Public Accounts Committee on March 30th, 2010

[The Chair, Liberal, Shawn Murphy]

I would like at this point in time to call the meeting to order.

On behalf of everyone on the committee, I want to extend to all witnesses and visitors a very warm welcome.

Welcome everyone.

Colleagues, this meeting has been called today pursuant to the Standing Orders to deal with chapter 5, “Acquiring Military Vehicles for Use in Afghanistan” in the fall 2009 report of the Auditor General of Canada.

The committee is very pleased to have Auditor General Sheila Fraser with us today from the Office of the Auditor General. She is accompanied by Hugh McRoberts and Jerome Berthelette, both assistant auditors general.

From the Department of National Defence, we have the deputy minister and accounting officer, Mr. Robert Fonberg. He is accompanied by Lieutenant-General Andrew Leslie, the chief of the land staff at the Department of National Defence, and Dan Ross, the assistant deputy minister, materiel, at the Department of National Defence.

From the Department of Public Works and Government Services, we have the accounting officer and deputy minister, François Guimont. He is accompanied by Terry Williston, the executive director of military procurement.

Lastly, from the Treasury Board Secretariat, we have Mr. John Ossowski, the assistant secretary for international affairs, security and justice.

On behalf of the committee, I want to welcome everyone here today. We do have a large crowd.

We're going to now ask for the opening remarks.

We're going to start with you first, Ms. Fraser. Five minutes, please.

[Sheila Fraser, Auditor General of Canada, Office of the Auditor General of Canada]

Thank you, Mr. Chair.

We thank you for this opportunity to present the results of chapter 5 of our 2009 fall report entitled “Acquiring Military Vehicles for Use in Afghanistan”.

As you mentioned, I am accompanied today by Hugh McRoberts, an assistant auditor general, and Jerome Berthelette, the assistant auditor general who was the principal for the audits of National Defence when we did this work.

This represents the first of several audits on military acquisitions that my office is undertaking. We are currently completing an audit on the acquisition of military helicopters to be reported to Parliament in the fall of this year.

The acquisition of military equipment involves several federal departments. National Defence has overall responsibility for setting military requirements and managing the acquisition projects, while Public Works and Government Services Canada, as the contracting authority, manages the contracting process.

Mr. Chair, we looked at four urgent projects, each costing over $100 million, to acquire military vehicles to improve operational capability and protect soldiers in Afghanistan. The projects involved the acquisition of replacement tanks, armoured patrol vehicles, armoured heavy support vehicles, and light armoured vehicles with remote weapons stations.

We examined how National Defence managed the projects to ensure that the acquisitions met government policies related to project management and that the vehicles it was purchasing would meet the Canadian Forces' urgent operational needs. We also examined how National Defence and PWGSC worked together to ensure that the contracting for the projects complied with government policies.

In three of the four projects we examined, National Defence and PWGSC provided the Canadian Forces in Afghanistan with urgently needed vehicles that National Defence determined met the operational needs.

The fourth project, acquiring the LAV-RWS vehicles, slipped behind schedule and the vehicles were not delivered to Afghanistan until after our audit was completed.

For the two competitive contracting processes that we examined, we found that both processes were managed in compliance with applicable contracting policies. However, none of the four projects was managed in accordance with National Defence's project approval guide. The problem that National Defence faced is that its guide did not have a separate process to deal with urgent operational requirements and it gave no guidance on which of the many required elements could be abbreviated or in fact even abandoned in the face of urgent needs.

We recommended that National Defence take the opportunity to apply its experience from these projects to assessing the elements of the guide to determine which elements may be safely modified or deleted in the face of urgent need, as well as whether some are needed at all, regardless of urgency.

In January, Mr. Chair, during my visit to Afghanistan, we had the opportunity to see this equipment and to speak to the soldiers who use this equipment on a daily basis. What the soldiers told us about how the vehicles were meeting operational needs was consistent with what we reported in this audit.

Mr. Chair, we are pleased to report that both National Defence and PWGSC agreed with our recommendations. The two departments have shared their action plans with us and we believe these plans have the potential to address the issues raised in this chapter.

However, the work on this audit was completed in May 2009 and we have not audited actions taken by the departments since then. Your committee may wish to have the departments reports on progress and the results they are achieving.

Mr. Chair this concludes my opening remarks. We would be pleased to answer any questions. Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Ms. Fraser.

We're now going to hear from the Deputy Minister of National Defence, Mr. Robert Fonberg.

[Robert Fonberg, Deputy Minister, Department of National Defence]

Mr. Chairman, members of the committee, thank you very much. I appreciate the opportunity to join you today to talk about chapter 5 of the 2009 fall report of the Auditor General.

