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37th PARLIAMENT, 1st SESSION

Standing Committee on Public Accounts

COMMITTEE EVIDENCE

CONTENTS

Thursday, February 21, 2002

1530

The Chair (Mr. John Williams (St. Albert, CA))

Mr. Manfred Kühnapfel (Director, International Affairs, Office of the Auditor General of Canada)

The Chair

1535

Mr. Alexander Semikolennykh (Deputy Chairman, Accounting Chamber of the Russian Federation)(Interpretation)

The Chair

Mrs. Wayne

The Chair

Mr. Alexander Semikolennykh (Interpretation)

The Chair

Ms. Sheila Fraser (Auditor General of Canada, Office of the Auditor General of Canada)

1540

1545

The Chair

General Raymond R. Henault (Chief of the Defence Staff, Department of National Defence)

The Chair

Mr. Jim Judd (Deputy Minister, Department of National Defence)

The Chair

Mr. Anders

The Chair

Gen Raymond Henault

1550

Mr. Anders

Gen Raymond Henault

Mr. Anders

Gen Raymond Henault

Mr. Alan Williams (Assistant Deputy Minister, Materiel, Department of National Defence)

Mr. Anders

Gen Raymond Henault

Mr. Anders

1555

Gen Raymond Henault

Mr. Alan Williams

The Chair

Mrs. Sheila Fraser

The Chair

Mr. Bachand (Saint-Jean)

1600

Mrs. Sheila Fraser

Mr. Bachand (Saint-Jean)

Mrs. Sheila Fraser

Mr. Bachand (Saint-Jean)

The Chair

Mr. Bachand (Saint-Jean)

Mr. Alan Williams

1605

Mr. Bachand (Saint-Jean)

The Chair

Mr. Bachand (Saint-Jean)

Gen Raymond Henault

The Chair

Mr. Alex Shepherd (Durham, Lib.)

Mrs. Sheila Fraser

1610

Mr. Peter Kasurak (Principal, Office of the Auditor General of Canada)

Mr. Alex Shepherd

Mr. Peter Kasurak

Mr. Alex Shepherd

Gen Raymond Henault

Mr. Alex Shepherd

Mr. Alan Williams

Mr. Alex Shepherd

Mr. Alan Williams

1615

Mr. Alex Shepherd

Mr. Alan Williams

The Chair

Mrs. Sheila Fraser

The Chair

Mr. Alex Shepherd

Gen Raymond Henault

The Chair

Mrs. Sheila Fraser

The Chair

Mrs. Wayne

1620

The Chair

Mr. Jim Judd

1625

The Chair

Mrs. Wayne

The Chair

Mrs. Wayne

Mr. Jim Judd

Mrs. Wayne

Mr. Jim Judd

Mrs. Wayne

Mr. Jim Judd

The Chair

Gen Raymond Henault

Mrs. Wayne

The Chair

Mr. Anders

1630

Gen Raymond Henault

Mr. Anders

Gen Raymond Henault

Mr. Jim Judd

Mr. Anders

Mr. Peter Kasurak

The Chair

Mr. Bachand (Saint-Jean)

1635

Gen Raymond Henault

The Chair

Mr. John Bryden (Ancaster--Dundas--Flamborough--Aldershot, Lib.)

The Chair

1640

Mr. Peter Kasurak

Mr. John Bryden

Gen Raymond Henault

Mr. John Bryden

The Chair

Mrs. Sheila Fraser

The Chair

Mr. Robert Bertrand (Pontiac--Gatineau--Labelle, Lib.)

1645

The Chair

Gen Raymond Henault

The Chair

Mrs. Sheila Fraser

The Chair

Mr. Robert Bertrand

Gen Raymond Henault

The Chair

Mr. Anders

1650

Gen Raymond Henault

Mr. Anders

Gen Raymond Henault

The Chair

Mr. Bachand (Saint-Jean)

Gen Raymond Henault

Mr. Bachand (Saint-Jean)

Gen Raymond Henault

Mr. Bachand (Saint-Jean)

Mr. John Bryden

Gen Raymond Henault

Mr. John Bryden

Gen Raymond Henault

1655

Mr. John Bryden

Mr. Jim Judd

The Chair

Mr. Alex Shepherd

1700

Mr. Peter Kasurak

Mr. Alex Shepherd

Mr. Jim Judd

The Chair

Mr. John Bryden

Gen Raymond Henault

1705

The Chair

Mr. Jim Judd

Mr. John Bryden

The Chair

Mr. John Bryden

The Chair

Gen Raymond Henault

The Chair

Gen Raymond Henault

The Chair

Mr. Jim Judd

The Chair

Mr. Jim Judd

The Chair

Mr. Jim Judd

The Chair

1710

Gen Raymond Henault

The Chair

Gen Raymond Henault

The Chair

Gen Raymond Henault

The Chair

Gen Raymond Henault

The Chair

Gen Raymond Henault

The Chair

Mr. John Bryden

The Chair

Mr. John Bryden

The Chair

Mr. Bryden

The Chair

1715

Gen Raymond Henault

The Chair

Gen Raymond Henault

The Chair

Mr. Peter Kasurak

The Chair

Mr. Alan Williams

The Chair

Mr. Alan Williams

The Chair

Mr. Alan Williams

The Chair

Mrs. Sheila Fraser

1720

The Chair

CANADA

Standing Committee on Public Accounts

NUMBER 041

1st SESSION

37th PARLIAMENT

COMMITTEE EVIDENCE

Thursday, February 21, 2002

[Recorded by Electronic Apparatus]

¹ (1530)

[English]

The Chair (Mr. John Williams (St. Albert, CA)): Good afternoon, everybody.

I know it hasn't been advertised in the agenda, but we do have a delegation, and a very important delegation, here from Russia this afternoon, the members of the Accounting Chamber of Russia, who are visiting the Auditor General's office in Canada. As you can see, we have our Auditor General, Ms. Sheila Fraser, at the table.

I would ask Manfred Kühnapfel, also from the Office of the Auditor General, to introduce our guests this afternoon.

Mr. Manfred Kühnapfel (Director, International Affairs, Office of the Auditor General of Canada): Thank you, Mr. Chairman.

It is a pleasure to introduce the guests from the Accounting Chamber of the Russian Federation. First, there is Mr. Vadim Fotinov, the interpreter for the delegation. Then there is Mr. Alexander Nikolaevich Semikolennykh, deputy chairman of the chamber. Mr. Vladimir Georgievich Panskov is a member of the executive collegian of the chamber.

The Chair: Gentlemen, we want to welcome you to the Parliament of Canada and to the public accounts committee. We know you have a special interest in seeing how the political process works here in Canada. We do hope your visit here is fruitful and you can return home with some new ideas and new experiences that allow you to perhaps improve accountability in Russia.

Through the interpreter, I will now ask if you'd like to say a few words to the committee.

¹ (1535)

Mr. Alexander Semikolennykh (Deputy Chairman, Accounting Chamber of the Russian Federation)(Interpretation): Thank you very much, Mr. Chairman. I express our gratitude for the invitation to this committee meeting.

Our delegation, representing the Accounting Chamber of the Russian Federation, is on an official visit, and we are meeting our colleagues from the Office of the Auditor General. The main purpose of the visit is to study your experience, namely, the interaction between the Office and Parliament, and this has a long history here.

The Accounting Chamber was set up just six years ago. In our interaction with the Russian Parliament we're not quite satisfied. Probably, the Russian Parliament, in turn, is not quite satisfied with the way they've been interacting with us.

These three days have been very informative, through our meetings with our Canadian colleagues. We attended question period in the House of Commons. We had many meetings with our Canadian counterparts at the Office of the Auditor General. We would like, once again, to express our gratitude for this opportunity to see this committee in action today. We have a similar committee now in Parliament.

So once again, thank you very much for providing us with this opportunity.

The Chair: Thank you. I understand you are going to remain with us throughout the rest of the committee hearing to observe how Parliament interacts with the bureaucracy and with our Auditor General.

This afternoon we have the Chief of the Defence Staff, and we look forward to the testimony we're going to hear, the debate, and the dialogue between the three parties, the Auditor General, the defence department, and the members of Parliament.

Yes, Mrs. Wayne.

Mrs. Elsie Wayne (Saint John, PC/DR): I had an opportunity to be in St. Petersburg, Russia. There were about 54 different countries that were represented at the Parliament we met there. Your chair in Russia asked me to go and speak to the young people at your college in St. Petersburg. I was truly honoured. They were marvellous young people who had a great interest in Canada. So I think, Mr. Chair, we'll perhaps see some of those young people here someday.

Thank you, Mr. Chair.

The Chair: Thank you very much.

Mr. Alexander Semikolennykh (Interpretation): Thank you very much for your warm words about our country.

The Chair: We'll ask our guests to take a seat at the back, and then we'll bring forward our witnesses right away.

Pursuant to Standing Order 108(3)(e), we are considering chapter 10 (National Defence--In Service Equipment) of the December 2001 report of the Auditor General of Canada.

