National Defence Committee on June 16th, 2023

[Alan Williams]

It rests with the Prime Minister. David clearly said it. If the Prime Minister doesn't care about this, none of this matters, and the fact is that none of them have cared about this, and that's why this doesn't happen. I say in my book that, unless a Prime Minister directs it to be done, it won't be done.

I'm not in favour, frankly, of committees and secretariats, because that just diffuses accountability. I like to be able to say, “You're in charge. If it screws up, you're responsible. If it's successful, great for you.” Every time you have these overlaps and duplications, it muddies accountability, and it delays the process.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Mr. Perry, what do you think?

[Dr. David Perry]

I think something set up in PCO would offer the opportunity to try to get a sense across government of where the issues are, to coordinate them better and align them with government priorities, coming back to whether this does or does not matter. If this is government's 84th priority, then you shouldn't expect that it's going to go all that quickly.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Mr. Perry, you talked about the $4 billion that lapsed going from “Strong, Secure, Engaged” to the non-spend. Can you walk us through in between? There's a departmental plan, and there are the estimates, and then there is the money that's not spent. What didn't get spent? What are the specifics that were called for in “Strong, Secure, Engaged” that don't exist as result of lapsed funding?

[Dr. David Perry]

It's hard to point to any individual project, because we don't report on this data, just to drive that point home, but the majority of projects are behind schedule. I think it's fairly widely attributed.

One other thing I'd look for is that I think that dynamic.... It's not just lapsing. We're talking about the difference between what was anticipated to happen in 2017 and the shortfall in terms of lack of progress. The departments aren't even asking for the money in the estimates. Then there's lapsing now with respect to the estimates. The net difference between anticipated spend in “Strong, Secure, Engaged” and what gets spent, as reported on in the public accounts, is what I think I and the Parliamentary Budget Officer were talking about in terms of that $4-billion difference.

I anticipate that's going to get worse because, if you go back to the spending profile in “Strong, Secure, Engaged, which the PBO has reported on, that amount is supposed to be skyrocketing in the next couple of years. We are incrementally increasing how much we are spending, but the amount that was anticipated to be spent was supposed to go up dramatically to about $11 billion, $12 billion or $13 billion, and we're currently spending about $6 billion.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Wow. Even just for the committee and the report, are there a couple of big examples you'd want to highlight that are of particular concern on the non-spend?

[Dr. David Perry]

Well, they're the ones that Alan mentioned. Shipbuilding is behind schedule. Fighter jets are behind schedule. The ground-based air defence.... I could use the rest of the 20 minutes.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

What about navy service contracts? You spoke about that in your opening statement. You referred to the $700 million in cuts to that. With the time we have left, walk us through what the impacts are and what the outcomes of the service contract issue would be.

[The Chair, Liberal, John McKay]

You have 20 seconds, please.

[Dr. David Perry]

The department contracts for services for a whole bunch of things that it doesn't have either capacity or specialized skill sets to do, like people to provide engineering support and additional basic staff support to work on projects. One thing to reflect on, and I've pointed this out for years, is that there's been a marginal, couple-of-hundred-person increase in the procurement workforce, and they were anticipating that it was going to spend three or four times more money.

[The Chair, Liberal, John McKay]

Thank you, Mr. Kelly.

Mr. Fisher, you have four minutes, please.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

Thank you, Mr. Chair.

Thank you, gentlemen, for being here.

David, it's always nice to see you.

I'm interested in procurement processes in other countries. I'll start with you, David, because your second recommendation was about defence procurement data. How do processes in other countries, specifically our NATO allies, impact the way capabilities are provided to armed forces around the world?

[Dr. David Perry]

I would say that the lack of data makes it hard to provide a really meaningful comparison because you have there very idiosyncratic national approaches, so it's hard to look at different systems and identify what parts of the processes are most similar to be able to provide some meaningful analysis about who does what better. You can look at different countries. The French have a different approach from the U.K., but it's hard to make exact comparisons when we're doing it in an information vacuum in Canada.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

Do you not have a finding or a country out there that's doing wonderful work that we could go to school on?

