Public Accounts Committee on May 1st, 2017

[VAdm Ron Lloyd]

As part of the departmental results framework, one of the things we have to land on is these new key performance indicators. We're going right through with all the various L1s in the organization. We're starting with a key performance question, and then we're using a logic model to then land on the key performance indicators. That is the manner in which we're going to approach that.

We then get a review of the logic models and what they believe are their key performance indicators, to make sure they map and align with what the deputy minister, the chief of defence staff, and the minister need to make informed decisions going forward. Then once we brief that, we will have landed on our key performance indicators going forward.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you.

Mr. Ferguson, is there anything you would like to add? Are there any observations you have about what should be performance indicators?

[Michael Ferguson]

Well, we understand that sometimes measuring performance can be a difficult thing to do, and particularly in complex businesses like National Defence and the Canadian Forces. It can be a difficult thing to do, and I encourage whatever progress they can make on that.

I think in terms of the report on the issue we raised, it was a very basic issue, which was that they had different measures for internal purposes than in their external. I think just making sure there is consistency between the information they're using internally to manage their operations and what they're reporting publicly on their performance is the base starting point. That was really the issue that we raised here.

Again, any progress they can make in measuring and reporting on their performance is a good initiative. It's not something I can really report on; we haven't audited it. The issue we raised here was a fairly fundamental one, and one that they need to get right, even with what they're doing right now.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Okay, thank you very much.

[The Chair, Conservative, Kevin Sorenson]

Mr. Christopherson, please.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you, Chair.

The time is quickly dwindling down. Let's stay with the deck. I think this is so key. I'm looking at page 18 where the Auditor General said.... We just talked about external and internal. I raised the question earlier, and I won't revisit that. That's all been dealt with, and you've committed to doing the internal too. That's the main thing we wanted to hear.

In terms of the external, in 7.66, this says:

We examined whether National Defence managed contractor performance in accordance with contract requirements. We found that, in some cases, due to poor quality of its data, management did not have the information that would allow it to properly measure contractor performance.

I'm trying to get a sense of whether the external thing is done and working the way it should. This leaves the impression that you kind of set it up but there is still something there, or am I mixing something else, which is easily done?

[RAdm Patrick Finn]

We have set it up, but we still have work to do. I'll give you a few examples. As we operationalize all of this, it has to go out to all the bases, all the wings, all the deployed locations. When it comes to troops on the front line or ships at sea, which may go through periods without connectivity, you can imagine how much work we're giving them to do.

There are areas where we've set up what we think are really good contracts. We've negotiated with industry key performance indicators and performance pieces, only to find that, when we roll it out into the field and we have individual maintainers, we've increased their workload to an unacceptable level. As we operate these fleets for two, three, four years, at first it might be a training issue. What is it? What's occurring?

I, personally, have been to Petawawa, Trenton, and Halifax to meet with maintainers to talk about it. We could have a well-developed Ottawa-centered contract, but when we roll it into the field we might find that their expectation on the maintainers is too much. We're going back to those to see if we have to release our understanding of the key performance indicators for that contract and renegotiate it. There are areas we've set it up in, but the pipeline of information we've asked for can be too much for the maintainers.

[David Christopherson, NDP, Hamilton Centre, ON]

I'm going to go out on a limb. I've heard a lot of answers to a lot of questions I've asked, and, pardon the pun, but many times they are defensive answers. I'm liking the answers. What I'm liking is that I'm not hearing a lot of gobbledygook that I don't understand. When I hear this, it usually suggests that this is being done deliberately. We've all been there. I'm very impressed, I have to say, with the specificity of what you're doing, and the bringing in of external factors. It really sounds like you're actually doing it, as opposed to just trying to get through this meeting, which has been an ongoing problem for us. I may have to eat those words, but I have to tell you, deputy, that I appreciate it especially when you take your criticisms. Nothing drives us crazier than somebody who comes in and starts making up nonsensical defences for things. It's better to just say you were wrong, and fess up to it, and let's get on. I'm guardedly optimistic, but history slows me down from going any further than that.