Our witnesses today from the Office of the Auditor General of Canada are Ms. Sheila Fraser, Auditor General of Canada, and Mr. Peter Kasurak, a principal with the Office of the Auditor General. From the Department of National Defence we have General Raymond Henault, Chief of the Defence Staff; Lieutenant-General George E.C. Macdonald, Vice-Chief of the Defence Staff; Mr. Jim Judd, Deputy Minister; and Mr. Alan Williams, Assistant Deputy Minister, Materiel.

Without further ado, we'll turn it over to you, Ms. Fraser, for your opening statement.

Ms. Sheila Fraser (Auditor General of Canada, Office of the Auditor General of Canada): Thank you, Mr. Chair.

We thank you for the opportunity to meet with the committee today to discuss chapter 10 of our report tabled this past December. As you mentioned, I am accompanied by Peter Kasurak, who is the principal responsible for our audits at National Defence.

I would like to start today by clarifying what we said in our report about the defence budget. We have been widely quoted as having advocated an increase in the department's budget. This is incorrect. It is up to Parliament to determine how much should be spent on Canada's defence. Our report calls attention to the fact that at the time of our audit departmental planners provided us with data that suggest that National Defence has a funding gap of some $1.3 billion in the current fiscal year. We noted this because the failure to match force structure with funds available has been one of the factors contributing to maintenance backlogs and declines in equipment availability.

I'd like to now turn to the specifics of our report. This chapter provides Parliament with its first set of comprehensive statistical data on a major component of readiness. Readiness is composed of four basic elements, people, equipment, training, and enablers, such as command and control and intelligence systems.

¹ (1540)

[Translation]

Today, I would like to discuss the following key points related to the chapter: first, what we found concerning the state of equipment readiness; second, what we learned about the department's ability to manage equipment readiness; and finally, certain actions needed to improve information in order to resolve the management issues noted.

Regarding the state of the Canadian forces' equipment, the statistics that we were able to compile indicate that the Army has maintained equipment, and the Navy is holding its own. However, the activity, availability and maintenance of Air Force equipment has declined considerably.

From 1989 to 1998, the Army has been able to keep deployed equipment available for use almost 90% of the time. However, it is experiencing some problems in keeping up with preventive maintenance and in keeping vehicles available for training in Canada.

The Navy has been able to maintain its activity, that is, the number of days its fleets are at sea each year. However, it is also unable to keep up with scheduled maintenance and is facing a “bow wave”of deferred work on the Patrol Frigate.

The Air Force picture is much more adverse: annual flying hours for the Sea King, Hercules, and Aurora have all steadily declined over the last five years. Their availability is declining, and mission aborts are increasing for all types of craft except the Griffon. Aircraft availability is low, except for the Griffon helicopter, which is new.

We also found that the supply system is rarely able to meet urgent demands, and there is a shortage of maintenance personnel. Overall, 13% of positions are vacant and 15% of those on the job have not completed the training required for their rank. Almost 40% of the training required to do specific jobs in individual units has not been taken.

Due to limitations of the data maintained by National Defence, we could not determine how operations and training have been affected overall. Nevertheless, there are strong indications that maintenance problems with the Hercules, Sea King and Aurora aircraft have limited training and operations. Delays in obtaining spares, prioritization of transportation of spares and “mission fatigue” of maintenance technicians appear frequently in unit reports.

[English]

Now let me turn to the state of equipment management. In general, the information needed to manage equipment is often unavailable. The information that is available is often inadequate, incomplete, and inaccurate. I would like to cite just a few examples.

First, none of the armed services has formal standards or targets for how ready its equipment should be. Second, we could find only 41% of the required post-exercise reports that document problems and lessens learned and facilitate corrective action; the rest were either not completed or had been lost. Finally, navy maintenance data are inaccurate, because of the posting of data up to two years after operations, use of estimates rather than actual measures, and loss of data because of bad diskettes, server crashes, and failure to back up data.

The lack of adequate management information is a problem that, unfortunately, is widespread throughout the federal government. Good information is the essential first step in good management, and without it, managing risk intelligently is not possible. We believe improvement of information is essential to resolve management issues noted in our report, and money alone will not solve the problems identified by this audit. There must be the will to assess operations and training and to learn from them in a systematic manner.

The department has agreed with our findings, and is already taking action through the roll-out of its materiel acquisition and support information system and its new supply system. However, the new supply system will not arrive until next summer, and the materiel acquisition and support information system is not expected to be in place until 2004.

Parliament might consider taking the following steps to ensure that equipment is better managed in the future: ensuring that the department sets a timetable to develop basic targets and goals for equipment maintenance and to begin reporting against them; asking the department to state what specific interim steps it intends to take to ensure the reliability of management information while its legacy information systems remain in use; and finally, asking the department to set a deadline for the completion of its lessons learned database and to regularly inform Parliament of the percentage of required post-exercise and post-operations reports that have been completed.

Thank you, Mr. Chairman. We would be pleased to respond to questions.

¹ (1545)

The Chair: Thank you very much, Ms. Fraser.

Now we will turn to General Henault for his opening statement.

General Raymond R. Henault (Chief of the Defence Staff, Department of National Defence): Good afternoon, Mr. Chairman, I really had not intended to say anything of substance at the moment. Mr. Judd and I are here to respond to your questions and those arising from the report of the Auditor General.

We do have a number of things that are under way at the moment. We are conscious of the validity of the recommendations that were made by the Auditor General and are taking steps and measures in a number of areas to address many of the things that have been talked about to improve the way we do business. One of our challenges, obviously, is to sustain the way we do business, given the challenges we have with resources, and most importantly, we must continue to be operationally ready and capable in the face of a number of demands, commitments, and resource challenges.

So we stand ready to answer your questions, Mr. Chairman.

The Chair: Thank you very much.

Mr. Judd, do you have an opening statement?

Mr. Jim Judd (Deputy Minister, Department of National Defence): I had an opening statement, Mr. Chairman, but I will dispense with it, so we can move to questions. I would just say we have a large measure of agreement with the recommendations of the Auditor General. Action was under way in respect of some or all of the recommendations. I would add that we probably take issue with some of the perspectives the Auditor General's office has in some of the report. We can get into that in the discussion and by responding to questions from members.

The Chair: Thank you, Mr. Judd.

So we'll get right into questions.

Mr. Anders, first round, eight minutes, please.

Mr. Rob Anders (Calgary West, CA): Thank you, Mr. Chairman.

What key elements will we have to look at eliminating in the next several years? Currently, with the types of shortfalls that the Auditor General is talking about, we're looking at major cuts. One of the first examples would be that 19 of our 32 C-130 transport aircraft are more than 35 years old. Are we going to be able to replace them all?

The Chair: General Henault.

Gen Raymond Henault: As we go through what will be a policy update or a policy review over the course of the next several months, we will be looking exactly at that, what capabilities we have, what capabilities are required for the future. Some of our equipment is obviously in need of either replacement or upgrade. We are doing that in a number of areas.

I can't tell you at the moment whether or not we need to replace all 32 C-130s. As we look at new transport capabilities and aircraft that have an ability to either carry more or carry equipment and people faster and further, it does modify the overall capability you need to do your job.

The essentials will be in relation to any undertaking we have in the current security environment, to ensure that we have, for the long term, the capabilities that will satisfy the response requirements of that new security environment. Much of that will be determined by the outcome of our upcoming review and update.

¹ (1550)

Mr. Rob Anders: I'll just shoot straight and say I didn't get a firm answer on whether or not we're replacing the 19 of those 32, but I'll move on.

Our two operational support ships are more than 30 years old. The navy is requesting three, and preferably four, new ships. How are we going to fund that?

Gen Raymond Henault: Funding will be a decision of government, obviously, but we currently do have a strategic lift project under way. It has two dimensions to it. One is strategic air lift, the other is strategic sea lift. The actual funding lines for that have not yet been confirmed, and none of those are in the budget, obviously, at this time. They're primarily in the definition phase at this stage of the game. So I will leave it up to departmental authorities, to government authorities ultimately, to determine the funding lines for those capabilities, but those do represent part and parcel of what we see as a requirement for the future, that is, the ability to deploy globally and to continue to operate in support of coalition activity, wherever we may be called upon to act.

Mr. Rob Anders: So we're hoping the government is going to do the right thing, I guess.

The Sea Kings still need to be replaced. What is the likely in-service state for the new helicopters whenever they are ordered?

Gen Raymond Henault: I'll let the ADM materiel take that question, but I would remind you that the Sea Kings have been upgraded over time, and so are currently very flyable and airworthy. The fact that we have put over $50 million into upgrading the Sea Kings has been of tremendous benefit to us as we await the outcome of the maritime helicopter project. I can assure you, from having been in the Arabian Sea over the Christmas period and not only having seen them in operation, but having had the opportunity to fly the aircraft, that the upgrades have been tremendously beneficial to what we do and how we maintain our operational capability at this point. Those aircraft, with the upgrades they do have, especially to the continued airworthiness of the aircraft, have been of significant benefit to us.

