:
Thank you, Mr. Chairman.
[Translation]
Good morning, ladies and gentlemen. I am MGen Mike Ward, Chief of Force Development. My role, on behalf of the Deputy Minister and the Chief of the Defence Staff, is to harmonize, synchronize and integrate the Force Development activities of the Navy, the Army and the Air Force, as well as the duties carried out by DND's Assistant Deputy Ministers.
[English]
Force development is that function that continuously conceives and redesigns the military so that it is better geared to fight the next war than the last one. It includes analysis of government policy on defence and the security environment, as well as we can predict it, out into the future. It uses that analysis to identify possible future scenarios within which we would apply military force or use military skills in things like humanitarian interventions. In those scenarios, we test our forces and our equipment to determine what changes might need to be made as we replace or modernize them at key stages in their lives.
Ultimately we combine the results to create a long-term plan that sets priorities for development over time. This defines the equipment requirements that guide what we procure, and we work closely with other government departments and our allies to share knowledge and experience so that we have confidence in our results and the recommendations that we forward.
In conjunction with each of the services and the associated deputy ministers, I focus on the developmental capabilities. Those capabilities will permit the Canadian Forces to provide Canada with effective and relevant military power. These include command and control systems and special operations forces at the national level, as well as major core capabilities such as ships, fighting vehicles, and aircraft in each of the services.
When we conduct force development, we speak in terms of capabilities. While our purpose today is to help educate about defence procurement, it's important to see the output of the procurement process as enabling an element of the force to be capable of doing a job or completing a mission.
The capability must be balanced, and therefore capabilities are made up of a combination of highly skilled and well-trained personnel, modern equipment, and the readiness to complete a mission, as you've seen recently during your visit to the task force in Afghanistan.
To further explain, a main battle tank is not, in and of itself, a capability. Only when it's married up with a trained crew and is prepared for a mission does it become part of our arsenal. A patrol frigate tied up to a dock is also not, in itself, a capability. Her Majesty's Canadian Ship Ottawa, however, now completing a six-month tour of operations in the Arabian Gulf with her full crew and six months of training and preparation, constitutes a complete military capability that's ready to complete a variety of missions.
[Translation]
The key to success as regards force development is the establishment of a long-term plan that considers the following: the security context Canada is dealing with and in which we need to develop our forces; the methods we use to employ our forces where they are needed to counter threats to Canada, either at home or overseas; the main requirements, with respect to our forces and materiel, that must be met to ensure that they are relevant and decisive; and, the financial circumstances under which the plan becomes cost-effective, justifiable and achievable.
Success in force development and strategic planning enables clarification of development options and capability acquisition.
[English]
I'm specifically responsible to work very closely with the associate deputy minister for policy and provide him with the military advice he requires in order to create the long-term defence capability plan that lays out how we will manage our military over a 20-year timeframe. Managing means how we invest in, modernize, recapitalize, or ultimately replace in service those capabilities, ships, aircraft, and fighting systems that serve or no longer serve our needs.
The plan is key to ensuring that we maintain a high level of operational effectiveness while at the same time efficiently managing our people and our fleets of equipment. I work hand in glove with the chief of programs to ensure that the defence plan can be resourced and afforded, and with the assistant deputy minister for materiel to make sure those capability requirements can be acquired in a timeframe that ensures a high level of operational effectiveness for our forces.
I welcome any questions you may have about the force development process.
Merci beaucoup.
:
Good morning. My duties on behalf of the vice-chief are primarily threefold. I manage the defence services program, oversee performance management and government reporting for DND, and coordinate issues with respect to strategic capabilities and resources between DND and other international security partners like NATO and NORAD.
[Translation]
The Defence Services Program comprises all the activities and projects approved by the Department which are deemed to be critical for the delivery of affordable and effective services to the government of Canada and Canadian citizens. I am responsible for allocating the resources needed to meet the Department's objectives. That could include staff, capital or financial assets.
