PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, October 23, 2001

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[English]

The Chair (Mr. John Williams (St. Albert, Canadian Alliance)): Good afternoon, all. Today, we're here pursuant to Standing Order 108(3)(e), for consideration of chapter 31 of the December 2000 Report of the Auditor General of Canada, on Fisheries and Oceans fleet management.

Our witnesses today are from the Office of the Auditor General of Canada. Mr. Michael McLaughlin is the Auditor General's deputy for corporate services; Mr. John O'Brien is principal of the Audit Operations Branch; and Mr. Kevin Potter is director of the Audit Operations Branch. Also with us, from the Department of Fisheries and Oceans, are Mr. John Adams, the coast guard commissioner; Mr. Charles Gadula, the director general, fleet; and Mr. Bill Doering, executive director of the fleet management renewal initiative.

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As usual, we'll start with the opening statement from the Office of the Auditor General, and Mr. McLaughlin, please.

Mr. Michael J. McLaughlin (Deputy Auditor General, Corporate Services, Office of the Auditor General of Canada): Thank you, Mr. Chairman, for this opportunity to discuss chapter 31 of our December 2000 report. Joining me at the table today are John O'Brien and Kevin Potter, from our regional office in Halifax.

In chapter 31, we concluded that the department was not managing its fleet cost-effectively. This finding concerns us, because the fleet plays a major role in providing services that are important to many Canadians. These services include aids to navigation, ice breaking, marine search and rescue, and marine environmental response. The fleet also supports the department in conducting science and enforcement activities.

The fleet represents a significant portion of the department's ongoing operational costs. In 1999-2000, the department spent about $229 million on operations, maintenance, and capital replacement of the fleet. In addition, it spent an estimated $52 million on shore-based support. Our audit focused on the 47 large vessels that operated during the 1999-2000 and regularly incur between 70% and 80% of the operating cost of the fleet.

Our report focused on three areas: organization and accountability; vessel life cycle management; and human resource management. I would like to highlight our main concerns in these areas.

The fleet is not a stand-alone organization in the department. Reporting relationships are complex. There are many players at headquarters and in the regions, both in the fleet that provides services and in the programs that use these services. These players influence decisions on the department's fleet activities.

We found that important elements that could make these organizational relationships work effectively were either weak or were missing altogether. For instance, program performance expectations for the fleet were short-term, unclear, or unrealistic. The funding horizon was for only one year, even though the fleet is a capital-intensive activity with high fixed costs. It was difficult to determine how amounts budgeted for the fleet were actually used in the regions. There was inadequate information to monitor and account for fleet performance. The method of allocating costs to programs discouraged vessel use. In the end, it was difficult to see how anyone in the department could be held accountable for the cost-effective delivery of the fleet service.

[Translation]

I would now like to highlight our concerns about life cycle management. Essentially, life cycle management is intended to manage the total cost of ownership of an asset over its lifetime. In 1995, the government required that all departments manage their materiel resources, including vessels, by using a life cycle approach.

We found that the department did not have a formal life cycle approach for vessels in place. In the absence of such an approach, we examined how the fleet managed key stages in the life of a vessel.

Our findings include the following: there was a wide variation in management and operating practices; the capital plan did not represent a realistic or true picture of the fleet's long term needs; there was no national system to regularly monitor the efficiency and economy of vessel use or to determine the results achieved; the fleet operated without timely, reliable and integrated information; there was a need for a national approach to vessel maintenance.

Finally, I would like to discuss our concerns about the management of the fleet human resources. People are the single largest operating expense of the fleet, representing about 79% of the operating costs attributed to programs.

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Our key findings revealed a lack of management focus on human resources: there was no human resource plan; there were variations in human resource practices among the regions; the implementation of collective agreements, when combined with the way in which funding is provided to the regions, constrained management's ability to operate cost-effectively; payroll costs were not regularly monitored; the existing shore-based support was too large, given the size of the fleet.

[English]

Mr. Chairman, we are pleased the department has committed itself to developing an action plan, with concrete timelines and accountabilities in seven areas. We believe these seven areas encompass the concerns we have raised. While we are pleased by the department's positive response, we have not yet seen a detailed action plan a year after the audit was completed. I encourage the committee to seek assurances from the department that this plan will address our concerns in a timely manner.

Mr. Chairman, while we concluded that the fleet was not managed cost-effectively, correcting this problem may not result in major savings. In fact, the fleet was not meeting important program requirements. Therefore, I believe our recommendations will help the department to address the shortfalls of its programs and improve service to Canadians.

Mr. Chairman, this concludes my opening statement. My colleagues and I would be happy to answer any questions from your committee.

The Chair: Thank you, Mr. McLaughlin.

We'll now turn to Mr. Adams, for a response or an opening statement from the department.

Mr. John Adams (Commissioner, Canadian Coast Guard, Department of Fisheries and Oceans): Thank you, Mr. Chair. I appreciate the opportunity to provide you with an update on how the department is responding to chapter 31 of the Auditor General's report. Before turning to the specifics of how CCG is addressing each of the concerns expressed in the report, though, I'd like to briefly provide some context.

There is no question that the audit caught the CCG not by surprise, but certainly in transition. It's fair to say this transition is taking longer than was originally envisaged. In hindsight, though, that's really not surprising, given the number and severity of changes the CCG had to contend with from the mid-1990s onward.

Program review was a difficult endeavour for all federal government departments, and the CCG was no exception. Adding to the challenge for us was the CCG's concurrent merger with the Department of Fisheries and Oceans. This brought with it, as just one element of a very intricate puzzle, the complexities of bringing together Canada's two largest civilian fleets. This marriage of two vastly different cultures, with different approaches to doing business, different management models, different technologies, etc., was not an easy one.

Complicating the mix was the introduction of a new approach to doing business with our clients, with the introduction of cost recovery and all of its machinery. At the same time, the organization was rationalizing properties and services. It is important to note that during the same time period, the CCG dramatically reduced its fleet, by means of a number of initiatives, from 189 to 108 vessels.

