National Defence Committee on March 25th, 2015

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

Are there any improvements that you might suggest?

[John Turner]

You mentioned the joint support ship. One of the lessons from that.... That procurement was cancelled because of the procurement strategy, which had us dealing with two design teams. Once we put out the request for proposal, we weren't able to get into detailed cost-capability trade-offs with them until they came back with their bids. By the time they came back with their bids, their bids had exceeded the initial budget that had been set.

The government announced the NSPS in 2010, and the umbrella agreements were let in 2011 with Irving on the east coast and Seaspan on the west, which pretty much re-baselined the delivery dates for the joint support ship, the Arctic offshore patrol ship, and the Canadian surface combatant. I can tell you now that the Arctic offshore patrol ship is on time based on that schedule, and with regard to the joint support ship, we think there is perhaps a one-year delay from when we initially thought we would take receipt of a joint support ship.

[The Chair, Conservative, Peter Kent]

That's the end of your time, Mr. Harris. Thank you.

Ms. Gallant, go ahead, please, for five minutes.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you, Mr. Chairman.

Through you to Mr. Turner, Mr. Chairman, why is it that when an equipment requirement arises in theatre, the procurement is on time and on budget, but purchases not required in theatre, such as the SAR helicopters—originally ordered over 22 years ago but cancelled by the Liberals after they used this critical life-saving equipment as a political football during the 1993 election—take decades for delivery?

[John Turner]

I think that when there's an urgent operational requirement, Mr. Chair, the emphasis is on getting the equipment to the personnel who need it as soon as possible. In many cases, that will lead to a sole-source procurement. We may be getting the capability we want, but we may be paying more money than we would pay for it through a competitive process. The urgency of the operational requirement creates a situation whereby an exemption to the government contracting regulations is permissible.

In a normal environment, the default position is competition, to make sure the process is open, fair, and transparent and that we're getting the best value for Canadians in the course of that particular procurement.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Could the witness describe a major piece of equipment that we paid more money for during combat requirements than we would have with a competitive process outside combat requirements?

[John Turner]

I couldn't give you an actual example, because there would be nothing to compare it to. On a sole-source procurement, we pay what the asking price is. If there had been a competitive process, there may have been a cheaper option, but whether it would have delivered the same capability is difficult to say.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Why don't you use the Chinooks as an example? We accessed Chinooks in theatre, but we ended up purchasing them afterwards. Was there a more expensive price tag on the ones we used in theatre, which weren't ours, than the ones we purchased subsequently?

[John Turner]

Off the top of my head, Mr. Chair, I don't know what we paid for the Chinooks in theatre. The Chinooks we purchased were a more recent model. The ones in theatre were a D model. The ones that we just purchased were an F model. The last of them was delivered in June 2014, and that was a $2.3-billion acquisition.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

I'm just questioning whether or not going the other way and not sole sourcing really does save us money. As the ADM of materiel, your responsibilities include working with other government departments. Based on your experience at Treasury Board and Public Works, which are two other departments that DND closely works with, how will this ensure that our procurement will run more smoothly than in the past?

[John Turner]

Despite the fact that we move a lot of program every year, I think there's obviously room for improvement in the overall defence procurement process. I think everybody would be in agreement with that.

As a result, we spend a lot of time working on a defence procurement strategy with three key objectives. One is making sure that we get the right equipment in a timely way to soldiers. The second objective is leveraging that procurement to the economic benefit of Canadians. The third objective is streamlining defence procurement.

In working with Public Works, one of the key ways we're going to streamline is actually a delegation of increased contracting authority over to the Department of National Defence. At the moment, our delegation of authority is $25,000 for goods, which is very low for a department with a $20-billion budget. That delegation will eventually potentially get raised to $5 million.

As an interim step, it will go up to $400,000. That would be about 50% to 60% of the contracts that PW currently lets on our behalf, which will free up resources to focus on the higher level of materiality, the more complex projects. That will be one way in which we hope to streamline defence procurements on a go-forward basis.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Okay.

