Public Accounts Committee on May 25th, 2021

[The Chair, Conservative, Kelly Block]

You are correct, Mr. Blois. I'm sorry. Please go ahead, for five minutes.

[Kody Blois, Liberal, Kings—Hants, NS]

Thank you, Madam Chair. I had my five-minute timer all ready.

Thank you to the witnesses.

As I sat here and listened to the testimony today, I found it interesting because, obviously, I know this committee is studying results and the AG aspect, but we have to think back to 2010 and some of the policy choices around building some of this capacity in Canada.

Mr. Matthews spoke to this during his testimony, about the fact that we came into this about a decade ago with very little shipbuilding capacity in this country. I guess I would just remind my colleagues, having had the chance to visit the Halifax shipyard and Irving, about some of those immense challenges of trying to build that capacity in-house. Particularly given the pandemic—I know with my own constituents although I can't speak for other MPs'—there's a lot of increased focus on the capacity that we want in this country, whether that be agriculture, pharmaceuticals or otherwise.

I'll start with Mr. Swales, if that's appropriate; he is the principal on this.

One thing we're lacking here, Mr. Swales, in this conversation, is the perspective of the actual ship—the private shipowners who are building these.

During your audit, I assume you had conversations with the senior management of these shipyards. What is their perspective in terms of the timelines, because the AG report certainly highlights the fact that perhaps we were all a bit ambitious about what necessarily could be achieved on the existing timelines.

What was their perspective, in about 30 seconds?

[Nicholas Swales]

We did speak to the shipyards, but I don't think I should speak for them in this regard. Our audit was on the work done by the federal government, or the federal government's management of the strategy.

[Kody Blois, Liberal, Kings—Hants, NS]

Mr. Swales, I can appreciate that; we're focusing on the government's internal procedures, but of course, that intrinsically involves the shipyards in question in the dialogue. Is there anything missing or anything in this report that would be relevant to their perspective in some of the challenges they faced on the ground, or was that really not part of the element in terms of examining the internal procedures, whether it was Seaspan in Vancouver, Irving or, most recently, Davie?

[Nicholas Swales]

We were trying to understand where the management from the government side could be strengthened so that, in working with the shipyards, it would be as well placed as it could be. We point out, in the report, obviously, that the shipyards have had their challenges; we mentioned welding issues with some of the offshore fisheries surveillance vessels.

Clearly there have been challenges on the shipyard side, but the focus of our work was on what the government could do and what it has been doing to try to keep the strategy on track as best it can.

[Kody Blois, Liberal, Kings—Hants, NS]

Perhaps I'll go to Mr. Matthews, then, with public procurement.

Can you speak to this? Obviously, my understanding of even the timelines.... It's optimistic, but now we're starting to get some precedent on how to build these ships. I assume that's part of the work of the government in terms of tightening the timelines and asking some of the existing procurement shipyards to be able to meet better standards moving forward.

[Bill Matthews]

That's exactly it, Madam Chair.

There is a natural tension. Obviously, due to the age of the fleets, there is pressure to get ships sooner, and we all know why that is. We also want schedules that are credible. When finding that balance in the early days, the yards and the government, frankly—officials—were overly optimistic in terms of timelines.

As we now have a few ships under our belts, we are in a position to be more real in our challenge to the schedules. We're demanding more detail from the yards in terms of the schedules, so that we can assess if they're credible.

I have mentioned the earned value management approach that we plan on adding in, and we have started that. As the yards mature, we'll have a better sense of what they can deliver when, and we can change their schedules accordingly.

[Kody Blois, Liberal, Kings—Hants, NS]

I appreciate that.

In the conversations I've had with some of the folks at Irving, for example, I've asked about beyond-government procurement and what opportunities may exist. Traditionally, Canada has not been in this space. I asked about whether there would be private opportunities for procurement in a more commercial sense outside of defence procurement, as I wasn't sure if those existed. I think that speaks to the complexities and the fact that it's not easy to build an industry overnight.

I have a question for Ms. Thomas on the DND side.

I think it was outlined in the report, but I just want to confirm. Operationally, have there been any challenges from your side? It also mentioned mitigation measures to try to avoid some of those operational challenges because of the delays. Can you broadly speak to that, in the about 25 seconds I have left?

[Jody Thomas]

How about I ask the Commander of the Royal Canadian Navy to speak quickly about the operational challenges and how he's mitigating them?

[Vice-Admiral Craig Baines, Commander, Royal Canadian Navy, Department of National Defence]

Thank you, Madam Chair.

Of course, we have a very careful balance of investment against operational requirement that we plan to. For example, we have two ships for deployment as we speak, and there is another one about to deploy in July.

With the JSS contract, as you know, we have an interim auxiliary tanker that is fulfilling that function. We find that, through smart scheduling on our side, we're able to manage both the maintenance and the operational requirements.