I'll hand it over to Mr. Williams for the follow-on to that.

Mr. Alan Williams (Assistant Deputy Minister, Materiel, Department of National Defence): I'm not sure there's much more I can add. We are, as we do every year, making sure all of our fleets are, from a safety standpoint, meeting the standards. We're doing nothing different with this fleet. We are examining that for its safety, supportability, airworthiness, and capability to maintain parts and supplies into the future.

Mr. Rob Anders: It doesn't sound too hopeful about replacements--just upgrades maybe, eh, gentlemen?

The army requires new artillery and must replace its tanks, or we're actually going to lose that capability. Is that going to be possible?

Gen Raymond Henault: Again, I can't respond to that without the outcome of the review. The update capabilities are exactly what we're going to be reviewing as we go through this process shortly. I would say to you, though, that the current Leopard tank fleet we have is one that has been upgraded just recently, and you highlighted the fact that we have done a number of upgrades. In fact, upgrades to the turrets, the fire control systems, and the overall weapons capabilities of our current fleet of tanks have ensured that in the interim, as we look to all of these capabilities, what we need or don't need in the longer term, we have a very capable weapons system in the current Leopard tank, and that will give us the room we need to determine what has to be done in the longer term.

Mr. Rob Anders: The annual flying hours for the Sea King, the Hercules, and the Aurora have all steadily declined. The Auditor General was talking about the last five years. Their availability is declining, and the mission aborts are increasing for all those types of craft, except the Griffon. Are we going to see this trend continue?

¹ (1555)

Gen Raymond Henault: The way those capabilities were measured is something that's open to interpretation, obviously, and I would ask Mr. Williams to give us a bit of an update on what that actually means for in-service ability rates and flying rates when it comes to those types of systems you've just talked about.

Mr. Alan Williams: I could just comment that the use of activity, while perhaps simple to understand, I don't think reflects the complex business we're in, frankly, and I'll make four points on that.

First, an activity does not equal an activity does not equal an activity does not equal an activity. If we fly our F-18s in combat patrol, activity is clearly different from using our aircraft for warfare missions.

Second, there is often no relationship between the extent of activity and its availability. For example, if you look at the medium logistic vehicle wheeled the Attorney General has in her report, over the last decade the fleets varied between 700,000 kilometres per month and 1.1 million kilometres per month, yet throughout that whole decade, in spite of the variance in activity, availability hovered around 90% month after month.

Third, an increase in activity is not necessarily a good thing. In our search and rescue fleets, for example, we require one helicopter to be available on standby 24 hours a day, seven days a week. If we find increased activity, that means perhaps this aircraft was not available for emergency activity the way we intended.

Finally, very often, a decrease in activity is planned and actually beneficial. For example, we are now trying to use simulation to a great extent. Simulation allows us to provide upgraded training in many of our weapons systems, and at the same time reduce the use of our different munition systems. With F-18s, for example, we're decreasing it from about 240 hours per pilot to 180. That 60-hour difference, while it reflects less activity, is a positive sign, and is made up by simulation activity and saving wear and tear on our valuable F-18 equipment.

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

Ms. Fraser, did you want to make a comment on this?

Mrs. Sheila Fraser: Yes, Mr. Chair, I would like to make just one short comment.

We can get into a long discussion about how rates are determined or not determined. There are two things I'd like to point out. First, the information that is in this report we compiled because National Defence did not have that information on an overall basis. I don't think it's up to us to go into the kind of sophistication needed to produce information we would have expected to be available in the department. Besides that, I think, if you look at all the trends, they indicate that there is an issue with the maintenance of this equipment. We can quibble about specific numbers, but I think the trends are quite revealing. I would hope that's where the discussions could be today.

[Translation]

The Chair: Thank you.

You have eight minutes, Mr. Bachand.

Mr. Claude Bachand (Saint-Jean, BQ): Thank you, Mr. Chairman. My first question will be directed to Ms. Fraser.

I quite enjoyed your definition of readiness, which you maintain is composed of four basic components. I would like to focus especially on the first three.

On the personnel side, the statistics that have been compiled show that personnel levels are below the targets listed in the White Paper. It was noted that Armed forces personnel levels should be 60,000, whereas in actuality, the forces have only 57,000 members. It has been rumoured that this number could drop as low as 53,000 members.

Regarding equipment, I noted that some supply problems had been identified, such as the unavailability of information needed to manage equipment. I also observed that for most trades, there are no standards in place respecting equipment readiness. Personnel maintain equipment pretty much any way they like, or based on their expertise. However, they are not held to any specific standards.

What concerns me the most is the training issue. If I understand your report correctly, 13% of positions in some areas are vacant. Also worrisome is the fact that 15% of positions are occupied by staff who are not properly qualified to carry out maintenance work. I can appreciate that Sea King helicopters require many hours of maintenance, more in fact than the actual number of hours spent flying, but I find it more than a little disconcerting that personnel who are not properly trained are doing maintenance on this type of aircraft.

Do you share the view of the three, three-star generals representing the Army, Navy and Air Force? During their appearance before the committee, they maintained that the state of troop readiness was better today than it was a decade ago. Do you agree with this assessment?

º (1600)

Mrs. Sheila Fraser: Perhaps I can start by clarifying a point raised by Mr. Bachand. Obviously, our audit did not focus on overall Canadian Forces human resources. Moreover, for your information, an audit is now being conducted of human resources management at National Defence. A report will be tabled in April and it may address some of your concerns.

As for the figures you quoted, we did indeed observe that 15 per cent of maintenance personnel do not have the necessary qualifications. To my mind, this doesn't mean they are incompetent. It means they require considerably more supervision, which puts more pressure on managers. We found nothing to indicate that equipment was unsafe or poorly maintained.

Mr. Claude Bachand: If I understand correctly, all this means is additional costs for training to ensure that maintenance is done properly, despite the absence of standards governing equipment maintenance.

Mrs. Sheila Fraser: There are no standards in place respecting equipment readiness. I assume there are maintenance standards. I can check that with my colleague. As noted in the report, some maintenance delays are occurring and the situation is getting worse with time.

As for comparing our current state of readiness with the situation a decade ago, I have to wonder who would venture to make such a comparison, given our lack of information about our current state of readiness and, I would assume, about the situation a decade ago.

Mr. Claude Bachand: Do I have time for another question?

The Chair: Yes.

Mr. Claude Bachand: This question pertains to the supply system and is directed to my friend Williams.

According to the Auditor General, the system is slow when it comes to providing spare parts that are urgently needed. In an emergency, it can be quite exasperating to have an engine malfunction and to have to wait for spare parts. Panic must inevitably set in.

Mr. Williams, I would like you to clarify three things for us. First of all, if I'm not mistaken, it seems the MASIS, the Materiel Acquisition and Support Information System, will not ready before 2004. However, I also read in the report that a new supply system will be in place by next summer. Can you give us a broad overview of this supply system, which will likely be transitional until such time as MASIS is up and running? Can you also describe for us briefly the current supply and information system?

[English]

Mr. Alan Williams: Let me talk a little bit about the two systems. In fact, the two systems complement each other. The Canadian Forces supply system upgrade program will allow us to keep control over our $9 billion inventory and know where each good is located, in which warehouse, in which depot, in the private sector or in deployed operations. The materiel acquisition support information system complements it. It does not look after our inventory, but it looks after maintenance and engineering standards for all our equipment. In other words, it will tell us, from a maintenance standpoint and from a life cycle engineering standpoint, when different pieces of equipment have to be repaired and when to make sure they're maintained up to date.

The Canadian Forces supply system upgrade system was launched this past year successfully at all bases and wings across the country, and we are going to be bringing it into Ottawa this coming summer. The materiel acquisition support information system has also been launched this past year. It allowed us to comply with the government's financial information strategy by accruing all of our $23 billion of assets into our system. It allows us to process complex procurements.

With deployed operation, I should point out that the navy will be on this system this year. So one-third of our equipment will be on this year. It will be followed in the following two years by the army and the air force.

º (1605)

[Translation]

Mr. Claude Bachand: Lastly, Mr. Chairman,...

The Chair: You have one minute remaining.

Mr. Claude Bachand: Mr. Chairman, I have to wonder if we're not all waiting for the new Foreign Affairs and National Defence policy. We've requested a policy review on numerous occasions. It's clear the Auditor General is also recommending changes, in light of the current situation. To what extent will the proposed changes be affected, be it positively or negatively, by the new policy? Putting it another way, are we not all working in a vacuum of sorts until a new National Defence policy is unveiled?

Perhaps General Henault could answer that question.

Gen Raymond Henault: There is no question that the new policy will either set out objectives for improving or modifying the structure of Canadian Forces or will produce some other results. In the meantime, we don't expect to continue seeing improvements to our systems, or to increase personnel capability, and so forth. I can tell you though that we have already implemented a plan to bring Canadian Forces personnel levels back up to 60,000 members, as was the case in the past. In fact, we surpassed this level very recently.

