I thank the committee for the opportunity to speak with you today.
I've been following your transcripts and your conversations at a distance. In fact I've engaged a couple of graduate students to keep track of the debates that have been going on and the questions and answers. I'm sure you realize this is great food for op-eds in newspapers, but it's also a great case study for students who are trying to understand what I like to call a vigilant Parliament.
I have to apologize for not providing you with any notes beforehand. It was reading week at Queen's last week, and I read something else. The graduate students were looking at the transcripts until last night, when I read them all.
I want to preface this morning's discussion with some remarks that I think will put the issue of defence procurement, as I see it, in context.
The first problem to be addressed is not procurement but the ongoing and immediate capabilities crisis in the Canadian armed forces. The procurement problem is not a crisis of process but a crisis of decision. This is, in any case, a second-order matter, though not an unimportant matter. Let me explain this line of reasoning, and then at the conclusion I'll make some remarks about some of the issues I think have highlighted this debate.
In 2004 a research team at Queen's University published an often quoted work. I'll advertise it. It's called Canada Without Armed Forces.
I asked the researchers a seemingly simple question. It was the question that I think should engage the House and this committee of inquiries over any number of years. The question I put to them was simply this. Based on the capabilities of the Canadian Forces, defined as equipment and people available in 2003--the research year that we did this work--and the signed contracts for new equipment on the table at the time, what would the Canadian armed forces look like in five years, ten years, and fifteen years further out?
Let me briefly read you the main findings of that research. The study revealed a future force undeserving of the title. Rather rapidly and then inevitably, in five years to ten years, Canada's major military equipment will succumb to the combined effects of overuse and technical obsolescence, making them operationally irrelevant. People with the right balance of age, experience, and training will not be available to replace those who will leave the armed forces over the next several years. Support equipment is disintegrating, and little has been done, or can be done in some cases, to stop it, because spare parts and technicians are not available to solve the problems.
Canada is heading for a long period when the government will be without effective military resources, even for domestic defence and territorial surveillance. Even if the next government were to provide nearly unlimited funds in an attempt to overcome this crisis, this deficit, little can be done before the apprehended crisis becomes fact.
Mr. Chairman, this is a statement of the national defence crisis facing this committee and Canada. This is a crisis that no one in the defence establishment at the time refuted, except to say, lamely, we have plans. What they did not say is that we have no money and we have no political support to act on the crisis.
The crisis is upon the nation, and it is unfolding much as we described. Time is the enemy, not money. However, the crisis is overshadowed by the gallant and persistent efforts of General Hillier and members of the Canadian Forces, who in combat operations are making do.
The response one might expect from a vigilant Parliament would have been immediate action to forestall the most dangerous aspects of the crisis. But such action was stalled for two main reasons, in my opinion: first, by a failure of the political community to act in unison to develop a non-partisan national defence strategy; second, by a muddled, directionless public bureaucracy, incapable of developing a plan to resolve the crisis.
That brings me to Mr. Alan Williams' study, which was just completed with our program at Queen's University over the last year.
Again, as with Canada Without Armed Forces, when Mr. Williams started this study I put to him what I thought was a straightforward question. I said to him: “Alan, what would you do if the Prime Minister came into your office and said to you that he wanted the Canadian armed forces rebuilt in five years, or else, and then he left the room? What procurement reforms would you make to accomplish this task?” That's the question.
The result of his work was Reinventing Canadian Defence Procurement, A View from the Inside. It's on the table, I believe, or it's certainly available.
I want to point out that the title Reinventing Canadian Defence Procurement is not accidental. The title was meant to convey starkly that reforming the process, adjusting procedures, or throwing money around Ottawa is not good enough. I'm not interested in reforming failures. Thus, the title and the intent of the research, as Alan Williams will describe in a few moments, is to create a defence procurement system to meet the current crisis, and with political support to prevent the crisis we are now in from recurring.
Let me turn now to six issues on the present debate and to discussion about defence procurement that concern me and some of the citizens, students, and other people I speak to often.
First, what we procure and how depends on your answer to this question. What do we want the Canadian Forces to do? The answer, in my view, is confounded by those who try, for whatever reason, to attach or hobble defence policy in the Canadian Forces to specific tasks and missions such as peacekeeping or domestic operations.
