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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.

On the agenda

MPs speaking

Also speaking

Michael Ferguson  Auditor General of Canada, Office of the Auditor General of Canada
John Reed  Principal, Office of the Auditor General of Canada
Jerome Berthelette  Assistant Auditor General, Office of the Auditor General of Canada

9:25 a.m.

Liberal

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.

9:25 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

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.

9:25 a.m.

Liberal

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

Thank you, Mr. Ferguson.

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

9:25 a.m.

NDP

The Chair NDP David Christopherson

Be brief, Mr. Byrne.

9:25 a.m.

Liberal

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?

9:25 a.m.

NDP

The Chair NDP David Christopherson

Mr. Ferguson.

9:25 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

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.

9:30 a.m.

NDP

The Chair NDP David Christopherson

Very good.

Thank you. Time has expired.

Mr. Aspin, you have the floor, sir.

9:30 a.m.

Conservative

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?

9:30 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

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.

9:30 a.m.

Conservative

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?

9:30 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

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.

9:30 a.m.

Conservative

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?

9:30 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

Michael Ferguson

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

9:30 a.m.

Conservative

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.

9:30 a.m.

NDP

The Chair NDP David Christopherson

Very good. Thank you, Mr. Aspin.

We will now move to Mr. Kellway.

You, sir, now have the floor.

April 26th, 2012 / 9:30 a.m.

NDP

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?

9:35 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

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.

9:35 a.m.

NDP

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?

9:35 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

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.

9:35 a.m.

NDP

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?

9:35 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

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.

9:35 a.m.

NDP

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?

9:40 a.m.

Auditor General of Canada, Office of the Auditor General of Canada

Michael Ferguson

Thank you.

I will ask Mr. Reed to answer that question.

9:40 a.m.

NDP

The Chair NDP David Christopherson

Very well.

Mr. Reed, briefly, please, sir.