On life-cycle costs, and I'm quoting from the report, “Treasury Board policy requires that a department’s investment plan take into account not just the acquisition of assets but their full life-cycle costs, including...costs...”. The office “found that the most recent National Defence Investment Plan from 2014 did not include full life-cycle costs for the six types of equipment we examined”.

I think you may have touched on this, but I'd like that closed. I gather you're now doing that?

[John Forster]

Yes, sir.

[David Christopherson, NDP, Hamilton Centre, ON]

Sorry, but maybe I could just ask...I mean, that wasn't so long ago.

[John Forster]

That's right.

[David Christopherson, NDP, Hamilton Centre, ON]

Really, you completely missed it again. We're talking about life cycle, and the Auditor General is telling us in the latest update that it doesn't look like it's in there. Help me understand.

[John Forster]

The Treasury Board policies on costing have evolved, even last year, and actually they match exactly where we've gone and are heading and have invested this year. The 2014 plan did not include life-cycle costs for all of our equipment. Some of that costing didn't include sustainment costs. In some of it we didn't make allowances for inflationary costs. There were a lot of holes, in my view, when I first looked at it. That's exactly why we made all the investments in changes to how we do our costing. Our next investment plan, which is due at the end of this year, will include all of those provisions.

[David Christopherson, NDP, Hamilton Centre, ON]

Thank you for that answer, deputy.

We're a bit past this, but it's the common-sense stuff that missed that makes me crazy.

For instance, we see in paragraph 7.33, page 11:

Furthermore, when National Defence purchased a fifth Globemaster aircraft, its stated assumption was that it did not need additional personnel to support five Globemaster aircraft at the same flying level as the original four.... However, we found that acquiring the fifth aircraft increased the need for maintenance, requiring additional overtime to ensure the aircraft....

Like, duh, who the heck would say that we're going to add a fifth plane, but it won't cost anything? Who decided that this made sense, and how did they get there, and why did they have their job at the end of it?

[The Chair, Conservative, Kevin Sorenson]

Mr. Finn.

[RAdm Patrick Finn]

Quickly, regarding the fifth, how we operate the C-17s is what's called three lines of tasking, so that at any given time we have three aircraft available for missions. As these aircraft start to age, the amount of time they have to be in maintenance increases, and there are larger maintenance activities. Looking forward at four, by virtue of overlap of heavy maintenance, we found ourselves in periods where we were going to have basically two-and-a-half lines of operation, which meant two.

From a strategic decision perspective, acquiring the fifth C-17 was to maintain three lines of operation. It was not the fact that we would have more maintainers, but that we would actually be rotating more aircraft through industry as they aged further. That was the rationale, and that's what occurred.

Again, there are periods where we don't always have two in maintenance, we have one, and we go from three to four, even with five. There are periods where, yes, the air force finds itself more aircraft, which it wants to use, I think, for good purposes. However, the rationale was that it took five to maintain three lines of operation. That was why we did that.

[David Christopherson, NDP, Hamilton Centre, ON]

Just the wrong assumption, right?

[RAdm Patrick Finn]

Well, there are big periods of time...In fact, we're approaching the point now where we have more aircraft going into heavy maintenance, so we will only have three at Trenton. The maintainers have the spares, have the ability to do it when they have three, so actually, creating the capacity for four, when pretty much on a go-forward basis there will only be three airplanes there, would equally be a problem, because, again, we'd be paying for too many maintainers for not enough aircraft if we did that.

[The Chair, Conservative, Kevin Sorenson]

Thank you all for appearing before us today. I think everyone assumes that procurement and value for money spent in defence is a very tough one to track, whether it's in Canada, the United States, Australia, or around the world. Canadians and taxpayers also expect that we are putting in measures to maximize those types of efficiencies and certainties in order to find value for our money.

Thank you for coming. We'll be following up on this. If you leave here, and think you could have supplemented an answer, maybe you were cut off, and you would like to do that, we would encourage you to forward those answers. Our committee will be drawing up a report on our meeting today and on this study, so thank you for being a part of that and appearing.

Thank you, committee, for your good work.

The meeting is adjourned.