Public Accounts Committee on Nov. 19th, 2020

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you, Madam Chair.

I want to start by thanking not only the Auditor General, but also the deputy minister and all members of the Canadian Forces.

As the member of Parliament for Hull—Aylmer and a resident of the Outaouais, I want to take a moment to thank the Canadian Forces for their exceptional work in my region during the 2017 and 2019 floods.

Your presence reassured many people here. You answered the call immediately to help your fellow Canadians. I'm very grateful for this.

My colleague Mr. Sorbara asked the Auditor General how Canada's system compared to the systems in other countries. She responded that she hadn't done a comparative study on the materiel provided to military bases in other G7 countries.

Ms. Thomas, I want to ask you the following question. Canada is allied with other countries. Our military members participate in missions as part of these alliances around the world. Do you want to emulate any countries when it comes to supplying materiel to military bases? Do you have a model in mind that you want to emulate?

[Jody Thomas]

It's a very good question. I'm going to ask Troy Crosby to speak to it, as he works on NATO working groups that look at supply chains and materiel management.

I would note that we are a unique country. We are a small armed forces, a small population and a vast geographic area to supply. NATO countries are often difficult to compare ourselves to just because of our geographic expanse. We have a unique challenge in Canada. It's not insurmountable. We're working hard to make sure that we do this better, but it is a difficult comparison for Canada just because of our geography.

I'm going to ask Troy to jump in.

[Troy Crosby]

It's in an interesting area inasmuch as we take part in a number of international supply chain fora with our allies on an ongoing basis, whether it's the Five Eyes partners, the U.S., the U.K., Australia or New Zealand, for example. As well, we also are very well connected with industry partners, with industry working groups and with industry conferences where best practices are explored.

Being a military, not all of the commercial practices clearly apply in our circumstances, but we do share lessons and some of the initiatives that are under way. As the deputy minister mentioned, even just this week I was speaking with my counterpart, the national armaments director from the United States, and supply chain resilience and supply chain issues were on the agenda. This is an ongoing conversation. We're always all working together to do the best we can, and we're maintaining our interoperability at the same time. It's an area that we're bringing into our solution and determining the best way forward.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you for your response.

Mr. Crosby, you just compared Canada to the United States or its NATO partners. Do you want to share any specific aspects with this committee?

As parliamentarians, we can make recommendations to help you, as you did in my region during the floods. I forgot to mention your more recent assistance in CHSLDs during the pandemic. Your work in Quebec has been outstanding. Once again, thank you.

Do you want to suggest any specific processes so that we can advance your interests with the government?

[Troy Crosby]

The lessons we've taken away from these conversations with our allies are that, given the unique aspects of the military supply system, there aren't any particularly specific targets that are achievable in the sense that, where industry holds itself to a very high standard of responsiveness from a supply chain perspective, in our case a lot of the success goes to our resilience and our ability to be resourceful under challenging and unpredictable circumstances. It's that resourcefulness and the thinking around continuous improvement, lessons learned, always reflecting after operations on what was achieved, how we could have done better and sharing those lessons among our allies that is most important to us.

At the same time, you're seeing that some of the investments that have been approved are the outcomes of some of these conversations on how best to move forward. For example, over $200 million was approved for the automatic information technology project in the summer of 2019. That sort of work and the definition work in exactly what we'll request in the request for proposal, taking into account security considerations, all come from those conversations as well.

[The Chair, Conservative, Kelly Block]

Thank you very much.

We will now move to Mr. Blanchette-Joncas for six minutes.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Madam Chair.

Ms. Thomas, I want to thank you for providing some clarifications in your response to a question that I asked you earlier. I know that the system is complex. You said that there are over 20,000 types of goods. Changing a military supply chain is much more complex than you might think.

I want to verify something. While preparing for this meeting, I came across a March 4, 2019, article by journalist Lee Berthiaume in La Presse. The article states that the Department of National Defence saved $700 million as a result of efficiencies. I want to congratulate you. This is a good thing. However, the department spent $2.3 billion less as a result of delays in the warship projects and the fact that some items cost less than expected.

Another aspect interested or intrigued me. I'm still looking for the source of National Defence's supply chain issue. The article states that “defence officials have previously blamed a shortage of procurement experts for some project delays and cost overruns.”

Can you comment on this, Ms. Thomas?

[Jody Thomas]

I believe you're referring to vote 5 spending on capital projects.

On individual projects we did save approximately $700 million that year, but we did not roll out the spending quite to the extent we intended to. I think it's important to note that the spending is not lost to the department. It is in our capital envelope and it will be spent.

We are proceeding with “Strong, Secure, Engaged” projects, as had been laid out in our investment plan.

Early on, as we launched “Strong, Secure, Engaged” and the range of capital investment required, we did have a shortage of procurement experts in ADM materiel. Troy and his predecessor, Pat Finn, have worked very hard at increasing the number of procurement professionals in both the Department of National Defence and in Public Services and Procurement Canada, so we're feeling much more comfortable with the level of employees and the competency and range of experience of our employees as we continue to proceed down the path of “Strong, Secure, Engaged”.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Ms. Thomas.

Can you shed some light on the reason for the shortage of procurement experts?

[Jody Thomas]

Many had been laid off when we went through a period of cuts, so the numbers reduced. A lot of expertise retired, so that train the trainers approach to developing people was lost.

