NDVA Committee Meeting

STANDING COMMITTEE ON NATIONAL DEFENCE AND VETERANS AFFAIRS

COMITÉ PERMANENT DE LA DÉFENSE NATIONALE ET DES ANCIENS COMBATTANTS

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, June 5, 2001

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[English]

The Chair (Mr. David Pratt (Nepean—Carleton, Lib.)): I'd like to call to order the meeting of the Standing Committee on National Defence and Veterans Affairs.

With us today from the Department of National Defence is Mr. Alan Williams, Assistant Deputy Minister, Materiel. With him is Brigadier-General Larry Lashkevich. We're pleased to have you gentlemen here today.

Before we commence with the proceedings, I would like to thank our vice-chair Mr. Peter Goldring for the service he rendered to the committee in my absence. I was in west Africa over the past couple of weeks. Mr. Goldring, thank you very much for filling in. Both the Liberal vice-chair and myself were unavoidably absent, so we thank you.

Mr. John O'Reilly (Haliburton—Victoria—Brock, Lib.): The whip is still trying to figure it out.

The Chair: Yes, I know.

Mr. John O'Reilly: Peter did a good job.

The Chair: It's what you can get away with in this business.

Just on that point, I should mention that I had the opportunity to see our Canadian troops that are part of the international military advisory training team in Sierra Leone. Ten members of the Canadian Forces are there, and they are doing a stellar job working with the British in the retraining and rebuilding of the Sierra Leone army. I hope that at some point the committee will have an opportunity to hear from some of these soldiers, because the work they've done is really quite amazing.

Mr. Williams, you and I have a standing joke about your neck attire. Perhaps you could explain to the members how you always seem to be sporting a different bow tie when you come before the committee.

Mr. Alan Williams (Assistant Deputy Minister, Materiel, Department of National Defence): Thank you very much, Mr. Chairman.

My daughter-in-law will be thrilled, because these bow ties are actually made by her. For those who are interested, it's www.bowtiesbylili.com.

I will point out that in terms of rewards and recognition within my organization, people have become quickly aware of the quickest route to promotion.

The Chair: Procurement is a family affair, then, Mr. Williams.

Please continue with the subject we have you here for today—that is, the state of readiness of the Canadian Forces.

Mr. Alan Williams: Thank you very much.

Good afternoon, Mr. Chairman, ladies and gentlemen. I'm very pleased to be with you again today. I certainly enjoyed our discussion in March 2000, when I outlined my organization's “Getting it Right” materiel acquisition and support reform process, as well as my visit this past March, when I was with the minister.

I want to talk to you today about the operational readiness of the Canadian Forces from the perspective of my organization. More specifically, I intend to discuss the materiel business and operating environment and our approach to coping with that environment within the context of the “Getting it Right” framework and the associated revolution in business affairs. I also want to discuss my top priorities for the future, and of course I want to allow as much time as possible at the end of my presentation for your questions.

Let me begin by outlining my role and key responsibilities.

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[Translation]

First and foremost, the ADM (Mat) organization is a central- service provider and the departmental authority for materiel programs. As ADM (Materiel), I am responsible for ensuring effective materiel acquisition and logistics support to the Canadian Forces and the Department of National Defence. This involves a major role in the planning and implementation of the Long-Term Capital Plan, with about $1.5 billion in annual expenditures, as well as overseeing annual expenditures of about $1.5 billion to sustain and upgrade existing equipment.

I am also responsible for logistics planning in support of operations, and I am the Canadian representative to the Conference of National Armaments Directors, a senior NATO committee that develops and promotes co-operative armament programs within the Alliance and its partners.

[English]

Let me now turn to the materiel business and operating environment. Most of the pressures within my organization are not dissimilar from those facing other organizations within the public service. For example, we are continuing to feel the impact of severe resource cutbacks in the 1990s. In our case we have experienced reductions in staff of over 50%. Those cutbacks, combined with compensation issues, have obviously had a negative effect on the morale of our employees. In addition we are experiencing a growing shortage of skilled personnel in many parts of our organization. That said, we are pursuing innovative measures to address these issues.

More unique to the materiel world, however, are external pressures stemming from an exceedingly complex legislative environment, an increasingly litigious business environment, and, perhaps most importantly, the revolution in military affairs, the RMA.

The RMA, as it is known, has been changing the face of the defence industry and armed forces around the world since the end of the Cold War. For example, it means that modern military equipment must be lighter, more mobile, and interoperable with that of our allies. At the same time, for defence-related organizations to survive and thrive in today's environment, the RMA requires nothing less than a concomitant revolution in business affairs. Within ADM Materiel that revolution in business affairs is being addressed through our “Getting it Right” framework. It is our organization's road map to successfully meeting the many challenges posed by the RMA and the framework through which I meet my responsibility of ensuring effective materiel acquisition and logistic support, thereby helping to ensure the operational readiness of the Canadian Forces.

As I described in my last appearance before you, “Getting it Right” means getting the right goods or services at the right time for the right price, while ensuring the right support and applying the right rules, all with the right people.

The first key thrust of this initiative is leveraging the strengths of industry. This is an area where the revolution in business affairs had an especially major impact in the past couple of years.

[Translation]

The contract we established with a private-sector firm last year to provide support for our troops in Bosnia is an excellent example of this. It is the first time that support operations for an overseas mission have been contracted out, and it represents an important step forward in enhancing the overall readiness of the Canadian Forces. This approach not only allows us to improve the quality of life of our often over-extended soldiers, but it also allows the government increased opportunity to respond to requests for support which our military forces might not otherwise be able to provide.

Another important way that we have been leveraging the strength of industry is by extensively consulting with the private sector prior to finalizing our Request for Proposals, or RFPs. In this way, we can benefit from industry's knowledge and experience in determining our performance requirements. At the same time, industry can be confident that its views will be heard and that it will have a fair opportunity to bid and be successful.

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[English]

Our approach is to tell our suppliers what we need, not how to provide it, thereby encouraging and rewarding innovative approaches from industry. This measure enhances readiness by ensuring that industry fully understands our needs up front, which increases the likelihood that suppliers will deliver what we need the first time, without requiring continual changes in the specifications. The maritime helicopter program is a good example of this approach. In addition to our benefiting from a more consultative and streamlined acquisition process, the new maritime helicopter itself will contribute to operational readiness by delivering more capability than the Sea Kings they are replacing.

The second key thrust of getting it right is undertaking best practices. One of our priorities in this area has been to move it forward with the alternative service delivery program, which was launched in 1995 to review all non-core activities and determine the most cost-effective delivery options. That program has also been instrumental in streamlining internal business practices. A recent initiative that has come out of ASD is a supply chain project, which is investigating the possibility of the private sector delivering the domestic portion of the supply and distribution functions related to the DND supply chain.

Total package procurement, which includes both acquisition and life cycle costs, is another innovative way of doing business that we have adopted over the past couple of years. This practice ensures the lowest possible cost throughout the life cycle of the asset, instead of just in the initial procurement, and improves operational readiness by ensuring timely, regular maintenance. Again, the MHP is a good example of this. In this procurement we're bundling 20 years support with the helicopter acquisition, to ensure the lowest overall cost for the taxpayer throughout the life cycle of the new helicopters.

There are also many other examples of new best practices that are changing the way we do business and helping to improve operational readiness. For instance, we are tailoring our support systems to fit each unique weapon system by identifying the optimum balance of departmental and industry support required for a given system. In addition, we are increasingly employing commercial off-the-shelf technologies wherever possible, to reduce both acquisition and support costs and the time it takes to deliver capability to our operational forces.

[Translation]

Equally significant are the ongoing developments in the area of materiel information management.

We are currently in the process of substantially reducing the number of information systems in the department. In the future, we will base our materiel information management requirements on just two proven, world-class commercial applications.

The introduction of our new Materiel Acquisition and Support Information System and the upgrade to our Canadian Forces Supply System will much improve asset and inventory management of our roughly 19,000 major equipment assets, which have a total value of about $13 billion.

These new, more-effective management systems will give us:

- more effective tools for tracking inventories and maintenance activities in the department and industry;

- greater visibility of costs;

- better availability of equipment in support of operational missions;

- and better information for operational planning and strategic decision-making.

[English]

The third and final thrust of our “Getting it Right” framework is enhancing contract structure and management. Emphasis in this area will be placed on ensuring clear accountability for each party, the inclusion of off-ramps, and building in both incentives and disincentives.

Since the 1994 white paper was published, we have significantly upgraded our equipment. For example, we have completed the modernization of four destroyers and the delivery of 12 new patrol frigates and 12 modern maritime coastal vessels. We have purchased 203 armoured reconnaissance vehicles, 651 new armoured personnel carriers, and four diesel-electric submarines. In addition, we are in the process of upgrading 402 light-armoured vehicles, and we are delivering state-of-the-art clothing to our military personnel through the Clothe a Soldier project.

What else is in store for the future in respect of materiel? I want to take a couple of minutes now to outline my major priorities for the coming months. At the top of the list are a number of key procurement files. For example, for the army there is the replacement of the four-by-four light utility truck fleet with 802 new vehicles and the implementation of the new $1.8 billion radio system, called the tactical command control and communications system. It is being integrated with the land force command system to provide army commanders with improved battlefield information management.

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For the navy, we will be acquiring 28 new maritime helicopters, providing sealift capability, and upgrading its command and control systems. For the air force, we will be taking delivery of our 15 search and rescue helicopters, ensuring airlift capability, and modernizing our CF-18 and Aurora fleets.

[Translation]

A second major priority is acquisition reform which, as I have suggested, contributes indirectly to increased operational readiness.