As far as we're concerned, the important thing is not necessarily matching the figure in the 1994 White Paper, but rather ensuring we have a sufficient number of trained, combat-ready members. The problem right now is that we have approximately 52,500 or 53,000 well-trained members, whereas we would really need 54,500.

Our recruitment and retention plan is helping us to restore personnel levels so that we can continue to meet operational requirements and keep up with the current pace of operations. That's already a step in the right direction.

Regarding our standards, some are quite technically advanced. They have helped to ensure our success from an operational as well as from a training standpoint. Our flight safety program is among the best in the world. Foreign countries regularly contact us to request our help in developing their training model and flight safety systems.

We have clearly defined tactical and operational readiness standards. Nationwide, we still have some work to do, as Mrs. Fraser mentioned, but we are working to develop a system based on the recommendations of Mrs. Fraser and her team.

Therefore, we are well on the way to a recovery in many areas.

[English]

The Chair: Mr. Shepherd, eight minutes.

Mr. Alex Shepherd (Durham, Lib.): First, I go to the Auditor General and this comment about the $1.3 billion shortfall. Your report talks about internal budget shortage. I'm not very clear about what that is. I've been around here long enough to know there isn't a department of government that doesn't have a list of things they would like to have. Are you just comparing a wish list to what was funded, and have you then assumed that because there's a shortfall, there's some kind of problem with maintenance? How do you arrive at that train of thought?

Mrs. Sheila Fraser: I'll ask Mr. Kasurak to respond to Mr. Shepherd's question.

º (1610)

Mr. Peter Kasurak (Principal, Office of the Auditor General of Canada): Thank you.

Our train of logic actually runs the reverse of what's suggested. When we did the analysis for this project, we found that many of the deficiencies in training time, shortage of spares, and lack of personnel were attributed to overall budget shortages. So we used this number, which was a staff estimate and, as you suggest, maybe not completely refined; it was being considered by management during the course of our audit. The department did acknowledge that there is a shortage, and we started with the effect and worked backwards, thinking we should try to represent the overall magnitude of this. We believe there is a significant gap still. To operate the current force structure on its present basis, additional funding is required, or many of the deficiencies we found when we looked at equipment maintenance will be difficult, if not impossible, to remedy.

Mr. Alex Shepherd: But the number $1.3 billion has no substance, in fact, related to this shortfall in funding for maintenance.

Mr. Peter Kasurak: It's composed of four basic pieces, two of which, at least, have a very strong link to equipment maintenance. One is the national procurement budget, which is about half a billion dollars of this, and the other is the long-term capital equipment plan, which affects how quickly you can modernize, and so reduce the need, perhaps, for some types of maintenance, especially corrective maintenance. So I do see a direct link between the two. For instance, one of the findings was that the C-130s have been very difficult to keep maintained. One of the contributing reasons was a decision not to purchase as many spares as in the past. The funds available and the maintenance service provided, we believe, are pretty directly linked.

Mr. Alex Shepherd: How do you tell? Is this number, $1.3 billion, a legitimate estimate of the shortfall in maintaining your equipment?

Gen Raymond Henault: I would be very careful with a number like that. It's an unconstrained number, perhaps, and we have to prioritize and balance off the requirements of people, equipment, training, and so on. There are always ways you have to balance off national procurement requirements against training and new capital procurement. We try to do the best we can with the budget provided to us. So there's no perfect number out there, I guess.

Mr. Judd may have a comment on that, but my view is that there are ways that has to be balanced. I'm not sure the comments made by Mr. Kasurak are entirely accurate.

Mr. Alex Shepherd: Mr. Williams, you talked about implementing the FIS strategy. Can you tell me, when you went through and valued the individual fixed assets, which you presumably had to do, whether you included a quantum related to deferred maintenance?

Mr. Alan Williams: No. What we're talking about is putting into the system at the particular moment in time the value of the assets, not extrapolating further.

Mr. Alex Shepherd: If it's a destroyer or whatever and it's got a million dollars worth of deferred maintenance, you'd have to take that into account before you valued the assets.

Mr. Alan Williams: When we put the values in, we put in not the initial cost of the item, but the depreciated value of the asset. These are taken at a particular point in time, and in accordance with standards for accounting. We wouldn't, at a particular point in time, anticipate future costs of maintaining the piece of equipment. Naturally, as the years go on, the increased depreciation would be reflected in that asset base.

º (1615)

Mr. Alex Shepherd: If an asset had normal maintenance, you would use your analysis. If we had been deferring maintenance on a piece of equipment for a considerable amount of time, it would affect how you valued the asset. The question I'm asking is, did you discover in this process that your assets were overvalued, just taking simple depreciation, that there was a significant amount of deferred maintenance that had to be taken into account?

Mr. Alan Williams: I would separate this accounting process from the issue we're talking about, the standard at which our equipment is being maintained. I think the recording of the database is done in accordance with structured accounting principles. The issue, as I think the CDS said, is that we're faced with the challenge of balancing and ensuring, as best we can, that our equipment is made available as necessary. I would just point out that the Auditor General does say that according to her and operations conducted to date, the equipment availability has been adequate. Notwithstanding all the challenges we're faced with, we do prioritize always, to ensure that when our forces are deployed, the equipment is available to meet their needs.

The Chair: Mr. Shepherd, the Auditor General has a comment.

Mrs. Sheila Fraser: Mr. Chair, I think Mr. Shepherd has raised a very interesting and pertinent question. We are just about to begin our audit of the capitalization of fixed assets in National Defence, and that will be one of the areas we will be concerned with.

The Chair: So the two accountants will be able to discuss this later on.

Mr. Alex Shepherd: To go back to the point about the maintenance personnel, I'm having trouble with this cause and effect relationship. There are assumptions over here the Auditor General's made, it seems to me, and I don't know whether you believe they're real. The assumption is that since we have a 15% shortage in maintenance staff, through job loss or whatever, your assets are in disrepair or not combat-ready. Is that a fair comment?

Gen Raymond Henault: I certainly wouldn't say they're not combat-ready. The Auditor General has a point there. There are areas in the structure, especially in certain very specific trades, where we have not topped up. That's one of the reasons we have many of the recruitment programs under way, to try to recruit more and more young people, some of them already skilled through community colleges and other places like that, who have perhaps either been in the service before or been in the reserve and gained some of those skills, so we can bring them into the Canadian Forces to fill some of those technical trades, those technical slots, that are so important to us in the longer term.

When we deploy an aircraft, a ship, or land forces, to theatres of operations, that's where, again, we have to make a prioritization decision, a manning decision, so that when operations are under way and we are called upon to go to whatever theatre of operations it happens to be, we do fill those holes, we always make sure the deployments have a full complement of technical and operational trades and support trades, so that as they undertake operations, they have exactly what they need to do what they're called upon to do. That does sometimes mean we have to go short in some areas back here at home, and that's something we've had to live with.

The Chair: Ms. Fraser has a comment.

Mrs. Sheila Fraser: I would just like to point out, Mr. Chair, that we did not indicate that this shortfall resulted in any effect on combat readiness. We indicated in the report, though, that there has been an increase in deferred maintenance, especially in the navy, and preventive and corrective maintenance. Obviously, the effort has been, as the general has said, to make sure that those troops who are deployed and the equipment that is deployed are ready, and the effects are back here at home.

The Chair: Thank you very much.

Now we'll turn to Ms. Wayne for eight minutes.

Mrs. Elsie Wayne: Thank you very much. I do have to leave right afterwards, so you'll all be happy. I know the general will be happy that I have to go and can't ask any more questions after this.

I want to say this. At our defence committee meetings this past week Colonel Dowsett came before us, the program manager of future strategic airlift and air-to-air refuelling, and he stated that they are in need of replacing and they are in need of getting airlift airplanes, because they cannot airlift our people at the present time. This is a very serious situation. I was very critical over the fact that we had to go to the United States to get them to airlift our men and women who were going over to Afghanistan. I said that if anything happened in Afghanistan and they had to get their troops out, they'd bring the U.S. ones out first, and ours would be last. He agreed with me. That's exactly what would happen. They'd take their troops first, and ours would be last.

With that situation, it is urgent that we get the money for our navy and give them the tools to do their job, to make sure our men and women who go over and put their lives on the line are looked after. He told us that what he needs is $2 billion. I asked him what the total price was for what he stated was required, and that was the amount. I don't know where we're at. Also, the vice-admiral has gone public now and said they need supply ships. We haven't got the supply ships to take over the equipment that is needed for our people.

I don't want those men to get into trouble, but I think, as I said this morning, just as soon, General, as you people who are in uniform start speaking out, we're going to get the money. All of us sitting around here in these other outfits we wear aren't going to get us the money. It's when you fellows speak out. So they're going to get the money, because they've now said they need it.

