I've dug through the House of Commons Standing Committee on National Defence's records, and some general comments:
Febuary 6th 2007:
Hon. Denis Coderre (Bourassa, Lib.):
Thank you, Mr. Chairman.
When I see General Hillier seated next to General O'Connor, I can only wonder about what happened in the past months so that now we finally need C-17 aircraft.
I remember that I had taken a specific interest in this issue on several occasions. Obviously, we can criticize the previous government, but we had a $13 billion plan. We worked together with all our partners to make sure, as we all want to, that our troops get the best equipment.
Today, we heard that it is urgent to obtain C-17 aircraft and that Canada must come first.
[English]
General Hillier, you were on record saying that we didn't truly need this, and that what you were looking for at the beginning was only access to those planes. “Access” means also to lease them.
We spoke about DART. The problem with DART was not that we didn't have the equipment at that time. It was the political decision-making that has made it look as though we played with the timing a bit.
[Translation]
What happened, General Hillier, so that National Defence now wants C-17s? We know that NATO has already bought three of these aircraft, that we could have taken part in the agreement whereby you could have acquired these airplanes in 48 hours.
[English]
Now we're saying “Canada first”. Canada first means that you have to make sure we protect Canadian interests. Protecting Canadian interests—and my definition of “sovereignty”—means also that you are able to do your own maintenance of that equipment.
Now, with C-17s, because of the intellectual property, we won't have any access to it, and we'll have to invest a lot of money in Trenton to make sure that we provide even the first line of maintenance.
General O'Connor, why do we truly need those planes? The way I see it, I could have put the $3.4 billion into the condition of the troops, more trucks.... I don't see the rationale for it. Would you explain it to me?
Hon. Gordon O'Connor:
Yes, I will, and then General Hillier can answer his part.
You may not be aware, but the defence department has had a requirement for strategic lift going back more than a decade, but your government chose to suppress it.
Hon. Denis Coderre:
A requirement for access.
Hon. Gordon O'Connor:
We want our armed forces to be self-sufficient. We do not want to depend upon other governments or commercial enterprises to lift our forces in a strategic manner. If we go to other governments and are proposing to lift our forces to do something they don't appreciate or don't support, we won't get the support from them.
And when it comes to leasing commercial aircraft, essentially strategic airlift is under the control of the Russian government. We already know of incidents when the Russian government has refused the use of aircraft because they don't agree with its use.
The British, for example, eventually bought C-17s because they had trouble with the leased aircraft, because the Russian government refused to allow them to land where they wanted to land them.
We are not going to be hostage to any foreign government and are not going to be hostage to any foreign company. This country and its armed forces are going to be as self-reliant as can be.
If you look at our geography, we are surrounded by three oceans, and when we have to move anywhere, we have to move great distances. One of the problems we've had in the past is that we have been employing our tactical aircraft—our Hercules aircraft—as strategic aircraft, and we are burning up the hours. The reason we have the oldest Hercules aircraft on the planet is that we've been using our Hercules aircraft in a strategic lift mode.
Hon. Denis Coderre:
General, if I may, I understand—
Hon. Gordon O'Connor:
No—
Hon. Denis Coderre:
If I may, I understand about that, and that's why General Hillier wanted to have replacement Hercs, not C-17s.
The Chair:
Denis, let him finish.
Go ahead, Mr. Minister.
Hon. Gordon O'Connor:
Let me finish. We also are getting Hercules, if you recall. In fact, we're ordering 17. You wanted 16; we're ordering 17. So we're getting them both.
Hon. Denis Coderre:
So we don't need them.
Hon. Gordon O'Connor:
We're getting both strategic lift and tactical lift, because the Canadian Forces need both tactical and strategic lift.
Now I'll hand over to General Hillier, and he can answer his part.
The Chair:
General.
Gen R.J. Hillier (Chief of the Defence Staff, Department of National Defence):
Sir, the only thing I would say, in addition to what the minister has said, is that when you need strategic airlift, if you are leasing it or are getting a piece of the NATO pool or are trying to beg or borrow it from friends and allies, everybody else in a crisis all wants it at the same time, and it's very difficult to get. Your flexibility and ability to be successful in what a country decides to do with the armed forces is not guaranteed.