In my view, the object of our defence forces must be to develop efficient, effective units that can, at the direction of the government, apply coercive and, if necessary, deadly force to situations endangering Canada's security and defence.
Defence procurement and defence administration generally are the instruments that must be used to provide the means to reach this end. Every other policy or decision that inappropriately interferes with this effort adds negative costs to defence policy.
My second point.... The Canadian armed forces are composed of certain basic capabilities that provide the foundation for operations. No matter what missions governments place on the Canadian Forces, Canada's geography will demand that large sums be spent on transportation, communications, surveillance, and technical capabilities. This suite of capabilities should be considered as operational overhead, without which the Canadian Forces will not be able to conduct any operations in Canada or elsewhere. For this committee and others like it in the future, the question to the government is not whether we maintain these capabilities, but how we do so efficiently and in time to avoid crises in defence and foreign policy.
Thirdly, I have a couple of words on competition within the process, and here Prime Minister Mackenzie King's ambiguity is always useful: competition if necessary, but not necessarily competition as we might think of it in “normal times”.
Alan Williams and I have had long discussions--I think that's a fair word--on this topic. And I think we agree, though our agreement is conditioned by circumstances: in my case, by the circumstances we face today. I will of course let Mr. Williams speak for himself.
The assertion is that competition helps lower costs, and generally I agree with that position. In recent times and debates and statements, critics have declared that the lack of competition, as they term it, on some projects now on the table cost Canadians a lot of money. Non-competition is, in effect, a tax on defence procurement.
My view in the present circumstances is that whatever extra spending there may be is a tax caused not by lack of competition, but by failure of governments to make timely and necessary procurement decisions, decisions that have to be made in time for careful, reasonable competitions to occur. Because we didn't make decisions and are now in a crisis situation, the tax that Canadians are going to pay follows from that, and not from a lack of competition alone.
Fourthly, in the current debate I think we sometimes lose sight of the first principle. The critical requirement is to provide members of the Canadian armed forces with the capabilities necessary for them to do what governments ask the armed forces to do.
In the current discussions much is made of the supposed rush to buy aircraft, but today I would like to emphasize that in the list of statements of requirements as part of that discussion, time is as valid a factor as is any other factor. Indeed, today for aircraft, ships, vehicles, and people, time may be the overriding factor. Napoleon once cautioned his marshals to ask of him anything but time. I think it is a caution that governments today might take heed of.
Fifth, I am, and I was, disturbed by the apparent reluctance of officials to engage in or encourage any substantial discussion on the relationship between process, government organization, accountability, and outcomes. Witnesses have said to you, “There is no need to massively overhaul the system, nor is there any requirement to create new agencies or organizations”. They went on to emphasize and praise “the dedication and professionalism of the civilians and military members” in the system and all the various departments involved in the process. They conceded, however, that “A lot of challenges remain, but they are not insurmountable”.
Unfortunately, as far as I can see from the transcripts, the witnesses did not describe what the challenges might be, but implied that Parliament ought to trust us. But if the process and the structure and the organization are fine, what accounts for Canada without armed forces? Perhaps it's members of Parliament. That seems to be the only answer to the witnesses' statements.
The problem in the system can be explained, can be talked about. And when we ask why does the system fail, I think the answer is we don't know why the system fails. And we don't know why the system fails because there is no member of Parliament, no minister who is responsible to tell you why the system works or why it fails. There are just a lot of members who have things to say.
My final observation is that in my analysis of the session so far I worry that in the continuing and recurring evidence and questions we are missing the wartime context of the matter that's before you. I think it is strange that members of Parliament and the political community generally will argue over $400 million or $500 million and where contracts are going, while at the same time we're spending lives in Afghanistan and elsewhere to meet the government's and Parliament's objectives.
I think we need to discuss not just the dollars, but what is happening to rebuild the armed forces. From my non-partisan political perspective--and I have no political bones at all, of course, or sense--I don't know why the government isn't being challenged for not buying six C-17s. We had 32 Hercules. Why are we arguing over buying just a few, when perhaps government should be challenged to buy 32? Why aren't we rebuilding the armed forces instead of arguing over things as though we were discussing matters in some sort of abstract situation?