Where are we at with this? Can you tell us where we're at with regard to supply ships, with regard to the requirement for airlifting? And of course, I agree with my colleague from the Alliance, when it comes to the Sea King replacement, I just can't believe we're still going through this--it started way back in the early 1990s, and we're in the year 2002 now. Can you just tell us where we're at?

º (1620)

The Chair: I think there were three questions there. Where are we with our supply ships? Where are we with the Sea Kings? Where are we with the airlifting?

Mr. Jim Judd: If I may, Mr. Chairman and Mrs. Wayne, let me try to put this into context and answer all the dimensions of your questions.

First, it is a reality that no one in the world today, including the United States and the United Kingdom, has enough lift capacity, either sea or air, in-house to move whatever they need to move whenever they need to move it. Virtually every military establishment in the western world I know of, including the United States and the United Kingdom, has in the past, as have we, relied on market charters as well as in-house equipment. We have some, the Airbus aircraft, the Hercules aircraft, the supply ships we now have, but virtually no one in the world I know of is self-sufficient in lift capability.

Second, we are engaged in a project now with respect to lift, looking at both sea- and airlift requirements in light of decisions that would have to be taken with respect to the Hercules aircraft and maritime lift capacity. Among the various options that are being looked at are the trade-offs between sea and air, and within each of those, the sorts of vehicles that would best do the job under given circumstances. Would we be best off with a mix of large aircraft, such as C-17 and Hercules, only one or the other? What should be the proportion between air and sea capacity? What sorts of options should we be looking at in acquisition? The United Kingdom, for example, has recently entered into an arrangement with Boeing for a lease on C-17s.

All of these issues are currently being worked on very hard by our staff with a view to addressing the whole complex, so that we can make a considered judgment on which way to go for both the air and sea capabilities. We are very conscious of the fact that our Hercules fleet is advanced in years and that the supply ships are in the same circumstances, but we think we're quite capable of arriving at decisions on the appropriate mix and the way ahead in time to allow us to address both of those.

º (1625)

The Chair: There you are, Ms. Wayne, you can go ahead now.

Mrs. Elsie Wayne: Is that my eight minutes?

The Chair: No, but that took six and a half.

Mrs. Elsie Wayne: Okay. I'm just going to ask a very short question.

Didn't NATO come out criticizing Canada because we have not had enough equipment, were not looking after our military in order for us--I'm not sure whether it was just peacekeeping or Afghanistan--to play the role they expected from us?

Mr. Jim Judd: The Secretary-General of NATO, to the best of my knowledge, has been publicly critical about the performance of non-U.S. NATO partners. His criticism, as it has been elaborated in a few speeches he has given recently, in Stockholm, London, and Munich, I think, has been particularly focused on European members of NATO. We have done some comparisons ourselves, which we can share with you. The Auditor General, I'm sure, would very much like them, because they are output-based. They show how the Canadian Forces compare to other NATO members in participation in international military operations.

Mrs. Elsie Wayne: We'd like to have that.

Mr. Jim Judd: I think you will see that we do relatively well compared to most of our European allies.

Mrs. Elsie Wayne: But he did criticize us as well.

Mr. Jim Judd: He criticized, I believe, everyone other than the United States.

The Chair: Before you run off, Ms. Wayne, the general, I know, has a point to make.

Gen Raymond Henault: May I just clarify one thing please, Mr. Chairman? With all due respect to Colonel Dowsett, who I know well, I would state to you that forces operating in a coalition, as we are in Canada at the moment, work under a very mutually supportive arrangement, with total confidence in each other's ability to protect their own interests and to save themselves if they get into a situation that would require, for whatever reason, extraction from the field. I can assure you that we not only go in there with deployment plans, we also go in there with sustainment and extraction plans. I would be the first to say that the Americans would not necessarily pull themselves out first. The commander on the ground would extract the troops in the most efficient manner possible given the requirements of the events of the day.

So I'm not as pessimistic about our arrangements with the Americans. I think they would do exactly what is right, and that may mean pulling us out, or portions of us out, much before their own troops.

Mrs. Elsie Wayne: I guess, Mr. Chair, when I hear the General referring to a coalition, it leaves a lot of unanswered questions in my mind, and you know why.

The Chair: Thank you, commander, and we wish you a pleasant trip.

Mr. Anders, we're now at the second round, four minutes.

Mr. Rob Anders: Thank you, Mr. Chairman.

The Auditor General stated in chapter 10, paragraph 11:

In spite of the government's decision to invest around $2.4 billion more in defence from 1999-2000 to 2001-02, departmental plans indicate a budget shortfall of $1.3 billion for 2001-02.

Mr. Shepherd asked a question about that. In paragraph 12 we read:

...to meet its estimated needs for new equipment over the next five years, the Department would have to almost double its planned spending on equipment, from $6.5 billion to $11 billion.

Generally, is it not fair to say the Canadian forces will not be able to maintain present levels of capability over the next several years, General Henault?

º (1630)

Gen Raymond Henault: Could you clarify what you expect us to maintain in force levels?

Mr. Rob Anders: What I'm asking is, in light of that second quotation, are you going to be able to maintain present levels of capability over the next several years?

Gen Raymond Henault: I'm going to pass that to the deputy minister. This is all part of our prioritization process.

Mr. Jim Judd: I'd respond with two points to your question. One is that I believe, subsequent to the preparation of the Auditor General's report, there was another budget and another infusion of money into the defence budget, which, therefore, I don't think was accounted for in the Auditor General's calculations.

The second point is with respect to future capabilities and our long-term capital plan. One of the basic issues, I think, in any kind of defence update this year, in the wake of September 11 of last year and other developments internationally, is taking a fresh look at exactly what sorts of capabilities we really would want to have or feel we need to do the kind of job the government would want us to do. So the issue of affordability of a long-term capital program is, in a sense, made a little academic if this fresh look is going to be taken at where we want to go over the next decade.

Mr. Rob Anders: I'm going to turn to the Auditor General, then, because I expect Mr. Judd was talking about more money going in since the evaluation. I'm guessing it wasn't $4.5 billion, and that being the case, I'm hard pressed to see how we could maintain present levels of capability. I'm going to ask the Auditor General or Mr. Kasurak.

Mr. Peter Kasurak: I think the deputy has raised a key point: how much force structuring for what? We would also have to add, at what levels of readiness? When we referred to gaps, we took what were status quo levels being used in the department at the time we reported. As these change, everything else will change around them.

That having been said, one of the main points we've been bringing to Parliament's attention for the last three or four years is precisely the question raised by the committee. A defence plan, a defence force structure, needs to have an adequate funding base, or you do end up with operational difficulties such as we presented in this particular chapter, difficulties to maintain equipment, difficulties in operating it. At the time we reported, the assumptions were probably reasonably sound, but I think that post-budget, post-September 11, and now into a new defence planning cycle, it's sounder to look at the future plans and how consistent they'll be, in order to come to grips with the problems our previous reports have identified.

The Chair: Thank you.

[Translation]

Go ahead, Mr. Bachand. You have four minutes.

Mr. Claude Bachand: Thank you, Mr. Chairman.

My office undertook a detailed study of so-called level 1 activity plans.

The interesting feature of these plans is that they are public, even though they are detailed. They were drawn up by the commanders of the three main branches of the forces. I know the Auditor General commented on equipment readiness and the current state of affairs.

Of course, it's impossible to predict the future. The interesting thing about the commanders' text is that they all recognize a certain state of affairs or situation which is not often acknowledged publicly. Moreover, their words contradict to some extent their statements to the committee to the effect that our state of readiness was sound.

Consider the words of Vice Admiral Buck:

Without additional resources, the Navy won't be able to provide the expected degree of naval capability [...]. Increased fuel costs, coupled with tight operating budgets, will result in the streamlining of much-needed fleet operations [...].Unless additional funding is secured, the Navy will be forced, among other things, to eliminate national and international exercises that help personnel achieve and maintain the proper level of readiness.

This calls into question the whole issue of interoperability.

Mr. Campbell from the Air Force noted the following:

The Air Force is facing serious shortages. The situation is extremely grave in the case of pilots and will likely deteriorate further over the next three years [...] resulting in a loss of capability.

Lieutenant General Jeffery, who maintained that the Army's state of readiness was greater today that a decade ago, notes the following in his activity plan:

Collective training has fallen below the level considered safe [...] Nine years have passed since the last brigade exercise.

A brigade trains together and there hasn't been an exercise in nine years. He also goes on to say the following:

We shouldn't even consider broaching such issues as equipment needs and personnel shortages.

I wonder if it is even possible to rectify the situation in the next few years without major adjustments to the budget.

General Henault, you've already stated that any additional funds would be welcomed. If you want to prevent a disaster from materializing, perhaps you would be wise to agree with our position and to ask the government to inject more money into defence. We on the committee have made such a request, but we would also like you to...

Would it be possible for you to do that, that is to echo the generals' concerns and to tell the department that if no additional funding is forthcoming, you will be unable to meet your commitments?