As regards the Defence Services Program, my organization asks itself the following: “What is the best way to meet a resource need?”, and “Can we afford it?”; it then provides the answers. To that end, I have a staff responsible for analyzing every aspect of a project proposal, including how urgent the operational requirement is, any capability gaps, financial constraints, turnaround times, contractual obligations, and so forth. My staff helps me set priorities for the Defence Services Program and coordinate approvals at both the departmental and Treasury Board levels as regards spending authority.
In managing the Defence Services Program, I also receive horizontal support and decision-making advice— in other words, within the Department, at my level—from the Program Management Board, which I supervise on behalf of the Vice-Chief of the Defence Staff and which is part of the third level of the Department's approved governance structure. The Board uses n a planning horizon of one to four years and looks primarily at resource allocation and management in the course of the fiscal year, as well as any corresponding financial repercussions. The Board also recommends changes to the Program in subsequent fiscal years and submits them to the Vice-Chief of the Defence Staff and the Deputy Minister for approval.
[English]
My division is also responsible for internal performance management framework across the department. As part of this mandate, we assist in the development and implementation of the departmental governance process in order to respond to internally and externally mandated reports, like the reports on plans and priorities, etc.
As part of this we collect data department-wide on a huge variety of issues ranging from operational performance, to capital planning, to workforce numbers. This data is incorporated into reports we produce, such as the departmental performance report, the report on plans and priorities, the management accountability framework, and the program activity architecture with the Treasury Board.
The responsibility for managing, coordinating, and advising on strategic-level capabilities and resource issues of a security nature related to NATO, Partnership for Peace, NORAD, and other government departments and NGOs, also falls under my mandate as the chief of programs. Generally, we facilitate relations between DND and these organizations by responding to and influencing real issues, programs, and resource demands within the department.
On procurement, I am obviously part of a much larger whole. I work in close consultation with both the chief of force development for demands and the assistant deputy minister of materiel to effectively and efficiently meet the department's mandate to give our troops the tools they need to assure success.
I will be pleased to answer any questions you may have.
:
Thank you, Mr. Chairman.
Good morning. It's a pleasure to be here to brief you and take your questions on defence procurement, a subject for which I am largely accountable in the Department of National Defence.
[Translation]
I have been the Assistant Deputy Minister, Materiel, for almost two years now. For the previous 30 years, I was an officer in the Canadian Forces.
[English]
I finished my career as Commander of Land Forces Western Area, followed by three years as deputy foreign policy adviser to the Prime Minister, from 1999 to 2002, and then I moved to the public service, as an assistant deputy minister in the Department of Public Works, where I was involved in contracting real property and IT services to the government departments.
I came back to DND in early 2004 as ADM of information management, and then for almost for the past two years as ADM of materiel.
I have seen first-hand the success our soldiers are achieving in Afghanistan, as I know you have recently. It has not been without significant sacrifice, but there is progress being made there, and there can be no doubt that Afghanistan is on the right track.
It reinforces to me the need to ensure that the Canadian Forces have the equipment they need to do the very, very demanding task that we ask them to do. They need that equipment in a timely manner. They can't wait, as they have in the past, on average, 15 years for a process to deliver. We are implementing a number of initiatives aimed at changing that process, and I want to take this opportunity to touch on three of those today.
First of all, we're moving to a performance-based, best-value competitive process where industry is provided broad, high-level, mandatory performance criteria and invited to propose their solutions; second, ensuring that we have a single point of accountability within performance-based procurement, where a single prime contractor is responsible not only for the provision of the equipment but for the long-term effective operation of that equipment; and third, wherever possible, procuring proven off-the-shelf equipment as opposed to somewhat riskier and lengthier developmental technologies.
All of these initiatives seek to improve the existing procurement system, but it doesn't circumvent the rules and processes that are in place by Treasury Board and Parliament. The departmental and interdepartmental approvals and oversight processes remain exactly the same. The basic tenets of fairness, openness, and transparency have not changed and continue to be the cornerstone of our procurement practice.