[Dr. David Perry]

I think you can look at lots of different examples of things where we could potentially see benefits of particular parts of the process, but I think the starting point for that should be, to my mind, what's not working here other than everything is slower, but that's a pretty generalized phenomenon.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

Mr. Williams, you were the former ADM of materiel. I'm imagining that you raged within the machine for several years. What types of obstacles were there for you when you were in a position where you could impact change? I can assume that you were pounding on the inside walls.

[Alan Williams]

I didn't find any obstacles. That's why, frankly, we didn't lapse money during my period there. That's why we reduced the cycle time by 40%. I was fortunate to have great people working for me. I was fortunate to have great deputies and ministers. I was fortunate to have colleague ADMs who shared my same sort of entrepreneurial instinct, and together we were able to make significant changes.

I remember towards the last three months of the year, we had a sort of brokerage house moving monies around from region to region so that we would be able to advance projects and not lapse funds. We set standards in the department. No longer were we going to take forever to allow the military to prepare the statement of requirements. The vice-chief said, “Two years, that's all you've got”, and we monitored that. It's interesting that a few years after I had left, the Department of National Defence did its own study that confirmed that not only had we met the challenge mark we had decided upon, but five years later, the times were higher than when we started. The people who I was working with, together we had a common vision and we were able to force that into the system.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

David, do you want to chime in on that?

[Dr. David Perry]

I would just point out that from the time Alan was there to now, the level of staff in the last organization you worked at in the materiel group is only about 350 people larger than it was when he was there. I think when he was there, we were trying to spend about $2 billion a year. Now we're trying to spend $12 billion. So point taken about the experience back then, but what we're trying to ask that staff to do is dramatically different from what it was two decades ago.

[Alan Williams]

If I may, that gets to the point I mentioned earlier. If a government is going to ask the military to do something, it should fund it, and if it can't be funded, the military has the obligation to say, “This is all that we can do.” We can't try to put a round peg in a square hole. What you ask the military to do has to be properly funded. If you don't want to give more money, you're entitled not to, but don't expect a different kind of outcome from the military.

[The Chair, Liberal, John McKay]

Ms. Normandin, you have the floor for one minute.

[Christine Normandin, Bloc, Saint-Jean, QC]

I will continue along the same lines.

Mr. Williams, you talked about the importance of calculating life cycle costs, but we often hear—as we did this week—that they are generally underestimated. Because the army wants something, the cost gets underestimated. To make matters worse, the ministers do the same. After that, estimates are exceeded, but no one is responsible for them.

To solve this problem, shouldn't we go the other way? We could say what we want and that it will cost more, and be conservative in the analysis.

[Alan Williams]

I couldn't agree more. I'm always mind-boggled why committee members ask officials to come and tell them what the acquisition cost of something is. The acquisition cost represents about 30% of the total life-cycle cost. It makes no difference. It makes no benefit, if you can have the front end if you don't have the back end. You ought to be asking about the full life cycle of the cost. That's why when I was there, if you recall, when we were doing major procurement, we bundled the acquisition with the full support. We looked at the overall life-cycle cost before awarding the contract as opposed to just ordering it with the company that perhaps had the lowest acquisition cost but later we would be faced with a huge incremental life-cycle cost.

There is absolutely no question that it's fundamental to change the way you think about business. That's why in my comments I can emphasize that it's that important. It's only 30¢ on every dollar to buy. Look at the overall life-cycle cost and make sure it's all there.

[The Chair, Liberal, John McKay]

I would encourage my colleagues to do the same thing. They seem to ignore me when they are asking questions.

Ms. Mathyssen, you have 59 seconds.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

Mr. Williams, when you were talking about the watering down of policy under the F-35s to open up the open bidding process, it seems to me.... Maybe comment on what we're doing now in terms of that question around P-8s and the replacement of the CP-140 Auroras and making it more specific to exactly what.... Are we making the same mistake over again just in a different way?

Maybe both of you can come in on that with my two seconds left.