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
Liberal
The Chair Liberal John McKay
I'm sorry. I'm reading from the wrong sheet.
Mr. Collins, you have six minutes.
Liberal
Chad Collins Liberal Hamilton East—Stoney Creek, ON
Thank you, Mr. Chair. I hope you can hear me okay.
I have read past PBO reports, and this one is written a little differently. I missed a portion of the opening, so excuse me if this was answered in the opening statement. I'm at a housing conference here, and they referenced a PBO report, coincidentally, this morning. They talked about a housing report that was done. Participants here talked about the rental construction financing initiative and the positive critique that the PBO referenced in terms of affordability and why the government should make some changes and tweak that policy as it relates to providing support for housing providers.
I use that as an example right now in my opening question, because this one is written a little differently. It doesn't reference existing policies. Certainly it highlights existing budgets, but it doesn't provide recommendations in terms of making changes. Traditionally PBO reports do that, and they do that for different constituencies. They certainly do that for us, in terms of allowing us to reflect on some of the policies that have been implemented and the changes that we might want to make in terms of making them better. They do that for our constituents.
That's a great example that I just provided, in terms of how I'm at a housing conference and they're referencing a PBO report and some of the changes that were highlighted in that document I referenced. Of course, our bureaucracies use these reports for the same reasons and rationale, in terms of making changes.
This one is written a bit differently. I didn't see those recommendations. I didn't see the comparisons that Mr. Bezan rightfully raised, in terms of how we compare to other countries. Those are the types of things that I think we're accustomed to seeing in many of the reports that come out from the PBO.
Who is the report written for? How is it to be used? Is it to be used by others in bureaucracy? I would have to guess that when it comes to trade-offs, those who create our budgets are well aware that increased support in one area means you may have to decrease in another area, because budgets are finite. Can you help me with that, in terms of who the sliding scales are for? Are they for the public to go online and play with them, to say if they're going to advocate for more in a certain area within the defence budget, here's where I would like to see it because I've utilized this tool that you provided online?
I wasn't certain, after reading this report twice, why that was created and who the intended user is. I'm sorry for the long introduction and anecdote.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Thank you. That's a very good question and an interesting one, and it allows me to explain a bit more, and probably a bit better, why we did that report.
This report, as you pointed out, is written differently because it's meant to be a companion to something that we released at the same time, which is a tool on our website intended for parliamentarians and their staff, and also for Canadians. It allows them to look at what happens if you increase or decrease some military capabilities, how much it costs and how much it requires in additional personnel, both in direct capabilities but also the indirect capabilities—for example, field hospitals, if you want to increase the army—and also the overhead costs that are accompanied by these increased or decreased military capabilities.
That's why we wanted to have that tool. We wanted parliamentarians to have that capacity to look at the impacts of varying 21 military capabilities. That's something that's not available right now from DND, so we wanted to have that tool available for parliamentarians so that they can play with the various capabilities.
It's not perfect, by any means. It's based on historical data, the most recent data from the past six years. We looked at that and we reconciled all these various objects by line item and made that fit into the 21 capabilities—direct, indirect and overhead—so that parliamentarians and Canadians can have an idea as to the costs and the military personnel required, or freed up, if you vary the capabilities. For example, for direct regiment capability, how much more or less money is needed directly to support them, as well as the personnel and also the costs?
Liberal
Chad Collins Liberal Hamilton East—Stoney Creek, ON
I had an opportunity to look at the DOD's same version online. I understand, sir, that you have an international component to your job, in terms of meeting with your counterparts and looking at what they're working on.
Where did the request come from, internally or domestically? Is it something that you witnessed that they're working on in another country—the United States is a prime example—and you thought this would be a useful tool here? Did someone request this, saying that there's not enough transparency, not enough budget information online or the public is clamouring for this? Of all the things you could have worked on with your limited resources, why did you go down the path of providing this tool?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It's something that we identified as a gap in information that was available to parliamentarians. We identified that as a gap before I was appointed, so it's something that was on our work plan the moment I stepped into the job.
However, there were a couple of events that prevented us from working on this issue, notably the pandemic and the fast pace of reports that we had to produce. That's why this was put on ice for a number of years, unfortunately. With the pandemic receding and Mr. Solomon becoming more available than he was before, we asked him to come back and complete the work that we had done, because we had identified that as a gap and also because of the sustained interest on the part of parliamentarians for information on anything that relates to national defence. For example, the moment we release a report on DND, be it on the operating or capital spending, the “Strong, Secure, Engaged” capital plan, or surface combatants, there is tremendous interest in our reports.