As you mentioned, Mr. Chairman, I have here with me today Lieutenant-General Andrew Leslie, chief of the land staff, and Dan Ross, assistant deputy minister, materiel.

The Department of National Defence welcomes and accepts all recommendations identified in chapter 5.

Before I discuss the specifics of the audit and the response of the Department of National Defence, I believe it is important to remind ourselves of the context within which this audit was undertaken and completed.

The audit considered four of a much larger number of projects that were under way during the time period to address complex soldier survivability challenges. These particular four have all now been successfully delivered. The four projects were approved between October 2005 and April 2007. Over that period we lost 48 men and women in Afghanistan. It was the first time since the Korean conflict that the Canadian Forces were fighting a full-scale war. It was a very intense and constantly evolving war.

In Kandahar province our troops were asked to secure complex, dangerous terrain equivalent in size to the province of Nova Scotia. They were facing a very determined enemy, an insurgency that was both adaptive and elusive. The enemy threat became more deadly, from bicycle- and car-borne suicide bombers to progressively larger, more powerful, and more complex improvised explosive devices buried in the roads and culverts that our military vehicles passed over. The tactics were changed, operations and intelligence evolved, and the military adapted, but we realized we needed to do more. We appreciate the fact that the Auditor General understood this context and took it into consideration when carrying out this audit.

Commanders in theatre and senior leaders at National Defence headquarters recognized the urgency of providing better equipment, specially armoured vehicles, to protect Canadian soldiers on the ground. The army evaluated the options and made recommendations about which capabilities were required to meet the different threats faced in Afghanistan. Once a potential solution was identified, our department worked effectively, efficiently, and quickly with our partners in other departments on the procurement of the vehicles.

The timeliness of these life-saving acquisitions would not have been possible without the understanding, collaboration, and commitment of public servants in the Department of Public Works and Government Services Canada and the Treasury Board Secretariat. We all worked together to expedite procurement processes, and we all understood that Canadian lives were at stake.

Collectively we moved forward as quickly as we could, recognizing that our approach entailed some judgments around certain kinds of risks. It involved a multitude of stakeholders, and there were clearly some communication challenges in quickly pulling together the right information for decision-making purposes. But we assumed the risks of working this way because the risks to our troops in delay or non-action were far greater. However, we never looked at the urgency as a licence to be sloppy in our processes. We never looked at the urgency as a reason to withhold information.

All four types of vehicles were urgently needed. They are all now fully in service. They have saved many lives and contributed to the success of our operations in the field. General Leslie, I'm sure, would be happy to answer questions on those issues. They provide capabilities our forces will use in future operations.

As the Auditor General stated in her chapter, each of the four acquisitions was managed in accordance with all Treasury Board policies, guidelines, and practices. The two contracting processes that were included in the audit were found to be in compliance with applicable contracting policies and completed in a timely manner. But that is not to say that improvements cannot be made.

As I stated earlier, the Department of National Defence accepts the Auditor General's recommendations. We are actively looking at our internal processes and policies to ensure we are better prepared to handle situations like this in the future.

We have provided you with a detailed action plan setting out how we are addressing each of the recommendations included in chapter 5 of the Auditor General's report. National Defence is seized with the challenge of implementing this plan. The action plan includes steps to strengthen the decision-making process for urgent requirements,

measures to enhance the already close collaboration between National Defence and Public Works as well as our other government departmental partners, and processes to ensure training requirements are firmly integrated into acquisition decisions.

We have already made good progress on a number of fronts. And, as the Auditor General has suggested, we are seeing how we can apply the lessons learned—not only to urgent acquisitions—but to regular acquisitions as well.

Mr. Chairman, just let me conclude by stating that the Auditor General's report is very much assisting us in improving how we manage the defence program, and particularly the procurement process. We take our responsibilities and accountabilities as stewards of public funds extremely seriously.

We also take seriously our responsibility to ensure that the Canadian Forces are ready when called upon to protect Canadians and their interests.

Thank you. I look forward to your questions.

[The Chair, Liberal, Shawn Murphy]

Thank you very much, Mr. Fonberg.

We're going to now hear from Mr. François Guimont, the Deputy Minister of the Department of Public Works and Government Services.

Monsieur Guimont.

[François Guimont, Deputy Minister, Department of Public Works and Government Services]

Thank you, Mr. Chair. I am very pleased to appear before you today with my counterparts from TBS and DND as part of your study of the Auditor General's Fall 2009 report, in particular, the chapter on Acquiring Military Vehicles for Use in Afghanistan.

As the Auditor General Office observed, PWGSC provided, together with DND, urgently needed vehicles to the Canadian Forces in three of the four projects examined, with the projects being completed in months rather than years.