Even as we are taking steps to address the shortcomings identified in the report, new challenges are emerging as even greater demands are placed on our asset base. Most notably, the events of September 11 are proving to have a significant impact on the coast guard. We are working diligently with Transport Canada—the federal government's lead agency for marine security—and other federal government departments in developing a legislative and compliance program, in order to increase the safety of the marine transportation system and to provide a visible government presence on Canadian waters. For the fleet, the immediate impact is an increase in the availability of operational ship days and aircraft hours for coast guard units. But while this is vital work that we are doing, it will place additional strain on our aging fleet.

It must be said that the report's findings that the fleet is undercapitalized was not news to us. Based on a renewal rate of only 4% for the asset base, the coast guard should be investing between $140 and $150 million in capital funding into our infrastructure each year, obviously including our fleet. Our budget over the last ten years or so has been in the order of $30 million to $40 million. That's one of the reasons why we brought in the integrated technical services concept to institute life cycle material management, in order to modernize our asset management practices and to help to define our recapitalization needs.

Turning now to the specifics of the report, the CCG examined the fourteen or fifteen deficiencies identified within chapter 31, and as the Auditor General has pointed out, the coast guard has developed a seven-part action plan to deal with them. To address deficiencies in fleet management support, we are instituting the aforementioned life cycle material management and we're developing long-term capital plans.

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With respect to issues surrounding fleet performance management and costing systems, work is under way to improve the integration of our information systems to resolve interfacing or linkages between the coast guard's MariTime system, the departmental salary management information system, and People Soft, which is from the human resources side of the business. We are also instituting performance measures and developing a pricing-costing model that will include risk management and pricing-costing options. It will also detail how to realistically price fleet services, as well as funding models that address how to finance the fleet.

To improve both fleet operational requirements and planning, and vessel resource utilization and redeployment, the CCG is drafting a multi-year planning framework and a strategic plan for operational and service requirements. These will look at types and levels of service, and mix and location of vessels.

To respond to the need for stabilized program demands and a clear articulation of the shared responsibility of clients and fleet management, a service accord template has been developed. A service accord for Marshall-related activities has already been implemented. Similar agreements for conservation and protection, science support, navigational systems, environmental response, ice breaking, and search and rescue, will be developed and implemented over the next three to six months.

Phase one of the development of a national concept of operations for the fleet includes defining obligations and priorities, practices and procedures, a concept of operational readiness, a base fleet approach, implementation of International Safety Management Code standards—or ISM standards—and multi-tasking and pricing. It is now complete.

For fleet human resource allocation and vessel crewing, we are developing a human resource strategy to deal with issues such as managing sick leave, models for shore support, recruitment, retention and training, and simplifying collective agreements. Already, the number of staffing actions has increased and the number of term—and I have to correct this—positions has been reduced, but the number of acting positions has gone up because many of the terms have gone into positions and actors have now come in. It's a never-ending battle, but we will eventually address all of it. Standardization of position descriptions nationally is underway, and national guidelines for consistent interpretation and administration of collective agreements on Intranet are being developed. To address management roles, relationships, and interfaces, we are developing a fleet management framework document, an updated accountability structure, and integration in business plans.

That's a brief overview of some of the many initiatives the CCG has undertaken. Simply put, we are adopting better ways of doing business in order to better manage the gap between available and required resources and desired results. We are doing this in consultation with programs, with our policy and corporate services groups, and with other government departments. The need for action is urgent and well recognized. Demand continues to exceed supply, with program demands for ships being much greater than what our fleet resources can accommodate.

That, ladies and gentlemen, ends the overview portion of my presentation.

The Chair: Thank you very much, Mr. Adams.

Before we go to questions, I note that you say you have developed a seven-part action plan to deal with the fourteen or fifteen deficiencies identified by the Auditor General. Are you in a position to table that plan with the public accounts committee?

Mr. John Adams: We are, yes, this afternoon.

The Chair: Okay, I appreciate that. You can deliver it to the clerk.

Mr. John Adams: I certainly will.

The Chair: Mr. Kenney, for eight minutes please.

Mr. Jason Kenney (Calgary Southeast, Canadian Alliance): Thank you, Mr. Chairman.

Welcome to the committee, and thank you for your appearance here. I have some general questions.

At least a couple of colleagues here are normally members of the finance committee, and they probably aren't terribly well informed about the operations and business of the coast guard. I wonder if Mr. Adams or any of his colleagues could give us a brief overview of the core business of the coast guard.

I ask this next question with particular reference to your statement that “the events of September 11 are proving to have a significant impact”. Could you tell us how your business has been affected by September 11 and the new security demands in this environment?

Mr. John Adams: Let me start, and Charles can jump in to help.

First of all, to talk about what the coast guard is, we are essentially responsible for safe waterways that are environmentally and responsibly used. We deliver on that mandate essentially through five business lines, which I'll just run through, giving a rough order of magnitude of the amount of money that is involved in each of them.

The first and largest is rescue, safety, and environmental response—and environmental response is essentially our response to environmental spills. This line is a protocol that exists between ourselves and the private sector, and it has a price tag of about a $93 million per year.

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The second and second-largest business line is that of marine navigational aids, if you will. Those are aids to navigation and marine navigational services—or MNS, as we will refer to it. This line carries an $89 million per year price tag, and it includes all aids to navigation, everything from floating aids through to fixed light stations, and anything else related to navigation on the waterways.

The third is the one Charles is responsible for, and that's the management of the fleet itself. That has about a $48 million per year price tag. That fleet obviously responds to program needs, and, as the Auditor General has pointed out, the program needs include coast guard programs, fish management, conservation and protection, science, and aid to any other government department. Occasionally, we will also help the RCMP, Immigration, etc.

