Public Accounts Committee on Oct. 28th, 2010

[Sheila Fraser]

Absolutely, and there is also an entire validation process, a challenge process within the department which, normally, assures the minister that the submitted estimates are reasonable. We can see that, in this case, this process was not followed.

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

The minister therefore has to do his homework and validate the information. That being said, we can more or less deduce that in 2006, when the initial decision was made, the minister at that time was asleep at the switch. Indeed, he did not really properly validate the information presented to him, nor did he do his job satisfactorily. So, at that time, he was asleep at the switch.

[Sheila Fraser]

Mr. Chairman, you will appreciate that I will not respond to such a political comment.

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

I will continue on the same subject. It is almost as though the new minister said to himself that these were the helicopters he was told he needed to purchase, that he had to continue to follow the same process, and was therefore perhaps going to continue remaining asleep at the switch as well.

I can appreciate that you may not want to respond to this statement either—

[Sheila Fraser]

No.

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

—and I respect that.

Madam Auditor General, all of a sudden, the risk level of this helicopter file is no longer estimated to be from slight to average. Should we be concerned if we were to head in the same direction with the F-35s as we have with the helicopters?

[Sheila Fraser]

Mr. Chairman, I cannot really comment on the acquisition of the F-35s, because we are not familiar with the analysis nor the way that these planes were purchased. I would hesitate to comment on this issue.

However, it would be important that the committee discuss, with the departments, the acquisition strategy for this complex equipment. Should we expect to have a firm price at the beginning of the process, or should we perhaps proceed on a step-by-step basis and state that we are giving our approval for the design and for the requirements? In the case of the Chinooks, this process took three years. Rather than expect to have a firm price at the beginning of the process, perhaps it would be better to have a step-by-step process where we would be provided with better information.

I doubt that, in 2006, we were in any position to estimate all of the modifications and understand all of the complexity of the project. If there is a question that needs to be asked about the way we proceed with these acquisitions, it is as follows: should we not be reviewing the process?

[Jean-Claude D'Amours, Liberal, Madawaska—Restigouche, NB]

Let us be clear: given what we know about the helicopters, there is a serious risk with respect to the F-35s today. This is a direct link, with the same department.

[Sheila Fraser]

That is a question that should be asked of the departmental representatives when they appear.

[The Chair, Liberal, Joe Volpe]

I will turn the floor over to Mr. Bachand immediately.

[Claude Bachand, Bloc, Saint-Jean, QC]

Thank you, Mr. Chairman.

Good morning, Ms. Fraser, I'm always happy to see you. I have some questions. My colleague was kind enough to invite me here today to support her as we deal with the issue of military equipment, particularly the helicopters.

I would like to tell you that, a few years ago, I met the president of Boeing Canada here, in Ottawa. And I was very surprised when he asked me to explain what was going on with the Chinooks. I answered him by saying that, since he was the president of Boeing Canada, he should be in a position to know. He told me that he did not really know.

So I decided to go to Philadelphia. I think that you are the right person to hear the following: I paid for my own ticket to travel to Philadelphia and did not accept a seat on the Boeing plane. The Chinook assembly line is located in Philadelphia. The American government is of course by far the largest supplier and purchaser of this equipment. I saw the assembly line and I was told that modifications were being made to the Canadian equipment. I asked about these modifications. I was told that they had been asked to make these modifications in order to have, for example, an additional gas tank and special defensive weaponry. Indeed, this type of craft is, in the American theatre of operations, always accompanied by Apache attack helicopters that provide defence, but we do not work that way. So I said to myself that this meant, in my opinion, that we were going from a low-to-average risk to a high risk.

If I were to ask assembly line workers to install two gas tanks instead of one on my car, and say that I wanted this instead of what is normally found on a car, they would tell me that they would happily comply, but that it would cost me quite a bit more. I think that, in the final analysis, this is what happened.

I have here the MERX contract from 2006, as it was put online. The specifications are indicated. For those who are listening to us—because you are familiar with the process—when military equipment is purchased, the Department of National Defence determines the specifications, Public Works and Government Services Canada puts the contracts online and oversees all aspects of the contract and Industry Canada deals with the economic spinoffs. I do not think that National Defence did its job properly. Indeed, when you determine a specification—the specifications are indicated here—and then, during the course of the contract, state that a mistake was made and that something else in addition is required, well I think that is a major problem.

I would now like to ask you some questions. Also, I should tell you to pick up your pen to note them, because I do not think that you will have enough time to answer all of the questions and I would appreciate your sending me a written response a little later on.

First of all, do you feel, when changes are made to the specifications during the contract, that that could result in unfair competition with respect to the other suppliers? Do you feel that the cost of the project will increase if other suppliers sue? Indeed, any supplier could say that this was not what was requested initially, that specifications were changed mid-stream and that, meanwhile, his services were not retained.