º (1635)

Gen Raymond Henault: Let's just say that the Deputy Minister and I are paying close attention to the budget process.

We're consulted through a number of initiation documents. Each year, before the department's internal budget process is launched, we update our capacity and the needs of our environment chiefs and other level 1 personnel in the department. We request funds by way of initiation documents. We do not impose any restrictions.

[English]

Here is everything we need to do, everything we would like to do, and everything we would wish to do in the longer term if there were no limits on our expenditures.

[Translation]

They identify pressure points in terms of equipment, training and personnel. We consider these requests and the department's overall needs, including those of level 1 non-military personnel like the ADM (Mat) who handle finances, human resources, and so forth. In other words, we do a kind of balancing act. We look at what we can do with the budget allocated to us and what kind of funds we can allocate to level 1 personnel, bearing in mind major priorities in terms of operational or support requirements.

Again, the operational planning process involves some prioritizing.

[English]

The Chair: Mr. Bryden, please, four minutes.

Mr. John Bryden (Ancaster--Dundas--Flamborough--Aldershot, Lib.): I hope the witnesses will disregard Ms. Wayne's suggestion that the military should speak out independently, because parliamentarians lack power, in her view, to address the needs of the military. You will know you are honour bound to answer to Parliament and not to speak out independently. I wanted to make that point, Mr. Chair, and I know the witnesses will appreciate that.

It appears to me that one of the things the Auditor General is pointing out is that there has been a logistical problem she's dealing with. As I recall from my very little military reading, the secret of Napoleon's success was that he knew where all the bakeries were, and he took a personal interest in the condition of those bakeries on behalf of his troops. So logistics are very important. Did the Auditor General look at the state of the Department of National Defence's computers, the hardware and the software capability to manage not only defence needs, but the needs of tactical, inventory control, logistics, that kind of thing? What have they got there?

The Chair: Mr. Kasurak.

º (1640)

Mr. Peter Kasurak: Thank you, Mr. Chairman.

We did not examine the capacity of the supply system or the maintenance management systems directly, but I think it's fair to say that many of the problems we found that affect operations were supply-related. For instance, spare parts have not been arriving at deployed units in time. Sometimes it took two or three goes to get the right part in the right quantity to units. The after-action reports regularly cite difficulties in prioritizing shipments. So there is a strong indication that there's a problem, but we didn't do it by directly looking at the info system.

Mr. John Bryden: Let me ask some of the defence witnesses, do you have up-to-date computer capability? Are you modernizing your computers, so that you do have the latest in private enterprise Pentiums or whatever else we've got out there?

I'll tell you where this remark comes from. I read somewhere that our frigates, albeit some of the most modern in the world, have command and control systems based on obsolete computer technology. I would have thought one of the easy explanations for the logistical problem or the inventory control problem is that you've not modernized, you're not capable of modernizing your computer systems. What are you doing in that area?

Gen Raymond Henault: Mr. Williams has actually spoken about that in broad terms with reference to the materiel acquisition support and information system, MASIS, which is being introduced into the Canadian Forces and the department. This will, in fact, cover the full range of in-service and acquisition type activities in the department in a computerized fashion.

We have a very broad-based information management strategy being developed by the Canadian Forces. It's looking at the information technology that supports all these activities. We're always in need of upgrade and always need to stay abreast of the new technology developments under way in the world, but for example, our frigates have been updated over time. They are state-of-the-art frigates. They represent a communications and a command and control capability that is second to none. Those types of things are really part and parcel of how we're trying to do business, putting the emphasis where we need to put it, taking advantage of information management and technology that will help us not only with what the Auditor General is suggesting in regard to tracking and managing our equipment and so on, but also with the full range of activity we do along both the operational and support spectrums.

Mr. John Bryden: Having accepted that, I do hope the Auditor General will examine this area, because I think it is a crucial area.

Thank you.

The Chair: I think you were getting agreement from the Auditor General. Is that correct?

Mrs. Sheila Fraser: Suggestion noted.

The Chair: Suggestion noted, okay.

Monsieur Bertrand, s'il vous plaît, quatre minutes.

[Translation]

Mr. Robert Bertrand (Pontiac--Gatineau--Labelle, Lib.): Mr. Chairman, this afternoon I listened to my colleagues opposite and to officials from the Office of the Auditor General of Canada. If I weren't familiar with National Defence, I might be tempted to tell everyone that nothing works over there and that we should shut everything down.

However, I am quite familiar with the department, Mr. Chairman. Personnel deployed in various theatres of operation, whether in Canada, Bosnia or elsewhere, not only represent the department very well, but our country as well. They are doing an exceptional job. I've seen it firsthand, and so too have my colleagues opposite. We're going a little too far when we claim that nothing is working at National Defence.

I noted in the Auditor General's report that 15% of maintenance personnel on the job do not have the required qualifications, but that this doesn't necessarily mean they are incompetent. In my book, Mr. Chairman, if a person lacks the required qualifications, that person is not qualified for the job.

I have a question for General Henault, further to the Auditor General's comments. To you knowledge, are some pilots flying aircraft that are unsafe? That's my first question.

º (1645)

[English]

The Chair: That took a long time to ask, so I hope the answers are brief.

Général Henault, s'il vous plaît.

[Translation]

Gen Raymond Henault: As the Auditor General pointed out, despite the difficulties encountered in recent years, we have managed to maintain the capacity of our army and naval forces. We have also been quite successful on the air force side of our operations.

Let me assure you that no pilot or crew member is assigned to an aircraft if he does not have the necessary qualifications. This is a critical, fundamental component of our flight safety and training programs.

Similarly, our aircraft maintenance personnel do an exceptional job. No one is assigned to work on an aircraft, vessel or army vehicle if he does not have the necessary qualifications, or without first receiving the proper training to maintain that particular piece of equipment. Therefore, our personnel is qualified and no one without the proper qualifications is assigned to maintenance duties.

[English]

The Chair: Now we'll hear from the Auditor General.

[Translation]

Mrs. Sheila Fraser: When I responded earlier, there seemed to be some concern about security problems, owing to the fact that personnel did not have the necessary qualifications. Let me clarify this. We made no such statement in our report. We indicated that 15% of maintenance personnel on the job had not completed the training required in accordance with Canadian Forces standards. As I explained earlier, this doesn't mean that personnel haven't received any training at all, but rather that the training received is not up to Canadian Forces standards. As a result, they may need more supervision.

[English]

The Chair: Do you have a very quick question, Mr. Bertrand?

[Translation]

Mr. Robert Bertrand: What percentage of the Sea King fleet was available for deployment in the Persian Gulf?

Gen Raymond Henault: It depends on the aircraft. Some are available between 95 per cent and 98% of the time, while others are available only 50% of the time. As I said, it all depends on the aircraft and on the experience of the maintenance crews.

This is not the case with operations. We have an on-the-job training program in place. As the Auditor General mentioned, people tend to share their knowledge with others. This program is extremely effective.

Let me also say that thus far, Sea Kings have logged a total of nearly 1,900 flying hours in the Arabian Sea. They have flown approximately 750 missions without incident, which in itself is an indication of our operational capacity.

[English]

The Chair: Thank you very much.

Mr. Anders, please, four minutes.

Mr. Rob Anders: Thank you very much, Mr. Chairman.

My question is to General Henault. How disappointed were you with the 2001 budget funding for defence?

º (1650)

Gen Raymond Henault: Government provides to the Canadian Forces and the Department of National Defence the funding it wishes. I have no reason to be disappointed in the funding that's provided to me. It's a matter of balancing the requirements I've talked about previously.

Mr. Rob Anders: Virtually every military analyst has said the budget totally failed the Canadian Forces. Is that a fair statement?

Gen Raymond Henault: Absolutely not. We have been provided with a mandate for additional tasks, which we have been funded for, and we've been provided with a certain amount to effect some investment opportunities and take us further downstream. More would certainly be welcome, but that's for government to decide, not for me to comment on.

The Chair: Thank you, Mr. Anders.

Monsieur Bachand.

[Translation]

Mr. Claude Bachand: Thank you, Mr. Chairman.

First of all, I'd like to say a few words to my friend Robert about the Auditor General and the members opposite who want to shut things down. I don't think that is the case. There's a difference between saying that everything is going badly and wanting to shut down operations, and viewing the situation through rose-coloured glasses and maintaining that everything is going swimmingly at National Defence. Along with our friends in government, we're trying to strike a balance.

Nor should people think that we're calling into question the role of soldiers in the field. I accompanied the minister to Eritrea as well as to Bosnia, and I have always maintained that troops were doing an excellent job with available resources and capacity. They are totally dedicated to the cause.

By asking questions and trying to get some sense of where we're going, I'm not implying that our troops are not doing their job. It's a little like asking questions about the status of the prisoners held in Guantanamo and being told that we're siding with the terrorists. That isn't at all the case. Rather, it's a case of democracy in action.

