Public Accounts Committee on May 3rd, 2012

[Robert Fonberg]

Sorry, Mr. Chairman, just to clarify, there were no different accounts.

As I said on Tuesday, our last four major asset acquisitions have spoken to sustainment costs and acquisition costs, which is exactly what we did in the case of the F–35 and how we responded. Operating costs are within our departmental budget.

In fact, if you go back and look at the press releases for the last four major asset acquisitions, they all refer to sustainment costs and acquisition costs. So we communicated exactly the same way we've communicated over the last four major asset acquisitions.

[Bob Rae, Liberal, Toronto Centre, ON]

Well, with great respect, sir, you did not, because the number you gave to cabinet and the number given to the government included the operating costs as well as the personnel costs—that was the $25 billion number. That was also the basis for the number of the Parliamentary Budget Officer. But instead of admitting that, what happened was the government attacked the Parliamentary Budget Officer, saying that his numbers were out by a factor of 100%, when in fact there was a relatively minor difference of opinion between the internal numbers that the department had and the numbers that the Parliamentary Budget Officer proposed.

Why was the number on the website so different from the internal numbers that the government in fact had and that were the basis of the cabinet decision?

[Robert Fonberg]

Thank you.

I may ask the CFO speak to it, but I would say this. Our understanding at the time, and frankly it continues to be so, notwithstanding the comments of the PBO, is that operating costs were not included. We can find no evidence of operating costs. We asked them to clarify that issue two weeks ago—

[Bob Rae, Liberal, Toronto Centre, ON]

That's completely contrary—

[The Chair, NDP, David Christopherson]

Sorry, Mr. Rae.

[Bob Rae, Liberal, Toronto Centre, ON]

That's completely contrary to what he said today.

[The Chair, NDP, David Christopherson]

Mr. Rae, please.

Thank you.

Over now to Mr. Aspin. You have the floor, sir.

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

Thank you, Chairman.

And welcome, everybody.

Much has been made of the sole-source argument. Before you leave, gentlemen and lady, I'd like you to explain the process that led to the sole-source decision—I know it has a history of several governments, at least two—and how it played out here.

Mr. Guimont, can you address that for me, please?

[François Guimont]

Yes. I'll say a few words and then I'll turn to Mr. Ring, who actually administers the acquisition program.

The only point I would make is that sole source is a legitimate procurement strategy under certain conditions.

Mr. Ring will explain the general approach to sole-sourcing, and specifically in this case how it applies.

[Tom Ring, Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services]

Thank you very much for the question.

I will at some point turn to my colleague Mr. Ross, because he and I have worked together on this operation for some time and we share both elements of the decision-making process, if you will.

If you look at a government considering an acquisition, in the first instance one of the things we'll do is look at what is either the capability that you're trying to replace or new capability that you would look to acquire. We would then together look at what was the policy rationale for either buying a new capability or replacing an existing capability. I don't think there's been any debate on that particular issue with respect to the need to replace the CF-18 fleet.

We then go to a third phase of the procurement process. The Auditor General in some of his work has actually laid out quite extensively what the phases in the procurement process and the phases in the acquisition process are.

The next phase of the process is needs and options identification, and there are four or five different steps in that process that we went through. We worked collectively with our colleagues in the Department of National Defence.

Here I would ask Mr. Ross to speak to some of the preliminary work that was done in those phases that eventually gets you to a point where you ask if there is a competitive field that is available to you, and should you then seek a competitive procurement, as the Treasury Board guidelines suggest you should do, if one exists?

Dan, do you want to talk about the options there?

[Dan Ross]

Thank you.

Effectively, in that early options analysis piece, before you go to government for approval in principle to begin a project, we ask, in this case the air force, to identify their high-level mandatory requirements, what they really need that particular platform to be able to do. We take that and we look out at the market, with our colleagues in Public Works, and identify reasonable solutions, and have preliminary estimates of cost, performance, availability, etc.

In this case, that examination came back with a view that in terms of technology, looking forward 30 years, there was only one solution.

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

When did this whole process start, under which government?

[Tom Ring]

The joint strike fighter project started with the signing of the first MOU in 1997.

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

Under which government?

[Tom Ring]

A previous government.

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

Okay.

The other question I had was with regard to the secretariat that you pointed out, and the seven-point plan. Can you identify to me how this will help, in terms of communication between Public Works and National Defence, Mr. Guimont, please?

[François Guimont]

Thank you for the question.

As I mentioned earlier, the secretariat at the working level will draw from the various departments, so they will be co-located. It's quite obvious to me that if people are together, instead of being separated in their respective departments, they're going to be working as a team. That's the first thing.

The second thing is Mr. Ring will be chairing and will be responsible for the assistant deputy ministers' committee, which will then report to the DMs' committee. In all cases, we are going to work together. I'll be calling regular meetings of the deputy ministers' coordinating committee. The frequency of those meetings is a function of decisions to be made. I've made reference to consensus decision-making, like we did for shipbuilding, and these meetings will draw, in terms of frequency and content, on the work done by the assistant deputy ministers' coordinating committee as well.

So the key characteristic is people working together and the use of third parties to validate, when need be and as required. There will be a clear effort to work on transparency, as we did for shipbuilding. And the terms of reference, which we are finalizing, will essentially expand on the seven-point action plan and show how we are going to operationalize the various elements that have been outlined by the government's seven-point action plan.

[The Chair, NDP, David Christopherson]

All right. Time has expired, Mr. Aspin.

We will go over to Mr. Allen, who now has the floor.

[Malcolm Allen, NDP, Welland, ON]

Thank you, Chair.

I will be sharing some of my time with my colleague Ms. Duncan, provided the committee agrees, of course. Thank you.

Mr. Kennedy, earlier in response to a question you said—I don't have the exact quote clearly, so I'm paraphrasing here—that when you signed the MOU in 2006, which is the industrial piece, your expectation was that we were actually going to sign on to buy an F-35. Is that a fair characterization of what you said?

[Simon Kennedy]

I think what I was saying was that it's well understood that access to the industrial participation for Canadian companies is contingent upon participation in the process. So that's what I meant to say. If it was unclear, I do apologize.

[Malcolm Allen, NDP, Welland, ON]

So you didn't have an expectation or you weren't led to believe we were going to buy the F-35 by any of the other departments or deputy ministers or anyone else in that end of the business?

[Simon Kennedy]

Our interest is primarily in the industrial opportunities for Canadian companies, and it has been well understood by the—

[Malcolm Allen, NDP, Welland, ON]

Thank you, Mr. Kennedy. Thank you. I appreciate that.

Mr. Fonberg, we talked Tuesday, you and I, about $25 billion and $14.7 billion, etc. We do know that the Minister of National Defence, Minister MacKay, used the number of $15 billion. I'm not going to argue when and where and under what circumstances.

Did you give him that number, sir?

[Robert Fonberg]

We would have given the Minister of National Defence and cabinet three numbers, $5.7 billion for sustainment, $9 billion for acquisition, $10 billion for operating. So 5.7 plus 9 is close to the 15 that I believe the member is referring to, Mr. Chair.

[Malcolm Allen, NDP, Welland, ON]

So you gave him three numbers and you didn't make a recommendation. You allowed the minister to juggle them any which way he chose?