The fourth one is Marine Communications and Traffic Services, which is just exactly as the name implies. If you will, it's a little bit like NAV CANADA, but for maritime traffic, and it has a $42 million per year price tag.

Finally, there's ice breaking, which we do in the summertime up in the Northwest Passage, and in the wintertime in the St. Lawrence in order to accommodate commercial exploitation of the river as far up as Montreal during the winter. We also do some ice breaking in the Great Lakes. The ice breaking is done for commercial traffic and for flood control, and it costs $54 million per year.

Just to give you a little bit of a taste of how much work we do for fleet management, conservation and protection, and in support of science, fleet management runs about $12 million a year. That's primarily vessel support or platform support. Science is about $21 million a year, again for platform support.

So in round figures, that's the coast guard activity chart.

As far as September 11 and its aftermath are concerned, the first thing we had to do was increase the security on our vessels, and that obviously has had an impact. We have had to increase our watches and we have had to introduce a little bit of electronic surveillance and that sort of thing. It's not a big issue, but it's certainly an issue that is important to us.

Over an above that, what we have been focusing on at this stage is primarily staff action. What we're proposing at this stage is still only a proposal. It has not been considered by the ad hoc group of ministers responsible for anti-terrorism and public safety as of yet. That will happen this week or next.

Of the 108 vessels that we have, many of those vessels—and particularly the offshore vessels—operate on what we call a lay-day system. They're on for 28 days and off for 28 days off. We can't afford to maximize the availability of that vessel time, because if you take a year and divide it into 28-day chunks, you'll get thirteen chunks or periods. We actually work our vessels for only ten of those periods on average. We have two periods of downtime, and one period for maintenance. The two periods of downtime are there because we can't afford to maximize the utilization rate of the vessels, so we have to put them alongside for two months. On average, those two months will give us 1700 additional ship days for water presence should the government want to increase the presence of coast guard units on the water near ports and harbours, etc.

The other area we're looking at—and we have already instituted a change in this regard—is marine communications and traffic services. We normally request a 24-hour notice from ships entering Canadian waters. We have now pushed that out to 96 hours. Primarily, that gives us additional warning time, and by using information from the questions we pose to each of the ships, it gives us more time to decide whether or not we want to take any special actions with regard to those vessels.

The other thing we're doing is revising the questions we ask of all ships entering Canadian waters, in order that we get information that we would then share with other agencies within the government, including CSIS, the Canadian Security Intelligence Service, the RCMP, Immigration, or the Canada Customs and Revenue Agency. We would ask questions that would assist them with respect to what they might want done with those vessels.

There's also another thing that we would do with MCTS. We're proposing to make the reporting of entry into our waters mandatory in all cases for all vessels, not in some cases for some vessels. That again is merely a proposal, as all of these things would impact on us.

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The other thing that concerns us is that we only know of vessels in our waters essentially if they want us to know. They tell us. We have no capability of monitoring our waters. Our radar does not go out that far, and there simply isn't constant overflight to enable us to do that monitoring. What we would like to do is move forward more quickly—because we've been looking at moving into this area of high technology—into an automated identification system.

Now, I'm taking up your time, so I'll stop here.

But we are looking to speed up the introduction of AIS—the automated information system—in order that we would have positive control of all vessels destined for our waters and in our waters.

Mr. Jason Kenney: I'll just briefly follow up on that, because I think there's a question that lay people probably ask themselves in respect of September 11 and the coast guard. You say you sometimes work with the RCMP or with Immigration. If a ship is inbound to our coast with contraband or with illegals trying to gain entry into the country, is your primary responsibility to detect this incoming vessel and to notify police authorities? Do your officers have any police authority to arrest a vessel like that, or to arrest the people on board? How do you exercise those kinds of police functions in guarding our coastal perimeter?

Mr. John Adams: As MCTS, if we get information that would lead one to suspect that there's contraband or something untoward on that vessel, it's our responsibility to inform the RCMP at that stage. We have no enforcement responsibilities within the coast guard at all.

The Chair: Thank you, Mr. Kenney.

Mr. Murphy, for eight minutes please.

Mr. Shawn Murphy (Hillsborough, Lib.): Thank you very much, Mr. Chairman.

My first question is to you, Mr. Adams. I just want to develop the point that has been made in the report that there doesn't appear to be any standardization amongst the five regions. Each region operates with its own practices, its own procedures, its own policies. It would seem to me—and I believe the Auditor General has confirmed this—that it would be better if one best-practices regime were developed, if the system was standardized. My question to you is, who in the department is responsible for implementing that change?

Mr. John Adams: The deputy minister.

Mr. Shawn Murphy: Is he aware of that?

Mr. John Adams: He is.

What we're in the process of doing...and frankly, I welcome your question and I welcome the Auditor General's observations. I personally do not believe the management model we are attempting to live with within the department is necessarily the best, optimum model for a line organization, for a national institution the likes of the coast guard. That does not mean it can't be made to work. We are improving the systems that will enable us to live within the management model we have today, in a far more effective way than we have until now.

Part of our mandate—it's one the deputy minister wants us to respond to; he wants us to give him a recommendation on it—is to determine just what is the best way to manage the national institution called the Canadian Coast Guard. It addresses the very issue of whether it should be run from the centre, and whether those five regions should report directly to the line manager, who in this case would be me, the Commissioner of the Canadian Coast Guard.

Mr. Shawn Murphy: My second question, sir, again coming back to you, is on this whole area of human resources. It has been reported in the Auditor General's report that there are a lot of seasonal, casual employees being used right through the system. This has been borne out with my own experience.

I have a small coast guard detachment in my riding in Charlottetown, Prince Edward Island. I should tell you that morale is low. As far as I can see—and I'm not an expert—there is very weak management. Everyone answers to somebody in Dartmouth, and there's nobody in charge at the operation, at least not that I can see. When you see this many term and seasonal employees, it raises the spectrum of patronage—not political patronage, but bureaucratic patronage. This seems to be the case, because you see people in there with very little experience. They have some training, but very little training. There doesn't seem to be any strategy in terms of hiring qualified people. From your experience and from going over the reports, are you concerned about bureaucratic patronage seeping into the entire system in the maritime region?