General, you didn't answer one of my earlier questions, so I will put it to you again. Are you in a position to publicly state that Canadian Forces need additional funding? Do you have the option of doing this on the eve of a budget, after having made internal representations, as I'm sure you have made? It's possible to outline to the public what your expectations are of our armed forces, given international and local commitments. Ice storms like the one we experienced, or floods like the ones in Manitoba are always a possibility. So, on the eve of or several weeks before a budget, do you have the option of publicly requesting more funding for the Canadian Forces, or, out of a sense of loyalty, do you refrain from making requests of this nature?

Gen Raymond Henault: Our responsibility extends to making comments and recommendations to the Government of Canada via our department.

Mr. Claude Bachand: I see. Therefore, what you're saying is that you are not in a position to publicly express your dissatisfaction and to request more funding for National Defence. What you can say is that more funding would be welcomed. You've given me that very diplomatic answer on several occasions. However, you can't say that Canadian Forces would no longer be able to meet their commitments if this funding wasn't forthcoming. Isn't that what you're really saying?

Gen Raymond Henault: It's always important to set priorities and that's what we do with the funding allocated to us. As you well know, that's the extent of my responsibilities.

[English]

The Chair: Thank you, Monsieur Bachand.

Mr. Bryden, please.

Mr. John Bryden: I have just a couple of questions.

When the Auditor General's report came out, there was a lot of hullabaloo about the Canadian Forces being unprepared, and I have heard you say spending is a matter of priorities, and it may not be in the particular area looked at by the Auditor General. So let me just ask a, shall we say, tangential question. In your opinion, General Henault, are we investing actively, for example, in infantry-borne tactical weaponry and training? This is a whole other category.

Gen Raymond Henault: That is a good question. In fact, we are probably doing better in individual training than we have done in collective training over the last several years, for many reasons. Individual training up to what we call the operational level has gone not badly, up to the battle group level, and so on. It's beyond that where we've had to make some choices in the degree of training we undertake, and that's where we are making some prioritization decisions, all of which are being incorporated now in a strategic collective training plan, which is seeking to redress that in the longer term, based on funding levels that are available to us.

Mr. John Bryden: Are we investing sufficiently actively? It's never sufficient in terms of money or time, but are we actively acquiring the appropriate infantry-borne tactical weaponry?

Gen Raymond Henault: Yes we are. We have some of the best weapons that are available to provide for protection and whatever operations the infantry has to be involved in. But I would add that we do what we call tiered readiness. We know we can't afford to maintain all elements of the Canadian Forces, whether it's infantry or fighter pilots, at the top level of readiness, so we have levels of readiness that allow us to respond to our requirement very rapidly in given timeframes we already have established, hours or days or months. We can reinforce those immediate responses we have through a tiered readiness program, which then allows us to upgrade their qualifications, to bring them to that level of readiness where they can respond to operational requirements, wherever the government may call for it. It's in that way that we manage our readiness in an affordable and responsible way.

º (1655)

Mr. John Bryden: Thank you, General. I wanted to make the point, because I think it's important for Canadians to know that despite impressions to the contrary, as a result of the Auditor General's report, we are very capable in a key area of combat.

As one final question, is there any place, in your view, for a new white paper or a new study on defence priorities? Do you have sufficient direction now to carry you over for the next few years? Mr. Judd.

Mr. Jim Judd: As my minister said today, sometime over the course of the year we will be engaging in an update or review of our capabilities for structure etc. He also said, I think, that many things about the white paper of 1994 were, in his view, still sound. I think that characterization is right. If you read the white paper today, its assessment of the world was fairly good in contemplating the degree of chaos and confusion and conflict.

There are a couple of areas where it falls short. One is that when it was drafted, I don't think anyone anticipated that the Canadian Forces would be as active as they have been, internationally and domestically. Second--and this is not just trying to appeal to the Auditor General's good graces--I think some of our performance standards set out in the white paper have turned out to be not particularly relevant in the light of the experience of the last eight years. The biggest element there, of course, was the commitment to have a vanguard force, with the main contingency force deployed within x number of days with x number of people. The reality is that over the last eight years we've never been in a position of employing a main contingency force, although there have been a number of occasions, including right now, where we have had the equivalent, or more than the equivalent, of the vanguard deployed, except that these people are deployed in 20 different places, whereas the white paper contemplated a single point.

So one of the things I would certainly look for in a new document, if there is one, is a better understanding, for us and for government and for the public, of what you're getting for the money.

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

Mr. Shepherd.

Mr. Alex Shepherd: To the Auditor General again, it came up in our questioning about airlift. Some of the comments from the military people make a lot of sense to me. Are some of your assumptions erroneous? If we want to have the ability to do this massive airlift, and yet the private sector has the capability, clearly, at any point in time the military is in a position to second those aircraft to use them. Is the assumption you are basing this on that we must have this total in-house capability to move all our forces around any theatre in the world? Have you taken in those kinds of assumptions?

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Mr. Peter Kasurak: We made no such assumptions. The assumptions we've tried to use throughout this report are the assumptions and standards set by the Canadian Forces themselves. We didn't get into airlift in this particular report, but the standards we used for air maintenance, for example, were the informal standards used at the Wing level. We've never applied an operational standard in an audit that wasn't in use by the Canadian Forces or the department. If we had done that, we would have said so. We might do it in a benchmarking situation, in this audit we didn't. This is all against standards that are in use in the department.

Mr. Alex Shepherd: My final question is maybe a little off topic and states the obvious. With what we've gone through since September 11, though I know you're telling me you're going to restructure some of your strategy and so forth, it seems to me there's the potential for misallocation of resources here, in that these so-called terrorists don't use conventional forces. So spending more money on conventional forces may, in fact, not be the answer.

Mr. Jim Judd: I certainly don't dispute that. The government's budget in December of last year allocated a large proportion of the spending on security to non-military departments and agencies--CSIS, the RCMP, the Customs and Revenue Agency, and a whole range of others. Our portfolio, if you will, got a chunk of money as well for non-military purposes, for intelligence activities and consequent management activities. But much of the set of issues concerning what happened on September 11 is to do with law enforcement, intelligence, and non-military capability on the part of a state. I think that was fairly accurately reflected in the budget last year, and I think it's being reflected in other western jurisdictions, like the U.K. and the United States, where spending on intelligence and law enforcement is increasing as a result, with perhaps not as much going to traditional military and defence spending.

The Chair: Thank you, Mr. Shepherd.

Mr. Bryden, do you have a short question?

Mr. John Bryden: The budget actually allocated extra spending for chemical and biological warfare, countermeasure developments, that kind of thing. Is there something to be said for a review of that program, where it's at now, whether it's sufficiently financed? To my knowledge, there hasn't been anything like that in recent years. I know more money is going into it, but is there something to be said for a look at how that money is allocated, how that program needs to be reviewed?

Gen Raymond Henault: I know the ADM will add to this, but internally, the Canadian Forces completed a study before the September 11 events that looked at the full range of military chemical, biological, and nuclear requirements, whether it was for defensive purposes or to provide equipment and so on to deployed forces, as well as forces in support of domestic requirements. So we do have a baseline and we do have a program under way already seeking to redress a number of those issues. We had also been working on an asymmetric threats study, which had identified the potential threats of terrorism and chemical-biological threats out there that were coming to challenge us. So we have the baselines already that will help us in establishing, perhaps, what the path ahead is in a more refined manner as we go through this policy review and update.

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The Chair: Mr. Judd.

Mr. Jim Judd: There are two kinds of capability here. One is the capability the forces use, deployed if required, the other is the government's capability for domestic purposes. On the domestic front, the funding in the budget is going to be allocated horizontally, if you will, to a variety of departments and agencies, ourselves included, for a variety of activities, including training, research and development, preparation of first responders, developing expertise, and so on. I guess the short answer would be that to look at it now would probably be a little early, and maybe six or nine months from now would be better.

Mr. John Bryden: May I suggest again, Mr. Chairman, that this is something the Auditor General might consider. I think six to nine months is too early, actually, but maybe a couple of years from now it's a field that might bear a little examination.

The Chair: Thank you, Mr. Bryden.

Mr. John Bryden: Thank you.

The Chair: Gentlemen, I'm taking a look at the news release of the Auditor General from when she tabled her report in December 2001. I recognize that the audit was completed before September 11, but it goes as follows:

There was a conscious decision to decrease equipment readiness because of budget constraints and because the post-Cold War international situation no longer warranted high levels of readiness. Defence officials have said that these reductions are being carefully controlled. However, the Auditor General says careful control and good planning can only occur with better information about equipment readiness.

General Henault, do you agree with that statement?

Gen Raymond Henault: It depends on the context in which it was made.

The Chair: The context is that there was a conscious decision to decrease equipment readiness.

Gen Raymond Henault: We have what I explained earlier as tiered readiness, and so in some areas we have reduced the readiness of land, air, and sea forces in response to the international situation. I think, given the circumstances we now find ourselves in, we have to reconsider that. We've seen that more and more we're going to be called upon to go to areas we've never predicted we're going to go to before.

