I want to welcome everyone here.
This meeting, colleagues, is called pursuant to the Standing Orders. The committee today is dealing with chapter 2, “Support for Overseas Deployments—National Defence” of the May 2008 report of the Auditor General of Canada.
We're very pleased to have with us, from the Office of the Auditor General, Mr. Hugh McRoberts, Assistant Auditor General, and Wendy Loschiuk, Assistant Auditor General. From the Department of National Defence, we have the accounting officer and deputy minister, Mr. Robert Fonberg; the present Vice-Chief of the Defence Staff, Walter J. Natynczyk—soon to be elevated, and congratulations again; Dan Ross, assistant deputy minister, materiel; Major General Timothy Grant, Deputy Commander, Canadian Expeditionary Force Command; and Major General Daniel Benjamin, Commander, Canadian Operational Support Command.
On behalf of all members of the committee, I want to extend to everyone a very warm welcome.
Thank you, Mr. Chairman.
Mr. Chair, thank you for the opportunity to discuss chapter 2 of our May 2008 report, “Support for Overseas Deployments—National Defence”. I am pleased to speak to you today about this important topic, as operational support is the foundation on which military missions rely.
With me is Wendy Loschiuk, Assistant Auditor General, who was the principal responsible for our defence audits at the time this audit was under way.
Our objective for this audit was to examine the logistical support provided to the Canadian Forces mission in Afghanistan. We focused on whether the supply chain is moving needed equipment and supplies into theatre in a timely way and whether it can keep track of stocks in theatre.
In doing this, we wanted to ensure we fully understood the demands of support personnel in Canada and in Afghanistan and that we had the right perspective and appreciation for the challenges they face. To do this, we followed the supply chain from Canada into Kandahar airfield, where we saw first-hand the hard work and dedication of our Canadian Forces members.
We found that it is this hard work and dedication that is keeping the supply chain going. National Defence has been able to deliver to its troops the equipment and supplies they need to do the job, and personnel are finding ways to maintain the equipment and weapons. However, the operation has been challenging for them. The Canadian Forces has had to adapt and adjust as the Afghanistan mission has changed and demands on logistical support have increased. This mission has tested the ability of the Canadian Forces to support a major operation.
National Defence has adjusted to the mission demands in several ways: by chartering civilian airlift to help move about 85 tonnes of equipment and supplies each week; by borrowing or stealing spare parts from one piece of equipment to make timely repairs to another; by sending technical assistance teams to visit Kandahar airfield to help when backlogs build up; by hiring civilian personnel to provide support, especially in the maintenance functions and for the hospital; and by making do with what they have to accomplish objectives according to circumstances.
Some weaknesses in the supply chain are understandable, considering the changes in the mission since 2003. Audits by our colleagues in the U.K. and the U.S. have reported problems in their deployments similar to those we have found in ours. Their findings suggest to us that given the lengthy experience of both these countries in conducting overseas deployments, some of the problems we found are inevitable where there are long supply chains supporting thousands of personnel. Nonetheless, we believe it is important to be aware of these problems and to be addressing them.
We found that there is some cause for concern as supplies are arriving late and significant amounts of supplies cannot be accounted for. Most items requested from the supply system by Kandahar airfield do not arrive on time, including spare parts needed to keep equipment and weapons working. Shortages in spare parts make it harder to maintain some equipment and weapons in an environment that has already put considerable wear and tear on fleets. For the most part, combat fleets are meeting operational expectations, but reserve stock for some combat equipment has been declining. Some support vehicle fleets, such as land mine detection systems or trucks for transporting supplies, had very low rates of serviceability.
Commanders have expressed their concerns about shortcomings in the supply chain and the difficulties these have added to conducting the mission. Nevertheless, we found no reports that, according to the commanders, supply chain problems had caused a significant impact on operations.
Tracking supplies was also a problem in Kandahar. While we appreciate that the camp is large and shared by several countries, we nevertheless expected that most supplies once received would be readily retrievable. Supply technicians at Kandahar airfield manually record that items have arrived and in which container they have been stored. Given the volume of goods arriving on any one flight, this could be quite a challenge and has added to the difficulty of keeping track of items.