Even though you have already given me your opinion, I would also like to know how you feel about the Advanced Contract Award Notices, the ACANs. I've always given examples related to cars. When I negotiated the purchase of my car, I did not go about it the right way. Indeed, I wanted to buy the red Camaro that I had seen in the show, I thought about it day and night and I even said so to the salesman. I told him that I wanted this car, that I absolutely wanted this colour, and that I wanted everything that came with it, in a nutshell, I wanted the car. My father then told me that this was not how things worked. He told me that I should visit the other salesmen to try and get some competition. So I would like to know your opinion about the Advanced Contract Award Notices.

I do not know if you can go so far as to require that the project managers at the Department of National Defence remain the same. With respect to oversight and management rules, it often happens that, right in the middle of a contract, the manager is changed. It is important to me that I have an answer to that.

In addition, I would like to know whether you asked for any explanations regarding the Cyclone helicopters. The delivery date has been delayed and we were supposed to be able to impose fines, but no one has been fined. The way I see it, we are again deciding to renegotiate the contract and to try to come to an agreement with Sikorsky. I find this weird.

I do not know whether or not you're going to be able to respond to all of my questions in the minute remaining. If not, I would ask that you send me the answers, if you could.

[The Chair, Liberal, Joe Volpe]

Thank you, Mr. Bachand.

I did not interrupt you because you are in charge of your five minutes, you can use them as you wish. I see that you have decided to ask all of your questions. Thank you for giving Ms. Fraser the opportunity to respond to you in writing, because your five minutes are up.

[Claude Bachand, Bloc, Saint-Jean, QC]

Mr. Chairman, on a point of order. Will Ms. Fraser's answers be sent to all committee members?

[The Chair, Liberal, Joe Volpe]

That would be the case, as usual.

[Claude Bachand, Bloc, Saint-Jean, QC]

Very well.

[The Chair, Liberal, Joe Volpe]

Thank you, Ms. Fraser.

Madam Fraser, I know you'd love to answer every one of those questions. If there's time at the end, I suppose we could come back to them, but I'm going to go to Mr. Young.

[Terence Young, Conservative, Oakville, ON]

Thank you, Chair.

Madam Fraser, once again, thank you. We're happy to have you with us here today.

When I look at this audit in its totality, as a parliamentarian I have to say I think it's reflecting on the government; it's an excellent report card.

I look at the economic action plan; that has to be an A or A-plus. Management control of small agencies has to be an A or an A-plus; regulating large banks, registered charities; facilitating flow of imported commercial goods. So I see five out of nine here, A-pluses, and a couple of Bs and Cs.

I was in the provincial parliament before and I've been here for two years. It's the most positive audit that I've ever seen for a government. One of the As is definitely Canada's economic action plan.

You answered a question from my colleague regarding the amount of spending for economic stimulus, it being probably the largest in history. Wasn't it also the largest amount of money spent over a short period of time because of the urgency of the worldwide recession?

[Sheila Fraser]

I would believe so. I don't have an exact response, but certainly to flow $47 billion and another $16 billion from the provinces over a two-year period is obviously quite unique in Canada's history.

[Terence Young, Conservative, Oakville, ON]

I don't know if you remember a question I asked when we were at a conference this summer, but when I first arrived here, I found the parliamentary system of approvals for expenses to be rather slow moving, to say the least. So the government had the challenge of not only trying to address a worldwide recession by stimulus spending, but to do it in a very short period of time.

Would you agree that made the challenge much more difficult?

[Sheila Fraser]

Absolutely. As we note in the report, public servants worked very hard to find ways to accelerate the process, and in many cases used existing programs, so it didn't have to go through all of the approval process for new programs. They reduced many of the approvals from six months to two months by doing some of the processes at the same time rather than doing them sequentially.

The other thing I would note is vote 35, which enabled the funds to start flowing much earlier than they would have otherwise--I would say probably six months earlier. There were a number of mechanisms, actually. Vote 35 is quite new, and it really did help to accelerate the flow of funds.

[Terence Young, Conservative, Oakville, ON]

Thank you.

Your audit found that departments and central agencies “paid considerable attention to risk” and put in place suitable controls and mitigation strategies. Could you highlight how this was done and whether there are potential best practices system-wide or for other governments?

[Sheila Fraser]

It was very clear that government wanted this program to be successful, wanted it to be well managed, and I think senior people concentrated a lot on making sure that the risks were identified. There were numerous meetings. There was clear engagement of senior people in the programs, in the actual design of them, how they were to flow. There was consideration paid to how they would be managing these and the kinds of controls they would put in place, and there was very close cooperation in a working relationship with the provinces and territories.

I think it goes to show when people take these things seriously, they do them well.

[Terence Young, Conservative, Oakville, ON]

Right. Thank you.

I think there were 22,000 projects Canada-wide. You surveyed 410 of them from nine different programs and examined from the supplied information whether they were eligible according to the program requirements. If I'm right, you concluded that they all were.

[Sheila Fraser]

That is correct.

[Terence Young, Conservative, Oakville, ON]

So that's 410 out of 410.

Did you find any evidence of a challenge function, in other words, ineligible programs that were turned away or rejected or had requests for further information?