Mr. Chairman, let me return to my opening statement. The crisis this committee is dealing with is not defence procurement as a sometime matter abstracted from circumstances of the times. Canada and the Canadian Forces have been in the midst of a war since about 1992. And we are finding ourselves by our own decisions and choices conducting operations--that is, spending lives--while the capabilities of the Canadian armed forces are literally disintegrating as we talk.
Managing defence procurement in the crisis of failing capabilities and now in wartime demands is demanding, costly, and the prime responsibility of this Parliament. Defence procurement and managing this war demands an agile whole-of-government approach to the problem.
I recommend that this committee conduct its inquiries with this idea in mind. In that regard, and in advance, I strongly recommend that the committee accept Alan Williams' recommendation for the establishment of “Defence Procurement Canada” to manage the whole-of-government system for defence procurement.
Finally, the question I think Canadian political leaders should be prepared to answer is this: What exactly are you going to do, what is your funded plan, to rebuild the Canadian Forces over the next five years? I think Canadians might like to listen to that answer.
Thank you, Mr. Chairman.
Thank you, Mr. Chairman.
It is a great pleasure to be back here again, albeit in a different perspective, with my friend and colleague, Doug Bland, to discuss Canadian defence procurement. I will keep my remarks brief so we can have as much time as possible for questions.
Defence procurement is a subject that I am very passionate about and have devoted over ten years to learning and overseeing both at Public Works and Government Services Canada and at the Department of National Defence. Having seen first-hand and up close the tremendous dedication and commitment of our men and women in the military, I do not view this subject merely as an administrative exercise, but rather one that above all must see to their security interests.
In spite of the recent proliferation of reports and studies, the process is still accused of being too lengthy and too costly. Why is this the case, and how can it be improved? The answer, I believe, lies in two facts.
First, heretofore this very complex process has been examined in a piecemeal fashion rather than in a broad, comprehensive manner. As a result it has been difficult, if not impossible, to gain a true understanding as to how all the components fit together. Second, implementation of change has not been given adequate attention.
It was with these limitations in mind that I took to writing Reinventing Canadian Defence Procurement: A View From The Inside. I believe that for the first time anywhere, this book provides a complete and comprehensive description of the entire defence procurement process as well as a road map to implement the 25 recommendations made in the book.
If there is truly a desire to improve the process, I believe I have removed the mystery as to how it can be done. The book not only describes the process, but also provides insight into the behaviour of the players in the process so that one can understand why they are motivated to act as they do. Seeing how everything fits together, we can ensure that the recommendations align together to address the real weaknesses, not the perceived ones.
For example, at a lecture on topics in defence management at Queen's University, I asked the students if they thought the following five statements were true or false:
(1) The bureaucratic defence procurement process is unresponsive.
(2) There is too much political interference in the defence procurement process.
(3) The major funding pressures in the Department of National Defence are to pay salaries and benefits for military personnel and to acquire capital.
(4) It costs less to maintain new equipment than the equipment being replaced.
(5) Canada is dependent upon others, especially the United States, for strategic lift capability.
Perhaps, not surprisingly, most of the students agreed with each statement. In fact, each of these statements is more false than true. Allow me to comment briefly on each.
First, the bureaucratic process can work rather quickly. It took less than two years to sign a contract for the new maritime helicopters from the time Defence Minister David Pratt gave the go-ahead. The most significant cause of the delay was awaiting government approval to proceed.
Second, in the ten years that I have been responsible for procurement, I have not been aware of any instance where a minister has influenced the outcome of any defence procurement. This is largely due to the legal consequences resulting from the passage in the mid-1990s of the agreement on internal trade, or AIT.
Third, today more money is spent on maintaining equipment than on acquiring equipment. Yet historically, emphasis was placed only on the initial cost of acquisition, leaving the department somehow to find the additional funds to support the acquisition. The usual source was the National Defence capital budget, thereby eroding it even further.
Fourth, the costs to maintain new equipment are greater than for the old equipment being replaced. It will cost more to maintain the new maritime helicopters than the Sea Kings they replaced. Today's weapons systems are essentially complex software systems that require frequent and expensive updates and revisions. Accordingly, at the outset of any capital program it is necessary to obtain funding not only for the acquisition, but also for the full life-cycle costs.
Fifth and finally, with respect to strategic airlift, it is noteworthy that as of April 2003, when I last asked for the information regarding Operation APOLLO, Canada had moved three times the amount of freight and five times the number of troops for the Americans as they moved for us. The reality is that in coalition warfare each country contributes assets to complement those of its allies.
