Public Accounts Committee on April 26th, 2012

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

Thank you.

I'm looking at your chart. Exhibit 2.5 speaks to “Identification Phase”, “Options Analysis Phase”, and “Definition Phase”. I have a specific question. This project initiation started in January 2010, and I'm just trying to understand this life cycle costing, because this chart indicates that the total project life cycle costs are estimated during the options analysis phase. Then, during the definition phase, total project cost estimates are revised. So this whole process is one of a moving target and always a revision of costs.

Obviously, as you move further forward in a project, you become more knowledgeable, so I'm trying to understand the fact that life cycle costing, you indicate, wasn't provided in full by the department. But this chart suggests that it would have been premature to have those costs in full, considering where we actually are in the project management cycle. Can you comment on that?

[Michael Ferguson]

Thank you.

Certainly, that was one of the prime issues we raised in the whole chapter: things seemed to be out of sequence. We really felt that some of these processes or some of these things needed to have been put in place earlier than they were. It wouldn't have been a matter of them having done the life cycle costing too early; it would be a matter of them not having put some of these other phases in place early enough.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

Would you agree with my statement that life cycle costing is a moving target and that the project costs are a moving target and that the reality is that everything about this project is an estimate until we clearly understand the costs moving forward?

[The Chair, NDP, David Christopherson]

Go ahead briefly, please.

[Michael Ferguson]

Certainly life cycle costing is an estimating process. But the mismatch that was occurring in all of this was that, as the decisions seemed to be taking the government closer to the actual acquisition of the F-35 and the announcement in 2010 of the intention to acquire the F-35, it would be important to make sure that the decision was based on having full life cycle costing, based on the best information available at the time.

[The Chair, NDP, David Christopherson]

Thank you.

Mr. Byrne, you have the floor, sir.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Thank you, Mr. Chair.

Would it be fair to say that at the time of the audit, the Department of National Defence identified a number of tactical uncertainties and identified a relatively high level of risk surrounding the F-35 prototype that might prevent the aircraft from being fully suited or best suited to the Canadian armed forces' needs, as outlined within the statement of operational requirement?

[Michael Ferguson]

Thank you.

I don't think that's something I can comment on. You know, we did say in the report that it was important for National Defence to consider the risks and to make sure they had appropriate risk-mitigation strategies in place.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

But you do identify in your report that the Department of National Defence noted this project as being high risk.

Is that correct, Mr. Reed?

[Michael Ferguson]

In actual fact, we found—and it's quoted in one of the paragraphs, though I don't remember exactly which one—that it wasn't until late in the program that they finally increased the risk assessment up to medium. I don't think at any point in time the overall project was designated as a high-risk project.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

But there are technical deficiencies that may or may not meet the standard of operational requirement—is that correct?—as identified by the Canadian armed forces. You reviewed the operational requirements.

[Michael Ferguson]

We didn't do a comparison of the F-35 to operational requirements. What we were looking at was process and whether the operational requirements were prepared when they should have been prepared. We weren't trying to assess whether or not the F-35 was the right jet.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Thank you, Mr. Ferguson.

Mr. Reed, you interviewed 140 people within the Department of Public Works and Government Services, Industry Canada, and the Department of National Defence. Why didn't you just interview the deputy ministers? Would it be fair to say that just interviewing the deputy ministers would not have given you a fair or reasonable indication of the performance of this procurement process?

[John Reed]

It's a very normal practice for us to interview a wide range of officials to gain an understanding of the topic we're auditing, and as the audit moves forward, to use interviews to collect additional evidence, so, no, I think it was a very standard practice to do widespread interviews.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

Thank you, Mr. Reed. Perhaps we, as a committee, should follow your lead on that and do the same.

Is it fair to say that if someone feels their behaviour is acceptable and of a high standard, they'll probably continue that behaviour?

Mr. Ferguson, I'll ask you that, given your point of view as a long-time legislative auditor. If a government rejects every conclusion and criticism that you've found within your report, is it likely that they will simply repeat that behaviour because they feel it's of a high standard? With your experience as a legislative auditor, would that be fair to say?

[Michael Ferguson]

I'll respond to that simply by saying that the department agreed with the one recommendation we did make in the report. They disagreed with our conclusions, but they did agree with our recommendation.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

You don't have anything to offer us in terms of when a government rejects every conclusion that you reached in your report? It's not really of essence or material that they may repeat that behaviour again because it's acceptable, to them?

[Michael Ferguson]

That question is a bit too general for me to make a statement on. Again, the department disagreed with our conclusions. We felt that we laid out very clearly in the report where there were significant weaknesses in the due diligence. They did agree with our recommendation.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

The government has not indicated to you, to your office, or to anyone that they've accepted the conclusions of your report. In fact, you're still operating under the understanding that they do not accept the conclusions of your report.

From your experience as a legislative auditor, could you provide us with any commentary or opinion on what that says for ministerial accountability? In your experience as a legislative auditor—

[The Chair, NDP, David Christopherson]

You're running out of time, Mr. Byrne.

[Gerry Byrne, Liberal, Humber—St. Barbe—Baie Verte, NL]

—can a minister actually say one thing and the department say another, and there be no confusion between the two? Or is that a matter of concern to you?

[Michael Ferguson]

Certainly we received letters from the deputy ministers of the departments indicating that the departments disagreed with our conclusions. That's always a concern for us. That's why we did have a discussion with them towards the end of the audit. We felt that we arrived at the appropriate conclusions.

But it's always a concern for us when the departments disagree with our conclusions.

[The Chair, NDP, David Christopherson]

Very good. Thank you.

[Chris Alexander, Conservative, Ajax—Pickering, ON]

Mr. Chair, I have a point of order, please?

[The Chair, NDP, David Christopherson]

You have a point of order? You're not a member of the committee but you have a point of order?