Public Accounts Committee on May 15th, 2012

[Michael Ferguson]

Again, it's not something we went into a lot of depth on. Fundamentally, though, what we felt needed to have happened in this was that because it was a developmental type of project, because it was different, National Defence and Public Works should have gotten together very early in the process to determine just what exactly those steps would need to be.

This would strike me as the type of project where, because the government was going to be involved in both the sort of development side and then later the procurement side, or potentially the procurement side, it would be important to make sure there were the necessary controls in place to protect both sides of the project and then identify when those two are starting to merge, so that it moves from a development into a procurement project. We felt those lines were blurred, and that was what ended up causing some of the problem.

So I can't give you specifics, but what I can say is that we felt this was something that Public Works and National Defence should have worked out much earlier in the process, to make sure that both sides, the development side and the procurement side, were going to be able to unfold as they should.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Fine. Thank you.

Lessons learned, of course, hindsight.... If we all had the benefit of 20/20 hindsight, it would be a perfect world, but it's important that we take the lesson learned from this process and see, of course, if there are other applications in government procurement, either military or non-military. Would that be a wise thing to do? And do you think there is a generic lesson out of this that we could apply in a broad-based manner?

[Michael Ferguson]

I think certainly there are a number of lessons that can be learned from this and that need to be learned. I think an important part of what this chapter is about is making sure that those involved in these types of procurements do look at ways to try to improve these types of procurements.

Again, because this was going to be a very different type of procurement, it would have been important right up front to lay out what the ground rules were going to be, what the roles and responsibilities of each of the parties were going to be. By definition, this wasn't going to be a textbook type of procurement. So it was something where it would have been important up front to lay out what those roles and responsibilities were going to be. That was one thing.

Certainly I think the other two lessons, the other two main areas we identified, were good risk mitigation strategies when you're dealing with this type of a project with uncertainties, and then good and fulsome cost information.

So I think there are definitely areas where lessons can be learned for future procurements.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Fine, thank you very much.

I have one more question, if I may, Chair.

[The Chair, NDP, David Christopherson]

You're good.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Would you characterize this report as a tool to flag the deficiencies—obviously there were some deficiencies in this process—and a guide to ensuring that we move in a proper manner to replace the Canadian fighter fleet, to make sure it's robust?

Some people obviously don't want to see us have a replacement. There are those, even within the parliamentary precinct, who don't believe we need more equipment for our military. Some people would say this report is designed to completely put an end to the process to replace Canada's fighter fleet. Would you concur with their assessment, or do you think the greater intention is to flag the deficiencies?

[Michael Ferguson]

I think all our reports have two purposes. One is to improve the way government delivers services to the citizens of the country. Certainly whenever we can identify weaknesses or issues within a particular process, our goal is that those be dealt with.

The other prime outcome we expect from our reports is accountability, that the information is used, that the right questions get asked from the reports to make sure there is accountability for the decisions that are made.

I think those are the two prime purposes, and I think this chapter is no different from any other from that perspective.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Fine, thank you. I appreciate that comment.

[The Chair, NDP, David Christopherson]

Very good. Thank you, Mr. Kramp.

Now over to Mr. Ravignat. You have the floor, sir.

[Mathieu Ravignat, NDP, Pontiac, QC]

Mr. Ferguson, I'm having some difficulty in understanding something, and I hope you can enlighten us. At the same time as the government is saying it accepts your conclusions and that it will go forward with some form of reparation, they attack your findings and your methodology. Do you know why? It seems like a contradiction.

[Michael Ferguson]

I can't respond without having a specific area to address.

We presented the report. The department has agreed with the recommendation we made. The government has indicated they intend to put their action plan in place. Again, we haven't looked at it to—

[Mathieu Ravignat, NDP, Pontiac, QC]

Mr. Ferguson, that might be a question for the Minister of National Defence.

[Michael Ferguson]

Certainly.