Thank you very much.

[The Chair, Conservative, Kelly Block]

Thank you very much, Mr. Blois.

We will now commence our next round of questioning.

We'll start with Mr. Berthold for six minutes.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Thank you, Madam Chair.

Mr. Blois, thank you for giving me a bit of time earlier.

Madam Chair, since the beginning of this meeting and question period, having read the Auditor General's report, I have realized that leadership seems to be lacking, with all due respect to the people who are here to discuss the national shipbuilding strategy, or NSS. We have learned many things. It has taken us 10 years to learn. The government is starting to ask shipyards questions to figure out what is happening and why they are late.

Mr. Matthews, do you not think that we should figure out how the three departments communicate and organize ship delivery by different shipyards?

Based on what I have heard since the beginning of the meeting, I think that other departments would probably like to deal directly with shipyards.

[Bill Matthews]

The premise of that question may be a bit of an oversimplification of where things are. Of course, there have been ongoing discussions with the yards about schedules.

I think we're now in a better position to understand—

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Mr. Matthews, I apologize for interrupting you.

You say that I am oversimplifying the situation. It is not complicated: there is a shipbuilding strategy, and the federal government is being asked to supply ships and icebreakers to the Canadian Coast Guard and the National Defence. Ten years later, we are realizing that there are delays, that risk-management programs are ineffective and that the Auditor General, in her report, although she does remain very nice and accepts all your recommendations, is very strict about this entire process, which has been ongoing for 10 years.

Canadians expect various services and departments—your department and National Defence—not to have to learn lessons for 10 years on how to deliver goods to Canadians when given a mandate like this one. Billions of dollars are involved. Do you know how many Canadians it takes to pay those amounts?

I don't like to say that I am simplifying. What I want to know is why, after 10 years, you are still saying that you are learning lessons.

[Bill Matthews]

The lessons learned have been ongoing, but the sophistication of the yards and the risk management and schedule management tools that go with it.... These are long-term programs, so it's not a lesson you learn overnight. This is a multi-decade program, and we will continue to learn as we go.

We're now in a better position to understand what the yards can truly deliver. We've put pressure on the yards to adjust their practices as well, but it's a joint effort. I think you'll see lessons continue to evolve, but our practices will get more sophisticated as well.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Given what you are telling us, can you assure us that no delays will ever occur again?

[Bill Matthews]

In the shipbuilding industry, I don't think we can ever say there will be no delays. We've already talked about COVID. Even countries with generations of shipbuilding experience still encounter delays. These are complex projects.

We've talked a bit about the surface combatant already today. This is probably the most complicated project the Government of Canada has ever undertaken. It's going to be a challenging project.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

Do you think you have all the human resources and skills your service needs to complete this project and be the leader in this important file? This shipbuilding strategy is important, not only for Canada, but for everything currently happening in the Arctic, on our coasts, and with National Defence, which must tinker with its ships to get things done.

Do you sincerely believe that you have all the skills and expertise needed to get the job done?

[Bill Matthews]

The competence required and the skill sets, both from an employee perspective but also continuing to make use of outside experts to get advice, have been part of the strategy from the get-go.

We will be looking to increase our resources as well, both within our department to ensure that these programs continue to be managed with the level of effort required.... It is a combination of outside expertise, which is absolutely essential, as well as employees inside the government.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

How do you determine the needs in terms of expertise from outside your department?

What inadequacies have you identified within the department that external experts need to address? How do you select those people?

[Bill Matthews]

You can look to the Auditor General's recommendations for good clues as to where the expertise is needed, such as in risk management, to make sure we're world-class there. If you're into discussions of capability, I would leave that to my colleagues at Defence and the Coast Guard to answer.

In terms of risk management, it's evolving the contracts themselves to make sure they're world-class in terms of best practices as the shipyards mature. Those would be the two areas I would point to.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

In terms of capability, you are saying I should consult the two departments in attendance, but you yourself said you were a leader in implementing the shipbuilding strategy for Canadians.

That is why I am putting questions to you, and I would like the representatives of the two other departments to answer you.

Ms. Thomas, from the Office of the Auditor General, do you think it would be necessary to have more transparency and to receive more frequent public reports on the shipbuilding strategy, in order to be able to monitor the strategy's progress? Every delay is costing Canadians millions of dollars.

[The Chair, Conservative, Kelly Block]

Ms. Thomas, give just a very short answer, please.

[Luc Berthold, Conservative, Mégantic—L'Érable, QC]

I think she's frozen, and that was such a good question.

[The Chair, Conservative, Kelly Block]

It was a great question.

Madam Clerk, are you in contact? Is someone in contact with Ms. Thomas?

Oh, I see that she is unfrozen.

Luc, perhaps we can go back and you can very succinctly ask your question again.