We are pleased to note that National Defence takes this matter very seriously, and at the end of each rotation does an inventory count. However, these counts have shown that several million dollars' worth of items either could not be located or were there but had not been entered into the records.
National Defence has agreed with all the recommendations in our chapter. The department has also prepared an action plan that we believe represents a reasonable approach to addressing the concerns we have raised. We are happy to see that their plan includes objectives and target completion dates.
Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions.
Mr. Chairman, members of the committee, thank you for the opportunity to speak with you today.
You have already introduced my team. I don't need to do that again.
I would obviously like to thank the Auditor General and her staff for her report and for their presence here today.
Mr. Chairman, I would like to spend just a few minutes outlining for the committee some of the complexities involved in the supply chain that supports the Canadian Forces.
Every day, Canada's men and women in uniform depend on a supply chain for resources, food, medicine and equipment—often required on an urgent basis—which will allow them to do their job effectively. The military supply chain is a highly complex process with many components. Personnel located in Canada must acquire the supplies, transport them to users and manage inventory for the most demanding of operational environments.
This currently involves shipments by air, as the Auditor General has said, two to three times a week to transport approximately 85 tonnes of equipment and supplies to a destination 12,000 kilometres away. At Kandahar airfield, the Canadian Forces receives supplies and equipment from all over the world, including direct shipments from places like France and South Africa. A sea shipment may originate at the port of Montreal, transit in a place such as Pakistan, and then be driven overland into theatre. Once in Afghanistan, materiel and spare parts are moved from the base at Kandahar airfield to five different forward operating bases, as well as several remote sites, on a daily basis.
As the threat environment evolves, there is a need to deploy different or additional capabilities, spare parts, and other supplies on a regular basis. Adapting and adjusting to challenges in the supply chain helps ensure that the Canadian Forces continues to get the right equipment and resources to the right place at the right time.
The Department of National Defence welcomes the recommendations made by the Auditor General in her May 2008 report. The committee has asked about a $7.1 million deficiency found during an inventory review in Kandahar. Additionally, while the committee did not request information on the $6.6 million in surplus items highlighted by the Auditor General, I would like to speak to these briefly as well. Together these are a measure of overall supply chain efficiency.
An explanation of the discrepancies is included in a report requested by the committee, which I understand has been tabled with the committee.
The time period under which the Auditor General conducted her review includes the most active window of combat operations for the Canadian Forces since the Korean War. Undoubtedly, this intense period of combat has had an impact on the accuracy of supply record keeping, and this has been a real challenge for us.
We take our responsibilities and accountabilities for the effective and efficient management of our materiel holdings extremely seriously. We strive to maintain the highest standards in that respect. This is why we are one of the few nations that does stock-taking in theatre every time we do a troop rotation. Our major allies only do this type of accounting at the end of the mission. In fact, Canada is a leader among the armed forces of the world for inventory stock-taking.
Having the strict security parameters within which the Canadian Forces operate in Afghanistan gives us considerable confidence that the vast majority of the unaccounted-for items on the $7.1 million list are in fact stored somewhere within our secure compounds, or were actually used for equipment repairs or upgrades. However, due to the exigencies of a manual supply chain operating in a combat theatre, supplies and equipment may be unaccounted for. At present every effort is being taken to account for these variances. Over 5,000 investigations have been conducted into the $7.1 million deficiency and the $6.6 million surplus, including a number that are still ongoing.
To date the findings have consistently demonstrated that these discrepancies are the result of accounting variances, which are a combination of variances that result from manual entries into the CF information systems in theatre; misidentification of goods and spare parts by supply technicians who are unfamiliar with new equipment and parts arriving in theatre, some directly from manufacturers; and shortages in personnel caused by operational tempo.
These variances were compounded by the need to transfer assets to forward operating bases and a lack of connectivity to CF support systems. For example, supply technicians in these austere locations had no automated tracking system for items.