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Mr. John Adams: I certainly am, and I have essentially put my life on the line and have said I will not be satisfied until we get that addressed. Frankly, I am appalled at the number of term employees, and I'm appalled at the number of acting employees. Those numbers are unacceptable. I'm also appalled at the lack of what I refer to as command and control within some of the satellite sites. You mentioned only one of them, but there are more that are very similar to it.

We will get it corrected, but I can't do that alone. In that regard, the deputy minister has charged our ADM responsible for human resources to work with this, because he wants this issue resolved. So we will attack the question of terms and we will attack the question of actings.

I just mentioned that we have reduced the number of terms. I won't be satisfied until we've reduced it probably by a factor of 90%. But we are reducing the terms, and we will address the actings.

Part of what will help us, we hope, is moving with this quickly, because we have an accumulation of probably five to six years of inaction on the human resources side of the coast guard, so we consequently have a fair backlog of work to be done. We're hoping the Ranald Quail task force review of human resources may identify some changes that will enable us to expedite the work in that regard. But we are committed to it, yes.

Mr. Shawn Murphy: My last point, getting back to you, Mr. Adams, is on the whole area of communications. I would invite your comment on this issue. I believe the stakeholders—I'm talking about the employees of the coast guard, the fishing industry, and the marine transportation industry—are owed a statement by the coast guard on just exactly where you're going, where you see the coast guard headed, where you'll be in five years, and what services you will be offering. I know there are new technologies coming down the pipeline in terms of navigational aids. Where will those be? As a member of Parliament, I'd like to see a very clear statement from the coast guard on where you're heading and when you will get there.

Mr. John Adams: You'd almost think I planted these questions, because we are working on what we're referring to as Vision 2020 right now, frankly, and there is some new terminology in town. It used to be called A-BASE review, but it's now called departmental assessment. We're working with Treasury Board and Finance to define what the coast guard is today and what we see it being in 2020, and to identify the gaps in terms of getting from where we are today to where we want to be in 2020.

I don't think there's any question that we will be able to define where we are today. The issue is whether or not we can seek agreement on what we want to be in 2020. We now have that vision articulated. We have taken it through our policy committee departmentally, we will soon be shopping it around town interdepartmentally, and it would be our intent that it will be the vision we would share with all and sundry—obviously, members of Parliament are included—once we receive the go-ahead to put it on the street.

So we agree with you. We need to know that, and we will articulate it.

Mr. Shawn Murphy: I have one last comment, because I know I'm over my time.

You'll have to agree with me that 2020 is a long time away.

Mr. John Adams: Yes, it is.

Mr. Shawn Murphy: You may have to speed that up a bit.

Mr. John Adams: Well, 2020 is a long way away, but when you buy a ship, it's a 35-year vessel. You have to look ahead far enough. Right now, we're already at the point at which we need a significant injection of capital funds if we're going to renew our offshore fleet. That's a big decision that the government is going to have to make, and it's a decision that will have to be based on a vision that will justify such an expenditure. You have to go at least to 2020, because you're making it at least a 35-year vision. With a significant amount of work at the half-life of a vessel, you can stretch it out to greater than 35 years, so that's why we're looking at 2020.

Mr. Shawn Murphy: Thank you, Mr. Chairman.

The Chair: Thank you, Mr. Murphy.

Mr. Martin, please, for eight minutes.

Mr. Pat Martin (Winnipeg Centre, NDP): Thank you, Mr. Chair.

In reading the Auditor General's report, I actually find it quite harsh. It's quite firm in its observations. It actually says in the human resources section that even though 79% of operating costs are allocated to those programs, there was no human resources plan. That's a staggering thing to say for an organization of that size.

I'm also aware, though, that DFO is one of those areas most affected and impacted by the overall program review—and I do read that, even though they don't break out the number of jobs cut within DFO, they do flag it with an asterisk as one of those most affected.

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I'm curious to know how many bodies you lost during program review, and how many left for reasons other than attrition. Do you see that as the reason why this Auditor General's visit may have caught you off guard, perhaps with a lack of a human resources plan? Were you reeling with the impact of the cutbacks?

Mr. John Adams: Program review gave us a reduction of 30% in financial terms and a reduction of 40% in human terms. Combine those facts with the fact that we were moved from Transport, which had been our home—for how many years, Charles? I'm new, so I don't know—since the beginning, and were merged into Fisheries and Oceans, which was not a natural fit by any stretch of the imagination. Also add in the fact that our relationship with our clients was changed rather dramatically because we got into fee-for-service. When you combine those three things together, I would argue that we're lucky to have survived, frankly, let alone not having a human resources plan.

I'm not proud of not having a human resources plan, but we've been struggling with trying to pull a human resources plan together, and we will have a human resources plan as a result of this audit. They have given us a little bit of a kick in the pants, and we will move forward with a human resources plan, but it's not an easy plan.

What you have to remember is that I made reference to two quite different cultures when we brought the coast guard fleet together with the Fisheries and Oceans fleet. The Fisheries and Oceans fleet was very much a term operation, because you don't do science all winter and you don't really do very much conservation and protection during the winter. That fleet was very much a part-time fleet, with some of their employees being full-time seasonals, and many others being terms. Frankly, that's where a lot of the terms came from. It was from the amalgamation of the coast guard with the Fisheries and Oceans fleet.

I'm not criticizing Fisheries and Oceans over the way they ran it. That's the way they ran it, and it worked. But it's inconsistent with today's human resources management. If you want to advertise yourself as an employer of choice, the last thing you want to be is an employer of choice who says someone can work for you, but they can only work part-time. That doesn't work.

So we're trying to introduce those cultures and change those cultures. Frankly, that has also been a hindrance on top of the other difficulties that I've made reference to. But we are committed, and the deputy minister has decreed that we will see those terms reduced significantly.