That's why we thought it would be advisable to provide that tool for parliamentarians and the Canadian public to look at different permutations, for their own interest and for the purpose of holding the government to account.
Liberal
Bloc
Christine Normandin Bloc Saint-Jean, QC
Thank you very much.
It's always a pleasure for us to welcome the Parliamentary Budget Officer.
I'd like to follow up on what Mr. Bezan was saying. But first, I'd like to make sure that I've understood. Let me use an example: in the model you just described, when you move the cursor around, you can see modifications made to the direct and indirect costs. If I've properly understood the answer to one of Mr. Bezan's questions, there isn't a perfect correlation when you move the cursor. There's a sort of sweet spot that pops up automatically.
Is that right? Is that what happens for each of the capabilities? Is that accounted for in your model?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
We've wondered about that ourselves.
The ranges available on the online tool are fairly linear. They go from ‑25% to 25%. Beyond that, the linearity begins to break down. That's the main reason why we limited ourselves to plus or minus 25%. Indeed, the linearity, based on historical data over the past six years, is pretty much in that range. However, if we go beyond it, whether upwards or downwards, there's a risk of losing linearity. There could be a complete collapse or exponential growth in certain indirect capabilities, particularly for overhead.
Christine Normandin Bloc Saint-Jean, QC
Thank you very much.
I would also like to ask a question about the definitions of direct and indirect costs. I too was surprised to hear that the combat engineers, among others, are in the indirect costs category.
Can you tell me what a direct cost is? I believe direct costs are those that don't produce a military effect.
You've previously made comparisons with other countries, and I'd like to know whether they use the same definitions. My understanding is that Canada uses the same definition as the United States. Do other countries use the same definitions of direct and indirect costs?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
To my knowledge, in terms of definitions, very few countries provide this kind of information.
The United States was mentioned, an ally whose lead we follow in many instances for national defence matters, because that country tends to provide a lot of information, particularly from the Congressional Budget Office. We are therefore closely aligned in this area.
Mr. Penney and Mr. Solomon may be able to provide more information about comparisons with other countries.
I'll give you one example of direct capabilities. for combat ships, one might say that destroyers fall into the "direct capability" category. Supply ships like the MV Astérix or other ships, fall into the "indirect capability" category, even though they too might be deployed in combat zones or active zones.
Mr. Penney, could you tell us about comparisons with other countries?
Advisor-Analyst, Office of the Parliamentary Budget Officer
I was going to first touch on the indirect versus direct capabilities front. In particular, it's not to demean a capability if it's indirect. It's the point of delineation that we used and implemented in the model. Is it something that is typically deployed as part of a force mix, or is it something that can be conceivably deployed by itself? I think reasonable people can have disagreements on that front.
With regard to the international comparisons, I believe this is an import from both U.K. and U.S. military doctrine, but perhaps Mr. Binyam Solomon could....
Special Advisor, Office of the Parliamentary Budget Officer
Yes.
What we mean by indirect is essentially, when you go on a combat mission, you will need these things to go along with it. It's like a force package. Which one is the most lethal aspect? It's the one you would typically use for combat and for doing, for lack of a better word, the actual killing. Who is providing you the support?
Sometimes, we decide to include under the indirect not only the capability of combat engineering support but even reconnaissance. Even though some reconnaissance items might be employed for combat or killing, they are primarily used as a support unit that you send together.
Think of that as a force package—that indirect. It's not really an overhead when we are talking about indirect.
Bloc
Christine Normandin Bloc Saint-Jean, QC
Thank you very much.
I'm now going to ask some completely different questions.
Minister Freeland and Minister Anand announced $15 billion in cutbacks in various departments.
At what point can the Parliamentary Budget Officer become involved in analyzing impacts? Is that a role he can play?
Without revealing any confidential information, can you tell us whether your office is called upon sufficiently to analyze the impacts of cutbacks like these?
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It's certainly a role we can perform to help parliamentarians.
We have not yet been involved or consulted. That doesn't surprise me, because to some extent, the government needs to do this kind of work confidentially. When the internal work has been completed and more details become available, we intend to study the potential impact of any measures to be taken.
The minister, Ms. Anand, had given the department until the beginning of October to submit proposals. Decisions will probably be made over the coming weeks. Once the decisions have been made, we'll start seeing how we can get involved in providing relevant information and analyses.
Liberal
The Chair Liberal John McKay
Thank you, Madame Normandin.