The urgent need for certain equipment in Afghanistan also increased the pressure to deliver assets quickly. As a result, some were introduced without proper identification for tracking purposes. In addition, we cannot dismiss the difficulty in accounting for items destroyed or abandoned due to engagement by the Canadian Forces with enemy insurgents.
I am pleased to note that in spite of these challenges, the Auditor General does confirm that National Defence has been able to deliver to troops the equipment and supplies they need.
While we take extremely seriously our accountability for managing every taxpayer dollar voted to us by Parliament, the fact that there is a $7.1-million deficiency is in some ways nothing short of remarkable. This deficiency, along with the $6.6-million surplus, represented only 1.28% of the $1.072 billion of equipment and inventory held in Afghanistan. We also anticipate that a very significant proportion of these surpluses and deficiencies will be resolved when we do complete a full reconciliation of accounts at mission close-out and that very little of the materiel will in fact be assessed as lost.
That said, we have learned from this experience and the recommendations made by the Auditor General. I would like to address what measures we have taken to resolve the issues you identified, including those relating to the monitoring, tracking, and management of the supply chain.
Mr. Chairman, Canadian Forces and the Department of National Defence have reinforced specific efforts aimed at enhancing compliance and oversight. We regularly send in assistance teams to review stock levels and address problems with the supply chain in theatre. Specialized teams will have received the transfer of spare parts from the manufacturer's factory to Canadian Forces operations in Afghanistan. These teams will ensure that new parts are entered into the inventory system immediately upon receipt. We've also increased the number of supply technicians available to provide dedicated stock-taking and investigation capabilities.
Further, we have developed an action plan to address the problems identified by the Auditor General, which I understand was also tabled with the committee.
Please allow me to outline for you some of these measures.
In addition to the current consignment tracking system in theatre, a phased asset visibility project is currently under way to ensure timely and accurate tracking of inventory. An interim radio frequency identification has been established to track assets moving to and from Afghanistan. We expect a final solution based on a Canadian approach by the end of this year.
In addition, the department is currently introducing a hand-held bar code reading capability in Canada, which we hope to evaluate in Kandahar this summer. This will help deal with the manual entry issue in theatre.
Mr. Chairman, while the Auditor General found no reports of supply chain problems that had significantly affected operations, we recognize that this is due in significant measure to the dedication, hard work, and ingenuity of the troops on the ground. While we currently have a supply system accuracy rate of nearly 99%, we will continue our best efforts to help the Canadian Forces respond to the demands of Canada's mission in Afghanistan. Again, we take our accountability for managing taxpayers' dollars extremely seriously.
I wish to thank the committee for the opportunity to address this issue today and would welcome any questions you may have.
Sir, I don't have the detailed information with regard to revamping the process to meet your requirement of 10 to 20 days. I do want to say, though, that in terms of the major equipment that our soldiers and sailors and airmen and women use on operations, and now specifically in Afghanistan, we've had a pretty good track record over the past few years. Going from identifying a requirement, especially when we see either tactics change or the environment in which we're working change, to such time as we're actually able to field something on the ground, we're very, very quick.
I'll just use the example of tanks in theatre with regard to Operation Medusa, going back to August and September of 2006. The requirement for the tanks going into theatre was identified on about September 6. Through a massive effort led by Dan Ross, who can probably address some of these things, working with Public Works, working with Industry, in terms of getting the spare parts and so on, supporting that piece of equipment, we got that piece of equipment into theatre within a month, in fact less than a calendar month. On October 3, 2006, I believe the first tank rolled off the aircraft in Kandahar.
Indeed, the parts flow had a different expenditure rate from what we had expected before. The tanks were not intended at that point in time to be used in theatre. So buying engines, buying transmissions, buying all kinds of spare parts, we changed the flow. We got great support from Public Works and so on.
I can use other anecdotes with regard to artillery, with regard to some of the armoured trucks. Again, we found that some of our armoured trucks were not sufficient for the new techniques and procedures that the Taliban were using. In very short order, as a result of an immediate operational requirement, our materiel people, working with Public Works, working with Industry, reacted to that, and we had vehicles on the ground.
I would defer to Dan Ross and General Benjamin to go further on this issue, sir, if you wish.