We have set a goal of reducing the materiel acquisition cycle time by 30%. This is a very challenging objective and will require improvements by all participants throughout the supply chain—DND, PWGSC, industry, research and quality control facilities—each of which has its own systems and procedures. That is why we are now in the process of developing a co-operative strategy with other key participants.

[English]

The third key priority is industry relations, which I believe will be critical to meeting the many challenges ahead and ensuring operational readiness.

To further enhance communications with the private sector, among other initiatives we have recently established a defence industry advisory committee, DIAC. It will facilitate the exchange of views among interested stakeholders across the spectrum of defence materiel and industry-related issues. It meets three times a year and includes representatives from government, industry, and academia.

In summary, at the Department of National Defence we are introducing new modern business practices and state-of-the-art information management tools, and opening up new channels of communications with industry to help ensure we get it right. I believe these initiatives leave us well equipped to adapt to the ongoing revolution in military affairs and meet the foreseeable operational needs of the Canadian Forces and the Department of National Defence.

Thank you very much.

The Chair: Mr. Williams, thank you for your comments.

Before we get to the questions, I would like to advise committee members that our proceedings may be interrupted at any time. I'm advised by the whip's office that there may be votes over the course of the afternoon. At the end of the meeting, we will try to deal with a few housekeeping items.

We'll get on to questions. Mr. Goldring, you have seven minutes.

Mr. Peter Goldring (Edmonton Centre-East, Canadian Alliance): Thank you, Mr. Chairman.

Thank you for your presentation, Mr. Williams.

Mr. Williams, you talked in the very first part of your presentation about breaking down the helicopter contract into two portions, and it doesn't really clarify here whether the 20-year support was for each portion of it. Understandably, one would be the airframe and the engines, and a 20-year support system for those, I suppose, could make sense. But if you're looking at the electronic portion of it, if that's the second portion of the tendering, we know how fast things move in the electronic industry. Is 20 years a reasonable level of support for an electronic package? I would think you would want to move a little further ahead than to have 20-year-old electronics at the end of the procurement stage.

Mr. Alan Williams: Let me clarify that. You're quite correct. Both the basic vehicle and the electronic support will each have 20-year contracts. But actually, the purpose of the 20-year contract for electronic support is exactly to address your concern, because the contract calls for automatic software upgrades periodically, as new technology does evolve. So it was designed, in fact, to keep us in the loop and ensure we don't get out-of-date technology as the world changes. And as you're clearly indicating, with the revolution of military affairs, technology changes once every 18 months. So built into the contract will be mandatory upgrades to address these kinds of upgrades and make sure we do not fall behind.

Mr. Peter Goldring: But software is only one portion of it. Looking at electronics and where we've come from in the last 20 years, to LCD screens and chip technology, is that enough? Or should we be taking a serious look at upgrading electronics? And how often should that be done—every ten years to be reasonable?

Mr. Alan Williams: Well, I would say even more frequently than that. Again, the appropriateness of this is that it builds in automatic updates, not just to the software, but also to the electronics, so we can ensure that we get best practices maintained throughout the course of evolution.

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Not only does it do that for us, but it gives us a degree of stability and consistency, so as we plan our cost envelopes over time, we have reasonable assurances as to what they're going to be.

The contract also builds in incentives to allow for best practices. Cost savings that the supplier will be able to achieve will be shared between both ourselves and the taxpayers, as well as them. Because you're bundling a large chunk of time and money with it, it provides for investment opportunities, a good return on investment for industry, to look at capitalized options that in the short-term kind of contract they could never afford to do.

Mr. Peter Goldring: But isn't that rather crystal balling? How can you say with any certainty what you're looking at for an electronic package 20 years in the future?

I think back to when the Sea Kings were first ordered. I was in electronics in Clinton, and we took three hours on the transistor because they said it wasn't going to last, it wasn't reliable. It was tube theory, the electronics of the Sea King, when it was first delivered. Looking at that as the extreme, how can you crystal-ball and put a price tag on electronics 20 years down the road?

Mr. Alan Williams: One of the keys will be at regular intervals putting in benchmarks as to what the best practices in industry are, and mapping ourselves against those. It will be industry's requirement to ensure we stay, maybe not ahead of the curve, but along with the curve as technology changes.

There is certainly risk for both parties to this kind of action, but again, I would come back to the point that the only way you're going to be able to stay on top of the situation is by being innovative. When you bundle 20 years of a contract, you're talking about billions of dollars, potentially, and that provides the incentive for industry to take some of these risks along with us.

Mr. Peter Goldring: Now, in regard to this other comment here, where you talk about the new Maritime helicopters delivering more capability than the Sea Kings they are replacing, my understanding is that the operational or fly time, the endurance, or the range, whichever way you want to look at it, is calculated at the low end of the specifications to allow for an approximately 180-mile range, versus the Sea Kings, which are approximately a 230-mile distance. That to me would be not only a 75% lowering of the specifications of a 40-year-old Sea King, but the real risk here is when you're operating ship-borne and you're covering a circumference, you really in effect are cutting down the patrol range and capabilities to 60% of the Sea King. So how does that square, to have specifications that would allow such a discrepancy in downgrading of its range?

Mr. Alan Williams: As you're aware, the maritime helicopter is designed to have an endurance of two hours and fifty minutes, plus a thirty-minute reserve. If you figure 120 nautical miles per hour, you get a radius of about 340 nautical miles. If the Sea Kings were equipped with the same kind of equipment, their range would be 84 miles, so it's 84 versus 340. There is no question at all that what we're doing is getting much, much greater upgrade over the Sea King. Frankly, that's a no-brainer. If we weren't, you could ask what I'm doing in my job if I got something as ineffective as the Sea Kings are.

So the real number is a 340-mile range with these, which is consistent with the requirements of the navy, as opposed to 84 miles should the Sea Kings be outfitted with the same suite of systems that we're asking to be put on the maritime helicopters.

Mr. Peter Goldring: But are you not playing with numbers? What we really have is a Sea King that will do a patrol range of 230 miles in one direction, in a radius, and you're replacing it with a replacement helicopter, regardless of the electronics package in it, that will have a 180-mile patrol range that will not reach our 200-mile international water mark. So comparing range and distance of Sea Kings to the new specifications, the new specification at the low end is 75%, regardless of electronics.

Mr. Alan Williams: No, I don't think so. I think I'm seeing it correctly.

The Sea King, in terms of doing its job, were we to be able to outfit it with the kind of equipment that's needed to do the job... As everybody here is aware, the Sea King is now maybe 40% effective, so we're not talking about comparing something that's 40% effective, or ineffective, with something that's effective. If you want to compare two pieces of equipment that are equally effective, the Sea King, properly outfitted, can accommodate only an 84-mile radius, as opposed to 340 miles for the Maritime helicopter.

The Chair: Thank you, Mr. Goldring.

Mr. Bachand.

[Translation]

Mr. Claude Bachand (Saint-Jean, BQ): Thank you, Mr. Chairman, and thank you for your presentation, Mr. Williams.

I was looking at your previous work experience and your curriculum vitae. You are not wearing your bow tie in the picture on your curriculum vitae on the Internet; you are wearing a tie. I am not sure if you could change that. I would not say that it would enhance your qualifications, because you seem to be a highly-qualified man.

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On your resume, it states that you are in charge of capital planning, but in your presentation, you are more modest and you said that you play an important role in planning.

First of all, I would like to ask you whether you are in charge of planning or whether you do indeed only play an important role? Personally, I prefer to be in charge rather than just playing an important role.

Mr. Alan Williams: As is the case for many things in government, it is not always easy to answer this type of question. I am specifically accountable for capital.

The Canadian Forces determine their needs and determine priorities areas in their requests. My job is to assess at these requests. Based on a budgetary envelope, I try to look at the best way of procuring what they need and I manage these projects from beginning to end.

Mr. Claude Bachand: From what you have said, I understand that you do play an extremely important role. I am looking here at the budgets you manage. They are very large. We are talking about $1.5 billion annually for planning and $1.5 billion annually for repairs and maintenance. Therefore, you are responsible for an annual budget of approximately $3 billion. A long-term plan with a budget of $3 billion a year is being talked about. Would it be possible for members to see your department's long term plan? That would give us an insight into the plans of the Canadian Armed Forces.

For example, is the military intending to expand the military base in the riding of Saint-Jean? Do the priorities that you have spoken about appear in the documents that you have? Do members of Parliament have the opportunity to find out how you spend your $3 billion annual budget and, given that we are talking about a long term plan here, how you intend to spend this budget over the next few years? Would it be possible for us to have a list of priorities? Yes? If that is the case, could you please get that list to us? You can just simply give it to the committee clerk, and she will pass it on to members of the committee.

Mr. Allan Williams: No problem.

Mr. Claude Bachand: I would just like to thank you for your co-operation. This is exactly what I wanted. You are much more compliant than the minister, because the minister never answers our questions. He always glosses over them.

You are also in charge of the supply side of things, are you not? Would I be wrong in saying that you are currently evaluating bids from three companies, which I have already submitted their tenders? I am told that supplying the Canadian Armed Forces costs approximately $397 million per year. Apparently you have received bids from private companies which reportedly could do the same job for some $100 million less. Could you confirm whether this information is correct?

Mr. Alan Williams: I did not understand your question. What procurement are you talking about?

Mr. Claude Bachand: I am referring to the Canadian army supply system as a whole.

I am told that private companies have submitted bids on your call for tenders in terms of the supply system. This call for tenders includes pencils for the Saint-Jean base, food for the Trenton base and so on. It appears that some companies have submitted bids. I believe that the general explained that earlier.