In retrospect, I probably should have added one more myth--namely, that directing or sole-sourcing a contract speeds up the procurement process. In fact, you can lose more time trying to find ways to avoid competition than conducting an open, fair, and transparent competition.
In addition, sole-sourcing is generally a lose-lose-lose proposition. The taxpayers lose, as more of their money is usually spent on sole-source or directed contracts than when a competitive process is followed. Industry loses, as the quantity and quality of industrial and regional benefits demanded can be compromised. And the military loses--doubly. First, the excess expenditures come from their budget. Accordingly, these funds are not available for reallocation to meet their other priorities. Second, without competition we generally cannot be certain that we are acquiring the best equipment that meets the needs of our men and women in the military.
In my book, I discuss and make recommendations in three broad areas: the legal framework, the industrial impact, and the core procurement process itself. In my brief opening comments, I will just touch on the process, but of course I would be pleased to answer questions on all of the areas.
If there is one overarching observation that can be made, it's that there is a lack of clear accountability at all levels in the process--the parliamentary level, the ministerial level, and the bureaucratic level. The good news is that it is all fixable. I provide details on how it can be done, and done quickly.
In the book, I quote from an Ottawa Citizen article in which Anne McLellan, in addressing a specific defence procurement, refers to Defence Minister Bill Graham and Public Works Minister Scott Brison as the two ministers in charge of the procurement. She was right. With respect to defence procurements, ministers from these two departments are in charge. The problem is that whenever two ministers are in charge, neither is in charge. It is time to address this reality.
Perhaps the most significant of my 25 recommendations is the creation of “Defence Procurement Canada”, or DPC, an organization that combines the procurement resources from National Defence and the contracting resources from Public Works. It becomes the sole organization accountable for defence procurement. While I present five different governance models, I favour the one whereby DPC reports to the Minister of National Defence. Under this model, the Minister of National Defence is accountable for all elements in the procurement cycle, from the preparation of the statement of requirements, through the request for proposals, through the evaluation, and through the contract signing and administration.
The benefits generated from such a model go well beyond clarifying accountability. Significant resource savings will result due to the overlap and duplication of the duties and responsibilities. My conservative estimate is in the range of 48 and 125 person-years, or annual savings of between $4.8 million and $12.5 million annually. Equally important, it alleviates a large skill shortage problem that is becoming even more serious as the population ages.
The process will also be streamlined. When two departments are involved, the process moves only as fast as the slowest of the two. In the book, I cite one example where it took nine months for National Defence to negotiate a deal and over 21 months for Public Works to agree to it. While this may be an extreme case, the reality is that getting approvals through two channels rather than one takes extra time, and therefore slows down the process.
That being true, an obvious question arises--namely, why was the process structured this way in the first place? The answer is twofold. First, Public Works' role was designed to ensure integrity in the process. However, today there are other mechanisms that serve the same purpose. These include the Canadian International Trade Tribunal, the court system, the Auditor General of Canada, the media, and the general openness of our society. All help guard against any wilful manipulation of the defence procurement system. DND and PWGSC personnel are well aware of the dangers in operating with anything less than full openness, transparency, and fairness.
A second argument for the involvement of Public Works is its role as a common service agency, achieving government-wide savings. However, it is quite clear that in this case we are limiting ourselves to defence-specific goods and services, with no potential savings benefits to other government departments.
Delays in the procurement process arise from primarily three sources: first, awaiting government approval to proceed; second, excessive time for the military to finalize their statement of requirements; and third, overlap and duplication between National Defence and Public Works. Accordingly, with Defence Procurement Canada fully accountable, regular reporting on performance can be requested and expected from DPC, including reporting on the causes of any delays.
Finally, my advocacy for DPC should in no way be construed as a criticism of the people in Public Works and National Defence who work on defence procurement. To the contrary, I can personally attest to their smarts, energy, commitment, and integrity. They do magnificent work within the existing governance framework. Imagine what they will achieve once the constraints are removed.
In closing, Mr. Chairman and members of this committee, I am confident that, taken together, the full package of recommendations in the book will address the weaknesses in Canadian defence procurement and make it the best it can be now and in the future. Our men and women in the forces deserve nothing less.