The Chair: Mr. Judd, was it a conscious decision to decrease equipment readiness, because the Cold War international situation no longer warranted high levels of readiness?

Mr. Jim Judd: Over the last several years, as General Henault has said, we have adjusted readiness levels, for a variety of reasons, including the environment in which we're operating and whether the readiness levels were realistic given the environment. I would say as well that two other factors have affected our determination on readiness levels and our decisions on large-scale training. The first is that we have been deploying people at a rate I don't think any of us expected.

The Chair: When you say deploying, are you talking of peacekeeping or a war mission?

Mr. Jim Judd: All international deployments. I don't think, when the white paper was written, anyone expected the military to be as busy as they are today.

The Chair: Yes, but the military is to protect the country, and I'm quite concerned that you decreased your equipment readiness because the Cold War international situation no longer warranted high levels of readiness. We have known for years about potential suitcase nuclear bombs and all these things, and lo and behold, September arrived, and you're saying, gee, I guess we wouldn't anticipate that kind of stuff. Now it has happened, where are we? We don't get five years to get up to speed to go to war.

Mr. Jim Judd: I would say in response, Mr. Chairman, that I don't think the best readiness levels in the world would have helped any of us deal with September 11.

The Chair: You're missing my point, you're evading the point of my question, which is, can we afford to reduce our readiness at any time just because of budget constraints, so that we can't afford to be ready to defend our country when required, sometimes in a very quick manner? General Henault, let me ask you, you're the general in charge. Do you feel confident that you can defend this country?

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Gen Raymond Henault: Absolutely. The context in which that statement was made is post-Cold War, in which the large formations, bombers coming over the North Pole, as we have with our North American aerospace defence commitments and so on, were reduced as a requirement of the reduction in world tensions in that respect. We have, nonetheless, maintained high levels of readiness for light mobile forces that are capable of reacting on short notice.

The Chair: The Americans want to build a space defence agency in case China or North Korea or some terrorist lobs something at them right out of the blue. We've got a hot spot in the Middle East, where they speculate that maybe somebody will throw something at somebody else pretty quickly, without warning. And here we're saying, well, the Cold War is over, we can go back to sleep. I'm very concerned that the general responsible for defending this country would accept this decision to decrease equipment readiness because the Cold War is over. We've known for a number of years that while the Cold War is over, the world is getting a little bit hotter all the time.

Gen Raymond Henault: We have only reduced readiness where it makes sense. We've managed and maintained readiness and ability to respond to short notice requirements at levels that are quite traditional and have been seen now for quite some time.

The Chair: You say you can respond, and yet, when we want to go somewhere, we have to hitch a ride from the Americans.

Gen Raymond Henault: There is no country in the world other than the Americans, and perhaps the British to a degree, that can go anywhere they want at any time without some additional support. I would suggest to you that even the Americans require additional contracted support when they deploy their forces, and they're doing it today.

The Chair: I fully understand that you don't just have all that equipment sitting in a shed if you can use it commercially and so on. But September 11 was September 11, and we started sending a significant number of troops to Afghanistan in January and February, which is five months later, at which time you had to gear up. I'm not sure how much was transported by Canada, but I know the bulk was by Americans. When I was coming out of Edmonton airport on Monday morning, there were two big American transports being loaded up.

Gen Raymond Henault: You're absolutely right. We are transporting the Canadian Forces halfway around the world into a landlocked country, which requires us to transport them by air. The vast majority of the equipment we're taking over there requires outsized carriage capability. For that reason, we have contracted to the Americans. You have to also perhaps acknowledge that going into this part of the world, into Kandahar in particular, is not without its own risks. The aircraft are being fired upon almost every time they go in there. There is a risk of surface-to-air missiles or anti-aircraft artillery firing upon those aircraft, and so they go in at very specific times and so on. There's a force protection issue that comes with the deployment as well, and there are only a small number of nations that can do that.

The Chair: Yes, I appreciate that, but--

Gen Raymond Henault: We also have C-130s going into the Kandahar airport on a regular basis, because they have the proper equipment.

The Chair: Bosnia was the first war that was basically in defence of humanitarian needs. We didn't go to war with Bosnia and Serbia and so on because they were attacking us. We basically went to war with them because we couldn't stand the human rights policies, because they were trashing every human right and responsibility that exists. So we told them, you can't do that, and we went to war. It showed that the whole nature of war in the 21st century has changed. And then September 11 happened. Here were a bunch of radical terrorists taking on the United States of America--

Mr. John Bryden: I have a point of order, Mr. Chairman.

The Chair: No, no, no.

Mr. John Bryden: I'm sorry, Mr. Chairman, but I don't think it's the place of the chairman to lecture the witnesses on these particular points of view.

The Chair: I don't want to lecture. I'm trying to get the answer.

Mr. John Bryden: If you would ask the witnesses questions, we can all move along here. Mr. Chairman, none of us has had the opportunity of the lengthy dissertations the chairman's indulging in. So please, Mr. Chairman, ask questions.

The Chair: I've had six and a half minutes, and every party had eight minutes, and collectively, you've had about 10, so just give the chair a little indulgence.

My question is this. The nature of war has changed. We saw that in Bosnia, which was significantly before September 11. According to this statement by the Auditor General, you think the Cold War is over, so we don't have to be prepared. What are we preparing for next?

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Gen Raymond Henault: We're in a new security environment. Our policy update will dictate more clearly how that defence white paper can be adapted to this new security environment. It's a security environment in which we're going to be called upon to help provide security and stability worldwide, often unpredictable, often intrastate or interstate, not in large-scale war scenarios. That's the kind of world we find ourselves in, and we need to be able to deploy quickly, and we need to deploy efficiently, with command and control systems that allow us to maintain command of our troops in the field. It's a world in which we see ourselves probably continuing to operate in much the same manner we have over the last several years, in deployments like East Timor, Ethiopia, Eritrea, the former Yugoslav Republic of Macedonia, and now Afghanistan. So those are the types of conditions and situations we see for the forseeable future.

The Chair: I'm looking at the Auditor General's paragraph 10.36. Mr. Kasurak says he always uses the military's own criteria for determination of servicing and so on. It says:

The Air Force calculates operational availability as total time minus downtime for maintenance. The figures are expressed as percentages and are based on a 24-hour day. The Air staff stopped producing reports on operational availability in 1999 because of Year 2000 problems in the information systems used to manage the data.

I take it, by inference, that you haven't started keeping the data again. We were assured that there was no problem. Did you have a Y2K problem?

Gen Raymond Henault: We managed our Y2K problem and did not have one, but our data have been re-established. I would ask Mr. Williams if he has any comments on that. We are keeping data and maintaining and tracking our systems at this point in time. I don't think we stopped during Y2K, we just had problems doing it during that period because of the transition we had to go through.

The Chair: First let me ask Mr. Kasurak, did they stop taking data because of Y2K?

Mr. Peter Kasurak: The system we report around on the air side did terminate. We were unable to retrieve any of the data electronically for this audit. We ended up with only hard copy charts and graphs, which we used to reconstruct our own database. The air force is bringing a new system on line, but at the time we did the audit, it wasn't available to us.

The Chair: Mr. Williams.

Mr. Alan Williams: As the Auditor General has correctly commented, our problem isn't that we don't have systems. We have a ton of systems, we have too many systems. What we have to do is bring them together in a horizontally balanced and consistent way. We hope to do that with the CFSSU and MASIS systems. With regard to the air force, for instance, I and my people look regularly at 24 indicators that measure different aspects of operational readiness, inventory, and sustainability, all these kinds of things. The problem is that a lot of these aren't generated in a consistent, easy, user-friendly way. I think what we have to do is develop those systems so they can be extracted in a format management can make better use of. I think that is what we're trying to do.

The Chair: And we have your assurance on that?

Mr. Alan Williams: You have my commitment to try to make that happen.

The Chair: Okay.

I see that the Auditor General in her statement to the committee today finished up at item number 12 saying:

Parliament might consider taking the follow steps to ensure the equipment is better managed in the future: encouraging the department to set a timetable...; asking the department to state what specific interim steps it intends to take...; asking the department to set a deadline for the completion of its lessons-learned database....

So can I take it that you will implement these three recommendations of the Auditor General?

Mr. Alan Williams: Yes.

The Chair: Thank you.

We're going to finish with a closing statement from the Auditor General, as we normally do.

Mrs. Sheila Fraser: Thank you, Mr. Chair.

The audit we presented is all about information. I am encouraged by the department's response to our audit. They did agree with our recommendations and are taking actions that will address it.

I would like to suggest that the committee consider the kinds of information Parliament should be receiving on equipment readiness and the kind of information that would be useful to parliamentarians going forward. That would certainly, I think, help the department. It would also help us when we go back to do follow-up work at an appropriate time in the future.

Thank you.

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The Chair: Thank you very much.

The meeting is adjourned to the call of the chair.