Public Accounts Committee on May 3rd, 2012

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

Thank you.

The MOU was key to provide the opportunity for Canada to continue to have access to critical and detailed and highly classified information on the joint strike fighter program. We had verified prior to renewing that MOU that the F-35 remained a valid option going forward, even though there was no SOR and the air force had not stated any detailed requirement at that time. So that's one aspect.

The other aspect was that it kept the door open for Canadian industry to have opportunities in both design and early production industrial opportunities, contract opportunities.

Thank you, sir.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

My next question is for the Department of Public Works. Can you explain how the new secretariat will increase the communication between the Department of Public Works and the Department of National Defence?

[François Guimont, Deputy Minister, Deputy Receiver General for Canada, Department of Public Works and Government Services]

Thank you for the question.

Mr. Chairman, the OAG noted that the file up to this point had characteristics of a department working in a silo. So the first point I would make is that the secretariat would adhere to the structure that I described earlier and will bring people together. That's the first observation I would make.

Second, we will focus on the seven-point action plan. That is the mandate given to us by the government, quite clearly.

Third, we will draw from the experience we have gained through the national shipbuilding strategy. Interestingly enough, pretty much all the people around this table were involved in the national shipbuilding strategy, so I think we have a very good footing to cooperatively work together in coordinating, providing oversight, and working on a consensus basis.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you.

My next question is for the Department of National Defence. The Parliamentary Budget Officer debated whether this process was unique. Would you clarify how this is different from previous processes in the past?

[Robert Fonberg]

Just to clarify, is that in terms of actually acquiring, being in part of the development process, and then leading ultimately to the acquisition?

[Andrew Saxton, Conservative, North Vancouver, BC]

Yes.

[Robert Fonberg]

Perhaps Dan Ross could answer that question.

[Dan Ross]

Thanks for the question.

The vast majority of our acquisitions, because of cost, have been military, off-the-shelf, proven solutions that are already in existence and normally in service with another nation. That reduces our risks enormously. Costs are very specific, and there's proven in-service support performance there.

So this approach is very much different from that. In 1997 this was a blank sheet of paper. There was nothing. Four years later, Lockheed Martin, in competition with Boeing, demonstrated a prototype that took off in 500 feet, flew supersonic, and landed vertically. That was in 2011. We had joined that, for a $10 million contribution, in 1997, and then continued to monitor that over the past 15 years. That was obviously very early in any process of considering replacements for a CF-18, but the other alternatives out there, Eurofighters or Super Hornets, were also, even at that time, ten-year-old technology.

So the program is truly unique. Today there are 1,700 people in a joint project office supported by thousands in industry, supported by the nine partner countries. The aircraft is in production. There are large numbers flying, or about to be added to the fleet. Most of the technology issues are behind us. Costs for acquisition are stabilizing. We're gaining more and more specific insight into what it will cost to run the aircraft.

Thank you, sir.

[The Chair, NDP, David Christopherson]

Time has well expired. Thank you.

Moving on, Mr. Allen, you now have the floor, sir.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair.

It's nice to see you back, gentlemen and madam.

Mr. Fonberg, a document—actually, it was a Treasury Board Secretariat report—went to Parliament last year that talked about the F-35 and the $25 billion as being in “definitions” phase. So looking at the chart, on pages 12 and 13 of the AG's report in chapter 2, I noticed that just this year, that actual wording got changed to “options analysis”.

When I look at the chart, sir, under 2006, it says that “National Defence completed a preliminary options analysis of five...aircraft”. It goes through a series of steps, and then, when it comes to 2010, “National Defence provided letter to PWGSC to justify procuring F-35 without competition”.

Can you explain to me, sir, how “definitions” phase became “options analysis” phase eight months after it was reported to Parliament, when indeed you had decided to buy an F-35, or at least that was the letter you sent to Public Works?

[Robert Fonberg]

Thank you for the question.

If I may, on the specific question, which I believe is related to the report on plans and priorities from last year, on April 13 of this year my office was informed that there was an error in the supplementary tables on major capital projects in the 2011-12 report on plans and priorities.

Specifically, the RPP indicated that the next-generation fighter capability project status was in the definition phase. That was incorrect, and we apologize for that. In 2011-12 the project was in the options and analysis phase.

I could ask the CFO to speak to what that means. I would—

[Malcolm Allen, NDP, Welland, ON]

Fair enough; that works for me, that explanation, in the sense of.... You believed you were at the options analysis phase last year, and yet I believe that just on Tuesday the report back here was that we had gone back to that phase. I believe my friend Mr. Alexander, as the parliamentary secretary, is on the public record as saying we're going back to the options analysis phase, which implies that we were further along. But I'll take your explanation at face value.

At this point, I'd like to turn to Lieutenant-General Deschamps. Sir, do you have a sense of...? The $19,000 per flying hour for the CF-18--is that close? Is that a close number?

[Lieutenant-General André Deschamps, Commander, Royal Canadian Air Force, Department of National Defence]

Thank you for that question.

I don't manage those costs with regard to operating per hour. My colleague to the left actually manages those issues, so I will defer to him.

[Malcolm Allen, NDP, Welland, ON]

Thank you.

[Dan Ross]

Thank you.

I manage the contracted support for the CF-18 fleet, so all the spare parts and repair and overhaul annually.

[Malcolm Allen, NDP, Welland, ON]

I'm looking for numbers here.

[Dan Ross]

Annually, we have spent, over the last ten years, $200 million per year. Now, that is not the total operating cost of the CF-18. That is the portion that I manage.

[Malcolm Allen, NDP, Welland, ON]

When I use the number $19,000, you're not able to tell me. Could you provide that to the committee, please, flying hour costs? Could you table that with the committee?

[Dan Ross]

Sir, yes, we could calculate that for you and get back to the committee.

[Malcolm Allen, NDP, Welland, ON]

So when the U.S. says that the hourly cost to fly the F-35A is $31,000and change—we can round that up or down—does that number ring to you at all as close to the CF-18 cost? Or is that more than the CF-18 cost at present?

[Dan Ross]

We've always expected that the F-35, due to its complexity, would cost more. And as I testified here last year, knowing that we'd spent about $200 million annually for the F-18, I'd estimated $250 million to $300 million in my last testimony. So we expect that it will cost more.

[Malcolm Allen, NDP, Welland, ON]

Thank you. What I'm hearing from you is that it's going to cost more to fly the F-35 versus the CF-18. Yet we made an operating cost estimate. Mr. Fonberg has repeatedly said here, including the minister, that the sunk costs are the same as the CF-18 for the F-35. You, sir, have just told me they're more.

Mr. Fonberg, square the circle for me. How did it get to be more by Mr. Ross and the same by you?

[Robert Fonberg]

I think Mr. Ross will answer that question, Mr. Chair.

[Dan Ross]

Thanks, sir.

[Malcolm Allen, NDP, Welland, ON]

Mr. Fonberg, I'm looking for a response from you, sir. You're the deputy minister.