Evidence of meeting #40 for Public Accounts in the 41st Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was f-35.
A recording is available from Parliament.
NDP
Mathieu Ravignat NDP Pontiac, QC
Thank you, Mr. Ferguson.
I have one last question, and this is a concern that we have on this side of the table. It is whether or not, in your opinion, you actually got all the documents necessary—all those that you needed to complete this study. You state in your report, “In some cases, documented analysis did not exist to support decisions.” Did you receive all the documentation you needed to do your important job on this file?
NDP
The Chair NDP David Christopherson
Be very brief, please.
And we need a little more quiet over here, please.
Go ahead, Mr. Ferguson.
Auditor General of Canada, Office of the Auditor General of Canada
Thank you, Mr. Chair.
Yes, we received everything we asked for, and in fact if we hadn't, we have a responsibility to specifically state that in our work. We received any information that we asked for.
NDP
The Chair NDP David Christopherson
Sorry, Mr. Ravignat. No, sorry, please. Your time has expired. Thank you.
Mr. Shipley, you now have the floor, sir.
Conservative
Bev Shipley Conservative Lambton—Kent—Middlesex, ON
Thank you, Mr. Chair.
Welcome to the witness.
I want to go first, Mr. Ferguson, to your comments in your presentation, just for clarification. In bullet number 10, you talked about “that would be expected in managing a 25 billion dollar acquisition”. Am I to understand that's what would be the estimated actual purchase of the plane plus the sustainability and the operating of it over a cycle of time?
Auditor General of Canada, Office of the Auditor General of Canada
Thank you.
What we are using in that statement is National Defence's numbers, so this is, at least, a $25 billion purchase. We've identified that there are issues and questions around how that number was calculated, but regardless of whether the number is higher or not, it's at least a $25 billion purchase, and therefore we would expect a certain level of due diligence applied to that transaction.
Conservative
Bev Shipley Conservative Lambton—Kent—Middlesex, ON
So that number would include what you might call full life cycle cost.
Auditor General of Canada, Office of the Auditor General of Canada
That number includes what National Defence estimated to be the operating, maintenance, and sustaining cost for a 20-year period. We would have expected that the number would have included the additional years, so, no, it was not a full life cycle cost. It was a 20-year cycle cost.
Conservative
Bev Shipley Conservative Lambton—Kent—Middlesex, ON
This is likely something that Canadians need to try to wrap their heads around just a little bit—what we call full life cycle cost. I want to go to the full life cycle cost, because it has been brought up a number of times here.
First of all, have the costing models used by DND violated any Treasury Board approved methods for recording, calculating, and projecting these costs? Has there been any violation of Treasury Board method?
Auditor General of Canada, Office of the Auditor General of Canada
We didn't make a decision or conclusion on the basis of whether policy was violated or not. We identified that there were items missing from the life cycle costing. While the department was presenting something that was a life cycle cost, we felt it had elements missing and wasn't for enough years, so therefore, it was not a satisfactory estimate of life cycle cost.
Conservative
Bev Shipley Conservative Lambton—Kent—Middlesex, ON
Maybe you can help so the ordinary Canadian out there can understand what full life cycle cost might be.
I'm going to buy a car. I think these jets don't come for five or six years. There's an indefinite time before they actually land here. So when we're trying to calculate a full life cycle cost—and I need clarification on this—we're looking out for 20 or 25 years, or that's under discussion, I guess. So we need to determine the fuel used. We'd have to try to determine the number of tires, the length of time, and what those costs would be over the life of this vehicle, because we're going to now keep it for 20 or 25 years. There's the amount of oil it would require, the amount of windshield washer liquid we would need to put in it, the amount of repairs that would be required—not only mechanical, but there might be an accident and we would have to fix a ding or two. So there would be body repair.
Do I have to allocate into it now that it's going into a garage? There's an allocation of space for that car in my garage. Say I have a two-car garage. So on that allocation of space, would I have to allocate the repairs to that garage that might happen over 25 years to that vehicle? Because the house is insured and the garage where the car is parked is part of it, does insurance for that vehicle get included in the total costs for 25 years? Because I drive it on my laneway but I share my laneway with a truck I have, I'll have to now look at my laneway for 25 years and determine if I'm going to take it from a gravel laneway to an asphalt laneway. But now I'm going to have to worry about potholes that might appear in it.