We ramped up very quickly a huge range of projects, and we had entry-level employees. We didn't have more mid- and senior-level employees to manage some of the large projects, but we are in a far better situation now.

We have a very robust development program for our procurement experts, led by Troy's team, and we work very closely with PSPC to ensure that there is a cross-pollination of expertise between the two departments.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Ms. Thomas.

The same article states that this “shortage was created by successive cuts to the department” by various governments, both Liberal and Conservative, in the 1990s.

I'll go back to my question about the source of the issue. Do you really believe that a shortage of procurement experts is causing project delays and cost overruns, as stated in the Auditor General's report, or is the issue simply the result of budget cuts by various governments?

[Jody Thomas]

The decisions were all made within the department, making reductions in response to direction, so there were choices that were made within the Department of National Defence.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Ms. Thomas, I'm trying to find the source of the issue. A shortage of procurement experts is causing problems, and action plans must be developed. The Department of National Defence is receiving receive rations and goods late.

Did the hiring of additional experts or budget cuts cause all the issues that we're looking at today?

[Jody Thomas]

Some of those reductions were on the major project side of things in the capital envelope that Troy manages. As for some of the shortages in people, yes, more people would make a difference in some cases, but this is a systemic problem, the supply chain problem, within the Department of National Defence. There's no one year where you can say it all changed because we reduced the number of people.

Supply chain management has modernized, and we haven't invested in it. We are doing that now to ensure we have a system that can be updated and kept evergreen going forward.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Ms. Thomas.

Do we agree that, if there are fewer experts and operational resources to address the procurement issues raised today, there will be fewer results?

[Jody Thomas]

In terms of specific resources, I'll ask Troy to respond as to whether he believes he needs more people to manage this. When he does require more people, he comes to me through our formal budgeting process within the department, and more people are always needed.

Troy, is there anything specific you would like to add?

[Troy Crosby]

We've actually grown since “Strong, Secure, Engaged” was published. We've had an increase in the number of public servants involved in our capital acquisition program, which includes the purchase of spare parts that are delivered into the system to support our equipment, as we put it into service.

[The Chair, Conservative, Kelly Block]

I will now move to Mr. Green, for six minutes.

[Matthew Green, NDP, Hamilton Centre, ON]

You've heard me today passionately referring to COVID distribution. There may be some differences of opinion regarding whether it's germane to this report or not. I still strongly believe it is. I'll spend my time referencing specifically the issues brought up by the Auditor General's report with the frame and the understanding that I firmly believe it has a direct correlation to the military preparedness, and ability for COVID vaccination distribution.

In section 3.27, the Auditor General found that 50% of all materiel requested during the period covered by the audit was received after the required date of delivery. Among the late deliveries, 50% were at least 15 days late, and 25% were at least 40 days late.

In section 3.28, among the high-priority requests, it found that 60% arrived after the required delivery date. Of these, 50% were at least six days late, and 25% were at least 20 days late.

What is the Department of National Defence's service standard for deliveries?

[Jody Thomas]

Our service standard for deliveries depends on both the priority assigned to the object, and the delivery methodology, whether we're doing it ourselves or contracting that delivery.

I'll ask Troy and General Cadieu to both respond, because this is a very joint process between the department and the Canadian Armed Forces.

[Troy Crosby]

In certain cases, where we can foresee, or need to position ourselves to react quickly, we actually put together packages of spare parts that are pre-positioned in order to allow us to respond quickly on need. Beyond that, as the deputy minister had mentioned, the requirement is on a case-by-case basis in most cases, where requesters specify when they need the equipment in order to support their ongoing activities.

[Matthew Green, NDP, Hamilton Centre, ON]

What are the reasons, then, for missing them so badly? Do the service standards need to be reconsidered?

[Troy Crosby]

In certain cases, per the response to the Auditor General's report, where we need to introduce additional discipline into the establishment of those high-priority requests to ensure they are in fact reflective of an urgent need and that we're not diverting resources where they could be best served somewhere else, that's part of our response. That's part of what we'll be doing in the near term: ensuring that clarity exists.

[Matthew Green, NDP, Hamilton Centre, ON]

There's an old saying that an army marches on its stomach. According to the AG report, given the need to be well provisioned with food and with materiel and other supplies, I'm not sure that we're able to march very far, very fast.

I think about the Argyll and Sutherland Highlanders and the Royal Hamilton Light Infantry housed at the John Weir Foote Armoury in my riding of Hamilton Centre. We want to make sure that these men and women who are stationed there get the supplies and the equipment they need.

Section 3.47 says that for “129 high-priority materiel requests”, National Defence was asked “to provide the supply forms that were completed” and other documents, “such as emails and work orders”. The auditors found that “on the basis of the information [they] received, including explanations and supporting documentation, National Defence could not justify the high-priority status of 65% of the requests that were reviewed”.

Do you think high-priority requests are being made for things that may not be considered high priority so that they arrive only 20 days late, say, instead of 40 days late? Because this sounds like a way for our Canadian Forces members to try to find a workaround to this supply management system that doesn't work.

[Jody Thomas]

I'll refer to General Cadieu, but that is entirely possible, and that is why we are looking at the service standards and reviewing the documentation, the requirement and the justification for high-priority items.

If we divert attention from things that are truly high priority to those that are not, we take away resources from where they're most needed, so that entire governance and oversight has to be reviewed as a part of this audit and a part of our action plan for the audit.