Thank you, and I'll be pleased to answer your questions.
Mr. Williams, I think it is fair to say that one of the most important factors in procurement policy is accountability. One has the impression, and I am not being partisan here, since we saw the same thing when the government was Liberal, that there is a ping-pong game going on between the departments. I am therefore in favour of this agency.
I would like to talk more specifically about your experiences. You talk about current political interference. When giving his speech a few years ago, General Hillier described himself as a man of decision. He said it was not up to him to go over 15,000 pages of criteria, that he defined four or six principles and decided which planes, helicopters and everything else that he wanted to acquire.
We get the feeling when
what we call the SOR, the statement of operational requirement,
is being prepared at National Defence, that they arrange things to get what they want.
How can we talk about the integrity of the process if we really feel like the dice are loaded from the start? How can we talk about competition when we know, in terms of conditions, that the policy really consists of drawing lines in the sand?
Could you please elaborate on the question of political interference? How can we prevent this type of thing?
This will perhaps be my last question.
We're talking a lot about the paper anything and saying that out of the shell is the greatest thing. Would you make a difference between out of the shell and the paper plane, for example? I believe it's always upgrading anyway, and you don't have such a thing.
Maybe if we want to have a true competition, instead of playing with the requirements, we should stick to the plan, and like the C-17, have two companies and may the best one win.
What do you think?
I would first like to welcome our friends. I will begin by explaining why the Bloc Québécois really pushed to have this kind of study done.
The government wants to acquire equipment worth some $20 billion. I have always been baffled by the fact that members of Parliament, including those on the defence committee, were completely excluded. This is not an easy situation for parliamentarians. We are dealing with public servants and generals who have been around for some 30 years. We are trying to understand how things work, but we are left with the impression that everything is shrouded in a culture of secrecy. These people form a group. They make their preparations and the further things are kept from parliamentarians, the better. This is why I pushed for this study to be conducted. The culture of secrecy applies to everyone who appears before us as witnesses.
Mr. Williams, you are a changed man. I remember asking you some questions when you were a public servant. You do not have the same attitude. As I said, a culture of secrecy surrounds all of this. We must overcome it. We, as parliamentarians, have the considerable advantage of being those whom the taxpayers entrust to ensure that their tax dollars are spent appropriately.
Furthermore, Mr. Bland, you admit that the Canadian Forces have been neglected for years. However, one cannot build an army simply because one decides to do so. A defence policy must be adopted. The Liberals did so in 2005 and the Conservatives subsequently said that they would likely continue in the same direction. Everyone is now wondering what should be included in that policy and we are all anxiously awaiting the defence capability plan, which we have yet to see. We are in the process of purchasing some $20 billion worth of equipment, but we do not know whether it can be justified in the context of a new defence policy.
We hope to conclude our study by asking ourselves what the best solution would be. You suggested some avenues, Mr. Williams. You talked about the primary role of the Department of National Defence, and Public Works and Government Services. For now, the process is very fragmented. When we ask one minister a question, he tells us to ask the other minister the following week, since it is not his responsibility. When we ask that minister, he tells us that we should have asked the first minister the week before. We are in a rather awkward situation.
Could you please elaborate on the industrial benefits? This is very important to us. As I am sure you are aware, there is currently a debate raging on this. The Bloc Québécois is presenting a motion in the House today. I think the Department of Industry has a role to play. You did not mention this in connection with Defence Procurement Canada, but I imagine you want these people to complete the work of the first two and to ensure that the benefits are properly distributed.
I have raised many questions and will therefore hand over the floor. I am anxious to hear your answers.
Thank you both for coming today. Welcome back, Mr. Bland. I haven't been here when you've been here in your other role, Mr. Williams, but welcome today also.
It's been a real surprise to me, and it's been articulated already as we've gone through these hearings and had the various ministers and their officials here, that there is not a political person, a minister, who is finally accountable and responsible for the decisions. As one of the other members said on the committee, you would ask one minister a question--I asked one minister a question about his area of responsibility, and he said “That's not me, you'd better ask the other minister”. That's been a real surprise to me as a new person on this committee, the way it ping-pongs back and forth, and that there isn't one final person responsible.
I wanted to ask you why you chose the Minister of National Defence, after having worked through Public Works, why that was your choice.