Mr. Alan Williams: Are you referring to the Canadian Forces Supply System Upgrade Plan?

Mr. Claude Bachand: Yes.

Mr. Alan Williams: Fine. Some fairly major plans... I will continue in English. I am sorry, but it is much easier in English.

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[English]

The supply chain project is an effort, on our part, to see if the private sector can provide the warehousing distribution functions within Canada more cost effectively than we do. We have set, as a benchmark, that the program that costs us currently $360 million, they will have to do for at least $70 million less.

We have had extensive consultations with industry. We've had a number of industry days. They have visited all the bases and the wings. We put out an RFP in December of this past year. A certain number of bidders responded by the end of January. Those bids are in the process of evaluation, and 83% of their bids were evaluated, based on their responses. Those that passed the grade—there were 14 different categories they were evaluated on—were allowed to go in and make oral presentations.

Following those oral presentations, we are following up on the references they provided us. We'll be going to see those organizations these companies said they were able to improve, to make sure we're not just getting wishful thinking or hyperbole, on the part of these companies. I expect that before the end of this month, or maybe next month, we'll be able to go to the Treasury Board with a recommendation.

There are a couple of key points to mention and recognize. We have spent an enormous amount of time looking at the human resource element. In that regard, I want to give full credit to our union people, who sat with us on four steering committee meetings, went to HR policy committees with us, and were present at two union-management consultative committees. They reviewed the drafts. They went out and met with industry on industry days. They went out to all the wings and bases. They were very instrumental in getting us to upgrade the HR demands we put into the RFP.

In addition—and this is the first time we've done this—when the evaluation was done, they were able to watch the evaluation on closed-circuit TV in an accompanying room. So they were fully party to the kinds of important discussions that were going on.

The evaluation isn't complete, so I can't give you any results, but I will say that the strong efforts that were put in to highlight the HR component have paid great dividends. I'm sure, when the results come out, our civilians will be very much reassured by the results of the efforts that were put in by their union representatives, as well as by management.

Just so you understand the process too, when we select the winner, we will take maybe nine months to a year to work with that company and see whether or not everything they said makes sense and holds true. We will go through the HR planning, and we will go through the information-management planning.

Our military people, and this is very important, will do studies to ensure that the military resources that are what we call embedded in the supply chain contractor—or loaned to them, because these military people will still be under the control of the military—will be done in such a way that should they be needed for theatre operations, they can be deployed without impairing their operational capacity.

That's where we stand right now.

The Chair: Thank you, Mr. Williams. Thank you, Mr. Bachand.

Mr. Price.

Mr. David Price (Compton—Stanstead, Lib.): Thank you, Mr. Chair.

I'll just follow up on Mr. Bachand's question. Were there any attempts by any in-house bids on the project at all?

Mr. Alan Williams: There wasn't a complete system-wide one. The general who's sitting to my right was instrumental in really optimizing the depot operations very dramatically. But because what we're talking about is inherent in every base, in every wing, it's very hard to optimize that kind of thing inside. Typically we try to develop a most-efficient organization, when we have a kind of set organizational structure like 202 Workshop Depot, or something like that. But because this was so far flung, it wasn't subject to the same kind of MEO we would typically do.

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Mr. David Price: Okay.

I'll go back to follow up a little bit on the helicopters. With the last helicopter, the EH-101, we were looking at modular units for the communication system, the IMS. At that time, we were saying, “Okay, we know how fast the evolution of electronics is going. We will have to change as we move along, so every couple of years we will have to be able to slide units in and out, or we'll want to take that helicopter and use it for search and rescue, since it could be done on rather short notice.”

In the new platform you're looking at, following up on Peter's question, will any of this be not necessarily off the shelf, but modular, in the sense it can be put in and taken out rather quickly and easily? In particular, we see what's happening with communications. By the time this helicopter is on line, its communications will probably already be passé.

Mr. Alan Williams: You're absolutely right, but that wasn't quite the way it was going to be back in 1992. Frankly, in 1992 most of this work was developmental. That's why when we say we're going to save taxpayers between $1 billion and $1.5 billion, you can quibble about numbers, but I can also argue we're not buying exactly the same thing. Of course, you shouldn't expect us to do the same thing we were going to do in 1992 either.

One of the key reasons is because we're buying commercial off-the-shelf products. The huge developmental costs the taxpayer would have had to bear back in 1992 are not there now. The other key reason why we're going to be saving money is there's much more aggressive competition today. If you take those two factors into account, it's no wonder we're saving that kind of money.

Mr. David Price: You were talking about the helicopter's range, and if you added that equipment to the existing Sea King it wouldn't have any range at all. But with the new helicopter, you will have the possibility of removing certain parts of it that are not in use.

Mr. Alan Williams: Yes.

Mr. David Price: Okay. That's what I was getting at. So you'll be able to lighten up the helicopter to maybe increase its range.

Mr. Alan Williams: The helicopter will be required to be able to support our crew of four, the requisite fuel, our mission system and weapons, as well as a stretcher and two attendants. It has to be able to do all those things.

In the event the helicopter is at its home base and we know it will be going out for a particular mission, we must be able to, within an hour, remove some of the systems things we know we won't need, in order to allow for a bigger boarding party. That's the kind of flexibility we've asked for in our statement of requirements.

Mr. David Price: One of the other problems that comes up and seems to be problematic is prime contractor, which becomes the government, basically.

Mr. Alan Williams: The prime contractor is not the government. We will acquire the frame first. Then we will acquire the mission system integrator. They will be accountable for taking the frame we will provide to that company and integrating all of the mission systems they committed to in that competition. So the prime contractor will be the mission system integrator.

Mr. David Price: They will have the responsibility for the mainframe, at the same time.

Mr. Alan Williams: They will be responsible for putting the systems into the mainframe.

Because we are talking about two separate ones, there is always the risk, of course, that something may fall between the cracks. That's absolutely true. We will try to minimize that as best we can, but there's certainly some increased risk there.

Mr. David Price: I suppose, since I have the floor, I should ask you a little bit about this. We've all been to mess dinners before and we hear the regimental marches and all that. As I saw on the desk in front of you earlier, you have this little CD. Maybe you could talk a little about that and about this book you have out, or were involved in, Equal to the Challenge, about the women in past war years.

Mr. Alan Williams: I'd be happy to.

Mr. David Price: That wasn't a planted question at all, though.

Mr. Alan Williams: In fact there's probably no one less artsy in this world than me. For my organization to produce both a CD and a book is kind of different.

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I think there are two reasons. Having first joined the department about a year and a half ago, when you do go to the mess dinners and all the military people are dressed up in their finery, you'll find that the military band plays about two or three seconds of these key brand songs. They're very inspiring. As you know, these marches really tug on your heartstrings. I said I want to hear the whole songs, and I couldn't hear the whole songs. So under my chief warrant officer, I took over a year to produce that CD, which has at full length all the songs of all the branches within my organization. I give it away as reward and recognition and thank you to staff. I take it out to bases and wings when we'd travel. When I meet my counterparts from other countries, I give it to them. I'm thinking of sending copies to General Grant—he marches the kids off in the morning. I could maybe give him one of those too.

But people appreciate it. The book is also, I think, a very positive kind of activity. That book is called Equal to the Challenge. It's in English and French. It's the story of 55 women, military people, and their stories from World War II. About three or four weeks ago I had the honour, with the deputy minister, of presiding over a book launch where 30 of them were present. These women are magnificent, and the stories they would talk about have really been great.

When I was in England recently, I provided a copy to Baroness Simons. Hopefully, that will help CDC in their bid for the BOWMAN project. I gave a copy to Louise Frechette, and copies are available for everybody. I think it really is a testimony to the magnificent role women have played. Just before that, a month earlier, there was another book launch about the history of women in the military—two recent launchings that really do promote the role of women.

The Chair: Thank you, Mr. Williams.

Mr. Stoffer.

Mr. Peter Stoffer (Sackville—Musquodoboit Valley—Eastern Shore, NDP): Mr. Williams, thank you very much for your presentation.

Talking about women, on Monday we will be debating a motion in the House of Commons that I've put forward on behalf of the women of the military and those past ones, asking that there be a monument in every provincial and territorial capital honouring the work of women in our three major conflicts. So if you want to come down and listen to the debate, please do—and tell your Liberal friends to make it votable, so we, sir, can have success and they can put that in your next book.

Mr. Alan Williams: I have friends in both parties.

Mr. Peter Stoffer: God love you. Thank you again.

It says you're also responsible for logistics, planning, and support of operations.

Mr. Alan Williams: That is true.

Mr. Peter Stoffer: Does that mean base allocations as well?

Mr. Alan Williams: Base allocations and—

Mr. Peter Stoffer: You know what's coming.

Mr. Alan Williams: —in-field operations. And the general who's sitting here is directly accountable for that.

Mr. Peter Stoffer: Excellent, because I think my colleagues know the next question I'm going to be asking concerns the committee that was struck to analyse the future location of the maritime helicopter project. As you know, I represent the Shearwater Air Base, and my colleague over here has many people who live in his riding and work at that air base. Of course, we're very concerned about the future of that air base. Although no-one has come out yet and said, absolutely, Peter, I'm going to do everything I can to keep that base alive, they have hinted that it would be nice to keep it because of the location of the ships.

But, sir, a question for you is—

Mr. Alan Williams: I think it is easier for me to tell you the person to ask, because if there's one thing I try to know, it's my limitations.

Mr. Peter Stoffer: Yes, sir.

Mr. Alan Williams: I can tell you unequivocally that I have nothing to do with that decision.