[Mathieu Ravignat, NDP, Pontiac, QC]

Okay.

Hopefully we'll hear from the Minister of National Defence at this committee, but I guess we'll see.

In point 7 of your opening comments, you talk about “Working from estimates of contracted sustainment costs over 36 years provided by the Joint Strike Fighter Program Office...”.

I understand we're signatories on that joint strike fighter program office, and that that office uses 36 years. Why didn't the Government of Canada use 36 years?

[Michael Ferguson]

Certainly the joint strike fighter office provided 36 years' worth of sustainment cost information. The life-cycle costing policy requires identification of the costs over the full life cycle.

You'll notice that National Defence's policy, as I read it, even refers to the cost of disposal. By definition, if you have to include the cost of disposal, the expectation would be that you have to go out to the full life of the particular asset.

That was something we identified. We felt that life-cycle cost information should have been for that full life cycle of the aircraft, rather than just for 20 years.

[Mathieu Ravignat, NDP, Pontiac, QC]

I am going to move on to another question.

A letter signed on February 24, 2012, by Mr. Fonberg, Deputy Minister of National Defence, and Mr. Guimond, Deputy Minister of PWGSC, states that "some components of this risk analysis may not have been made available to the OAG for reasons of Cabinet confidence".

Is it common practice for ministers not to provide you with information and to claim reasons of cabinet confidence?

[Michael Ferguson]

Certainly we don't have access to.... We will get access, for example, to memorandums to cabinet, but we have an agreement about what we do and do not disclose when we're looking at that type of information.

We felt we had access to enough information in this report that we could still draw our conclusions. In fact our legislation requires us to bring it to the attention of Parliament if we feel in any instance that we do not receive information we need to receive.

We felt we received all of the information we needed. Some of it would have been in memorandums to cabinet. We have to be very careful about how we refer to that type of information

The other point I want to make in terms of your question is that the types of analysis and things we were looking for were analysis we felt should have existed in departmental documents. They're not analysis you would wait until you're preparing a memorandum to cabinet to actually prepare. We would have expected to see those types of analysis in a format that was not cabinet confidential.

[Mathieu Ravignat, NDP, Pontiac, QC]

Just to be clear, there was certain information that was withheld by the cabinet that should have been in the different ministries and accessible to you?

[The Chair, NDP, David Christopherson]

That's your time, Monsieur.

You can answer, Mr. Ferguson.

[Michael Ferguson]

If I understood the way the question was posed, that wasn't what I was saying. I'm sorry for the confusion.

What I was saying was that we did receive all the information we felt we needed to receive in order to draw our conclusions. There were certain types of analysis we felt should have been prepared and should have existed as part of normal departmental process. It shouldn't have been something they would have waited to prepare only to include in the memorandum to cabinet.

[The Chair, NDP, David Christopherson]

Thank you. I'm sorry, but time has expired.

Over to Mr. Shipley, who now has the floor.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair.

Thank you, Auditor General, for being here.

We recognize that during this whole process there's actually been no money spent. There's been no acquisition. There's been no planes bought. Is that true?

[Michael Ferguson]

There are two parts to that. The second part, in terms of no planes purchased, is correct. On the first part, in terms of no money spent, we identified a significant amount of money that was spent in terms of the development part and the industrial benefit part of this program.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Great. I'm glad you touched on that. From what we know, there's been incredible industrial benefit for the 60 or 70 companies that have garnered $425 billion in contracts.

Recognizing that, can you talk to us a little about some of the challenges you found in doing an audit at this stage in the process? And I have a question to follow that.

[Michael Ferguson]

Thank you.

The obvious challenge when you're looking at something in mid-process is that not everything has been completed. However, there were enough milestones along the way that we were able to identify that what needed to be done at those points in time had in fact been done.

That was really what this was about. It was a normal audit of process that was a long process. It was done during the process, which meant we had to identify the specific milestones we were assessing against.