The other question I had was around the issue of the procurement process. You've been on the inside of the process, but away from it for several months now. What are your views on the decisions that were related to the C-17 and the intention to go ahead, now, with the C-130J Hercules?
I have three or four questions here, and I'll get them all out and hopefully you'll both have time to respond.
The government has put out a plan now for $17 billion in defence procurement. You've made some strong recommendations around the procurement process. Given what Mr. Bland said and others have said, that the need is very pressing, would you think that these purchases should be held up while there's a reform of the process, or should the ones that are in the pipe already go ahead?
I'm also very interested in the issue of search-and-rescue planes, coming from British Columbia and the complex nature of search and rescue there with the mountains and the ocean and all of that. I think it seems to be really delayed, and I'm wondering what you could tell us about that.
The last comment I want to make is that I certainly agree with whoever said that we should get the position papers of witnesses to members of Parliament before the day of the meeting, because it's quite bizarre that you want to have informed discussion and debate at committee, yet you don't know what witnesses are going to say until they appear. When I was a member of Parliament in the early nineties, we did get the position papers ahead of time, and that gave you time to read and ask perhaps more informed questions.
The last comment is about the agreement on internal trade, which I think came out of the CF-18 decisions that were made. Now in this procurement, it's been negated through making a decision that the national security issues prevail. So I would like comments on that as well.
Let me start on a few things in a random order
First of all, in terms of the transcripts, my point is more than transcripts. It's not so much my opening statement and Doug's that I'm thinking of. But given your limited resources, I would expect that one of your researchers would interview witnesses well before, beyond our statement, question and challenge and bring that back to this committee so that you have substantive information upon which to further.... It's not just the opening statements; it's beyond that. That's point number one.
With regard to why the Minister of National Defence, in the book I did present five different.... The agency itself, Defence Procurement Canada, can report to the Minister of National Defence, it can report to the Minister of Public Works, it can report to a third minister, and there are administrative options within that. I chose it for the one reason that I have been talking about all along: I think it's important that one minister is being held accountable. The same minister who's accountable for the statement of requirements would be the Minister of National Defence; otherwise you split it.
You also have a human resource issue, because many of the resources within this organization will be military, and it's a lot easier for human resource management, frankly, to move these military people back and forth between this organization and the army, navy, or air force organization in a more seamless kind of way. This gets to Monsieur Bachand's point a little bit too. In the book I do comment that the deputy minister and myself thought we had an agreement at one point in time with Public Works to try this, but it got snafued. At some point in time you ask how often you are going to bang your head against the wall to make this happen.
This committee, under Pat O'Brien's chairmanship, also made the recommendation that this be looked at, but the government response was no, we don't think we ought to. As a player in the system, once a government makes that decision, that decision is made, and it would be inappropriate for me to challenge it.
There are a lot of procurements in the pipeline right now. The last thing I would suggest we do is hold them up. They warrant appropriate debate and discussion, and I think it's appropriate that we go about doing them the right way. As I said in my comments, the right way doesn't mean a long period of time, and the biggest delays are in getting approval. To give the government full credit, if it said it wants to buy tactical lift, strategic lift, and heavy lift helicopters, that's great. That eliminates one huge obstacle. Once that's done, let's move quickly through the front door, and not try to find a back door to go through. That would take, in my estimation, more time, so I wouldn't delay it.
In terms of fixed-wing search and rescue, this is an interesting case study, because you may recall that in 2004 money was put in the defence budget in the order of $1 billion or $1.3 billion to buy them, with the view that this is something we can do quickly. Here we are three years later, and nothing has been done. One of the major reasons for this is that in developing the requirements it seemed to me there was a tendency to try to make this skewed for one aircraft over the other. Part of the attention of why it didn't go forward is there was some opposition from people like myself and others who felt it's the wrong way of doing things.
One example.... You can say in your requirements something that makes intuitive sense: it has to go a certain speed; it has to go 273 knots an hour. But when you think about it, that doesn't make any sense, because what's important is not how fast it goes, but how long it takes to get wherever you have to go. There's a difference. If you locate your aircraft at different places within the country, you may not need to go as fast in order to get there within the requisite period of time.
And people here have talked about the importance of indicating things in performance terms. That means saying what the aircraft must do, not what it must be. It must be able to save lives within a period of time, as opposed to being able to necessarily be an aircraft that can fly so fast. It's getting the mindset changed to a performance base from a detailed spec base that is a key part of this solution.