The second part is that the leased aircraft cannot carry everything we necessarily need to carry. A great case in point is the armoured and engineering construction vehicles we just put into Afghanistan—a fundamental part of the reconstruction piece in southern Kandahar, a fundamental part of building Route Summit, for example. You can't carry those in our C-130s; you cannot carry them in most of the leased aircraft. You can carry them in the big Antonovs, but then the third point becomes that those big Antonovs and other leased aircraft can't land in all the airfields where we are.
As an example, when we put those heavy engineering vehicles in, we had to carry them to an intermediate staging base on an Antonov, and then we had to borrow from friends the airlift to take them into Kandahar. As a result, we could not guarantee when we would get them.
So I would say, sir, to own versus to lease a portion of the strategic airlift gives you the flexibility and the agility at the start of a crisis, when people—perhaps in the worst days of their lives—need some help—
[Translation]
Hon. Denis Coderre:
General Hillier, I have only 10 minutes.
[English]
Gen R.J. Hillier:
—to be able to set up the divisions for success, that's our military—
[Translation]
Hon. Denis Coderre:
With all due respect for the armed forces and especially for you, I know that you said several times that you wanted to replace the Hercules aircraft.
I can see another problem: things are being done much too fast. You dealt with only one supplier. By supposing that only one company could meet the requirements, you lost some negotiating power. Boeing has the Conservative government over a barrel, and Canadian interests are at stake. I think that this is indecent.
In the light of certain documents and articles, instead of proceeding with an ACAN, we could easily have asked some other companies to submit their proposals regarding delivery dates, capacity and tonnage.
[English]
General O'Connor, you went to the Pentagon and met Secretary of Defence Robert Gates. We have a major issue called ITAR, International Traffic in Arms Regulations. You could have made an agreement with the Government of the United States. Why can't we have those kinds of statements under procurement to protect our Canadian citizens?
Hon. Gordon O'Connor:
First, it's not a matter for the Department of Defence; it's a matter for the Department of Foreign Affairs. ITARs are controlled by the Secretary of State, and the prime actor in this is the Minister of Foreign Affairs.
However, when I was in Washington, I did speak to Secretary Gates and asked him to give us all the support he could to encourage the State Department to make sure that our requirements are facilitated.
[Translation]
Hon. Denis Coderre:
Let me come back to the C-17s. My question is for General Hillier.
Is it not true that in the department, on a certain occasion, Colonel Burt said that there were no problems with requirements? For instance, we could have had Airbus rather than Boeing, because the issue was not about capacity, tonnage, and especially not delivery. Ultimately, we could have proceeded with an invitation to tender, which could have saved some money.
In fact, I see that this is not only costing us $3.4 billion, but that in addition, we gave maintenance away entirely to the Americans. Because of the ITAR regulations, our industry cannot make any profits from research and development.
Moreover, are we not at the mercy of others with regard to maintenance? In fact, we will not have any maintenance capacity, because the Americans will be taking advantage of the second and third capacity levels.
What has changed in the requirements to make you, and by you I mean the department, absolutely want to have these cumbersome aircraft? Once again, we could have reached an agreement with NATO, with our allies—they are not strangers—who purchased three of these aircraft. We do not need them on a daily basis. Among allies, we could have worked to further our interests.
[English]
The Chair:
We have time for a ten-second response.
Hon. Gordon O'Connor:
Mr. Chairman, we do need them every day. If we get into one of these pools with the allies, everybody wants them at the same time. We are a continent surrounded by three oceans, and we need strategic—
Ms. Dawn Black:
I also have some questions on the C-17 purchases or the contract that's been let out. It seems to me that we're paying $3.4 billion for this contract, and Canadian industry is not getting the full benefit for the maintenance of that contract. So Canadian industry is losing out on what has traditionally happened in these kinds of procurements.
I don't believe that the military is being assured of receiving the very best product available, when there's been no competitive process. In a competitive process, each of the suppliers would tell you, tell us, and tell the Canadian government about the capabilities of meeting the requirements, which you spoke about earlier, General Hillier, that the military sets. During the competitive process, the bidding companies would have the responsibility of proving that their product met those capabilities. So there's no competitive process going on here.