Mr. Peter Stoffer: Okay.

Brigadier General Larry Lashkevich (Director General, Logistics, J4, Materiel, Department of National Defence): That actually applies to me as well. There is a review under way, and once that review is completed, it will be made public. But at this point it really wouldn't help.

Mr. Alan Williams: It won't be my organization that will be making those decisions.

Mr. Peter Stoffer: But when you're in conversations with these people who'll be making the decisions, if you could put a plug in to protect Shearwater, that would be great.

On page 3, you put down about the alternative service deliveries again. This is the first time someone has mentioned that the union has been very cooperative in this regard.

Mr. Alan Williams: That's true.

Mr. Peter Stoffer: My suggestion, Mr. Chairman, is, if it's possible, to invite the union themselves, to give them an opportunity to speak about their concerns on alternative service delivery. I think that would be very good. If they corroborate what Mr. Williams has said, I think that would be very good and very helpful for us.

But, sir, you talk about the Sea Kings and a more consultative and streamlined acquisition process. There are a couple of companies that would probably argue that point, Cormorant and Sikorsky, because that's the split procurement process, but on the next page you say:

In addition, we are increasingly employing commercial off-the-shelf technologies wherever possible to reduce acquisition and support costs.

Do you not see a contradiction in those two paragraphs?

• 1615

Mr. Alan Williams: No, I hope not. Notwithstanding that we're doing two separate acquisitions, the fact is that in each one we are going commercial off-the-shelf, we are using costs as an independent variable, we are using total package procurement. All of these things are going to save us time and, we hope, the taxpayers' money. The fact that we're doing two separate ones I think has valid reasons, in order to ensure optimum competitiveness in the systems area. It will be up to me, as we said earlier, to try to keep the costs implications of that to a minimum. But given the environment, these best practices will dramatically streamline the process compared to what it could have been were we not to employ these kinds of best practices.

Mr. Peter Stoffer: You mentioned costs, and many people on the government side have mentioned the fact that we're going to save the taxpayer $1.5 billion with this procurement process. But if the Sea Kings were replaced with the Cormorants, as they were to be when the Conservatives were in power, they probably would be in operation next year. Now they're not going to be around till 2005 or 2006, so there's really a delay of an additional ten years. It takes about 30 hours of maintenance for one hour of flying a Sea King. Over ten years, have you calculated what that cost was that would not have been there?

Mr. Alan Williams: The truth of the matter is twofold. I'm actually being conservative, because when I compare the costs, I'm not taking the 1992 costs of the contract that was cancelled, and I'm not escalating it up to today's term. So it's benefiting, if you want, from the lack of cost escalation, which I should have added on if I had wanted to be pristine.

The other thing I would say—and this may surprise some of you—is that in respect of maintenance costs, I'm not expecting a huge difference between the cost of maintaining these old, dilapidated Sea Kings and the cost of the new maritime helicopters. The old ones are costing us a lot because there's a lot to repair. But the new ones, frankly, are going to be very sophisticated pieces of equipment, with a lot more electronics, as we were saying earlier on. So in maintenance there may be some savings over the first couple of years, but I would not be surprised if the costs of maintaining one fleet as against another are fairly close.

Mr. Peter Stoffer: This is my last question. Sir, correct me if I'm wrong, but you're a representative of the Conference of National Armaments Directors, is that correct?

Mr. Alan Williams: Yes.

Mr. Peter Stoffer: What's your professional view on the national missile defence that the U.S. has been proposing and has been talked about through the media?

Mr. Alan Williams: That is a policy issue that's being debated by people well beyond me, above me and beside me, and it wouldn't be appropriate for me to comment on that. I don't know enough to comment intelligently about it.

Mr. Peter Stoffer: In that case I'll ask one more. You talked about the “Clothe the Soldier” program. It's the first time I've heard that expression. It's almost like “Adopt a Highway” program for five kilometres—you can clean up the side of the highway. I certainly wouldn't want that slogan to leave this room, “Clothe the Soldier”. Our soldiers' morale is bad enough. If we go around and say the Department of Defence has a Clothe the Soldier program, we don't look very good. I don't think there's another NATO country in the world that has ever said that—not that I'm aware of. Isn't there another term you could use, acquisition of clothing maybe, or something? Clothe the Soldier program—I feel like donating my jacket now, you make me feel so bad.

Mr. Alan Williams: We will take it. But that is an initiative for about $287 million, requiring 24 different pieces of kit to make sure our soldiers are better clothed.

Mr. Peter Stoffer: And reserves?

Mr. Alan Williams: And reserves.

Mr. Peter Stoffer: Thank you.

The Chair: Thank you, Mr. Stoffer.

Mrs. Wayne.

Mr. Peter Stoffer: Welcome back from Sierra Leone.

Mr. Alan Williams: Thank you.

Mrs. Elsie Wayne (Saint John, PC): Mr. Williams, yesterday in the House of Commons the Deputy Prime Minister stated that the new helicopters “will have a vigorous and robust anti-submarine capacity”. Yet the Minister of Defence, as you know, has repeatedly stated that the new helicopters would not have anti-submarine capabilities, because no such threat exists in the post-Cold War world. That's what the minister states. You are familiar with the specifications and the procedure. Which one is accurate in this?

• 1620

Mr. Alan Williams: Our minister has presented the statement of requirements to his colleagues, and in that statement of requirements he indicated that the helicopter would fulfil three roles: a support role, a surface surveillance role, and a subsurface role. Those are the three functions that we expect the maritime helicopter to perform.

Mrs. Elsie Wayne: Could you please tell us the approximate date, the month and the year, that you were told of the cabinet's decision to split the maritime helicopter project procurement? Moreover, could you tell us at what stage in the department's planning did this occur, before or after the statement of requirement was finished?

Mr. Alan Williams: The statement of requirement was concluded just before I arrived in the department, so we're talking about the late summer or early fall of 1999. We then took that and had a significant number of discussions, making cabinet aware of the different options in terms of how to procure that. I will say this, and I'm sure you've heard it many times: there has not been one letter, one comma, changed by anybody with regard to the statement of requirements.

We presented different options to ministers. We presented them throughout the course of last year before the election was called. Once the election was called, things stopped. We went out with draft proposals, draft ideas, to industry. They had to respond back by October 9 and they did. We wanted to get back to them with the results of that, but the election intervened. Afterwards, we provided ministers with feedback in terms of what industry had said, and they then came back to us with the direction in terms of how to proceed.

Mrs. Elsie Wayne: The last time you were with us, Mr. Williams, you indicated that the MHP contract was not in violation of Treasury Board guidelines 9.1.1 and 9.1.2. What I'd like to know is was that your legal opinion, or were you told that by the officials within the Treasury Board? Perhaps you could use your reply to explain to us how you would have gone about advising Treasury Board officials of the decision to ignore 9.1.1 and 9.1.2.

Mr. Alan Williams: In the way we acquire goods and services it is not prescribed that thou must do A or B. There are times when it's appropriate to use best value. There are times when you can do lowest cost compliant, which is what we're doing here, and there are myriads of what you can do. I think there is no question that the Treasury Board regulations allow you to do that, and there's also no question, it's equally important, that the agreement on internal trade allows you to do that. There have been a number of legal opinions that make this absolutely clear.

Mrs. Elsie Wayne: Don't you honestly believe in your heart that if the previous government had not put out a contract for the EH-101, what we are doing for the replacement of our Sea Kings now would be different, and all of the companies would be afforded an opportunity to bid? I say that to you because, as you know, I was a mayor and David Price was a mayor—I don't know if any of the others who are sitting around this table were mayors—and we dealt with tenders and we had to do what was best. We had to do what was best for our people to give them the tools to do the job out there, not necessarily get the lowest price but give them the tools to do the job and what was best for them to do it.

So this is why I really don't have any time for politics in defence. I only have time for us to give our men and women the tools to do their job and the best tools, and if we have to pay a little more to give it to them, then we pay a little more to give it to them. But I have major concerns about what we're doing.

• 1625

Mr. Alan Williams: All the questions are important, but let me try to take some time to make sure I respond, and if you're not comfortable let's debate it.

I won't deal in hypothesis and what-ifs. But let me make this absolutely clear. I have spent months dealing with all the industry players openly. I have no doubt in my mind I can, with all integrity, say that they each have an opportunity to play the game, and to bid, and to be successful. Each one would like me to do something different to make their position better. But each one of the major players, without exception, has an equal opportunity to bid and to be successful. There is no doubt of that. Frankly, if there were, I wouldn't be doing the job I'm doing.

I've worked too hard with industry in terms of the credibility of the organization. I meet with all industry players from all the major companies regularly in my office. If they have concerns about something that's out there, they tell me, we discuss it, and if necessary we make amendments so that's it clear that our understanding and theirs is the same.

I have no reason to believe that all three will not bid, and all three I believe have an equal chance to succeed. Let me say also that I think it's vital to me that they are all in there. If I'm going to convince our forces that we have the best product, I want them all to play. If they make the business decision that they don't think they can win, it's not my problem. But I will make sure they each have a fair chance, and I think by going through the lowest price compliant that's the best for the Canadian taxpayer and, most importantly, the best for the forces.

I think that if I didn't do this, you'd have more of a right to castigate me and say, “Alan, why are you wasting the taxpayers' money?” I'm not saying I'm getting something that doesn't meet their needs. I'm not saying I'm getting something that's deficient. I'm saying we've taken the time to say exactly what we need, and if we can do that, I don't understand why people would want us to move to something else where I'd spend more money than I have to.

The Chair: Actually you've run out of time, Mrs. Wayne, but I'm sure we'll have time to get back to you again.