[Translation]
In the past, the procurement process at National Defence was a lengthy and extremely complex one. A number of organizations were involved.
[English]
To a significant degree, however, the delays and complexities have been self-inflicted wounds by DND on itself. We have spent years producing lengthy, detailed, complex technical specifications in the tens of thousands of pages, often with hundreds of mandatory requirements that entailed responses that were equally lengthy and complex.
We have in the past refused a 90% solution of a proven off-the-shelf product, engaging instead in expensive and time-consuming development, customization, and Canadianization. These processes have been long and costly, both to the government and industry, and obviously to taxpayers. The result has often been that all bidders were non-compliant and the entire process was unsuccessful, causing months and in some cases years of delay at significant and unnecessary expense to both taxpayers and industry. The focus has been on the process itself rather than on the results needed, which are safe and operationally effective equipment in the hands of our troops in a reasonable timeframe, and 15 years is not a reasonable timeframe. Those things had to change.
In terms of performance-based best value, we don't need to tell industry, a Sikorsky or a Lockheed Martin, how to build a helicopter. They know how to build aircraft. What we need to tell them is what capability we need to provide to our soldiers, in broad, high-level performance terms, and let them come to us with their solutions, if they have a solution. That's what we've done with strategic airlift, tactical airlift, and the medium to heavy helicopter projects. For each project, we provided industry with the high-level performance requirements and invited them to propose solutions, and we evaluated those solutions against the high-level performance needs of the troops.
Each process was fair to all the vendors, it was open to anyone who had a solution, and it was transparent to taxpayers. Each process had the same level of departmental and government approvals, including cabinet. The new process has the potential to deliver equipment years sooner than it has in the past. We are looking at now focusing our major procurements on the concept of that performance-based, best-value process.
I want to elaborate further in two ways. We look at this in two versions: one being off the shelf and the other one being design-built. Let me talk about off the shelf for a second. The preference, if possible, is to seek proven off-the-shelf solutions when acquiring equipment, whenever possible. In most cases, an existing capability that provides a 90% solution is the most prudent and effective way to proceed. In some cases, such as the replacement of our aging Hercules tactical air fleet—and we have grounded, permanently unflyable, four out of our 32, and others will follow shortly—the urgency of the requirement dictates that waiting for developmental technology to come into full production is not an option.
What is perhaps more important is that acquiring an existing, proven technology greatly reduces the risk associated with the acquisition. We know what the operational performance is. We've seen it, it's evaluated, and it's proven. There is much more cost certainty in the acquisition price, which we know. We have seen that with our allies and we know what industry pays. The delivery dates can be defined with precision, and the in-service costs are demonstrable and predictable.
Projects that seek these proven off-the-shelf solutions state mandatory high-level requirements in operational performance terms—terms such as protection, mobility, range, and often include things like key safety, certification, and delivery parameters.
These are publicly advertised to industry, inviting them to propose responses and often provide their product for us to evaluate against the mandatory criteria. We insist on, if at all possible, firing the guns, flying the aircraft, and conducting destructive testing on vehicles so that we know they will survive IEDs and to confirm that they meet the operational requirements of the forces before we buy them.
For example, test driving a shiny new red Camaro ensures that it performs to your expectations—I don't think they make them anymore. It does bring more certainty to the process.
[Translation]
If only one company is able to meet our requirements, we can save a considerable amount of time by negotiating directly with it.
[English]
Cost risk is minimal, and our negotiating position remains strong, as we have solid information on actual market prices and the maintenance cost data from our allies.
[Translation]
If a number of companies meet our requirements, we issue a call for tenders, and the bid assessment process takes its course.
[English]
There are occasions when design-build projects must be employed, for example, for new classes of ships and certain combat vehicles. The joint support ship project is an example of a design-build procurement process.
We recognize that there is greater risk in a design-build process, but it can be mitigated by having the prime contractor be responsible not only for the acquisition portion or the production portion but also for long-term in-service support for that equipment.