Perhaps I could elaborate in more detail.
Some of the challenges that were evident at the place in time when the Auditor General did her review were representative of the early introduction of equipment, without perhaps the normal time and space to deliver the integrated logistics support with normal spare parts.
Normally when you would embark on a major project--for instance, to buy the armoured trucks--you would have about two years before your armoured trucks would be delivered. In the intervening time, you'd build up your logistics stocks, your spare parts, your procedures, and you'd be ready for the armoured trucks.
In this case, we got armoured trucks delivered directly from the factory to the field, directly to combat. So you have a lag to get those spare parts and processes in place. It did take extraordinary efforts to do that. The entire supply chain, General Benjamin's command, and the troops in the field reacted to get the job done, but I have to comment that in those instances of tanks, Nyalas, Mercedes trucks and so on, we are catching up to that supply chain lag. We are building up those stock levels. We are finding fewer instances where there are urgent demands required.
As time goes on, I think we'll see with future stock-level reviews that the spike of variances will come down significantly.
Thank you, Mr. Ross and Mr. Natyczyk.
What I find a little disturbing is that the personnel actually have to, in your own words, make extraordinary efforts, or they have had to in the past. Perhaps at a later point we could take a look again at the system design and what's being done to make sure that we don't put this additional burden on the personnel of having to make extraordinary efforts every time it appears that we're missing equipment.
Is there an actual list? You say things are much better now. I understand that on Kandahar base there's a so-called graveyard of equipment. Some of it's been taken out by IEDs, and some other equipment has had to be cannibalized for parts. Is there an inventory of what's in that particular graveyard or of what's being cannibalized? Or is it just kind of ad hoc?
I'm just wondering if there's a list that you can provide this committee of equipment--especially when it comes to ground transport--that is needed, that we don't have in place for spare parts, that you're critically short of in Kandahar at this time. The worry there is not only the inability to meet field mission objectives; it's also, for our soldiers, the worry of jeopardizing life and limb.
So do you have a list that you can provide to this committee of what we're short of right now? And if you don't have that type of list, why not?
As well, what's in this “reserve” inventory, I guess, that you have in the graveyard in Kandahar?
Mr. Chairman, basically procurement is through Mr. Ross's organization, and they bring most of the assets into our depot. I take care of the national depot here in Canada and I project this equipment into the theatre through the distribution process, which is worldwide and very complex, and we do the retrogrades, meaning bringing back all of that equipment. Once in theatre, it then goes to the theatre commander. General Grant in this instance is representing people taking responsibility of the kit there.
Part of my task is to make sure that we understand the full supply chain from the manufacturer to the theatre, understand the level of stocks, and understand whether in time and space we can bring it into that theatre at the right time and at the right place to make sure we don't compromise operations. We call it total asset visibility.
This is something my command is looking at. We're looking at all the assets there and trying to determine in fact what those choke points are. What we're seeing now, Mr. Chairman, as we procure many of the items, is that many of those items are procured worldwide off the shelf. I thought our supply chain would come from Canada to the theatre, but in fact we needed to have those critical pieces of equipment go directly into that theatre, so our supply chain in fact very often starts from the manufacturer and goes into the theatre of operation.
It's the first time that many of those capabilities are being exposed to this climate. It's 50-plus degrees, with very fine dust that gets into the mechanics and so on, so it's extremely difficult to forecast what is going to break. It's almost an art to understand what will break in three months and six months.
I monitor this very closely back through the supply chain to see if we have the repair parts in our depot in Afghanistan or in our depot here in Canada. If not, we see what the manufacturers have in their stocks, and how in time and space we can we bring it into that theatre. Just the right amount at the right time is something that I'm looking at, and I have this for every capability in that theatre.
Thank you, Mr. Chairman.
I'd just like to clarify this so that we don't leave an impression....
In terms of the commanders' reports, they dealt at length with logistical issues and supply issues, and they certainly did raise concerns, in some instances, about deficiencies in the supply chain. What we identified as being notable was the fact that in reviewing all of those reports, at the end of the day, yes, there had been problems with the supply chain, but what they also indicated was that those had not affected combat operations, which we thought was important to draw attention to. But they certainly addressed logistical issues at some length in those reports.