I have to wonder if part of the reason for going this route is an attempt to improve relationships with the U.S. Is that part of the thinking that went into the process? If so, aren't we putting the issue of Canadian sovereignty before the requirements and needs of the men and women in the Canadian Forces?
Also, look at how the contract for maintenance apparently will be carried out. It's my understanding that the maintenance will be carried out by the U.S. Air Force. I wonder then, if we were in a situation where American and Canadian planes needed maintenance and servicing at the same time, whose planes would get priority?
Hon. Gordon O'Connor:
With respect to the contracting side and the benefits, you'll have to talk to those ministers. They'll give you the details.
First, from my point of view, the Department of Defence doesn't declare whether or not it's a competitive process. That's done through Public Works. But from our point of view, an ACAN or an SIQ is a competitive process. Once the requirements are out there, anybody in the world can come forward with the product, and if they can prove that the product does it, there's a competition.
So it's just the sorting out; it depends upon the requirement. You send the requirement out. If a number of companies can answer that requirement, then basically you run a competition. If it happens that no other companies but one can meet the requirement, then that's the way it is.
I don't set the requirements; the military sets the requirements, and I literally don't interfere with the requirements. I do not change one number, one dot. These are requirements that go through a rigorous process in this and other departments, where military officers have to justify why the requirements are the way they are.
Once that requirement's accepted, basically it goes out to Public Works, which decides the process. Whenever a company is chosen, then Industry Canada gets involved with the industrial benefits.
The other point you made was whether there was there any thought of sort of catering to the United States. There wasn't. Our military and I don't care where the product comes from, as long as it meets the requirements and is the best choice at the cheapest price. It happens at the moment that the aircraft we're selecting for strategic lift is American. The tactical is American, and the helicopters are American. But who knows what truck—in fact, trucks, because there are two truck projects in there—we're going to end up with. And who's building the ship? We don't know yet. There are still two teams. They started running it down with four teams. We have no idea who's going to win it.
So from our point of view, it is a competitive process.
Ms. Dawn Black:
The requirements appear to have been set so that only one company was able to match those requirements exactly.
But the other question, I think—
Hon. Gordon O'Connor:
Madam, theoretically two to three companies could have met those requirements. They just had to show up with an airplane.
Mr. Russ Hiebert (South Surrey—White Rock—Cloverdale, CPC):
Thank you, Mr. Chair.
Mr. Minister, I think all members of this committee would agree that with our men and women in uniform putting their lives at risk, they deserve and need to have the best equipment to do their job. I want to thank you for the tremendous leadership you've been showing in this respect when rebuilding our military.
As you may be aware, the former ADM for materiel, Alan Williams, has published a book on procurement. I expect him to be coming before this committee at some time in the future. He states that during his time at the defence department and at Public Works, no minister ever attempted to influence the procurement process, because the process simply doesn't allow it.
We've heard, even today, some members of the opposition suggesting that there is opportunity for influence in the C-17 contract. Perhaps they don't fully understand the process. I was going to give you some more time to explain to the members of this committee how this decision is made by the military alone.
Hon. Gordon O'Connor:
I have my two major subordinates here with me, and you can ask them independently whether I've ever interfered with any of the requirements. You'll find that I never have. And I never will.
I'll let the DM carry on. He was explaining the process when he ran out of time.
Mr. Ward Elcock:
I'm not quite sure how much more you want me to explain, but I was just about to say that the other part of the process, which is industrial regional benefits, is the responsibility of the Department of Industry; they oversee that process.
Once all of that is approved, we go to contract, and it is the Department of Public Works.... We work with them, but they are the ultimate authority in the signing of the contract.
Hon. Gordon O'Connor:
All right.
One part that the military does get into is at the end. The military receives the product, they employ the aircraft or ship or truck or whatever it is, and they have to have a training system. That all has to be part of the process so that they can be effective.
Mr. Russ Hiebert:
In your presentation you talked about how the department is moving from a technical requirements specification to a performance-based specification. Could you briefly explain to us what the difference is between these two processes, and secondly, how the performance-based specifications make the acquisition of major military equipment more efficient and more timely, to the benefit of our men and women in uniform?