Mr. MacGregor, welcome to the committee. You have six minutes.
NDP
Alistair MacGregor NDP Cowichan—Malahat—Langford, BC
Thank you very much, Mr. Chair. It is a pleasure to be here.
Thank you to all three of you for being here today.
Back in 2017, I had the pleasure of being invited aboard HMCS Vancouver, one of our beautiful frigates out on the west coast, and they took me for a sailing to show me its capabilities. For anyone who's been on the frigate while it's pretty much ready to go, it has a very large crew to make that ship work. It's a 100-metre long ship. I know that a frigate, of course, is classified as direct-action capable. It's capable of many different roles, but of course the personnel aboard that ship serve many different roles. With some, you could look at their job position and argue that it's indirect or that they are helping sustain the ship.
In your classification system, you're essentially looking at the unit when classifying, so everyone in that unit, no matter what their role—because it is a direct role—is going to be classified under that cost. Am I reading this right? Is it the same for the Canadian Army and for the Royal Canadian Air Force?
Special Advisor, Office of the Parliamentary Budget Officer
The personnel numbers are basically as you indicated. On a ship, you would have those who are going to be providing some sort of overhead or indirect activity. That could be determined by the expenditure data we receive, which we could map into something called “the frigate”, which would have its own specific cost centre or data point.
The personnel one was a bit of a challenge for us. We had to actually use other external information as well, beyond DND, just to make sure that those numbers we're using are also publicly available and comparable. While the methodology you described is essentially the same as what I described, there might be some nuances in terms of making sure that it's part of the publicly available information.
Sometimes you might have some extra people who should have been labelled as base employees, or sometimes the first direct maintenance work that is done for the ship when they are on board or travelling would be tagged to a base or a fleet maintenance facility personnel, so we have to make some adjustments on that.
NDP
Alistair MacGregor NDP Cowichan—Malahat—Langford, BC
Thank you.
I'm substituting in on this committee, but when I was looking at the ratios between direct costs, indirect costs and overhead costs for the three branches, and of course joint costs, I became curious. Are you aware of just how those ratios compare with the NATO average or some of our closest allies? Are we an outlier in any of these? Is this comparable across the NATO spectrum? Do you have that information at all?
Advisor-Analyst, Office of the Parliamentary Budget Officer
I don't have a breakdown by direct, indirect and overhead, other than what's available from the Congressional Budget Office, but there is nothing.
Special Advisor, Office of the Parliamentary Budget Officer
Just to clarify, what we mean by “there is nothing” is that, with the exception of the United States, which is willing to provide that kind of information publicly, not a whole lot of nations have been able to break it down in that fashion.
NDP
Alistair MacGregor NDP Cowichan—Malahat—Langford, BC
The next question I have is specific to my riding.
My riding is Cowichan—Malahat—Langford out on Vancouver Island. We are very much oriented toward the Royal Canadian Navy, especially in the south end. Many of my constituents are either full-time service members or civilians working at CFB Esquimalt.
I understand in your report why you needed to exclude new major capital expenditures, like the procurement of new military systems, but in my riding we know that the wait-list for service members and their families for military housing is close to 700 at CFB Esquimalt, and we know that, year after year with successive governments, they have kind of punted that critical maintenance and new building expenses to prioritize some of the mega-projects, like the F-35 procurement.
We have a lot of military personnel and their families suffering as a result. We have not had those increases made to those budgets, but I am wondering if you can tell us why the report does not include modelling for the increases to things like the Canadian Forces housing agency. Is that not something you could link to personnel costs? It's such a vital and important thing, especially for constituents of mine.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
That's a good point, and that speaks to the exclusion of major capital expenditures in the report, because major capital expenditures—such as housing but also frigates or fighter jets—are expenditures that are for decades. It would be quite difficult to include an accurate cost of the capital expenditures necessary to increase or decrease specific military capabilities, and also the various types of expenditures that can sometimes depend on policy choices, whether that's housing that's provided on base or off base. That's why we have not included these types of expenditures.
NDP
Alistair MacGregor NDP Cowichan—Malahat—Langford, BC
Just as a quick follow-up, would that not sort of affect your personnel costs? If the personnel are having trouble housing themselves, that's a cost they're having to bear, which indirectly I think may affect the Canadian military.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Yes, it's obviously something that military personnel.... If they have to bear additional costs, it will have a negative impact on the capacity of the Canadian Forces to recruit, but also to retain their military personnel. That's probably a very different issue than just the tool and the model we have built.
