Public Accounts Committee on May 1st, 2017

[John Forster]

I said that we're doing the planning and analysis for it.

[Phil McColeman, Conservative, Brantford—Brant, ON]

The planning and analysis? The planning would take resources in your department and place them into a group that would say, “We need to do the planning for the Super Hornets even though we haven't decided whether we're going to get the Super Hornets.”

[John Forster]

Yes. There's a group in the department in the air force that will look at both the interim fighter and the final replacement.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Would it seem like...? For me, I'm a small business guy. Help me. Is this not putting the cart before the horse?

You haven't decided. You've told me that you haven't decided on whether or not we're going to get value for money and the Super Hornet purchase is going to go forward, yet you're doing the planning for putting into place, the planning for the infrastructure—the planning, not the putting it into place—for the Super Hornets.

[John Forster]

Well, as I indicated, we're going to do full life-cycle costing of that acquisition. We have to look at what infrastructure may or may not be needed, and other elements of it. It's how you would acquire the equipment. It's part of the analysis we would do before the government takes a final decision on whether to acquire those aircraft. It will need the estimates, the analysis, and the numbers.

[The Chair, Conservative, Kevin Sorenson]

Thank you very much, Mr. Forster. I think we may come back to some of this.

Mr. Christopherson, go ahead, please. You have seven minutes.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you very much, Chair.

Thank you to all our witnesses for being here today.

You all know how long I've been around here. The more we get into this, the more I think we need a separate, stand-alone public accounts committee for defence and aboriginal affairs, because we just never seem to turn the corner. Every time the department comes in, it's always, “we got it right this time.” I share Mr. Lefebvre's sentiment. Why should we believe that this time it's going to be different? I also agree with Mr. McColeman that this is an incendiary report.

Really what is problematic is not the part where we're finding new problems, and what are you going to do about it? It's these ongoing problems that keep happening time after time after time.

Let's go through it again.

On page 22 of the Auditor General's report, paragraph 7.85 is on National Defence's performance. These are the words of the Auditor General:

In response to the questions about our 2011 audit, National Defence told the House of Commons Standing Committee on Public Accounts that it would develop performance measures on its maintenance and repair activities and its financial and materiel information system by December 13.

This is an example of how there's a problem, and there's an offer to fix it, and you tell us you're going to do this and everything's fine. And what does the next paragraph, 7.86, say?

We found that while National Defence had established performance measures in support contracts with private firms, it did not develop similar measures for its own performance.

Help me understand how telling us in 2011 that you're going to deal with this issue effectively, and you're going to put the measures in place....and then we find out it was only a half-measure, that it was done for the private sector, but not on your own. Is there a good reason for that?

[VAdm Ron Lloyd]

With respect to our continuing performance, as we discussed previously, it's one thing having the data; it's another thing to provide it and distill it into the information to make the decisions.

As a result of the tools we've introduced in the department most recently, we're actually beginning to make steady progress in some of these areas. In particular, I'm thinking of spare parts for equipment through supply depots.

Right now by allowing the business owners—the actual army, navy, and air force—to have visibility of these parts, we're learning that we may actually have some of our parts stored in the wrong place.

[David Christopherson, NDP, Hamilton Centre, ON]

I'm sorry. I don't mean to be rude. You know the drill. We're short on time.

I specifically asked whether there is a good, common-sense reason why when you told us you were going to fix it, you only half-fixed it?

[RAdm Patrick Finn]

I think in the context of dollar amount, we're at more than half. As we brought the systems together, we tried to look at where our biggest expenditure is, and that is in the private sector, the support contracts.

We've been working on building the performance measures there, testing them out, and using them. We are now starting, as the vice-chief said, to roll those out to the army, navy, and air force, where there are uniform maintainers who do higher-level maintenance as per the maintenance that the Auditor General describes in here.

We're trying to take the core, the most expensive pieces, build the measures, and then actually roll them out to the rest of the department.

[David Christopherson, NDP, Hamilton Centre, ON]

Okay. I assume the second part is under way.

[RAdm Patrick Finn]

Yes, sir, it is.

[David Christopherson, NDP, Hamilton Centre, ON]

Just before I leave this and turn to another matter, I'm going to turn to you, Auditor General.

There's another matter related to this that is incredibly serious. The Auditor General stated in paragraph 7.71:

Furthermore, the information National Defence presented in its annual Departmental Performance Report on equipment availability was not meaningful.

That report goes to Parliament. That's not just some internal whatever. That is your report to Parliament.

Auditor General, could you briefly tell us what your concern is? What exactly does it mean when you say the information was not meaningful?