So now I have over 20 to 25 years to try to estimate what costs of that is going to be allocated towards this vehicle that, actually, I'm saying I'm not going to buy it now. I'm going to get it five years from now, and then from that five years I'm going to extend it out another 25 years.
I'm just trying to—
NDP
The Chair NDP David Christopherson
Mr. Shipley, please pay attention to me. Your time has expired. Please stop. I'm going to allow Mr. Ferguson a few moments to respond, but this is the only way we can proceed. Your proper allocation of time has expired.
NDP
The Chair NDP David Christopherson
Your apology is accepted.
Mr. Ferguson, provide a brief response, please.
Auditor General of Canada, Office of the Auditor General of Canada
Thank you, Mr. Chair.
First of all, I think the honourable member is buying cars the same way I am, trying to keep them going for 25 years. Having said that, the important thing in life cycle costing is to get a full picture of what those costs are going to be to operate something like this.
We identified that there were some significant things were missing from the life cycle costing—for example, attrition, upgrades, and the fact that these aircraft were going to last for 36 years, not just 20 years. When we raised the issue of life cycle costing and the fact that it was not complete, I don't believe we were nitpicking in any way. I think that we were saying that there were some significant elements that were missing.
NDP
The Chair NDP David Christopherson
Very good. Thank you, and I appreciate the brevity.
Moving on, Mr. Byrne, you, sir, now have the floor.
Liberal
Gerry Byrne Liberal Humber—St. Barbe—Baie Verte, NL
Thank you very much, Mr. Chair, and thank you to Mr. Ferguson and your team for appearing before us. It was a bit of tough sledding getting you here, but I'm glad you're here now.
Paragraph 2.82 of your report indicates that the Department of National Defence and the Department of Public Works and Government Services Canada disagreed with and refused to accept any of the conclusions of your report, as outlined in paragraphs 2.80 and 2.81. Has any minister formally corresponded with the Office of the Auditor General, subsequent to the release of your report, indicating to your office that they have reversed their position and now accept your conclusions?
Auditor General of Canada, Office of the Auditor General of Canada
Thank you.
Certainly, to the best of my knowledge, we have not received any correspondence from any minister on this chapter.
Liberal
Gerry Byrne Liberal Humber—St. Barbe—Baie Verte, NL
Has any departmental official within the Department of National Defence or the Department of Public Works and Government Services formally corresponded with your office to indicate that they are reversing their position and now accept your conclusions as contained within the report?
Liberal
Gerry Byrne Liberal Humber—St. Barbe—Baie Verte, NL
Thank you, Mr. Auditor General.
In the course of your audit, did you find any basis to confirm the government's assertion that some replacement of the CF-18 fleet was necessary, and—what I'm most interested in—that a specific replacement aircraft was required relatively immediately? Was there a basis to conclude that something had to be done and done quickly?
Auditor General of Canada, Office of the Auditor General of Canada
The audit was more an audit of the process that occurred after the decision to enter into the joint program with the United States, and then the decision, further on, towards the choice of jets to replace. It was not an audit looking at, in first instances, should the government or should not replace the jets. That wasn't the audit. The only thing, I think, in the audit that relates to the question is the fact that the useful life of the existing jets, the CF-18s, is expected to come to an end in the timeframe of 2017 to 2020.
Liberal
Gerry Byrne Liberal Humber—St. Barbe—Baie Verte, NL
Perhaps Mr. Reed or Mr. Berthelette would be able to answer this question better.
During the course of your audit, did you find any evidence that the government, by the fall of 2011, was considering any other aircraft as a potential replacement for the CF-18 other than the U.S.-led joint strike fighter aircraft, the F-35? Was there anything else being considered?
Auditor General of Canada, Office of the Auditor General of Canada
As I understood it, the question was about the process up to 2011. Through that process, we found that options were considered, but they were considered earlier on than the 2011 point that the question referred to. There were points in time when different aircraft were identified as potential options, but that would have been before 2011.