Public Works successfully implemented strategies, again with DND, to fast-track the contracting processes, and we managed the two competitive contracting processes that were examined in compliance with applicable contracting policies.

The only issue observed for Public Works and Government Services was the clarity of information to senior officials. However, the Auditor General also noted that given the urgent operational requirements of National Defence, the few problems found in the competitive process were somewhat understandable.

Only one of the AG's five recommendations was directed to Public Works and Government Services, and it was shared jointly with DND. The department accepts the recommendation that Public Works and National Defence “should examine lessons learned in contracting for urgent operational requirements that could be applied to help speed up the regular procurement process.” We agree with the Auditor General that highlighting the successful aspects of this procurement could benefit future procurement processes.

The departmental action plan, which has been shared with the committee and the Auditor General, includes a detailed review of the steps, procurement activities, actions, and processes that led to the timely acquisition of the military vehicles examined in the audit. I am pleased to report that the lessons learned from this audit are being used by the acquisition branch of the Public Works and Government Services to improve their regular procurement processes.

I'll be happy to answer your questions. Thank you.

[The Chair, Liberal, Shawn Murphy]

Merci beaucoup, Monsieur Guimont.

Mr. Ossowski, do you have an opening statement? I understand you do not.

[John Ossowski, Assistant Secretary, International Affairs, Security and Justice, Treasury Board Secretariat]

No, I do not.

[The Chair, Liberal, Shawn Murphy]

Thank you very much. That was good.

We're going to go to the first round of seven minutes, to Monsieur Dion.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Thank you, Mr. Chair.

Welcome to each of you. Thank you very much for being here this morning.

What we have to discuss together and to look at is a very important topic. It's about the success of the military mission, the lives of our brave men and women in uniform, and the necessity of choosing good weapons, good contracts, and to do it in a timely fashion.

I think what the deputy minister, Mr. Fonberg, said is very important, especially the following paragraph:

However, we never looked at the urgency as a licence to be sloppy in our processes. We never looked at the urgency as a reason to withhold information.

This is very key. We have four cases, and I must say....

In reading the report, we see nevertheless that troubling errors were made, in all four cases. I am certain that we will not have too much of the time alloted to us to go into this in detail. That is why this committee exists, to verify these details with a great deal of attention and rigour.

I would like to talk about the first case, the armoured vehicle replacement project. It seems that a design error was made. The Leopard 2 were unable to be equiped with mine plows and bulldozer blades, which made them rather unsuitable, if I understand correctly, for the mission.

On page 10 of the Auditor General's report, it states, “no research was done to find out if these implements could actually be fitted on the tanks.” So, the immediate question that springs to mind is how such a mistake could have been made.

Next, I want to go to page 26 of the report. I will read the paragraph in question, because it is quite surprising. It is paragraph 5.80 on page 26 of the English version.

It's paragraph 5.80. I don't know the page number in the English version.

Half of the paragraph will read something like this:

“We found that National Defence was aware, but did not disclose, that there was a significant risk that it would not be able to replace the entire Leopard 1 tank fleet in Afghanistan because it would not be able to equip the new tanks with the landmine plows and bulldozer blades needed for operations there.”

We wonder whether this was a mistake, or a failure to provide that information. First, I would like clarification from Ms. Fraser, please.

[Sheila Fraser]

Thank you, Mr. Chair.

We cannot know the reason for this omission; perhaps National Defense can answer that question. With regard to the issue of not knowing that the tanks would not be able to be equiped with bulldozer blades and other equipment, the problem stems from the fact that National Defence is not supposed to speak with suppliers before commencing the procurement process. We have raised this problem: Public Works should participate much earlier in the process in order to obtain better information about the equipment and changes that might occur, particularly with regard to said equipment. The equipment specifications changed, but National Defence was unaware of this and presumed that it would be able to install that equipment on the armoured vehicles. So, it would be essential to change the process in the future, in order to be able to obtain better information about the equipment that they want to purchase.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

I want to understand the timeline. At one point, the department was unaware of this but it found this out later and did not mention it. This is what paragraph 5.80 states.

[Sheila Fraser]

Correct.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

When was it aware of this fact, and did not share it?

[Sheila Fraser]

I would ask Mr. Berthelette to answer that question.

[Jerome Berthelette, Assistant Auditor General, Office of the Auditor General of Canada]

Mr. Chair, it's difficult to say because we have not had access to all the evidence needed it to confirm when National Defence realized that it would be impossible to install that equipment on the tanks.

I'll speak a little bit in English, because some of the terminology is difficult for me in French.

As the Auditor General says, as National Defence started this process to acquire these tanks, they didn't do any research. Part of that was because there was some history with respect to the Leopard tank, and the Leopard 1 was able to utilize these implements.