Build quality delivers lower maintenance and through-life costs. By weighting the in-service support price in their bid higher than the acquisition price, we are motivating the builder and rewarding the builder who has invested in quality and knows the equipment will be cheaper to maintain. I'll use the example of engines in a ship. If we motivate the bidder to put top-quality engines in a ship, he will bid a much lower in-service support cost, knowing he doesn't have to fix them every day, and the long-term cost of ownership of that ship over the life of it will be lower for the department.
So the message is simple: build in quality, performance, and reliability, and there's an advantage to the bidder. The total cost of ownership is lower to the taxpayer, and therefore the best value, and soldiers have better and more reliable equipment.
[Translation]
In closing, I would just like to take a few moments to clarify a popular misconception with respect to some of the major acquisitions we recently made. I want you to know that not one of those processes involved single sourcing. In each case, it was a competitive process.
[English]
Sole-source contracting is primarily used by DND, with our colleagues in Public Works and Government Services, for urgent operational requirements on operations, such as the M777 Lightweight Howitzer, which you may have seen in Afghanistan or heard about in Afghanistan, where it has been enormously important for the protection of our troops, or in cases where the service or item required is governed by proprietary intellectual property rights. For example, I need to buy spare parts for LAVs from General Dynamics, which makes the spare parts and owns the intellectual property for LAVs.
It's important to note that in every situation we aim for competition. However, for certain capabilities, there may be only one solution available, and that is a reality we can't change. As I said before, if there's only one company able to meet the requirements, significant time can be saved by negotiating with them directly. If there are multiple companies that can meet the requirements, then, as I said, a formal request for proposal is issued and a normal evaluation process ensues.
In all cases, it's a best value for the crown process. Allegations that negotiating with a single supplier produces higher acquisition costs is not true. We have a very good idea of the market prices for off-the-shelf equipment, like a C-17 or a Chinook helicopter, and would not enter into that contract if the value for the Crown were not there.
[Translation]
In summary, the steps taken by my organization, along with my colleagues at Public Works, and by the Department of National Defence, represent pragmatic, effective solutions that will result in a streamlined defence procurement process.
[English]
There is no need to massively overhaul the system, nor is there any requirement to create new agencies or organizations. I would point out that the contracting support from Public Works and the team led by Mr. Williston is totally integrated with the Department of National Defence's procurement team already and has been for many years.
Within DND and within the existing system, implementing a performance-based best-value procurement model has already paid dividends. Seven months after the statement of operational requirement was approved, we were in contract for strategic airlift. The process was fair, open, and transparent, and the Canadian Forces will receive their first aircraft this summer, just one year after the government announced its attempt to proceed.
I should add as an aside that this procurement was due in no small part to the dedication and professionalism of the civilians and military members in my organization, as well as Public Works and Government Services, Industry Canada, and the Treasury Board Secretariat.
A lot of challenges remain, but they are not insurmountable. We are working hard with our colleagues across government on resolving the ITAR issue with our American counterparts. Retention and rebuilding of a professional project management capacity is also one of my major priorities. A more efficient and streamlined process is already yielding benefits.
[Translation]
Thank you for your kind attention.
We are now available to answer your questions.
Mr. Ross, General Ward, and, General Hincke, thank you very much for being here, and thank you for your work in the service of the members of the Canadian Forces and our country.
You have a very difficult job to do, and having just touched its surface, we certainly had an appreciation of how complex it is. I don't envy you because you probably have a lot of sleepless nights.
First, on procurement, I'm going to ask four questions, and you may not be able to answer them all today, but if you could provide us with the answers, that would be appreciated.
Sitting with your colleagues in Public Works, the Treasury Board, and industry, you must say to yourself, there's a better way of doing this. So looking at the big picture and how we can streamline the whole procurement process--and saying, in an ideal world, we could have this changed from here to here—if you've thought of some kind of a model like that, particularly looking at the Swiss and Australian models, and learning from best practices around the world in your experience, could you please provide us with this kind of model, which we could add to our final report? That would be very helpful for us in trying to look at ways where we could really cut to the chase to make sure you're able to do the job in as quick and effective a fashion as I know you're trying to. So I'll leave that.