Mr. Benoit.

Mrs. Elsie Wayne: Darn. I had a reply to that one.

Mr. Leon Benoit (Lakeland, Canadian Alliance): Welcome, gentlemen, to the committee.

Mr. Williams, in your presentation you make the statement that the total package procurement, which includes both acquisition and life cycle costs, is another innovative way of doing business that you've adopted over the past couple of years. This practice ensures the lowest possible cost throughout the life cycle of the assets instead of just in the initial procurement. Then you go on to say that the case of the maritime helicopter is a good example and that in this procurement we're bundling 20 years support with the helicopter acquisition to ensure the lowest overall costs.

I have two questions on ensuring the lowest overall cost. First is that of risk. There was an article in the Ottawa Citizen that said, and I quote: “In a two-competition approach the risk to the Crown increases dramatically. This risk could take the form of contract omissions or errors.” I'd like you to comment on that, please.

Mr. Alan Williams: We're really talking about two separate things, frankly. As we talked about a bit earlier, were I to bundle the two things together there is no question that would lower the risk. But given that I'm not doing this, given that I'm getting the vehicle and then getting the suite of systems, in order to optimize or to minimize the overall life cycle costs of each by bundling each separately I'm at least ensuring that the overall life cycle costs of the helicopter frame and of maintaining a suite of systems will be minimized over the 20-year period of time.

That's a separate issue, and were I to bundle the two together that does lower that risk.

Mr. Leon Benoit: Whose decision was it not to bundle the two together, as you would normally expect to happen?

Mr. Alan Williams: I think we should be clear here. There are advantages and disadvantages of doing either. There are lots of ways in proceeding with this.

Mr. Leon Benoit: No. My question was specifically, whose decision was that not to bundle?

Mr. Alan Williams: The decision came to us from the government.

Mr. Leon Benoit: So it was the government's decision to do that, and you will admit it does increase risk.

Mr. Alan Williams: Yes.

Mr. Leon Benoit: So that's something we have to be concerned about.

My second question is on the cost not covered in this long-term agreement. As Mr. Price has pointed out, and as some other MPs have pointed out, with electronics obsolescence can happen very quickly. Does this agreement specifically cover a situation where the electronics becomes obsolete to the point you have to completely replace it?

Mr. Alan Williams: When we launch the long-term support, we will have benchmarks in there to ensure that as technology changes we get the advantage of the technological changes and the software upgrades we talked about earlier.

Mr. Leon Benoit: And those are all covered under the agreement, the hardware and software?

Mr. Alan Williams: Yes.

• 1630

Mr. Leon Benoit: Even if it comes to a point where it's determined that you can no longer patch this hardware up, that software upgrades aren't going to do the job, and that it needs to be replaced, is that covered under this contract?

Mr. Alan Williams: We don't have the contract yet. We will be going out to do it with industry over the course of the next year. I'm simply reflecting to you what our objective is in making the comment. While there are risks in any kind of program of this sort, at least this approach minimizes that kind of risk. Is it a guarantee? Absolutely not.

Mr. Leon Benoit: But how can you even make a statement that this is going to save money, that it's going to lower costs, when you haven't the contracts in place, when in fact those contracts may well exclude a situation where there's a general replacement of the electronics?

Mr. Alan Williams: My point is the following. If you go out and acquire just the initial good and you leave the long-term contract separate, you will not—generally speaking—do nearly as well financially as you would if you bundled the two together. Why? Because for one thing you have many more dollars involved in it, and that will typically require companies to sharpen their pencils. More importantly, as you know, if you did buy something at the front end, there is the risk that the parts they put in, in order to minimize their front-end costs, could be extremely expensive in the long term.

So in terms of ensuring accountability, there is no question in my mind that you minimize the risk and try to keep the cost down to the fullest extent possible. Is it a guarantee? Absolutely not. But I would think in this age of rapid technological changes we at least are trying to be as innovative as we can to protect the forces and to protect the taxpayers.

Mr. Leon Benoit: Just a very direct question, then. We talked about risk, and the risk certainly was increased by having these two contracts instead of a bundled contract. In terms of cost, this approach you're talking about—namely, covering the life cycle costs, may well exclude some substantial costs in terms of replacement of electronics—

Mr. Alan Williams: I'm not sure why you're saying that. There's no basis for saying that.

Mr. Leon Benoit: So you're saying that over a 20-year period there's no way there may be costs that would fall outside of the contracts.

Mr. Alan Williams: What I'm saying is no one can predict the future. No one can predict 20 years in the future. What I'm saying is if—

Mr. Leon Benoit: What are you really getting for your money then?

The Chair: Mr. Benoit, our witness is trying to answer the question here. I would ask you as well, Mr. Benoit, and I don't know why I have to keep reminding you, to direct your comments through the chair. All the other members of the committee don't seem to have a difficulty with that.

Your time is actually expired.

Did you want to make any further comments, Mr. Williams?

Mr. Alan Williams: I'm okay.

The Chair: Mr. Bachand.

[Translation]

Mr. Claude Bachand: I would like to come back to the lowest- price philosophy which seems to be developing at the Department of National Defence. It appears that this is a new concept which is being pushed forward by the department. I gave a typical example of this approach during the debate on the Sea King helicopters in the House. If I have a choice between a Cadillac and a Lada and I am told that a Lada is only one dollar less than a Cadillac, I would tend to want to spend one dollar more and buy the Cadillac.

You found a way to sell this point of view to members of Parliament and to the people. You say that you want the equipment to be as inexpensive as possible. At this point in time, you have to take into account the Lada and the Cadillac. Would the soldiers or the army personnel who will be using these instruments be any safer in a Lada which is travelling at 100 km/h than they would be in a Cadillac? I have examples. We are talking about the Sea Kings, but we could also discuss the light utility wheeled vehicles project. I believe that the wheeled vehicles to be replaced are called Iltis.

Mr. Alan Williams: They will be replaced by LUVWs.

Mr. Claude Bachand: According to the information I have, only Mercedes-Benz made a bid. It is a 209-million dollar contract, and there are people who said they would not bid because they cannot break even at that price. What will show us that this is the best vehicle? How do we know that the Department of National Defence will not enforce much less stringent standards because it does not have to compare it to another vehicle, given the fact that there was only one bidder?

• 1635

Therefore, the lowest price, best-value concept applies to all materiel, but it also applies to the issue of services, as I understand it.

I will give you another example, that of Contracted Airborne Training Services. This is coming up as well, but we will be demanding the same service at 70% of the 1998-99 costs, in order to save approximately $42 million. We are in the process of establishing lower standards than those we had. In the end, that is my question. Both for equipment and for services, will the lowest price concept that we have heard so much about not lead us into a dead end where we will find ourselves with equipment and services that will be inadequate for the Canadian Army?

[English]

Mr. Alan Williams: Let me take the time, because I think again there has been a lack of understanding.

When you set a criterion—lowest price compliant or best value—you have to live with the results. People often ask what happens if it comes in a dollar less. The reality is what happens if it comes in $140 million more. You can't pick and choose and say at that time, oh, I don't really want to spend $140 million more, even though it's best value. You can't change. My experience is that's much more likely. You're not going to find a dollar difference. You're going to find perhaps a hundred million dollar difference in terms of best value. It's not just best value. It's not just lowest price. It's lowest price compliant. People forget about that.

The way we look at it, we're using taxpayers' money—still borrowed money. I would argue the following. Why in fact would I pay a nickel more for something I don't need if what I need will do the job and do the job well? At no time did the forces compromise in terms of what they need. That statement of requirements stands as valid today as it was when it was written a year ago. We're not compromising on that. If you talk about best value, then you are opening yourselves up to a potential where in fact the best value will cost the taxpayer not one dollar more, but $100 million or $200 million more.

I'll also just emphasize that in the 1998 contract the search and rescue helicopter that won, even though it was best value, was also lowest price compliant. It won on that basis too. We didn't set it, but as it turns out it was lowest price compliant. So let's not misrepresent what we're talking about here. We're not talking about getting a cheap or an inadequate good. We're talking about getting something that we need. The money I might save in this, I could reapply to other equipment capital needs of the forces.

With regard to CATS, again I would just come back to the methodology I've talked about. We're having extensive discussions with industry. We're trying to find out from them, using their innovative ideas, what's feasible and what isn't. At the end of the day, we may need to put more money in, but that's the beauty of what we're trying to do. We have open consultations. They understand where we want to be three, four, five years down the road. If they tell me, Alan, you're insane, you can never get anywhere close, then I have to stop and rethink this thing. But if not, they may say, Alan, if you change this or that around, we can deliver to you 90% of what you want. Then we know we're close to a deal. Then we know we can go out to the marketplace innovatively and creatively.

That's the approach we're trying to follow. Nothing is sacrosanct. We're not trying to tell industry what to do. We're trying to articulate what our problem is and allow them their experience and their innovativeness in order to try to meet our needs.

The Chair: Thank you, Mr. Bachand.

Mr. Regan.

Mr. Geoff Regan (Halifax West, Lib.): Thank you, Mr. Chairman.

Mr. Williams, thank you for coming today.

You've told us today about some of the things you're doing in relation to best practices and some of the new information management tools you're going to be using. Obviously you've expressed concerns about personnel. It strikes me that in order to implement or bring in those new practices and tools, if you don't have the horses to pull the load, it's awfully tough.

My concern is that you indicated you are pursuing innovative measures to address the issues of the growing shortage of skilled personnel. What kinds of innovative measures are you looking at? What is your success so far? Where do you see the way out of this problem?

Mr. Alan Williams: I'm not sure I see a way out, but we are trying to come to grips with it.

