Evidence of meeting #7 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 million.
A recording is available from Parliament.
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
So no further funds have been put in place yet, but you're thinking about it?
Chief of Staff, Materiel Group, Department of National Defence
No. Public Works leads in the strategy.
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
Thank you.
The second risk question I have is this.
There is a risk, obviously, of project cancellations, delays, or reduction in scope. Under the initial RFP, those risks were assumed by private enterprise. Since then, that has been renegotiated, and there has been a transfer of risk of a half a billion dollars from the private sector to the taxpayers. This was raised by the Auditor General. He commented that there was inadequate clarity to avoid that kind of extra assumption of risk by government.
First, is the risk perceived to be higher than it was when the RFPs were being negotiated due to budget cuts?
Second, why would the government voluntarily assume a half a billion dollars of risk that the proponents had already assumed in their bids?
Third, are there contingent liabilities in the books for this potential half billion dollar cost to the taxpayer?
Chief of Staff, Materiel Group, Department of National Defence
The requests for proposal themselves were not designed around transferring this risk. It actually allowed the bidders to come in and put in a price against their infrastructure upgrades, which we anticipated paying over time and in fact had money in the budgets to cover that.
All of the bidders came in with no infrastructure costs to the crown—all of them came in that way. So they actually got their funding for their infrastructure elsewhere, and in fact we are not guaranteeing any of their loans. The Auditor General, in fact, commented on the process, saying:
The competitive process for selecting two shipyards resulted in a successful and efficient process independent of political influence, consistent with government regulations and policies, and carried out in an open and transparent manner.
What occurred after the two shipyards were selected was that both of them said they were assuming a financial liability here and were going to take that on themselves, but they needed to know that we were in this with them for the long term and wanted to know what happened if we walked away.
As we looked at it, walking away from all of these projects is de facto saying that Canada will not have a coast guard or a navy.
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
Excuse me, but the questions were pretty specific.
Has the risk been perceived by the bidders to have escalated due to cost uncertainty or budget uncertainties and delays?
Liberal
Chief of Staff, Materiel Group, Department of National Defence
Okay.
I can't speak for the bidders. Our discussions with them indicate that, no, it's not an increased risk. It's a reality of getting a degree of backstop certainty given the financial liability they are incurring.
Liberal
Joyce Murray Liberal Vancouver Quadra, BC
Why was the risk transferred, and where is it in the figures, the contingent liability for a half a billion dollars?
Chief of Staff, Materiel Group, Department of National Defence
We had budgeted for actual infrastructure improvements, assuming the bidders would come in and ask for that funding. They have not. They have sought that funding elsewhere, so the funding does exist within the project budgets.
November 28th, 2013 / 10:30 a.m.
Conservative
The Chair Conservative Peter Kent
Thank you, Admiral, and Messrs. Fadden, Lindsey, Martin, Forster, General and Admiral. Thank you very much for your time.
We will suspend now for a couple of minutes and then resume committee consideration of the actual votes for the supplementary estimates (B).
Thank you very much.
Conservative
The Chair Conservative Peter Kent
Okay, colleagues, we have the specific votes now to consider. The clerk reminds me that in effect vote 1b is already before us.
NATIONAL DEFENCE
Department
Vote 1b—Operating expenditures..........$713,103,522
Vote 5b—Capital expenditures..........$1
Communications Security Establishment
Vote 20b—Program expenditures..........$12,624,635
Military Police Complaints Commission
Vote 25b—Program expenditures..........$3,349,559
(Votes 1b, 5b, 20b, and 25b agreed to)
Shall the chair report the supplementary estimates 2013-14 to the House?
Conservative
The Chair Conservative Peter Kent
Without amendments.
All right, colleagues, thank you.
This meeting is adjourned.