Some of our terms...for example, if you go on the Louis S. St. Laurent, which is our largest icebreaker and the largest vessel in the fleet, you will meet people who have been on the Louis S. St. Laurent in a term capacity for greater than ten years. If they're terms for ten years, are they really terms? They're really indeterminates, so you could say to make them all indeterminates. There are a multitude of problems with that—and I won't get into them—but the deputy is very close to doing so, and so am I. We will simply make them indeterminates and figure out how we're going to live with that. That would be a little bit of a knee-jerk reaction and it might be a little irresponsible, so we're going to look at some of the ramifications of doing it, but we will address it and we will have a human resources plan.

Mr. Pat Martin: Do I have any time left?

The Chair: You certainly do. You have another three and a half minutes.

Mr. Pat Martin: Good heavens, that's a luxury.

My second question would be about the undercapitalization of the fleet. It's your feeling that to get a renewal rate based at 4%, which is not a very high turnover, you'd have to be spending $140 million to $150 million every twenty years, which you are not doing. Is that correct?

Mr. John Adams: Correct.

Mr. Pat Martin: You're spending about one-third of that, so you're talking about a sixty-year renewal of the fleet. I'm wondering what it would take or what motivation we could give the federal government to allocate a sufficient amount of funding to invest at that 4% rate. I don't see it as excessive, really, given that $150 million these days is less than one week's surplus of the EI fund alone—and that's per week, never mind per year. It doesn't seem like a staggering amount of money if there has been a renewed interest in the work the coast guard does since September 11. What would you recommend to us to compel government to give you the funding you need?

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Mr. John Adams: What we really need is an affirmation of the principle that there is a place for a civilian government fleet. If you want a civilian government fleet, you have to pay a price for it.

Now, having said that, people will ask us where else there is a civilian government fleet. The United States of America has the U.S. Coast Guard, which is similar to ours except that they bear arms—we do not bear arms—and they have other responsibilities that we don't have. But if you go to Australia, they don't have a civilian fleet the like of ours—

Mr. Pat Martin: Is it military? Is that what they—

Mr. John Adams: For offshore, they rely on the military. For the inshore, they rely on an equivalent to the Royal National Life-boat Institution, which is a voluntary...I guess it's the Royal Life Saving Society Australia. They have a different approach than we do, as does the U.K. So if you look around, there is no single model, no single answer.

Is there a right answer? Frankly, our position is that Canada is Canada, and we have our answer. We think what we do is the right thing, so what we're attempting to do with Vision 2020 is seek a reaffirmation that there is a belief in a civilian government fleet. We're going to conclude that if there is, we need a significant injection of capital soon. We're at the stage now—and I'll give you a figure—where we're thinking that we need, in round figures, $350 million to $400 million in order that we can introduce a new series of offshore vessels to replace the most seriously aged vessels currently in our fleet. Then, if we follow that up with a regular allocation of capital money, we can renew and reinvigorate our fleet.

Now, in fairness to the government, they have supported a complete renewal of our inshore vessels, of our lifeboats. We have 54-footers that are Heron-class vessels—that's a British design—and we have 47-footers adapted from a U.S. design. Within the next five years, we will replace all of our inshore vessels with those new vessels. The inshore fleet will be in great shape, but the offshore fleet is another matter.

The Chair: Thank you very much, Mr. Martin.

Before we go to the second round, I just have a question, Mr. Adams. You mentioned in your opening statement that you don't really know vessels are entering our waters unless they voluntarily tell us they are doing so, even though you do say they have to give you 96 hours, which is up from 48 hours. Well, when the Ukrainians shot down that airliner over the Black Sea, within about three hours, the Americans announced that it had in fact been shot down by a missile. Since September 11, we have had this great concern about protecting our borders and about people coming ashore or into Canada illegally and so on, yet you're telling us that you just don't have a clue. If somebody wants to come here unannounced from across the ocean, you wouldn't know about it.

Mr. John Adams: That's a fact.

The Chair: Okay.

Mr. Kenney, four minutes.

Mr. Jason Kenney: I just want to pursue that.

You mentioned that the U.S has a civilian fleet that's armed and has other powers. What sorts of powers do they have, very briefly? Would they be more aligned toward securing their continental perimeter, for instance?

Mr. John Adams: I don't think Admiral James Loy would contradict me if I characterized them as the fifth armed force of the United States of America. They truly are an armed force. They have been in every war in which the United States has ever been engaged. When war comes, they're cut over to the Department of Defense, although they normally are with Transportation.

Mr. Jason Kenney: Do they have what you referred to as AIS, the automated—

Mr. John Adams: No, not yet, but they would want it for the same reason we would want it: for positive control of vessels in our waters.

Mr. Jason Kenney: I'm asking these questions, of course, because the North American security perimeter is becoming a very live issue. Obviously, coastal perimeter is very much a part of that.

If an inbound vessel with contraband or illegal aliens was headed into the United States, would they not have more advanced technology and equipment to detect and deter such a vessel than we would have in Canada?

Mr. Charles Gadula (Director General, Fleet Directorate, Department of Fisheries and Oceans): When we look at it in this context, most of the intelligence gathering is probably done at the port of departure. That information is shared between security and intelligence services that gather it, and it is then forwarded through international networks, both to the United States and ourselves.

In the past, for example, when we had immigrants landing in Pugwash, Nova Scotia, we were notified and the coast guard did a joint operation with the RCMP. We do a fair number of what we would call “black” operations in direct partnership with the RCMP or with the Department of National Defence or police forces.

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It's international intelligence that gathers some of that information. In both cases, for ships coming toward both countries, not every vessel—dependant on size—necessarily has to report in. One of the things the commissioner mentioned earlier was that if we looked at a perimeter around North America, we would want to establish regulations stating that any vessel entering our waters must report in, whether you make them do so at the 200-mile limit or the 12-mile limit. As they reported in, we would then start to track them. In the areas where we have radar coverage, we'd be able to pick them up. If you then built into that something like an AIS, you would have an automatic tracking of that particular vessel, so it would help with the situation.