• 1640

In the last year in my organization we hired 94 people, which represents 44% of all the staffing over the last five years. We have tried to do it horizontally, so we have tried to bundle up the needs of the organization and allowed for more effective kinds of hiring. We have provided electronically to our managers on the desktop the most creative and innovative ways of doing staffing. We've brought people in from the private sector; we've brought people in from inside. Any way we can find people, we're trying to bring them in.

At the same time, actually, we have a pilot now that we're trying to introduce, whereby we're trying to hire people, frankly, using electronics. So rather than take days and weeks and months of filling out forms, we're planning to have a certain number of questions on the computer. You come in. You sit down. Depending on how well you do, that's the level that we think you're going to be at. And then, when we come to interview, instead of having three people interviewing one candidate, we're going to have maybe one person interviewing seven candidates. So we take seven candidates in a room; we pose to them a question or two, and we let them go at it to one another, figuring that'll be a more creative, innovative way to try to find people.

So our approach is to do everything possible—in terms of electronics, in terms of opening up our websites, in terms of new hiring practices—to bring people in.

Right now, we're still fighting an uphill battle. We still have over a hundred or so—I think it's 120 or 125—vacancies that we're trying to fill. It seems like staffing is a never-ending business. It certainly is not the most efficient function within government, but you do what you can. And I think what we're trying to do is understand that there is no option. So, as I said, we brought in 94 last year. Hopefully, we'll do at least that well this year and try to bridge the gap, because you're quite right—with everything that we want to try to do, if we don't have the right number of skilled people, we won't be able to proceed.

Mr. Geoff Regan: So you've told us that you don't see a way out, but let me ask you it this way: if there was one constraint that you face in this regard that you could remove or move, what would it be?

Mr. Alan Williams: I don't think it's that simple. When you're talking about limited skill sets, it's not a problem that only I'm facing. Engineers are scarce throughout this country. We're all fighting for the same resource. So what you have to try to do is build an environment that attracts people and that people will want to come to. In my case, I'll say it here, it's energy, excellence, and enthusiasm—“e-cubed”—an environment where people can take some chances, take some risks, have some fun, and try to be innovative. We're hoping that kind of environment will attract people. And while I don't see the solution, I think we're closer to seeing a light—and it's not the train coming towards me, but it's light at the end of the tunnel. So I think we're close to it.

Mr. Geoff Regan: In view of that, what is your progress in relation to introducing the new materiel acquisition and support information system and the Canadian Forces supply system?

Mr. Alan Williams: Both are coming along extremely well. The general, in fact, looks after the Canadian Forces supply system upgrade, and he tells me every day...

We're at how many days prior to countdown?

BGen Larry Lashkevich: It's 13 days.

Mr. Alan Williams: We're 13 days before it goes live at Borden.

And, General, you may want to just elaborate on the CFSSU and MASIS.

BGen Larry Lashkevich: We're in the process of introducing two modern information applications. The two that we're basing them on are COTS—commercial off the shelf. Now, like many other governments and militaries, we have a multitude of information systems. Our materiel acquisition support is going to be based on two. And these are ones that are proven. These are ones that the Gartner Group has analysed, and they have assessed that they are the top two in the world for the kind of business that we do.

For the supply system upgrade, we'll be starting on June 18—in just 13 days—when we're going to be going live at CFB Borden. We will then be implementing it across the western part of the country, which will be done by the end of July, and then we'll be implementing it by the end of September across all of Canada to all the bases, stations, and units that we have across the country. That is for the supply and distribution community—the practitioners in the field.

In addition, we've introduced a new automated information system for acquisition, for program management, and for performance measurement. And this particular application has already started. It's been put in place in 202 Workshop. It's an army national-level workshop in Montreal. It has now been effective, and we're already seeing the excellent results when it comes to doing business smarter. It has been a major factor in reducing the number of people there, as well as doing business performance measurement.

• 1645

We will be applying that for all acquisition at the national level. It will provide the kind of visibility that we need to be able to buy the right things and then put them into the supply system that we have.

The two systems are being integrated now. This is a major undertaking, and we're in the process of starting that process today.

The Chair: Thank you, General.

Thank you, Mr. Regan.

Mr. Stoffer.

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

Mr. Williams, in your illustrious career so far and your knowledge of defence procurement processes, has there ever been a split procurement process before for an aircraft for the military?

Mr. Alan Williams: I don't recall doing so in any period like this at all. Every procurement, frankly, is different, and it stands on its own.

Mr. Peter Stoffer: But has there ever been a split one, like we see with the MHP program?

Mr. Alan Williams: Well, this is the first time that I've acquired something that has, if you want, a frame and a separate system suite. Typically they don't come apart like that, so they can't be put together like that. So I haven't, but, as I said, this one is unique in terms of its doability this way.

Mr. Peter Stoffer: The reason I asked that, sir—and I say this with all due respect—is that we've heard from the Conference of Defence Associations. We've heard from Cormorant and Sikorsky, from Esprit de Corps—I mean, you name it—the Alliance Party, the Conservatives, the Bloc, the NDP, all of those. There are all kinds of people who are questioning the validity of this procurement process, and yet witness after witness—be it General Maddison, be it yourself, be it the minister—are all saying this is a great one. So are we just all wrong, or we don't get it, or what?

Mr. Alan Williams: No, I don't think the question is of right or wrong at all. There are different kinds of approaches. There is no question, as we said, that this raises the risk. If you're industry, you're asking, “Why are you doing something that raises the risk?” If you're government leaders, though, you have other preoccupations as well. The notion that this might allow for more opportunity for Canadian industry is not a trivial matter. The fact that industry doesn't like it doesn't make it wrong, but you'd understand why it's being done.

If in fact you couple that with a strong belief by the ministers that they have strong, capable people that can perhaps keep the ramifications of the risk down—which is what they're trying to do—then perhaps it'll turn out to be fine.

It's hard to second-guess both their advantages and disadvantages, so I don't think there is right or wrong. But you should understand why industry is not happy with it, and why it is something that in fact could benefit at the end of the day those Canadian companies that are successful in the mission systems that otherwise may not have been.

Mr. Peter Stoffer: Okay. Sir, when do you expect those helicopters to be replaced? In what year?

Mr. Alan Williams: Well, we won't know for sure until we complete both acquisitions. We're still hopeful for 2005. We'll have to complete both. It depends on who the winners are, whether they've had a history of working together, and how far advanced they are. We remain hopeful for 2005 while recognizing that there might be some slippage.

Mr. Peter Stoffer: Because as you know, Mr. Chairman, the minister has said very clearly that 2005 was the date, and now the word “hopeful” is attached to that.

Thank you.

I have another question, sir. On the news last night they talked about a recruitment program by the military, and they're going to have four bases across the country for aggressive recruiting. They're going to have these bases in Halifax, in Quebec, in Winnipeg, and I believe on the west coast.

Now one of the things that the news article did was indicate that Cornwallis was shut down in Nova Scotia as a cost-cutting measure. Now, in the very aggressive new recruiting program that is happening, will those new recruits be housed in existing bases, or will there be a new base created because of it? If it is a new base, then why not just reopen Cornwallis and go back there again?

Mr. Alan Williams: That is totally out of my responsibility. My only concern is to make sure that they're clothed.

Mr. Peter Stoffer: You're the clothes guy. We'll call you “Mr. Levi”. Okay.

This is the very last question, sir. What does the Conference of National Armaments Directors do?

Mr. Alan Williams: We're the senior people from each country that are accountable for defence acquisition. In the NATO meetings, what we typically spend most of our time on is looking at defence capability requirements that heads of government and defence ministers have indicated are a priority for NATO as a whole, and together we try to see whether or not, collaboratively, we can find smart ways of meeting the NATO equipment requirements as efficiently and effectively as possible.

• 1650

Mr. Peter Stoffer: But NATO itself has mentioned the national missile defense program. They've made comments about it, and yet you said earlier that it's not fair for you to offer an opinion. If you're representing Canada on this national armament directory, I would assume you have an opinion about whether we should even participate in national missile defence or not.

Mr. Alan Williams: The issue of national missile defence, again, just to repeat, is not one that I can comment on with any degree of knowledge and detailed understanding and assessment, and—

Mr. Peter Stoffer: Give it a shot.

Mr. Alan Williams: —as such, I know my limitations.

Mr. Peter Stoffer: Very good.

Thank you, Mr. Chair.

The Chair: Thank you, Mr. Stoffer.

Mrs. Wayne, back to you.

Mrs. Elsie Wayne: Thank you very much.

If there's going to be a recruitment centre, Mr. Chair, I'm hoping they're going to look at Camp Gagetown, which is just outside Saint John, New Brunswick, between Saint John and Fredericton—and yes, it's one of the best, as you know.

Mr. Peter Stoffer: That was CFB Cornwallis.

Mrs. Elsie Wayne: Well, it was—

Mr. Peter Stoffer: Yes, it was.

Mrs. Elsie Wayne: —but it's closed down. Ours is still there, dear.

Mr. Peter Stoffer: There's CFB Shearwater.

Mrs. Elsie Wayne: Anyway, Mr. Williams, I respect you and your commitment to the armed forces. I want you to know that. But I want to ask you this: How do you explain a company like EH Industries that feels so disadvantaged by the contract process that they challenged it at the Canadian International Trade Tribunal and the Federal Court of Appeal, both of them? They went in both areas because they felt so strongly. I believe they would be pretty sure they were being excluded, and that's the reason they took those drastic actions.