Hon. Gordon O'Connor:
I'll ask the chief to respond.
Gen R.J. Hillier:
Mr. Chair, ladies and gentlemen, when we started walking through specifications, what we would use in the past was detailed specifications for every conceivable part of a piece of equipment, in order to get something.
For example, for an aircraft, we said we need a wing so big, wheels so big, the aircraft had to be so long and have so many doors and do certain things—and all in great detail. In fact, in the Maritime helicopter project, for example, those specifications went to 17,000 pages.
We looked at that and asked why we were doing it. We were actually doing it to say that we needed an aircraft that could carry a certain size of load, by weight and capacity; could carry it at a certain speed, because you have a certain timeframe that you want to close; could carry it thus and thus far; and when it got there could land on a certain kind of airstrip—perhaps a rough, unprepared, short airstrip in the middle of the north of Canada, or in the middle of Afghanistan—and be able to unload the equipment without being dependent upon outside equipment that might not be on the ground. In short, it had to be self-contained.
We asked why we didn't actually just say that we need an aircraft to deliver this kind of weight, of a size that fits the major equipment we have or the normal containers that we have now and are developing for use of transport; that we need to carry it this far and this quickly and be able to do those things on the ground.
We decided that by far the best, the simplest, and the clearest process was to go out and say: “If you can do this, bring your aircraft. We don't care what kind it is. We actually don't care how big the wing is. We don't care about anything else, as long as it can do this.” Then we judge which is the best—the cheapest, or whatever—if more than one show up.
We think it is actually the right approach. Then you take the aircraft that wins, that says it can do this and do it most cheaply—or do it—and say, these are the specifications we want. It's so simple. We've gone through it for months and years and never gotten to that place, and we actually think this makes eminent common sense.
Mr. Russ Hiebert:
It certainly sounds as though it does.
When did the defence department start incorporating this approach?
Gen R.J. Hillier:
Sir, it was two years ago. A little while after I took over as Chief of Defence Staff—I believe Mr. Bachand was there—I spoke at the Canadian Defence Association and said we needed to do this, from our perspective, to meet our responsibilities to a minister of national defence.
This Minister of National Defence—like Mr. Graham before him, I will say—is most supportive of that, and we work well with our minister here to provide him exactly that. He then holds us accountable, saying: “Show me your line of logic here. What kinds of missions, what kinds of tasks are we asking you to do?” Obviously, with Mr. O'Connor's past experience, some of those things are very intuitive, but in other cases he peels right down to the level so that we show him our reasoning, our line of logic for why we said we need to be able to land on an airstrip that's 3,000 feet long and is not paved and is in an area where there is some air threat. He holds us accountable to clearly lay out that line of logic.
Mr. Russ Hiebert:
It is safe to say, then, that these sorts of performance-based specifications were used in the decision to purchase the C-17s.
Gen R.J. Hillier:
In fact, yes.
Mr. Russ Hiebert:
Thank you.
Mr. Minister, you've been a close observer of the military procurement process for your entire career. I was wondering if you could share with the committee some of your observations about the strengths and weaknesses of the procurement process and offer any advice on where we should focus this committee's efforts.
Hon. Gordon O'Connor:
As the chief just explained, it started a couple of years ago. The reforms that defence has begun to implement are showing fruit. It used to take about four years from the time somebody had an idea until we got to the point where we could move beyond the department. That is down now to basically months.
So great improvements have been made in the defence department, but the defence department is just one part in the process. You have Public Works, you have Industry, you have Foreign Affairs, and you have the Treasury Board. What we have to do is make sure that together all these departments and processes are as smooth as possible; that you have the normal checks and balances in the government, but that you don't put undue processes in.
We could probably theoretically keep speeding up the process in the defence department, but unless procurement moves at a good rate, and the industry department's industrial benefits are identified, and Foreign Affairs deals—in some cases—with ITARs, then you get a fast start and things slow down.
So it's a matter of reforming the whole process. That started in our government. The Prime Minister has mandated a number of us to get together to keep refining the process to make it simpler and faster.