Mr. Jason Kenney: The Americans, of course, have the Drug Enforcement Administration, which is watching everything—on the southern perimeter, anyway—in their waters. They have the Defense Intelligence Agency, with enormous satellite coverage, etc., which we don't have.

In regard to this $350 million to $400 million that you spoke of to replace the offshore vessels, what period of time would the coast guard reasonably need or take for that kind of program to be implemented? Over how many years would you spread that kind of expenditure if it were authorized?

Mr. Charles Gadula: It would be similar to something we did in the mid-1980s with the SRCPP program. That was when we built the last series of 1200s and 1100s. That program was phased in over about a five-year period at that time.

When we look at the offshore capability, it's interesting to note that Canada's ice breaking capability lies within the coast guard. There's none in the navy. So when we look at establishing a visible coast guard presence in the high Arctic or out at sea in the ice-covered waters off the east coast, it's the coast guard that's there. If you wanted that five-year horizon, the vessels that we're talking about would be ones like the large icebreakers, or the 1200s; the 1100s, or the medium icebreakers; and the 1000 class, which has some ice capability but would be used in areas like the Great Lakes, the St. Lawrence River, and so on.

Mr. John Adams: Or for harbour breakouts in Newfoundland.

Mr. Jason Kenney: I think you have an unusually attentive audience amongst policy-makers now because of September 11, in terms of whatever perimeter function the coast guard can employ. I suspect there will be great interest amongst policy-makers in looking at improving your resources to the extent that this assists in deterring and interdicting inbound contraband and illegal aliens. Most of what you're talking about in terms of fleet expansion or replacement is Arctic ice cutters, which really don't play into that role, if I'm not mistaken.

Mr. Charles Gadula: If I may provide some clarification, what we have are 108 vessels currently, and 27 aircraft. Of that 108, our Arctic deployment is five icebreakers. When we look at the east coast of Canada, all around Newfoundland, the Labrador coast, the approaches to Belle Isle, and anything you go down except for the ice-free Port of Halifax, you need an ice-breaking capability in the winter time, so there's a fair amount there. For western approaches and the western Arctic, we've had cases in the past in which, unknown to us, a ship has put passengers ashore to Canada in the remote Arctic. When these particular immigrants showed up at the local RCMP office, that's when we knew they were there. So when you look at reporting in and those kinds of infrastructures, I think that's kind of important.

The other part of the coast guard that we have in addition to the fleet is a significant amount of shore personnel and infrastructure, like bases, operations centres, and communications centres. A couple of examples would be Inuvik and Iqaluit.

The Chair: Thank you very much, Mr. Kenney.

Mr. Shepherd, please, for four minutes.

Mr. Alex Shepherd (Durham, Lib.): Getting off of the security envelope for a minute, prior to September 11, our preoccupation was safety. My brief introduction to the coast guard came through doing a tour of one of your ships in Cape Breton. The captain informed me he couldn't afford to go to sea. You have just indicated that you have reduced the fleet by 42%, yet still it's not being heavily utilized. You're using a half-year off-and-on. I'm not quite sure what that means, but presumably....

The ultimate question is whether these financial deterrents are creating a situation in which these vessels can't effectively engage in search and rescue operations, or whether you are making choices between replacing buoys and so forth in navigation channels when they need to be replaced. Are these things the outcome of some of our financial decisions?

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Mr. John Adams: We do risk-manage, but we do not compromise on search and rescue. We have a search and rescue protocol that is second to none in the world, and we do not prejudice that. Now, we don't always get the buoys out of the water as soon as we would like to before the ice comes in, and we don't always get them back in the water as soon as we'd like to when the ice goes out, but we do then put notices to shipping out to shippers to indicate that we haven't got them out. So some compromises are made as a result of the lack of funding, yes.

When you say we don't operate our vessels, you're right. On average, we operate our vessels for only ten of the thirteen available work cycles. That's on average. Some vessels, like the Louis S. St. Laurent, for example, the large icebreaker...once the Louis S. St. Laurent has comes out of the Arctic in each of the last three years, it has stayed in Dartmouth. It has not been called into service, because we haven't needed it to break ice in the Gulf of St. Lawrence, around Newfoundland, or in the river. So the Louis S. St. Laurent sits there for six months, but some of the other vessels are out for longer. On average, though, it's ten-two-one. In other words, they're out for ten work cycles, with two alongside and one in maintenance.

So that's the average, and, yes, we do have to compromise programs at times, but never search and rescue.

Mr. Alex Shepherd: You touched on the issue of cost recovery. This is an aspect that is bothering a lot of people with commercial interests and so forth. We've certainly heard a lot of complaints from commercial carriers either that they don't need these services they have been charged for, or that they're prohibitively costly when compared to what they would be if they were done by the private sector. You were just telling me you don't have the maximum utilization of your equipment. I don't know to what extent that inefficiency has been carried on inside your cost-recovery program.

Mr. John Adams: If you ask the private sector, they will tell you plenty. But I don't always agree with the private sector. If they're so good, how come they're having so many problems? That's what I often ask them. Frankly, it's interesting how the worm turns. Before they were paying for services, we couldn't do enough for them. Now that they're paying for them, they don't want us to do anything for them. Frankly, we will not compromise on safety, and what I've said to them is that we have to work together because we're part of the same business. But there is a limit beyond which we cannot go with respect to safety.

If you ask a captain how much he needs in the way of aids to navigation, he'll give you a number. Let's say it's ten. If you ask the pilot, he'll probably tell you eleven would be better. If you ask the owner, he'll say zero, because that costs nothing. Frankly, that's always the problem when they're working on the bottom line. And our industry today is in trouble, there's no doubt about it. The marine sector of our economy is in trouble. The carriage capacity is not being maximized. We know, because our fees are constantly below target, because ships are not carrying as much cargo as they have carried in the past, and that's hurting them. I won't dispute that. But we can't compromise safety.