My three real questions are as follows. First, regarding the replacement for the fixed-wing SAR, it's come to my attention that the statement of operational requirement for the minimum flight speed has been raised to 140 knots.
In my province of B.C., where contour search and rescue is very important, I understand that the best way to do visual SAR is between 70 and 120 knots. So could you please tell us why that minimum SOR has been raised to 140 knots, which I think really compromises the security of our SAR techs and the functioning ability of the plane to do the job, particularly for contour searches?
The second question is, when we were looking at tactical versus strategic airlift, we came to the conclusion that purchasing tactical airlift, while renting the Globemasters from the United States, would save the taxpayer $400 million. Why didn't we buy the replacement for the Hercs and lease the Globemasters from the U.S., which would have enabled us to have those C-17s here? The Americans liked it, and it was responsible for the taxpayer. Why did we not take that course of action?
Lastly, do the ITAR restrictions apply to both DND employees and industry?
Thank you.
:
Yes, I will try. Let me give you a very old example that actually ended in a performance-based process.
In the 1980s, we were trying to buy a low-level air defence system for our forces in Germany. Our engineers had tried to write a specification on how to build an air defence system of missiles, guns, command and control, and communications--with no success.
There were many firms in the world that delivered air defence missiles, guns, and so on.
In 1985, a new project manager said, let's just ask industry to propose how they would defend a brigade in Germany. We went out for the first time ever—and I was a very young major, posted for the first time to international defence headquarters—and stated the operational requirement: to shoot down how many aircraft in how many minutes, day and night, in the German brigade area.
We received 13 comprehensive proposals from industry. They evaluated those primarily on their operational effectiveness, on their industrial regional benefits, on price, and on in-service support. The operational effect was weighted higher than anything else.
That entire process, from the point when we left the technical base and the stage when we'd tried to design it ourselves, which had gone on for about eight years, to the performance-based one, happened in two years, and we had deliveries a year after that.
In my view, that system is still today one of the best in the world. We have maintenance problems now after 20 years, but it does work.
We didn't do it again after the low-level defence in the intervening 20 years. We are doing it now for tactical airlift.
We did it with Nyala to buy the armoured vehicles for Afghanistan, for example. We went out and said, these are our high-level requirements; we do need them urgently.
So the delivery schedule was a key performance requirement. In fact, we only had one company, the South African company, that had any in production. There was just nothing else in production.
We delivered 75 Nyala in one year, and we saved our soldiers' lives.
There are lots of examples. There is one good old example, and I think there are lots of good new examples coming.
:
Thank you for saying that. I want to go back, for the sake of transparency.
I want to thank you personally, Mr. Ross, for your candid responses. This is not a political issue. As General Hincke, General Ward, and you, as a former military man...this is an issue of making sure the right equipment is available. Were there obstacles in the past in how procurement was brought forth? As you said earlier, of course there were. Now, we're changing.
General Hillier was also kind enough...and I appreciate your candid response. You were asked a question by a member of the committee earlier and you rebutted very honestly in saying no, that is not the case.
If you recall, the start of a review on procurement—and I want to state this for the record, Mr. Chair, because what we are trying to do here is very important—really commenced post-2005 budget.
The previous Liberal government was more than receptive. So the statement made earlier, that there is some suspicion, some investigation, etc., I think we have to take totally off the record. That being the case, the moneys that first came forward in the 2005 budget have now very much appreciated, and they have also increased under this new government. So what would be the case? What we really want to do, as my colleague Mr. Martin said, looking at other models and how we make it more effective, more efficient, and streamlined, nobody here wants to question.
I want to just close by asking this question. You mentioned the Department of Public Works and CDS. Yesterday, the response from the minister--and we don't want to waste the minister's time--was to ask Public Works, ask Industry. Really, it is the Department of Public Works.
Would you just say yes or no, because the buzzer is going?