Public Accounts Committee on April 26th, 2012

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

I think what I'm hearing from you and your team is that by the fall of 2011, the only option being considered at that point in time was the F-35.

[Michael Ferguson]

Certainly in 2010, the government announced its intention to purchase the F-35. Now again, it still had not put in any order to actually acquire a jet at that point in time. But certainly, from the point in time that the decision was announced, everything was moving towards the eventual purchase of the F-35.

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

Thank you, Mr. Ferguson.

I think, from the point of view of the committee—

[The Chair, NDP, David Christopherson]

Be brief, Mr. Byrne.

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

—if there is a basis of evidence in which the CF-18 needs to be replaced immediately, and if we find that basis, and there's only one aircraft, the F-35, now in consideration.... If you couple need, requirements, and the fact that only one aircraft is being considered, we've effectively bought the F-35. Would you agree with that conclusion, or do you have an opinion about that?

[The Chair, NDP, David Christopherson]

Mr. Ferguson.

[Michael Ferguson]

Thank you, Mr. Chair.

Certainly we have indicated in the chapter that everything that happened throughout this time period was leading more and more toward the eventual purchase of the F-35. However, again, we stated a few times that it's important that before that purchase is made, the government revisit what could happen and make sure they're going to make the right decision in replacing the CF-18.

[The Chair, NDP, David Christopherson]

Very good.

Thank you. Time has expired.

Mr. Aspin, you have the floor, sir.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Thank you, Chair.

Welcome, Mr. Ferguson and your colleagues, and thank you for appearing before us today.

Mr. Ferguson, you have indicated in your testimony that this is a unique approach, due to the unique nature of Canada's participation in the joint fighter program. I can agree with that. Our government has been cutting its teeth on this program. This is an international program, a joint program. It involves up to, I believe, eight nations, and was started and endorsed by the Liberal government.

We do have to remember that these are estimates. We are strictly at the developmental stage.

One of the key lessons learned in this whole process and in other processes, and specifically I refer to our shipbuilding procurement, which was a very successful procurement, is that we need to engage experts and keep politics as far away from the decision-making process as possible. That's a good lesson learned. The new secretariat that is envisioned will do just that, and they will start with fully costing the F-35 jets.

Do you think, sir, that this is the right approach to getting a full and impartial costing of these jets over time?

[Michael Ferguson]

Thank you.

We haven't done an audit on the process that the government has announced it's intending to follow, so I can't comment on any specifics of that.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

I appreciate that, sir, but in your previous career or in your knowledge in taking over your specific duties, have you ever studied this innovative procurement process? If so, what were your thoughts with regard to the process we created that was very successful in procuring ships for the 21st century?

[Michael Ferguson]

I guess that has various parts. Again, we haven't done an audit on the process the government has announced. We haven't done an audit on the ship procurement either.

In my previous career, I had been part of projects for purchases of assets. It is very critical in those projects to make sure that due process and due diligence and rigour are applied to make sure that the right decisions come out of those types of projects. That's what this audit was all about—looking to see, in this instance, whether those basic principles of good management were applied in the whole decision-making process.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Thank you for that, sir.

That's a good segue into my next question about due diligence, scrutiny, rigour, and transparency. With your previous experience or with your current experience in your new role with the government, would you agree that this new secretariat would address these problems in removing silos and centralizing decision-making?

[Michael Ferguson]

Again, because we haven't done an audit of the new process, I can't comment on the specifics of the process.

[Jay Aspin, Conservative, Nipissing—Timiskaming, ON]

Okay.

I'll wind up my time, Mr. Chairman, by reminding members that we are simply talking about estimates here. We're in the developmental stage.

[The Chair, NDP, David Christopherson]

Very good. Thank you, Mr. Aspin.

We will now move to Mr. Kellway.

You, sir, now have the floor.

[Matthew Kellway, NDP, Beaches—East York, ON]

Thank you very much, Mr. Chair. To Mr. Reed, Mr. Ferguson, Mr. Berthelette, thank you for being with us today.

Mr. Ferguson, unlike you and Mr. Shipley, I just buy vehicles in the hope that they last as long as possible. I'm not optimistic about these things. I'm thinking 10 or 12 years. I know some of my colleagues haven't even ever purchased a vehicle, which leads to my question.

Wouldn't it be a problem if the government decided to purchase fighter jets in the same way that it buys its vehicles, since everybody approaches these things differently? Secondary to that, aren't there well-established processes already in existence that governments are supposed to follow for these purposes?

[Michael Ferguson]

Thank you.

Again, I think this particular purchase is a very large purchase for assets that are going to last for a very long time. It's a very large financial commitment. Therefore, it's very important that the right financial analysis be done so that it's clear that the government understands the cost of the assets and the cost of maintaining those assets, including the types of costs that we said should have been included.

I would rather not get into the discussion about analogies, because quite frankly, in this chapter we are talking about acquiring fighter jets. That's unique. They need to make sure that the right processes, the right management practices, are applied to that acquisition.

[Matthew Kellway, NDP, Beaches—East York, ON]

Thank you, Mr. Ferguson.

In your report you are critical of the life cycle assumption that was put forward by the department—the $25 billion life cycle cost, a 20-year life cycle cost—and you noted in your report that, in fact, the government is planning on flying these planes for at least 36 years.

I notice also in the report that the joint strike fighter program office in the United States provides the department annually with Canadianized costing figures based on a 36-year life cycle cost.

Do you have an explanation for us, from your audit, for why a 20-year life cycle cost was chosen by the department instead of a 36-year life cycle cost?

[Michael Ferguson]

As I said in response to a previous question, my understanding is that 20 years was the normal practice for the Department of National Defence. However, again, I can't speak for the department and I think the question is best asked of the department.

[Matthew Kellway, NDP, Beaches—East York, ON]

Can you tell me this, then, sir? When these documents are received, they're based on the select acquisition reports that the U.S. Department of Defense provides for the U.S. Congress. I'm sure you've seen these. They're very comprehensive. The 2011 document is 85 pages and full of facts, figures, tables, and so on, supporting the 36-year life cycle cost.

When these are received by the department, where do they go? Who receives these?

[Michael Ferguson]

Again, I think it's best if the question is directed to the department to give the specifics of what happens. My understanding is that the department receives the information that's related to the expected acquisition in Canada of our jets. Again, just to make sure the question is answered fulsomely, I think the department can best explain what they receive and what they do with it.

[Matthew Kellway, NDP, Beaches—East York, ON]

Thank you, Mr. Ferguson.

I have one very quick question. In paragraph 2.76 you wrote that, “cost data provided by US authorities had been validated by US experts and partner countries, which was not accurate at the time.” Which cost data are you referring to? Is this the cost data that formed the basis of the government's $15 billion life cycle cost?

[Michael Ferguson]

Thank you.

I will ask Mr. Reed to answer that question.

[The Chair, NDP, David Christopherson]

Very well.

Mr. Reed, briefly, please, sir.