I will agree with them that, frankly, we have been inefficient. We've worked very closely with them over the last three years to remove some of those inefficiencies, and we have succeeded. We will continue to work with them and we'll continue to strive to reduce inefficiencies, but we can't get to zero, which is where they would want us to be.

Mr. Alex Shepherd: When you say inefficiencies—

The Chair: Mr. Shepherd, I'm sorry, but I'm afraid your time has expired.

Before we move to Mr. Martin, I just want to ask you a question, Mr. Adams.

Mr. Alex Shepherd: Has your time expired?

The Chair: I don't have to wait. I'm trying to wrap this up by five o'clock, so I'm just interjecting periodically here.

Mr. Adams, you mentioned that you won't compromise safety, but I look at paragraph 31.35 of the AG's report, and it says:

Some vessels do not carry the search and rescue equipment specified as required. Some vessels do not have appropriately trained rescue specialists aboard. ...vessels are often tied to the wharf while they are in offshore search and rescue status.

Mr. John Adams: They don't need to be offshore to be...Charles, do you want to take that one?

Mr. Charles Gadula: Sure.

If we look at the offshore posture, it's really looking at the daily situation, having a look at where the risk is that day—is there fishing activity in particular zones?—and then deploying a particular ship to provide what we would call coverage. It's much like moving pieces in a chess game, because we don't have enough ships.

When we deal with the issue of having a ship without a trained rescue specialist capacity, that can happen—not frequently, but it can happen—and it can happen for a number of reasons. We have a multi-task fleet and we have some single-purpose SAR boats. Hopefully, if you deal with the single-purpose SAR boat—and here I'm talking about the 41-footer, the 44-footer, or the 52-footer—within the core component of that three- or four-crew, you'll have the rescue specialist makeup. When you move to the larger ships, on which our rescue specialists provide first aid services for the first 24 hours, sometimes you can't get that total skill mix within the complement, so there have been occasions when that skill mix hasn't existed.

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The Chair: Mr. Martin, for four minutes.

Mr. Pat Martin: I'd like to come back to the idea of the management challenge that you face in merging the two organizations together, also with the program review going on. You had a reduction of 30% in your fiscal budget and 40% in human resources over a period of four or five years. Would that have been the program review period?

Mr. John Adams: Three to four years.

Mr. Pat Martin: Given that I think it's going to be an easy sell, to answer your question that you put out about how we're going to convince government that we should have an established civilian coast guard, I think the value of it is self-evident as all the issues stemming from the New York disaster surface with Canadians.

How are we going to re-staff or staff up the cutbacks in order to put us back to where we were, at least? There's a saying in the public service unions that some cuts don't heal, that when you take that big a slice out of your management or human resources pie, it's not like flicking a light switch on and off when the funding returns. You can't just make it all right again. What part of your human resources plan is dedicated to filling those positions that were cut? I guess “recruitment” is the term I'm looking for.

Mr. John Adams: Retention and recruitment are a departmental challenge. In fact, the deputy has named one of the ADMs within the department as responsible for recruitment and retention for the entire department. We're just one aspect, because recruitment and retention, frankly, are challenges for the entire public service.

You're absolutely right. You don't turn the tap back on, particularly with mariners, because there is a worldwide shortage of—in round figures—20,000 mariner officers in the world today. Our people can find work in a nanosecond if they decide they want to leave.

Generally speaking, we don't lose that many people to the commercial sector. Why? Well, the business they do with us is fascinatingly interesting and challenging to mariners, because we take vessels where you shouldn't take vessels. Inevitably we have to go where dummies take vessels and get themselves into trouble. When you compare that to BC Ferries, which drive on fixed lines and when they blow, they don't sail, the mariners love it. As long as we treat them fairly—that is, compensate them properly—they generally don't leave, so we have not had phenomenal attrition.

I'll tell you how bad it was during program review. If you can believe it, we zero-loaded our coast guard college in Sydney. You never zero-load a training establishment. If you zero-load a training establishment, it's the kiss of death. You send no students there with zero-loading. What happens then, of course, is that it dies.

What we did was bring in foreign coast guard students in order to try to keep the institution alive and to make a few bucks. We brought in students from the United Arab Emirates, and we brought in Saudis and Kuwaitis. These are students who came into our coast guard college. We taught them and found them ship time on our ships, in order to make them mariners so they could go back home.

We did that for a number of reasons. We did it obviously to continue to breathe life into our Canadian Coast Guard College, but we also did it because we have a tremendous reputation throughout the world, including in the Middle East. They wanted Canadian-trained coasties to go back to man their coast guard equivalents.

We've done all of those things to try to move forward. We do have recruitment and retention as part of what Bill is looking at as part of the renewal initiative, because we do have to take special measures to address it. But we are re-staffing right now. We have Canadian cadets at the Canadian Coast Guard College, and we will get more there over time.

You can tell I enjoy this subject, because I'm monopolizing a lot of your time. I'm sorry.

The Chair: That's all right, Mr. Adams.

Mr. Kenney, for four minutes, please.

Mr. Jason Kenney: Thank you.

In your statement, you said the fleet has gone from 180-some vessels to 108. Did the 180 include the combined fleet of DFO and the coast guard?

Mr. John Adams: Yes.

Mr. Jason Kenney: What was the coast guard fleet pre-merger?

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Mr. John Adams: Do you remember, Charles?

Mr. Charles Gadula: I'm taking a guess, but I'd say about 160.

Mr. Jason Kenney: I see. The level now is substantially less. Of the current fleet, how many of those vessels were DFO, as opposed to coast guard ships?

Mr. John Adams: These would be the cutters.

