Evidence of meeting #77 for National Defence in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was tool.
A recording is available from Parliament.
Liberal
Emmanuella Lambropoulos Liberal Saint-Laurent, QC
Thank you, Chair.
Thanks for coming to help clarify certain things and helping to explain this new tool to us.
When looking at the website, I noticed that some of the capabilities that are listed have that range of 100 plus or minus 25%, and some don't.
I'm wondering if you can explain what the difference is here. Why, for example, don't the Canadian Rangers, Arctic and offshore patrol vessels or coastal defence vessels have anything such as a sliding scale there?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We refer to these as locked, so there's not much that can be done for these capabilities.
In these cases, it's because moving the scale even a little bit would get us out of that linear relationship. For example, for some capacities, if you tried to decrease them, you'd get to zero pretty quickly, or you'd have a ratio that wouldn't be sustainable. You'd get virtually zero capacity, but you'd be stuck with a very high ratio of indirect and overhead costs, so that wouldn't be very helpful.
It's the same if you were to increase it by 25%. You would probably need to incur significant and disproportionate capital expenditures, so the tool wouldn't be that helpful in these cases. That's why these capacities are locked.
Liberal
Emmanuella Lambropoulos Liberal Saint-Laurent, QC
In terms of why these 21 military capabilities were identified, is there a rationale? Is this just what there is? To the average Canadian, can you give some rationale as to why these are the ones listed?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Sure. These are the ones that are relatively—and I say “relatively”—easy to understand but also easy to measure, and they're probably the most widely known and available in the Canadian Armed Forces.
Liberal
Emmanuella Lambropoulos Liberal Saint-Laurent, QC
I noticed that you also deemed the Rangers non-essential, and that there are some that are more essential than others in the capabilities and in the different categories.
I'm wondering what the rationale is, considering the fact that they were essential, especially during the pandemic. They were dispatched to long-term care homes, and obviously they do a lot of incredible work in their own communities in areas where you wouldn't necessarily want to send the forces. They know their environment. They are the ones who are protecting certain areas that the forces aren't necessarily protecting in other ways.
I'm wondering why that one was deemed less essential.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We didn't pass judgment on whether capacities are essential or not. We leave that to those in charge of determining Canada's military needs and capacities. We may have labelled some as direct or indirect, but I don't think we have labelled anything as essential versus non-essential.
There may be some miscommunication or maybe some typos in the tool or the report.
Chris is kicking me under the table, so I don't think there's any typo.
Advisor-Analyst, Office of the Parliamentary Budget Officer
If I can just add, the model and the way we built it is completely agnostic as to whether a given capability—whether it's direct, indirect or overhead—is essential or not.
In fact, everything's assumed to be essential. You need the overhead and you need the indirect, in order to have the direct.
Liberal
Emmanuella Lambropoulos Liberal Saint-Laurent, QC
I have one other question in terms of indirect and overhead costs. Mr. Solomon gave a bit of a clarification earlier and said, for example, that the cost of the combat engineering supports that would be sent along would be indirect. What would be considered as overhead, and what's the differentiation between the two?
Special Advisor, Office of the Parliamentary Budget Officer
A typical example for an overhead.... Let's take any of the navy capabilities. An indirect capability would be a fleet diving unit, a unit that would be going along with the ship. Eventually, when we have the JSS, for example, the joint support ship, that would be considered indirect, because we need them to be refuelling while they're on a mission. Overhead would be items like the fleet maintenance facility that stays offshore doing the work, the maritime command, or the executive overhead that would be sitting at Halifax or Esquimalt or NDHQ. Those would be the overhead we're talking about in that case.
Liberal
The Chair Liberal John McKay
Colleagues, I think we have time for one more five-minute round.
Let's start with Mr. Bezan.
Conservative
James Bezan Conservative Selkirk—Interlake—Eastman, MB
Thank you.
This report and this model are going to be, hopefully, a living document, or you guys can update the information. Now that the public accounts have been tabled and the 2022 financials are out there, can you input that data here and update the model?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We could to the extent that the level of information, at the granular level that we need, is available from DND and to the extent that we can reconcile it with the standard line items that we have in our model.
Conservative
James Bezan Conservative Selkirk—Interlake—Eastman, MB
This is only good if it has current data in it.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes, it is.
Conservative
James Bezan Conservative Selkirk—Interlake—Eastman, MB
Once it stales, it's garbage in, garbage out. Is that right?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes, it is. It becomes an interesting intellectual exercise, but not much more than that.
Conservative
James Bezan Conservative Selkirk—Interlake—Eastman, MB
When is the F-35 report going to be coming out? I know you've been working on it. Can we expect it to be tabled here soon so we can have you back?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes, you can. Hopefully, it will be next week—late next week.
Conservative
James Bezan Conservative Selkirk—Interlake—Eastman, MB
That's awesome.
You also talked about whether Canada is ever going to get to the 2%, and you said that the gap is widening. You did your report on NATO's 2% spending target in June 2022. Are you going to be updating that? Already, if we look at the charts you had in there, we were supposed to be at 1.33%. We missed that mark. We were supposed to be, this year, at 1.46%, and you're saying we're going to be significantly lower than that. Do you have any plans to go back and update that dataset?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
No, we don't—not in the near future. We're focused on the F-35s and then updating the report on the capital spending at DND under “Strong, Secure, Engaged”.
For the 2%, we are also held hostage a bit by the availability from NATO of NATO definitions and updated numbers, but it's something that is of keen interest to parliamentarians. It's not in the near future, but it's not never. It will probably be sometime in the next several months.
Conservative
James Bezan Conservative Selkirk—Interlake—Eastman, MB
Going back to your force structure model and talking about the tooth-to-tail ratio, some people would say that the tail is fat and the tooth is lean. Where can we cut the fat without affecting the tooth? There's always the issue around sustainment, and you said that, certainly, some of the overhead is necessary. Were you able to identify, through this process, whether there's too much bureaucracy? Are we top-heavy? Do we have too many commanding officers, flight officers or general officers?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We looked at historicals. We looked at the numbers that DND provided us, and we reconciled that. We tried to tie all the little knots there were to ensure that we had a good tool, but we didn't look at whether all the numbers were necessary, or whether all the overhead and indirect costs were necessary. That was way out of the scope of that report.
All of that is to say that I can't answer that question, because we have not done that kind of work, looking at everything with a very critical eye and asking, “Is it absolutely necessary?”
Conservative
James Bezan Conservative Selkirk—Interlake—Eastman, MB
When we start looking at the issue of procurement—we've been talking about this now for some time at committee—there are dollars tied to it within the Canadian Forces. There's no doubt that, for whatever reason, the big-ticket items definitely use bigger tooth-to-tail ratios. Surface combatants are going to really change that number dramatically. New fighter jets will change that number dramatically, which isn't necessarily the same for putting boots on the ground in the army.
When you're doing this process, are we talking about the U.S. numbers being higher because they have a more robust air force and navy versus Canada to get to 1.4%?
Advisor-Analyst, Office of the Parliamentary Budget Officer
I would suggest that they certainly have a higher rate in regard to the total force employment. The operations rate is much higher in the United States. We could also talk about their higher-end systems costing more on a flying-hour basis, let's say—recurring variable costs—which is what the model does.