Mr. Alan Williams: I have to tell you that I have the utmost respect for Agusta Westland. When I was in Italy I met with Mr. Caporaletti, and over our dinners, which are typically social, from the first moment we saw each other we went at each other. He is determined and committed to try to make this thing happen.

Having said that, my experience has told me that for every procurement we undertake, I expect a challenge. Typically they're not by the winner; typically we find that it's the losers who go to CITT or the Federal Court. So the fact that somebody goes to try to optimize their situation doesn't surprise me and doesn't bother me. Those redress mechanisms are available through the trade agreements, and if they're successful, they're successful and things will be modified.

But first of all, they didn't win, and secondly, if they did, I'd hear what the court would have to say and I'd adjust. But at this stage of the game, if you're asking me, with all due integrity, whether I think we have something that is fair and balanced, I would have to say absolutely yes. The fact that some company thinks it's not in their best interests doesn't make it wrong.

Mrs. Elsie Wayne: But I think you'll agree that in one of the reports that came back, they said that under guidelines 9.1.1 and 9.1.2 of the Treasury Board, what we were doing was not proper and was against those guidelines.

Mr. Alan Williams: That's not my understanding.

Mrs. Elsie Wayne: That was not your understanding?

Mr. Alan Williams: No.

Mrs. Elsie Wayne: It was ours.

Mr. Alan Williams: No, that's not my understanding.

Mrs. Elsie Wayne: Since you were last here, it has become public knowledge that with respect to the search and rescue helicopter procurement several years ago, the government sought outside independent analysis to ensure the process was fair and open to competition. Specifically, Mr. Justice Dubin and KPMG consultants were asked to undertake that review.

Can you tell us whether any such outside risk analysis was completed for the ongoing MHP process, and if so, by whom?

Mr. Alan Williams: I'm not aware of any.

Mrs. Elsie Wayne: You're not aware of any at all? So there was no analysis done this time around.

Mr. Alan Williams: I think you said “by outside people”.

Mrs. Elsie Wayne: Yes, that's right.

Mr. Alan Williams: No, I'm not aware of us hiring anybody to do any outside work.

Mrs. Elsie Wayne: Okay.

Well, Mr. Chair, he's assured us that our men and women are going to have clothes, so I feel good about that. I hope they're going to have a place to sleep as well, and not together—and I'm the only woman who will sit here and tell you that I have great concerns about women being on submarines. I really and truly do.

The Chair: Mrs. Wayne, I'm afraid that's not Mr. Williams' department.

Mrs. Elsie Wayne: I know it isn't, darling, but I have to tell him anyway.

Mr. Peter Stoffer: What's wrong with women on submarines?

Mrs. Elsie Wayne: Oh, for the love of God, you have only one set of bunks. Where do you think they're going to sleep?

Mr. Peter Stoffer: I grew up with nine kids. My sisters were on one side of the room, and I was on the other.

• 1655

The Chair: I'm not sure how this is relevant to the operational readiness of the Canadian Forces.

Anything further, Mrs. Wayne?

Mrs. Elsie Wayne: No, that's fine.

The Chair: Okay, Mr. Bagnell.

Mr. Larry Bagnell (Yukon, Lib.): Thank you.

Just so I don't lose by default to Cornwallis and Gagetown, you know, the Yukon has never had a base, so I think we should be—

Mr. Peter Stoffer: You have had a base. They shut it down years ago.

Mr. Larry Bagnell: In recent memory.

I too don't quite understand Mr. Benoit's point, and maybe he's going to get back to it, but if there's some great sea change in technology, whatever method we take on procurement is going to be a big cost. But it seems to me, the method you've chosen, where the company that sells us the item has to fix it, has those other benefits that we're going to get.

But my question is just on general procurement. One of the new ways in corporate procurement is that instead of changing all the time, bidding constantly, you try to have a relationship with a supplier for a long term, because there are some benefits to the supplier. A smaller company can buy equipment; it can do research because it knows it's going to have some long-term funding.

Are the Government of Canada's contracts and procedures flexible enough to allow you to do that, and if they are, do you have some examples of success stories where you have a longer term relationship with maybe a smaller company in either a more remote region of Canada, or in Canada as opposed to a big country like the United States that might have a competitive advantage over us, where this has worked to our advantage?

Mr. Alan Williams: Certainly. The rules allow us to be flexible. The key with the rules is that you have to say what you're going to do, and then you have to do what you said you were going to do.

Having said that, there are a lot of innovative ways you can develop long-term relations. The general talked about materiel acquisition for an information system, MASIS. That was done using the procurement methodology that I call “benefits-driven procurement”, which allowed us to start off with one company, develop the relationship, and continue to further that relationship as we go through a number of gates. So, without question, we can do it.

In my comments, I talked about tailored weapons systems support and systems support contracting. These are new ways of bundling different kinds of smaller contracts into larger ones and establishing a long-term relationship with a company, tailored to each individual weapons system. So again, we're not doing one-way-fits-all, and that allows us to develop these kinds of relationships in the most appropriate way for each weapons system.

The Chair: Thank you, Mr. Bagnell.

Going back to Mr. Goldring...

Mr. Peter Goldring: Thank you very much, Mr. Chairman.

Mr. Williams, I want to thank you for mentioning that it was a government decision on the Sea King replacements. We've been hearing a lot whether it's a military decision or whether it's a government decision.

But regarding your comments on “lowest price compliant”, in principle that sounds okay, obviously, to go for the lowest price, but “compliant” is what I have a problem with. When we look at the comparison of the Cadillac and the Lada, maybe we could look at a Ford Bronco and a Lada. There are reasons Ladas aren't used in the oil patch in northern Alberta. You won't find any there.

“Compliant” is where my big concern is. I'm looking at a report dated July 1998, which was not the Cold War period. It's a draft statement of requirements, and they say a three-hour endurance is essential for naval helicopters based at CFB Shearwater. Their reason is to do instrument flying legally to places like Sydney or Newfoundland, for them to fly legally, let alone...

Then when we look at the other information they provide, the question comes to my mind that the military have their plans for training, for missions, for rescue, and all other things, and I would expect that if the military asked for a three-hour endurance, all their training plans are set with a three-hour endurance, and that this would be a minimum type of standard for them.

So I'm having great difficulty with this, and maybe you could explain to me, so I can understand the helicopter companies' concerns on this, why report after report from the military is saying they need a three-hour endurance, yet a decision on a contract, which you say is a government decision, has now opened this up to a lesser specification than three hours, that being two hours and 20 minutes. They're trying to bid with this Ford Bronco, and we're opening the specifications up to a Lada. We're not dealing with apples and oranges here. Why would we not be looking for a helicopter with the endurance and performance standards our military wants?

• 1700

Mr. Alan Williams: I can only reiterate. Without question we are.

Let's say you're running a family in which there are a number of children, and you're debating whether or not you're going to buy something. One of your children gives you a note that says “I think this is what I need”. At the end of the day you might make the decision as the head of the household, or your wife might, in terms of what you're going to be buying.

To be blunt, simply because someone in an organization suggests they want this or that doesn't make it right. It doesn't make it wrong.

The heads of the military made their decision as to what they wanted. They made it without pressure, interference, or intervention. It's those requirements that industry is now responding to. The fact that their memo is circulating doesn't surprise me. I'm sure there was vigorous debate within the navy in terms of what was needed and all those kinds of issues, as there should be. But simply taking a memo or an article that differs from the final conclusion doesn't mean the final conclusion is wrong. It means that the heads of the military took the time to debate all these different things and at the end of the day they were satisfied that this is what they wanted. That's how I view the issue.

Mr. Peter Goldring: With regard to the new requirements for bidding on a maritime helicopter, the specifications do not say it has to be able to fly on instruments from Shearwater to Sydney or Newfoundland. Maybe you could confirm that. Perhaps you could advise us when these specifications were changed to allow this lower level of performance in order to be able to bid on it. Maybe you could comment on why it might be understandable that helicopter companies would be upset at having to bid against companies that clearly are substandard in performance. Could you answer those and maybe provide the substantiation?

Mr. Alan Williams: The statement of requirements deals with endurance. One of the key things we've tried to do this time, as opposed to years ago, is not saddle industry with 7,294 detailed specifications and say you have to do all these things. What we're saying is here are the performance characteristics we need, and we say two hours and fifty minutes with a thirty reserve. I can't tell you whether that means you can fly from point A to point B. I will tell you that's what the SOR said, what the SOR still says, and what the SOR is going to say tomorrow, and that's what they're going to bid on. That is what the navy feels is necessary to work in the environment in which they work. Of that there is no doubt whatsoever.

The Chair: Mr. Goldring, you're over your time.

We'll go now to Mr. Wilfert.

Mr. Bryon Wilfert (Oak Ridges, Lib.): Thank you, Mr. Chairman.

Mr. Williams, I want to talk to you about operational readiness and acquisition reform. Before I do, though, I want to clarify Mr. Goldring's comment.

In the end it's the government that makes the final decision. On the helicopter issue the minister is on record as saying that when he received from the military what they required, not one item was changed, no commas, etc. The decision to split was that of the government. I assume that if there were an issue, the military would have raised concerns. Do you know if that was done?

Mr. Alan Williams: The military would not raise concerns and should not raise concerns. I think their issue is, “Alan, this is what I need. I'm holding you accountable to get it for me.” It's my job to get exactly what they need. The fact that it's done in A or B is not their concern. They said “Here are our requirements, Alan. This is what we expect you to deliver on.”

Mr. Bryon Wilfert: The military indicated what was required, and the government, to your knowledge, did not interfere.

Mr. Alan Williams: Absolutely not. Nothing was changed. The document stands today as it did then.

