Evidence of meeting #44 for National Defence in the 41st Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was process.
A recording is available from Parliament.
January 28th, 2015 / 4:20 p.m.
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
Thank you. I appreciate both of you being here to help us understand how these procurement problems can be fixed and how we can have a better result than we've had over the last seven or eight years.
I want to understand about the funds left unspent.
Mr. Perry, I've seen comparisons about almost 25% of vote 5, which is for military equipment, being left unspent. Normally, historically, Canada leaves somewhere around 2% unspent.
Senior Analyst, Security and Defence, Conference of Defence Associations Institute
That's right. That goes as far back as public accounts have made those records relatively easy to find.
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
So this is a totally unique problem in the last six or seven years.
What about other countries? What would be a norm for funds that are approved by their Parliament, promised out, and left unspent?
Senior Analyst, Security and Defence, Conference of Defence Associations Institute
To be honest, I haven't done that kind of analysis.
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
Okay. It's unlikely 25%, but we're not sure.
You talked about the funding that was promised and left unspent and the procurement workload. At the same time, the NSPS came out with a whole lot of requirements.
I believe you said in your report that part of the problem was that there was no prioritization. Had there been prioritization, those things could perhaps have gone through more quickly instead of having everything plugging up the system at once.
Has that been solved, or is that still the case?
Senior Analyst, Security and Defence, Conference of Defence Associations Institute
To my knowledge the prioritization issue is still outstanding. There has been an active effort in National Defence to undergo a process in conjunction with the renewal of the Canada First defence strategy to look at prioritizing a shorter list of the very long list of projects they have to actually try to move those through the system more quickly, but to my knowledge it hasn't actually progressed.
Particularly problematic is that the Treasury Board meets only a certain number of times each year, and if you have three times the volume of files for which you could conceivably get a submission in and approved, then you have a problem, and you have to make some difficult choices about which projects you don't want to put on that list.
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
Okay. So it's not looking that hopeful if we continue to have clawbacks and we continue to have lack of prioritization and proper management of the flow of work.
The budget in the CFDS was too small to begin with. Was the process different from what is normally used to assign a budget for projects like that, or how did that come about?
Senior Analyst, Security and Defence, Conference of Defence Associations Institute
The process was different in the sense that the Government of Canada has changed the accounting standard. Historically, we used to assign project budgets in fixed dollars and then escalate them when we actually got closer to contracts. We've moved away from that process now, and things are always booked in pre-escalated budget-year dollars, which means that they're set to a fixed point in time, and if anything happens to the schedule, you inevitably lose purchasing power with any kind of delay, so that's different.
Where I'd point out that the—
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
Excuse me. Has that been fixed with the new procurement strategy or is that still...?
Senior Analyst, Security and Defence, Conference of Defence Associations Institute
Not to my knowledge. It's still the same budgeting process.
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
Okay.
So these all led to procurement delays, and then another factor you described was the additional red tape. Is that being addressed with the new procurement strategy, to your knowledge?
Senior Analyst, Security and Defence, Conference of Defence Associations Institute
It's supposed to be in terms of the streamlining, but my sense is that it is by far the least developed component of the whole defence procurement strategy, and I'm not really aware of any concrete action.
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
Okay. So we're really seeing, as the professor said, more business as usual, not changing the systems and the processes under the new system.
Professor, is it your view that Canada's system has more ministers and deputy ministers and wish lists in the pot than other countries you've studied, or is this the norm and is this why other countries struggle as well?
Professor, Department of Management and Economics, Royal Military College of Canada, As an Individual
What I've referred to is not quite wish lists, but the structure of the procurement.
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
No, I'm not talking about wish lists now. I'm talking about the structure, where you have Public Works, Industry, Foreign Affairs and Trade, and International Trade now, DFO in some cases, the Ministry of National Defence, and Treasury Board all having to make decisions together.
Professor, Department of Management and Economics, Royal Military College of Canada, As an Individual
My picture has four boxes. There are other bodies, of course, but the main bodies are Treasury Board, Defence, Industry, and PWGSC.
You are coordinating, and that's an improvement, but the fundamental problem is there. Some of our allies removed the dividing boxes and said, “Okay, here's the agency.” The agency can take different forms. For our procurement, we had a conference about a year ago. You can turn it into a crown corporation. You can turn it into a separate defence procurement agency. It can sit somewhere in the government, and you can even think.... The Brits took a foolish step: they took it back. They said they were going to have a private procurement agency.
Liberal
Professor, Department of Management and Economics, Royal Military College of Canada, As an Individual
With somebody; one body is responsible.
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
Yes. Is that what you would suggest should be the changed procurement strategy in Canada?
Professor, Department of Management and Economics, Royal Military College of Canada, As an Individual
We can at least have a discussion. We're not having the discussion. It's the first time in a major forum that I'm able to say we have to have a discussion. The Brits, the Australians, and many other Europeans moved in that direction. The Americans pretty much do it, but they have four different ones: army, navy, and air force, as well as the marines. But they are so big. Comparable countries mostly moved to manage them with one point of accountability. In 10 years we'll see the results.
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
Maybe you can clarify this. There was one thing on your charts that you didn't have time to speak to. In 10 seconds, what is the column that says “national champion” and Australia and Canada “no”?
Professor, Department of Management and Economics, Royal Military College of Canada, As an Individual
For national champions, it matters a great deal in the case of Great Britain. What they did in the procurement of some items.... The big British company—remind me—the huge one, the second-biggest company in world....
Professor, Department of Management and Economics, Royal Military College of Canada, As an Individual
Yes, BAE Systems. For example, they have.... I recently wrote a report on that. We have the munitions supply program. It's an utterly inefficient program that we have. What the Brits did was to say, “BAE Systems, you manage this”, because there you trade off security, security of supply, against the costs. Now what we do is security at any cost, while the Brits said, “We trade them off.”
Conservative
The Chair Conservative Peter Kent
Thank you, Professor. That's time.
We'll move now into the second round. We'll have five-minute segments, beginning with Mr. Bezan.