Mr. Russ Hiebert:
With my last question, I'd like to touch on what the benefits of the strategic lift will mean to the military. I note that 13 years ago, in 1993-94, the air force had 700 serviceable aircraft; 10 years later they were down to 290, with serviceability rates of 30% to 60%; the air force suffered a 75% drop in air power in 10 years.
I was wondering, again, if you could mention for this committee the benefits we will experience from the acquisition of strategic lift.
Hon. Gordon O'Connor:
I think the chief will respond.
Gen R.J. Hillier:
I would say a couple things, sir. First of all, I'll speak from what I hear from the men and women in uniform. This, to them—and they tell me this—is a visible, tangible sign that they'll get the tools to do the job they need to do. We have had a bonding between the air, land, and sea forces as a result of this Afghanistan mission, because they are all there in Afghanistan, as perhaps you saw, although the navy is not in as primordial a role. They have had a bonding that shows, and their appreciation for each other and for what each part—air, land and sea—brings to the Canadian Forces to give one effect for Canada, which we haven't seen in the Canadian Forces in decades, for sure....
They see the C-17 as a sign; it's the tool they need to do the job. It is coming, it is coming quickly, and it's coming because they need it. For them it is a morale issue that is huge.
Second, simply from being able to do that mission, or missions similar to it, or missions around the great expanse of Canada, the C-17, as I mentioned earlier, gives us a flexibility and an agility, particularly at the front end, when we own the aircraft.
Obviously, as you get into longer timeframes, you can perhaps rely more on leased aircraft, although there are some limitations, as I also mentioned earlier. But at the front end of any mission, such as the ice storm where I was, here in eastern Ontario, or the Red River Valley flood, where in the first several days we were trying to get large numbers of men and women and equipment into the area to help Canadians during what was the worst time in their lives, the C-17 and the strategic lift gives us a flexibility and an agility we simply do not have right now. It helps set conditions for success, and in a place like Afghanistan, whilst helping to increase the probability of success of the mission we have been asked to do, it also helps us in a very real way reduce the risk to the men and women who are involved in implementing the mission.
The Chair:
Thank you, General.
We have finished our first round, and I thank you all for your cooperation. We start our second round. It's five minutes, so it's quite a bit faster. We will start with the official opposition and then go over to the government and then back to the Bloc.
Mr. Martin.
Mr. Robert Bouchard (Chicoutimi—Le Fjord, BQ):
Mr. Minister, General Hillier, Mr. Deputy Minister, I welcome you.
This is an important and complicated issue. I have a few questions for you and you can answer them once I have put them.
Mr. Minister, you said that the current procurement process was too long and too complicated. You even said that the procurement process could incur 15-year delays, if I understood correctly, between concluding the deal and delivering the equipment. First I would like to know what the new timeframe for procurement is.
On the other hand, you stated that the first stage consisted in defining the requirements. I gather that there is a danger in setting requirements because it could involve targeting or identifying a supplier. How can you reassure taxpayers that they are getting their money's worth?
Moreover, you presented to us a procurement process that, in my opinion, is an emergency equipment procurement process for the Canadian Forces. Is there not some danger in setting the delivery schedule as a priority? Let us consider what is immediately available.
Finally, is this new procurement process similar to what is done in other countries or in other federal departments?
[English]
Hon. Gordon O'Connor:
When DND sets requirements, deadlines are usually set on the state of the equipment or a new requirement that has arisen because of a change in threats, and so you need something to deal with the threats. In most cases you're dealing with equipment that probably has to be replaced and is past its usable life, so you start to set deadlines.
The classic one right now is the Hercules aircraft. A number of them have been used at such a high rate that their life expectancy is only a few years. When you have a situation like that, you have to act as quickly as possible to try to deal with it. For example, one of the points we forgot to make with the C-17 is that the C-17 lifts four times the load of a Hercules. When you start using C-17s, you're taking a lot of the weight off the Hercules fleet so they can be replaced as quickly as possible, but deadlines are basically part of an analysis the military does.
In terms of value for money, if we're buying something essentially off the shelf--that is, we're not building it from the start and all the way through--we know, once the process is completed, what we're going after, and we essentially know what they cost. There's no secret out there in the planet. If you name some large military piece of equipment, whatever it is, within a day or two I can tell you what the price is, because other countries have paid for it. Government records everywhere in the civilized world are public, so you know what they cost, and you know approximately what you're going to get.