The second thing I just want to be clear about is that the $6 million and $7 million—the other end-of-rotation inventories—was not something that we identified. That was something we drew attention to as a result of the reports and the very good work that DND had done. If they had not done that work, we certainly would not have had the audit capacity to detect that.
I think, in fairness to the forces, I just wanted to clarify that.
Thank you, Mr. Chairman.
First and foremost, I'd like to say to those who have had to handle the responsibility of a very difficult mission, all Canadians are proud of you and appreciate the work that you're doing there and continue to do.
I wanted to ask a couple of questions. I probably took a look at this report in a different light from what most people would, because as a leadership assignment I read General Pagonis's book, Moving Mountains, and have an idea of just how sophisticated a supply chain is. As I was reading this report, I thought it was too bad that we didn't have everything labelled as tonnes of equipment moved, as General Pagonis did in his book, because you really realize when you're constantly feeding a small city of people just how much work it is.
I wanted to ask some questions to get some details on some of the things the Auditor General highlighted.
In paragraphs 2.43 and 2.51 in the Auditor General's report, on pages 15 and 18, there's some talk about the Nyala and other equipment, and something was really niggling at me when I was reading that. What responsibility do the manufacturers have in this? I would think that when they come to you, they probably make some significant promises about equipment. And as Major General Benjamin said, you almost have to have this down to an art in figuring out when something is going to break down. Are the manufacturers of this equipment fulfilling their responsibilities?
I'll just start off, if I might, Mr. Chairman.
Any piece of military equipment put out there is a compromise of a number of factors: protection, mobility, power, its firepower. It's always a compromise of all of these characteristics of a vehicle. The Nyala is a great vehicle. And we realized, because of how the mission was evolving, that we needed to provide a more heavily armoured car than we initially had with the G-wagon or the jeep that we had in theatre, which were armour-protected but didn't have sufficient protection.
On the market at the time, the Nyala, the RG-31, was out there. It was designed more specifically for road work. Well, in the Kandahar area there aren't a lot of roads, so it's going over some pretty tough terrain. Also, it's a vehicle that we fielded pretty quickly, because we needed it out there. That vehicle has saved a lot of lives, and we've learned a lot about how it is to be employed, and the drivers have learned what they can put it through. That put a lot of strain on the vehicle.
Because the vehicle is so popular, a lot of our allies have lined up at the manufacturer to buy it as well, so all of the parts are actually not going for spares, but to the manufacturing of original equipment. So therein lies the challenge. At the same time, the manufacturer is learning about its vehicle and producing better variants of that vehicle.
I will turn this over to General Grant, who, as the commander on the ground at the time, received those vehicles and put them into theatre.
We all wish you the best of luck, really, especially in the care of our soldiers. And let me just say that if my approach to this today seems a little uncharacteristic, it's because I have a great deal of sympathy. Prior to entering public life--quite a while ago now--I spent ten years punching a clock, working in a parts department. So nobody knows more about back orders and the wrong part and things that don't fit and why it happens than I do. It's been quite a few years, and there is a lot of technology, but that's not always a big help. So you're going to hear a lot more sympathetic a questioner than normal here, because I do have a great deal of sympathy for how difficult this is.
That being said, however, the report, in paragraph 2.21, shows us that 50% of all the equipment and supplies that are ordered don't make it on time. That speaks to planning as much as it does to the actual delivery on the ground. Is that improving? Why is that number so high?
We've been out there for quite a while now. It would seem to me we'd be a little closer to knowing when things could really happen, given all the difficulties you have. So can you give us a little explanation of why the figure is 50%, and what you're doing to lower that, please?
Thank you very much, sir.
Much has been focused on the $7 million worth of inventory that wasn't accounted for. I have read the reports and so on. I mean, you're in an operation where your focus is to make sure you get equipment to the front lines to supply your people. It's important to have a good accounting system in place, but the priority is priority.