So there was a process of continuing these discussions. A certain assumption was made that these pieces of equipment could be fit on to tanks. As they proceeded and got closer to a contracting process, it seems it became clearer that it was going to be more risky, more difficult to put these pieces of equipment on. And then as they got closer to actually preparing the submission for government to consider these tanks, it seemed clear to us, on the evidence, that at that point National Defence knew there was a very high risk they would not be able to put this equipment on. This happened in a very short period of time, we have to keep in mind. So what we see is a process of coming to understand what this equipment was actually capable of doing.

[Stéphane Dion, Liberal, Saint-Laurent—Cartierville, QC]

Might I ask the deputy minister of National Defence to tell us what happened?

[Robert Fonberg]

I would like to turn, if I could, to the assistant deputy minister of materiel, who's very familiar with the actual timelines. I do believe that the origins of the challenge were that based on the Leopard 1 model, as opposed to not exactly having done the research, and given the urgency, we made certain assumptions about the ability for the Leopard 2 to be retrofitted with the plows and the blades, and through the acquisition process came to the conclusion that this wasn't actually possible. We subsequently actually figured out how to do that ourselves.

I'd ask Dan Ross to make a comment on that, Mr. Chairman.

[Dan Ross, Assistant Deputy Minister (Materiel), Department of National Defence]

Thanks, Rob, Mr. Chairman, Mr. Dion.

The process of initially loaning the German Leopard A6 tanks in the spring of 2007 unrolled very quickly. It wasn't clear what we could specifically do in terms of plows and rollers in that period of six weeks to two months.

I do recall having a meeting in Germany with Rheinmetall, which is the designer of the support vehicles. Their engineers said to me quite specifically that they were confident they could push plows and rollers. At that time we did not have full technical information about the Leopard tanks.

As the Office of the Auditor General staff have said, it became clear to our engineers, in discussion with KraussMaffei and Rheinmetall later, that there was uncertainty about the structural strength at the front of the tank to specifically take the force of putting the plow in the ground. I know this is very technical. There was a question of whether or not at what point we should have transmitted that information to Treasury Board Secretariat, having already drafted the Treasury Board submission.

We did not feel, when we understood there were going to be difficulties of that small number of tanks, that it was substantively changing the purpose of loaning the A6s and getting them to Afghanistan quickly. The primary purpose, as General Leslie can talk to, of getting the Leopard 2A6s there was force protection of what we call a gun tank—not a tank that's actually pushing a plow or roller but a gun tank that can move in close support of our LAV III Coyote and Bison vehicles, and if necessary take a hit from IEDs or RPGs or any armour weapons and survive those much better than the Leopard 1.

We had taken a significant number of casualties in Leopard 1s. In the fall, starting in August 2007, we put Leopard 2s in theatre. Virtually all of those casualties ceased to occur. We had two soldiers injured in Leopard 2s compared to a fairly significant number of Leopard 1s.

We continued to work on the plows and rollers issue with the engineers of KraussMaffei and Rheinmetall, and have subsequently designed adaptors ourselves for Leopard 2s to push rollers. Because we're not going to return those A6 tanks to Germany, we've been allowed to actually make the modifications permanently to some of those gun tanks. I admit we still have a problem with the force entailed to put the plows on the Leopard 2 tank, and we have a separate project that is much more rigorous, much more methodical, that will solve that problem for us over the next year or two.

I know that's a long and technical answer, but it was not a technically simple question at the time.

[The Chair, Liberal, Shawn Murphy]

Merci beaucoup, Monsieur Dion. Thank you, Mr. Ross.

Madame Faille, you have seven minutes.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

Thank you, Mr. Chair.

When the Auditor General appeared before us in November, I asked her questions and I was satisfied with our office's answers. Furthermore, my colleague had put a question to you regarding your experience with this kind of investigation or audit. Earlier, we heard Mr. Berthelette tell us here, in committee, that he had trouble having access to various documents.

I would like to hear your comments on the transparency of the information you obtained during this audit.

[Sheila Fraser]

I will ask Mr. Berthelette to respond.

[Jerome Berthelette]

French is not my mother tongue.

[Meili Faille, Bloc, Vaudreuil—Soulanges, QC]

You can answer in English, if it will be faster. There are fewer words in English.

[Jerome Berthelette]

To be more precise, I don't want to give the committee the impression that we did not have access to the documents within National Defence. We did have access to all the documents needed.

What I was trying to say is that as you go through the series of documents trying to put together the story of the acquisition, it's not always possible from the documents we looked at to be able to put together the exact timeframe as to when somebody knew something or somebody did not know something.

That's the only point that I would like to make--that particular point.