I see I'm being waved by the chairman.
We are very pleased to be here today to talk about the work we have done on audit procurement in the Department of National Defence. Accompanying me are Hugh McRoberts, Assistant Auditor General, and Wendy Loschiuk, principal responsible for defence audits.
First, let me say that this committee's current study on the procurement process as it pertains to defence acquisitions is welcomed by my office, and I hope I can contribute to your work. However, my ability to add to some of the discussion may be limited. I'm happy to talk about the findings of any of our audits tabled before Parliament, but I really cannot comment on subjects we have not audited--for example, the C-17 strategic airlift procurement or the Victoria class submarine.
When we plan our audits in any area, risk and materiality are key elements we consider. In the case of National Defence, the concerns that we have noted in the past, plus the spending anticipated for new equipment, naturally draw our attention. I look forward to coming before this committee at some future date to have more detailed discussions based on audits we will be doing in the future.
This committee is examining whether the procurement process works and what can be done to make it better. I have said in the past, and continue to believe, that more rules and more process are not the answer. The current system, if followed, can provide the openness, fairness, and accountability that are essential to ensuring National Defence gets the equipment it needs, and that it achieves best value. But for the system to work properly, management must exercise sound judgment to ensure good monitoring and oversight and that necessary action is taken if things start to go wrong.
Where we have commented upon defence contracting, I have, as you know, rarely had concern about the fairness or openness of the process. My recent audit on relocating members of the Canadian Forces, RCMP, and federal public service did raise such concerns, and the government is addressing those.
I have found, rather, that the defence acquisition cycle seems to suffer more from the burden of its own weight. The process can be cumbersome and layered with reviews and approvals—some of which do not seem, on the surface, to advance decision making. For example, we found that delays in getting approvals for flight simulators slowed one of the projects under the CF-18 upgrade program.
Defence is looking to introduce new platforms into service very quickly—much faster than they have been able to, in the past. Nevertheless, government regulations require that a fair and open bidding process be followed and that there is transparency in the selection of successful contractors. Following regulations takes time, and Defence cannot skip steps or cut corners to speed up delivery. Senior management from all the departments that are involved in defence acquisitions must be accountable for ensuring the fidelity of the process and for demonstrating that all steps were taken to obtain the best value.
The fast pace of technology change and the speed with which Defence wants to introduce new platforms into service leave no doubt that things must be done faster and better. I am glad to say that Defence is working to reduce its acquisition time and improve project management. Defence is focusing more on the capability it wants the platform to deliver and letting bidders work out the options to present for consideration.
Our audits have identified four key areas in which defence acquisition management needs to improve. Requirements need to be better defined and clearly linked back to well-defined defence priorities and objectives. Overall project monitoring can be weak. Risks should be better identified and managed, and finally, options analyses and the related business cases have often been poorly done.
We have also reported our concerns about the problems caused by a lack of skilled, experienced staff assigned to manage many major acquisitions. We raised this issue during our audit on upgrading the CF-18 fighter aircraft. Defence downsizing in the past combined with the retirement of skilled personnel has left the department short of managers who have the knowledge that was gained through years of contracting, and acquisition experience that is needed to run a major project.
Several defence acquisitions also include a long-term service contract to provide maintenance and support. We audited one long-term service contract, that being the NATO flying training program in Canada, in which the contractor provides military pilot training. Partnering with the private sector does not absolve National Defence of its accountability and responsibility to achieve results, and the department must hold its private sector partners accountable for the level of service provided. We have found that this is not always an easy thing to do, and it requires that performance measures and expectations be made clear upfront. When performance is not met, there must be ways of compensating the government.
We have recommended that National Defence re-examine how it enters into agreements with the private sector. The defence department has taken steps to improve its long-term service contract agreements by better defining performance and holding contractors accountable, and by getting some flexibility. In this way, when needs change the department can avoid expenditures for which no services are received.
Mr. Chair, I want to thank this committee for the opportunity to discuss our findings on defence procurement. I believe that the audits that we have conducted over the last 10 years or more have contributed to better procurement practices in the government and, as a result, better stewardship of public funds. We will continue to monitor and report on acquisition capability.
This concludes my opening remarks. We would be happy to answer any questions from committee members.