National Defence Committee on Oct. 26th, 2023

[Yves Giroux]

We can certainly do that. We can look at the assumptions. In fact, we do so often, particularly in our economic and budgetary forecasts. We also do this for our long-term forecasts of government financial viability. When we publish reports, we often, where appropriate, present alternative scenarios to give parliamentarians an idea of what might happen if the government were to make a change in direction. So it's always possible for us to study the assumptions and work with the government.

What we don't generally do is make public policy recommendations, for example on whether the government should implement a national pharmacare program. We just estimate the costs. However, we can work from the assumptions to estimate the cost or the implications of various scenarios.

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

Thank you very much.

I have a question about overhead. We've often heard that military procurement generates an enormous amount of bureaucracy. I'm thinking of things like analyzing bids in response to tender calls.

Are the bureaucratic costs included in the overheads presented here, or are they mainly tied to what happens at Public Services and Procurement Canada?

[Yves Giroux]

First of all, there are two different things. Expenditures incurred by Public Services and Procurement Canada would probably not be included in the model. However, expenditures incurred by the Department of National Defence for the procurement process would certainly fall into the overhead category.

[The Chair, Liberal, John McKay]

Thank you, Madame Normandin.

Mr. MacGregor, you have two and a half minutes.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Thank you, Chair.

In your model, there doesn't appear to be a separation of personnel between public and outsourced. I want to make that point. The Union of National Defence Employees had an “Uncover the Costs” report. They found staggering evidence that rising outsourcing of operations and sustainment in the Canadian Armed Forces is actually costing more to the department. If we have a situation where outsourced contractors are costing more than maintaining the good union jobs on base, I'm not sure how the model can be effective if we don't delineate the costs between outsourced and in-house work.

Can you tell this committee your thoughts on the impact of the more expensive outsourced contracting in your model, and maybe why there wasn't a delineation? Are there any thoughts you have on that?

[Yves Giroux]

In our model, the costs of the outsourced expertise is in, but as you pointed out, we don't factor in the personnel. The costs are there, but when you look at the personnel impact, it's not there, and it's because it's difficult to determine the full-time equivalent or the personnel impact of contracted-out expertise.

Contracting out expertise can be done for a variety of reasons. It could be to get expertise that does not exist within the Canadian Armed Forces or DND as a department. It could also be because it would not be advisable to develop that expertise in-house, for example if it's necessary for a limited period of time. It could also be related to the fact that the expertise is difficult to retain, as we have seen in the difficulties for the Canadian Armed Forces in reaching their target. That's probably as much as I can say, not being deeply involved in the day-to-day operations of the department and the Canadian Armed Forces myself.

[Alistair MacGregor, NDP, Cowichan—Malahat—Langford, BC]

Very quickly, where does the difficulty lie? Is it in your trying to obtain the data from the department or...?

[Yves Giroux]

I wouldn't say it's difficult to obtain the data. It's probably difficult to get that second-hand information from the contractors, because it's not something that is perceived as pertinent in all cases.

[The Chair, Liberal, John McKay]

Thank you, Mr. MacGregor.

Mrs. Gallant, you have five minutes.

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

Thank you, Mr. Chair.

In the 2022 budget there was an unexplained $15 billion earmarked for our military that was described as a big “black hole” because we couldn't figure out what it was for. Was this money spent that you know of, or do you know what happened to it? Does it show up anywhere?

[Yves Giroux]

I don't know exactly what you're referring to, but when we ask for information from the Department of National Defence we get the information that we need. You may be referring to the capital expenditures, so I'd have to look at the specifics of those billions of dollars.

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

Could you get back to us on whether or not that $15 billion was spent, and if so, how it was spent?

In August 2021, the CAF acquired four new and fully operational simulated urban training sites at Gagetown, Valcartier, Petawawa and Wainwright, and that was as part of the urban operations training systems project, at a cost of about half a billion dollars. Did your analysis for 2023-24 include the approximately $15 million to $20 million to cover the software renewal for this fiscal period? The program has not been renewed, and they've shelved this capability.

[Yves Giroux]

We looked at historical data, and the most recent year we had, I think, was 2021-22, so we would not have looked at anything beyond that for the purpose of establishing this model.

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

At your last meeting here in June you said the shortfall for Canada to get to NATO's minimum 2% threshold was between $13 billion to $18 billion. What, if anything, has changed? Have we come closer to that mark?

[Yves Giroux]

For the current year, when we did that report in June 2022, we estimated the gap would be $15.5 billion in 2023-24. If anything, that gap has widened since that time, because of the GDP and the way the spending has evolved at National Defence.

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

That excludes that $15 billion that's missing as well.

What did you determine was the biggest contributor to the disproportionate cost just to keep our four submarines barely operational? Really, what I'm looking to do is understand how we could calculate the cost of waiting to acquire a new fleet of submarines versus pouring money into keeping the hand-me-downs we do have afloat.

[Yves Giroux]

It's a question that is of great interest to me as a taxpayer, but unfortunately, my office and I have not done a study or a report on the submarines—not yet.

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

Last week at this time I was at CFB Petawawa, on the planes. We had the engineers out there, and the CDS was there taking questions. One of the soldiers asked, “When are we going to get our drones?” I think they started asking for them in 2003, and they were Predators back then. Then he said, “Well, that's the answer you gave me last time.” He asked it again and he said the same thing: “That's the same answer you gave me the time before that, and the time before that.”

This soldier's been waiting over a decade for the Predator drones and now they're being set aside for a higher, more costly drone with more capabilities. How would we use your tool to calculate the cost of, again, just getting what we can in terms of Predators, because they are still available—India's buying them, as is the UAE—versus waiting and paying more, albeit for something that has more capabilities?

[Yves Giroux]

Because the tool is based on historical data, if it's a capacity or tools that do not exist at the Canadian Armed Forces, the tool would not be helpful in determining the cost of waiting or acquiring equipment that the Canadian Armed Forces do not already have, unfortunately.

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

Okay.

[The Chair, Liberal, John McKay]

Just for the purposes of the record, Mrs. Gallant's first question had to do with a $15-billion hole.

Do you understand what it is she's asking for at this point?

[Yves Giroux]

I'm not one hundred per cent sure, but if I had to summarize that, I would probably assume that it's based on the capital spending of DND that was not according to the initial plan under “Strong, Secure, Engaged”.

[The Chair, Liberal, John McKay]

It's important for Mrs. Gallant that the PBO understand what it is she's looking for.

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

Do you want to me explain a little further, Mr. Chairman, for the purpose of following up?

[The Chair, Liberal, John McKay]

Why don't we leave it that you can explain it to him off-line. That should be helpful.

With that, we'll go to Ms. Lambropoulos for five minutes, please.