Mr. Charles Gadula: I think the current ratio is that probably 20% were old DFO, while the rest were coast guard. It was really the state of the equipment, because when we looked at the multi-task capability, we tried to keep the best of both groups.

Mr. Jason Kenney: You gave us an estimate about the capital costs for replacing your offshore vessels, that being $350 million to $400 million. What would the incremental operational costs be on an annual budget-year basis? Have you made any estimate of that? Are you talking about bigger vessels or more vessels? Are you talking about more personnel?

Mr. Charles Gadula: No, I think we're talking about maybe a different mix in different geographical locations, but I think the mix is probably pretty good at the moment. It has a multi-mission capability in it, in that it meets the needs on the west coast, on the Fraser River, in the Arctic, in the St. Lawrence, on the Great Lakes. So the mix is okay. On average, our O and M, the operating costs to operate the fleet...the operating cost that I have for the fleet this year, excluding refit, is $155 billion.

Mr. Jason Kenney: What's the budget figure for the AIS?

Mr. Charles Gadula: There's an estimate in there. It's really a partnering arrangement between ourselves, private industry, the United States seaway, and the Canadian seaway. I think we're looking at an all-up cost of about $50 million, as an estimate.

Mr. Jason Kenney: That would do what again, exactly? Give us the pitch here.

Mr. John Adams: You have ground-based stations that receive...it's a satellite-based system. They have transponders on the vessels. It's as simple as that. The transponders go through and come down to the receiving, ground-based station in your country. It's nothing more—

Mr. Jason Kenney: And the Americans haven't done this yet?

Mr. John Adams: No, and that's because it's satellite-based, and clearly there's a fair demand for satellite time now. Secondly, they want it to be international, because it's being driven to International Maritime Organization standards, out of London. Frankly, it's not inexpensive, but technology is now at the stage at which this can be delivered.

I very seldom contradict you, Charles, but I want to be sure we got those numbers right. Do you have the numbers there?

Mr. Charles Gadula: Yes, I have the numbers here.

Mr. John Adams: This is on AIS.

Mr. Charles Gadula: We're probably talking about a couple of different things here, meaning what the coast guard proportion would be and what the all-up systems would cost.

When we look at now trying to put it in place in accordance with international standards, the capital cost for a complete system and harmonization with the U.S. is about $30 million, but you have to break that down into a number of years and the proportion that the federal government would kick in, because the industry itself is involved as well.

Mr. Jason Kenney: Can you make a compelling case that the AIS, plus your $350-million new capital fleet budget, would enhance Canada's coastal perimeter security in a significant way?

Mr. John Adams: We certainly believe that. We're working at putting that pitch together, because we have to now go before the ad hoc committee and explain what we can do to enhance that perimeter for security purposes.

Mr. Jason Kenney: You talked about the need to make a case for a civilian government fleet. Would our coastal borders, our coastal perimeter, be more secure if the nature of the coast guard were altered somewhat, if your officers were given more peace officer powers and you were equipped with some form of armed vessels? Would that matter?

Mr. John Adams: The coast guard does not want to go there. The philosophy in this country is that it would be an escalated response. If you needed that, you would go to the armed forces.

The Chair: Thank you very much, Mr. Kenney.

I'm assuming, Mr. Adams, that your seven-point plan, which you are going to be tabling with the clerk, addresses all the concerns raised by the Auditor General. Am I correct?

Mr. John Adams: It will, yes.

The Chair: Okay.

In your opening statement, you said you are

adopting better ways of doing business to better manage the gap between available and required resources, and desired results.

There is a gap between your available resources and your required resources. How big is that gap in dollar terms?

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Mr. John Adams: Right now, the gap in our ability to provide fleet resources—that is, platform support to our programs—is about $14 million on an annual basis.

The Chair: You're only $14 million short of what you need to do the job properly?

Mr. John Adams: That's to survive at ten-two-one.

The Chair: Oh, no, that's not what I asked. To do what you are required to do and to achieve your desired results, in order for you to fulfill your mandate as a coast guard year-round, with vessels that are adequate for doing the job and with renewing them as required, what's the gap between what you get and what you need?

Mr. John Adams: Are you talking about O and M, capital, or both?

The Chair: If you have them both, give me both figures.

Mr. John Adams: For capital—and these are round figures, now—we're getting $100 million less than what we need in order to renew. And that's not just fleet, that's all of the coast guard's real property assets, including real property and fleet. We're about $100 million underfunded on an annual basis on capital.

On O and M, if we wanted to maximize the utilization of our fleet to twelve-and-one, versus ten-two-one, it would be somewhere in the neighbourhood of $45 million for the extra two. We're already $14 million short, so the round figure is $59 million on an annual basis.

The Chair: So it's about $60 million, which means you're $150 million to $160 million short of what you actually need to fulfill your mandate.

Mr. John Adams: That's what we think we need, yes.

The Chair: I think we've come to the end of our questions. We want to move into in camera in order to adopt some reports, but does anybody have any more questions?

Mr. Harb.

Mr. Mac Harb (Ottawa Centre, Lib.): I just think we should be very thankful to our witnesses for the wonderful job they are doing, notwithstanding the pressure on their resources.

The Chair: Thank you for that, Mr. Harb.

If there's nothing else, do you have some closing remarks, Mr. McLaughlin?

Mr. Michael McLaughlin: Thank you, Mr. Chair.

We're glad to see the coast guard is working away to correct the problems we identified in this audit. We certainly look forward to reviewing their detailed plans and to being able to comment on them in our normal processes of follow-up.

We're particularly concerned, as you've expressed, about the gap between the service expectation and the actual achievement. Certainly, we would like to see that kind of information being made available to Parliament.

As has been expressed, if anything, there will be more demands as a result of September 11. That makes dealing with our concerns rather more urgent at this point in time, so we would certainly want to encourage the coast guard to proceed with all due dispatch.

The Chair: Thank you very much.

The public part of this meeting is now adjourned.

[Proceedings continue in camera]