We are missing some key pieces of equipment in terms of naval ships. We don't know when a critical time is going to occur or when they're going to be needed for combat or for national security within our waters. Is that not as important, equal to a combat situation, when we critically need that equipment for our navy, seamen, and air people?

[John Turner]

I think that following NSPS the timelines that have been developed for the delivery of the joint support ship, the Arctic offshore patrol ship, and the Canadian service combatant are timelines that are realistic and that will deliver real capability on an acceptable timeline and minimize or avoid altogether any gaps in capability.

[The Chair, Conservative, Peter Kent]

That's time. Thank you, Mrs. Gallant.

Ms. Murray, please, for five minutes.

[Joyce Murray, Liberal, Vancouver Quadra, BC]

Thank you.

Thanks for being here today.

In looking at your very impressive background in the Canadian Armed Forces, and seeing that you joined National Defence in 2008, I'm going to speculate that it must have been very difficult times, because over the last four or six years there has been such a gap between the myths that have been propagated about stable and increasing funding for this department for 20 years, and the reality of the budget cuts and the clawbacks. You have been in the middle of having to deal with some of that.

I hear from men and women in uniform about the morale problems in various areas of defence because of the budget cuts and also about the lack of provision of replacement equipment, which means that people can't train on the equipment. I want to ask about morale and what your past experience has suggested or has led you to have as a framework for improving morale when there is a systemic problem in a department.

[John Turner]

It's difficult for me, Mr. Chair, to comment on morale in the Canadian Armed Forces. I'm no longer in the Canadian Armed Forces. That's probably a better question for some of the commanders.

[Joyce Murray, Liberal, Vancouver Quadra, BC]

Okay, no worries. We can go on to another question.

In this department, one of the myths around providing equipment that was propagated by the Canada First defence strategy laundry list of equipment—versus the reality of all the delays and cancelled equipment projects—ties into the vote 5 budget being announced and then allowed to lapse. I call that a deliberate clawback, because it's 23% that has been lapsed, whereas prior to the Conservative government, the average was 2%.

In your previous work in other ministries, have you had to deal with managing a budget of which up to a quarter of what is announced and promised is actually not allowed to be spent or is not spent? How does one manage a program when there's that kind of uncertainty and instability in funding and budgets?

[John Turner]

Thank you for that question.

Mr. Chair, I'm not sure of the precise numbers with respect to a lapse, and we have different terminology within departments with respect to carry-forwards, which we're allowed to—

[Joyce Murray, Liberal, Vancouver Quadra, BC]

That's $7.3 billion, actually.

[John Turner]

—carry forward.

I can't comment on that actual number. I would tell you that project teams will bring down extra contingency into their annual spending plans, because they're always anticipating the unanticipated. I want to make sure that they have the contingency money available to them should they need it in a given year. If they don't need it, we reprofile that effort. We reprofile that money to future years so that we spend it in the years in which the contract milestones will actually be met.

Money may shift from year to year, but it's a case of having the money available in case it's required. If it's not, we reprofile it to a future year.

[Joyce Murray, Liberal, Vancouver Quadra, BC]

Well, contingencies I understand, having been a provincial minister and a business person. A 2% lapsing, which was the previous average, is understandable, while 23% appears to be deliberate. That's why there's an impact on the ability to plan when you have multi-year programs but in a single year the funding that has been approved by Parliament may be clawed back by up to a quarter. It looks as if that's.... At this point, you'll have a responsibility for that. What would be your strategy?

[John Turner]

Again, I'm not sure where you're getting the numbers from for a 23% lapse. I'm unable to comment. We reprofile money from year to year. I'm unaware of the 23% figure, but I'd be happy to look into it.

[The Chair, Conservative, Peter Kent]

Your time is up. Thank you, Ms. Murray.

We have the formality of the question, colleagues.

Shall the chair report to the House that the committee has examined the qualifications and the competence of John Turner to the position of associate deputy minister of National Defence and finds him competent to perform the duties of his respective position?

[An hon. member]

So moved.

[The Chair, Conservative, Peter Kent]

So moved.

Thank you very much, Mr. Turner, for your time with us today.

We'll suspend briefly as the next witness approaches the table.