The public works minister is going to have to come to you and explain that. We said the other day that we basically obtained the C-17s at an 8% saving. Well, he was basing it on the world price; the prices are out there.
On your question about an emergency acquisition process and buying off the shelf, I didn't quite get the point you were making. What's the question you have?
[Translation]
Mr. Robert Bouchard:
It had to do with the delivery schedule and the availability of equipment. Is there not a danger that this might become the high priority criterion for these procurements?
[English]
The Chair:
A short response, please, sir.
Hon. Gordon O'Connor:
It's one of the criteria that we try to get something that is already created. We don't want to spend money on development. It's certainly one of the criteria, but it wouldn't be the overwhelming criterion.
And maybe what other governments or other government departments are doing with respect to processes—
The Chair:
No, we have to move on. We'll have to revisit that. Our time is up.
Ms. Gallant, for five minutes, then Mr. Cannis.
Mrs. Cheryl Gallant (Renfrew—Nipissing—Pembroke, CPC):
Thank you.
Mr. Minister, we've all heard the horror stories about military procurement in this country: a brand-new hundred-million-dollar satellite, stored and never launched; trucks with the screaming brakes, “leaky squeaky vehicle wheel” I believe they're called, which reveal the presence of our troops; modern electronic equipment that could not be turned on because it interfered with commercial broadcasts.
I'd like to ask if a suitable product was already commercially available for some of these but for whatever reason somebody decided to develop a new, possibly redundant, product or to modify existing equipment. I'd like to know about this idea of purchasing so-called “off the shelf” equipment. It has been spoken about for years. I certainly don't think this practice is appropriate everywhere in military procurement. Would you please outline some of the scenarios in which this off-the-shelf purchasing would be appropriate?
Hon. Gordon O'Connor:
I think if it's available, off-the-shelf procurement is appropriate for every case. If you can actually get something off the shelf, that means it's fully developed, perhaps with the exception of naval vessels. But if you start talking about aircraft or trucks or guns or whatever for the military, we really want to acquire proven products. When we acquire some vehicle or machine or weapon, we want to know what it will cost to maintain, the breakdown rate. We can project the cost of maintaining this piece of equipment into the future, so we really want it off the shelf. We want to avoid development. We had a history of developing over a period of decades. We used to call it C1. We had to Canadianize everything.
If two or three or four first-class militaries can use a piece of equipment for a certain function and we need it, why can't we use that? Why do we have to take it and fiddle with it? So we're reducing development work on equipment. We're trying to take equipment that is available. There are some exceptions. I mean, I won't get into it, but in software there may be unique things you have to do. But ideally we try to get equipment off the shelf.
Mrs. Cheryl Gallant:
Minister, when we talk about military procurement we know we're talking about some very expensive, complex hardware, so obviously the burden of selecting the right hardware is high.
I understand our people within the Canadian Forces and the Department of National Defence are always anticipating what needs replacing and when, as you described earlier. Yet too often it seems as though we're only alerted to the decrepit state of some military equipment when something tragic happens. I don't think this is a consequence of our military not anticipating what needs replacing. We all know they've been warning us for years about the need to replace equipment such as the Sea Kings or Labrador helicopters. Clearly the political actors throughout the 1990s failed to provide the stable policy and funding environment for our armed forces so they could begin the replacement of crucial hardware in a timely fashion.
Minister, I know that Canada's new government takes issues regarding our armed forces very seriously. In your vision of the Canadian Forces, that the forces desperately need to ensure that all our men are protected properly, what do you think needs to be done?
The Chair:
One minute.
Hon. Gordon O'Connor:
That's like asking how high the sky is.
As I said, we have to basically recapitalize the entire armed forces over the next 20 years. We're now trying to work our way through a bow wave of demands so we can get to the state where equipment has a lot of usable life left. For some time we will have to accelerate...and then we can probably slow down to some more modest rate. But right now, we have a catch-up problem in the air, land, and sea. That's what we're trying to do.
It's a wonder purchase, and from many standpoints, makes perfect sense. No one that is possibility going to be unfriendly with Canada is going to be the boss of us with our C-17's.