But $7 million out of $1 billion--let's put that in context. At the same time, let's compare that to some other government operations we're all quite familiar with: $350 million on a sponsorship program, where we had to pull teeth between the Auditor General's office and a commission to find out what in the world happened, where this money went. We still don't know what happened to $40 million; we have suspicions of what happened to it. But the Gomery commission couldn't even figure out what happened to $40 million.
We spent over $1 billion on a firearms registry, and the error rate was double-digit on a lot of these things. When you tried to use the system, it was double-digit. We had things like $30 million spent on computer programs that failed. They didn't work. And it was never even authorized by Parliament.
Putting this in context, I think this is a vast improvement over some of the things we've seen here.
On the $7 million, let's just get the record clear here. Some people are suggesting that maybe this equipment disappeared or there was fraud involved or something along that line. My reading of the report doesn't give me that indication at all. It's a tracking error or not putting labels on stuff, but it doesn't mean the equipment doesn't exist or isn't being used by our forces.
Could you clarify that for us, General?
Yes, I can give you the flavour of it.
Most of the equipment in fact is related to spare parts. This is one of the key issues, that the chain of command wanted to have a better grip on spare parts, especially as we were moving to the FOBs.
So just imagine my team going into an FOB, and they go there for three or four days. We ask the the company to line up their armoured vehicles, because we want to check them and make sure that the kit is there. Each of those LAVs has 8,000 parts, and some of them we have to account for. And we had big armoured plates to account for. We have to go in and check them out. So they line the vehicles up, and we start checking the plates, and all of a sudden they say, “Oh, sorry, we're in the middle of an operation”, and they all bug off.
And then what happened? Well, we did 75% or 80% of the check, and we couldn't confirm the other 20%, so we reported the other 20%. This is what it's all about.
Strategic airlift and sealift in fact is something critical to a country like ours that wants to be successful in a place like Afghanistan, which is a land-locked country.
You may take Air Canada and fly to wherever in the world. These are predetermined paths. When we bring the military materiel and go to a place like Afghanistan, we have to go over 16 different countries. We need flight clearance over those 16 different countries, and very often they will say they need two weeks' notice, especially if it's a weapons system, ammunition, and those types of things. So it is extremely complex. In some instances you could go one way, and that nation may say no, you're not coming this way. It's like a huge puzzle. It is a tremendous challenge to then support our forces by having strategic airlift and sealift to that theatre.
We have found over the last three years of experience that the most efficient way of doing business is obviously related to planning and for us to load the heavy equipment on a ship, a full-time charter. I now have a full-time charter, a roll-on roll-off type of ship that's like a big ferry, if you wish, so we can bring that equipment closer to the theatre of operations. We do the last leg with a tactical airlift directly into the Kandahar region. The way we do that is saving us millions and millions of dollars. As we do that, obviously there's equipment we want to repatriate back to Canada, especially the beyond-repair kit that they don't need any more, and we fly it back to that staging base very close to the theatre and sail it back to Canada. That's the most efficient way of doing business.
The business is extremely demanding, as I've mentioned. We have at least 16 strategic flights per month to support and sustain that mission, and every time it's a different path as we go there and have to get clearance or not. The C-17 has been a tremendous asset to help us out in that process, and it's giving us some autonomy. We use it. It is in the pipeline, and it has been a tremendous asset for us to support that mission and to support any other demands worldwide. For example, we had the cyclone in Burma, we had the earthquake in China, and we can use our own strategic airlift or we can contract it out.
Even though we will have at full operating capability four C-17s, this will only represent about 40% of the job that I do on a daily basis--only 40%. We will always rely on other strategic airlift and sealift means, because it gives you a lot of flexibility as you move around the world to do the job. So it is complementary and it is giving us, really, the autonomy that we need.
If Canada could afford five, six, or eight C-17s, that would be great and fantastic, because it would give us that much more autonomy. But look at the United States. It has close to 200 C-17s. And even though they have 200, they still rely heavily on strategic commercial airlift through the Antonov IL-76 type of platform.
It is a complex business, and having the two tools helps you out, because in some instances a country will say no to a military aircraft but will say yes to an Antonov. That gives us tremendous flexibility to go anywhere in the world.