression, so every government entity, including the Canadian armed forces, has been reducing its expenditures. We don't know exactly what that will mean; however, in a month or so we will know. But let's take the opposite view. Let's go with the view of some of the current government's challengers and say that we should just stop all this military spending or reduce it significantly and concentrate on domestic issues and perhaps some other things, like aid to other countries.

Would I be correct in saying that this would affect our ability to defend ourselves, number one, or to act as an important part of our mutual defence? I'm referring particularly to NATO. You referred to the C-17, which is deployed out of my riding, out of Trenton, and can do a lot of good things both domestically and internationally.

Could you connect the dots? A lot of people think the military is just about fighting. It's actually much more. If you could expand on that, I'd appreciate it.

[Col Brian MacDonald]

Let me give you one instance from my own experience. Earlier this summer I was invited by the Department of National Defence to attend Operation Nanook, which at that point was going on in Resolute Bay in the high Arctic. I arrived at Trenton, boarded the C-17, and off we went to Resolute. Travelling on that aircraft with me was a medical team that was being deployed to Resolute on a training mission as part of the exercise. Now, this was when an aircraft went into the ground in Resolute Bay. I was on that C-17. We landed 20 minutes after the accident took place. The medical team was deployed instantly. Because of that instant deployment and the availability of the C-17, there are a couple of Canadians who are alive today who under different circumstances would not be living.

So strategic resources capable of reaching far out in the combat sphere are also able to reach out to strategic distances within Canada to handle a civilian requirement such as a search and rescue.

So when we are looking at military resources, we are looking at dual-purpose resources. But they are dual purpose in the sense that they have a strategic distance capability. I remind you that it is the same distance from St. John's to Victoria as it is from Pelee Island to the top of the Arctic archipelago. These are distances that Europeans can't believe unless they are Russians.

[The Chair, Conservative, James Bezan]

Thank you. Time has expired.

Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair.

My thanks to both of you for a helpful presentation.

Colonel MacDonald, I want to say that your paper of last year was one of the few I've read that actually contained some insight into military financing. I find papers coming from the Department of Finance difficult enough, but the overlay of military financing on other financing really becomes confusing. The first thing I noticed in the paper was that the main estimates, what we're going to get next month, are kind of like a guess. It's sort of a pin the tail on the donkey exercise. Actually, the real juice is in the supplementaries. Over the last six or seven years, the supplementaries have been roundups of about a billion a year, on the average. So you start out with your budget and you add in your supplementaries.

Why do we have to do it this way? Why can't the military tell the Department of Finance what they need, what they can live with, and how much money they will actually need to get by on for the fiscal year ending March 2013?

[Col Brian MacDonald]

I think that you really require somebody from the ADM finance side of the department to give you a comprehensive answer to that. It's all part of the government budgetary cycle where you start, basically, in the previous summer. You call for, then, the responses to the Department of Finance as to what various departments will want. This eventually then leads to the work-down of the program to the point where the budget is tabled, the main estimates are tabled, and then we wait to see if there is going to be any action in the supplementaries.

Interestingly, this past year there has been no significant increase in funding in the supplementary (A) or supplementary (B). We haven't seen the supplementary (C) yet, so I can't project on that one.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Supplementary (C) is due in another few weeks, isn't it?

[Col Brian MacDonald]

Yes, (C) is due in another few weeks.