[Michael Ferguson]

I think we explain that starting in paragraphs 88 and 89. In 89, for example, we say:

We found that neither the Chinook helicopter nor the CC-130J Hercules aircraft were included in the aggregate calculation for the performance measure of availability reported in the Departmental Performance Report.

Then at the bottom of 89, we say:

We also noted that when aggregating the overall calculation, National Defence included 100 percent availability for the submarines, whereas its internal reports showed that they were available for only 42 percent of their planned sea days.

Our concern was that the information that was being reported publicly in the departmental performance report was in some cases inconsistent with internal information that the department had. We would have expected that the information they were reporting to Parliament would have been the same type of information they had internally.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you.

Given time constraints, I want to move on until the chair hooks me out.

On page 9, exhibit 7.2, under “Assumption”, says:

Support costs for new equipment will be the same or less than for the previous equipment.

The reality is that:

Support costs were as much as two to three times more than those of previous equipment due to enhanced operational capability and additional contractor responsibilities.

Your assumption—and with a lot of these things the assumption is the key—is that everything will be fine, the same cost or less. It ended up costing us two or three times as much.

Again, how did that happen?

[John Forster]

When you look at the equipment and what you're replacing it with, in a way you're a bit comparing apples to oranges. You had an older piece of equipment, less technology, and less capability.

In the case of the new equipment, it will cost you more—

[David Christopherson, NDP, Hamilton Centre, ON]

You didn't say that.

I'm sorry, sir, but you said here, under “Assumption”, that the “new equipment will be the same or less”.

The things you just talked about are the things the Auditor General pointed to that raised the cost. You didn't take that into account in the first go-around.

[John Forster]

That's right.

Now we do the life-cycle costing going forward on all of our major equipment that we've implemented in the last 18 months—a centre of costing. We're doing life-cycle costing, and we will look at what the sustainment and maintenance costs are.

We're not assuming it's the same as a 30-year old piece of equipment. We will look at that—

[David Christopherson, NDP, Hamilton Centre, ON]

You need all this high-priced help to tell you that, sir?

You needed all those people with scrambled eggs on their hat to tell you that things were not—

[The Chair, Conservative, Kevin Sorenson]

Thank you, Mr. Christopherson.

We'll go to Mr. Arya, please.

You have seven minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Mr. Chair.

Mr. Forster, I'm glad that you mentioned the need for value for money, flexibility, and economic benefits to Canadians. The part on economic benefits to Canadians is the one that I'm interested in.

I'm also glad to note that you're talking of the federal government and how they can leverage their collective resources. With regard to that, the Canadian defence industry is quite strong. We have 63,000 employees in this sector, and 44% of them are in Ontario. The pay earned by the defence company workers is about 60% higher than comparable jobs elsewhere. Sixty per cent of the defence company's revenues are through export.

What you are doing to commercialize the hundreds of millions of dollars we have invested in DRDC? The Canada First defence strategy talks about the ongoing collaboration between the defence department and the industry. We also know that the Canadian defence budget during the next 20 years is higher than the oil sands capital investment. Oil was rolling at about $100 per barrel.

We are investing quite a large amount in Canadian defence. How can we use that investment in the defence budget to stimulate economic growth? Specifically on DRDC, with the technologies that are being developed, how are we commercializing them?

[John Forster]

Thank you, Mr. Chair.

DRDC is the research and development arm of National Defence, and they already do a lot of projects in co-operation with industry.

This is a really important issue that we heard in the consultations on the defence policy review: how can we better leverage, not just our research budget but also our procurement program to help Canadian industry deliver jobs, exports, and products for Canadians? That's an area that we're looking at quite significantly. We'll be—

[Chandra Arya, Liberal, Nepean, ON]

You're looking at it, or are you taking steps to implement them?

[John Forster]

It's very much some of the work we are doing as part of the defence policy review, so I don't want to get out ahead of Minister Sajjan on that.

It's how do we better use our R and D budget to leverage Canadian jobs, exports, products, and how do we then use our procurement system as well?

[Chandra Arya, Liberal, Nepean, ON]

We are investing quite sizable amounts in strategic aerospace and defence initiatives, we're spending billions of dollars on R and D. A good chunk of that goes to technology companies in the defence sector. The Canada First defence strategy also talked about the benefits to SMEs, which have the opportunity to grow and become world leaders in specific technologies.

This talk has been going on for years. I've asked the defence minister three times what he is doing in conjunction with the Minister of Innovation, Science and Economic Development to actually do something for the Canadian defence sector.