• 1705

Mr. Bryon Wilfert: In your earlier comments you talked about operational readiness and acquisition reform. You talked about reducing the cycle by about 30%. You indicated this is very challenging, and it's something I imagine you're going to be quite seized with. You're dealing with DND, industry, research, and everything else. They all have different structures, procedures, etc. Could you expand on this cooperative strategy in terms of the timeline? What are the benefits financially and otherwise in this type of approach?

Mr. Alan Williams: Do you mean from acquisition reform?

Mr. Bryon Wilfert: Yes.

Mr. Alan Williams: I think there's certainly the perception, and perhaps the reality, that it takes us too long and costs too much to buy things. We've started to look at the legitimacy of that argument in terms of trying to do better. We've looked at 241 cases over the last 10 years or so, and we found, for instance, that 56% of the time is spent on the front-end definition and approval process. So we don't have to change legislation in order to try to do things more smartly. What I have to try to do is streamline the approval process, see if by buying commercially off the shelf and by comparing notes with colleagues in other jurisdictions we can do things cooperatively and shorten that timeframe at the beginning and get things faster.

As I said, I think it's vital today, because the way the revolution is occurring, we can't afford 10-year projects any more. We really have to be able to find what we want, get it in, and then allow for upgrades as they occur. I don't think there's any question that's where we're going, and I think that's the leading edge way of doing business in this age.

Mr. Bryon Wilfert: Do you have a timeline for that?

Mr. Allan Williams: I certainly hope to have a plan in place this year in terms of how I can achieve that. Right now we're looking at the figures, and we're going to be making proposals.

Mr. Bryon Wilfert: In terms of operational readiness, you indicated you have a staffing issue. I realize you don't necessarily have the same staff numbers you may have needed during the Cold War or whatever. But if a crisis occurred and you needed to respond, how would you deal with that kind of situation?

Mr. Alan Williams: Under section 506 of the agreement on internal trade, if there's an unforeseen emergency—and I put the emphasis on the word “unforeseen”—we can basically do what we have to do. If you were to tell me that tomorrow there will be a crisis that might affect the health and safety of our people, I would forget about rules and practices and do what I have to do in order to protect their lives.

Mr. Bryon Wilfert: Thank you, Mr. Williams, for your remarks.

The Chair: Thank you, Mr. Wilfert.

Mr. Bachand.

[Translation]

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

Mr. Williams, you just said that you take the requests from the various army corps. I think the words that you used were:

[English]

“Alan, this is what I need”.

[Translation]

Could you please explain the replacement process to us for the Sea King or for the wheeled vehicle we were speaking of earlier? From the time the general says to you

[English]

“This is what I need”,

[Translation]

and the department tells you

[English]

“This is what they need”,

[Translation]

what is set in motion?

First of all, are plans and specifications submitted? Are the companies who wish to put forward a bid obliged to comply to plans and specifications?

[English]

Mr. Alan Williams: No one case is exactly the same. In principle we will get a document from the military that reflects a gap between their capability and their need. Typically, they would have done some research in terms of defining what's available in industry so as to be sure that what they're looking for is doable. We will then structure a project team, which involves them as my client, and together we will begin to explore with industry whether or not and how the requirements can be met.

[Translation]

Mr. Claude Bachand: Is there a program at this point? Do you say to the company or to the different bidders, before they put their bids in, that you want to have this type of materiel before that date?

• 1710

[English]

Mr. Alan Williams: We're trying to move away from being prescriptive. I'd rather not tell them I want this kind of material or that kind of equipment. I'd rather just say: this is my need, I need to have this capability—what ways can you suggest to meet that need?

[Translation]

Mr. Claude Bachand: If there are several bidders, do you first of all ask for delivery of a prototype built to specifications so that we can test it? Yes?

[English]

Mr. Alan Williams: It depends on the associated risk. You mentioned that we were replacing our Iltises with LUVWs. In that procurement, the winning bidder has to give us a number of prototypes. We test them at the Aberdeen test centre in the U.S. to make sure they meet our standards.

[Translation]

Mr. Claude Bachand: My last question, Mr. Chairman, is the most important for me. I want to go back to Iltis.

If my information is correct, only Mercedes-Benz put in a bid. How can you be stringent in your assessment if you do not have any other vehicles with which to compare this company's? How can you say that the company was the lowest bidder to comply with the plans and specifications, ask the company to provide you with a prototype and decide that what the company is offering you is good, since it was the only company to put forward a bid? How can you make any comparisons if only one company elects to bid?

[English]

Mr. Alan Williams: The truth is, you can compare—even if you're not comparing it to a competitor. In general, if there's only one bidder, you can still compare the product against the specifications you outlined. If the company meets the specifications, they meet them. When we publish a competition, nobody knows if we're going to get one, two, five, or ten companies. Sometimes you only do get one—that's up to the industry. But generally, that company feels it's in a competition, and tries to win it.

If they don't—if their product either doesn't meet our specifications, or the price is greatly outside our budget—we'll cancel the competition. We just say that this didn't work, and we're going to have to find some other way around the problem. We're certainly legally able to do that.

[Translation]

Mr. Claude Bachand: Thank you.

[English]

The Chair: Thank you, Mr. Bachand.

Mrs. Longfield.

Mrs. Judi Longfield (Whitby—Ajax, Lib.): My initial question was exactly the question Mr. Bachand had raised. It caused me some concern, so thank you, Alan—I have some level of comfort after that response.

In May, the U.S. General Accounting Office said that there had been considerable cannibalization of their U.S. military aircraft to keep others operational. Are we experiencing the same problems? How long can we continue not having the parts we need for what is arguably a very aging supply of military equipment?

Mr. Alan Williams: We have a number of very expensive and elaborate programs on the board right now to make sure that our aircraft are up to date. Our CF-18 modernization and our Aurora modernization are really expensive programs designed to ensure that.

As well, in both cases we're reassessing how many we need. In all likelihood, we won't need as many as we have. So before disposing of them we will, as far as possible, take all the advantage we can of the parts for the aircraft we will retain.

I think the air force is looking ahead strategically at what its role will be, and wisely using what it has in the best possible way.

Mrs. Judi Longfield: Thank you.

The Chair: Mr. Price, you've got three and a half minutes. Use it wisely.

Mr. David Price: Thank you, Mr. Chair.

If we go back to when our frigates were built, they were designed to be integrated with a helicopter system in terms of their very high-tech towed sonar array system and so on. Is that still in the helicopter contract?

Another question: is the cost of the modifications that have to be made to the frigate included in the contract? And what priority have we put on interoperability with our NATO allies, in operating the frigates and the helicopter itself?

• 1715

Mr. Alan Williams: The answers are yes, yes, and very high. I can expand on that if you'd like, but those are really the answers. Yes, they will be integrated. Yes, the cost of modifying the frigates will be borne by the private sector for each individual bid. And yes, we're making sure that all equipment we're putting in is highly interoperable with our allies in terms of things like radar communication and electronic defence mechanisms.

Mr. David Price: One little addition: with regard to the cost of modifying the frigates, are we putting in anything that has to be done in Canada? Do the specifications require that modification has to be done in Canada, in their own shipyards?

Mr. Alan Williams: I'm not certain whether we say where the work will have to be done.

Mr. David Price: Put it in.

Mrs. Elsie Wayne: Yes, put it in—they were built in Saint John.

Mr. Alan Williams: I don't know the answer, but I can certainly let you know.

Mr. David Price: We're paying for it, after all.

Mr. Alan Williams: In fact I think the answer is undoubtedly yes, because we will be making the frigates available in our yards for the companies to come in and fix. So upon reflection, the answer is yes. If I'm wrong I'll let you know.

The Chair: Thank you, Mr. Williams.

Mrs. Wayne.

Mrs. Elsie Wayne: Well, I certainly hope you're right. I hope you do it very quickly, before they turn it into a wood processing plant.

Mr. Williams, in my last round you said that no external risk analysis or fairness analysis was sought by the government. Could you detail for us what kind of internal analysis was completed? Could you also give us your opinion on why external advice was sought on the search and rescue, but not on the current MHP process?

Mr. Alan Williams: In terms of this one, my team and Public Works are continually analysing what's out there. I hate to be blasé, but this is how we do business on each and every project. We're always looking at options and talking to industry, that kind of thing.

In terms of the 1998 project, we brought in KPMG because we were surprised, frankly, that a couple of companies turned out to be non-compliant. I wanted to make sure we didn't do anything stupid. At the same time, I think it's important to note that this was really the first major procurement after the 1994, 1995, 1996 introduction of the different trade agreements. So I think it's not surprising that even the ministers were only just becoming aware of and understanding the new rules of procurement. I think that's why other opinions were brought forward, and in fact they did confirm that the actions we took were fair.

Mrs. Elsie Wayne: That's fine, Mr. Chair.

The Chair: Mr. Price? Okay.

Anything further from this side? No? Mr. Benoit.

Mr. Leon Benoit: Back to a question I was just about to ask when I was interrupted before: it's on the total package procurement for the Eurocopter, which includes the life cycle cost and the procurement. You said that this bundled process ensures the lowest overall costs. My question was, might a substantial cost arise—specifically from major replacements of electronics, or something else—that might fall outside this 20-year package deal?

Mr. Alan Williams: I think that's always possible, no matter what option you choose.

Mr. Leon Benoit: So how can you be sure that this really is the lowest overall cost, as you say in your document?

Mr. Alan Williams: My point is that bundling these two together—combining both acquisition and long-term costs—should, in all probability, result in a lower-cost option.

But if you did it the other way, that same issue might still come up. Even if you separate them out—do the acquisition, and then a year later turn around and do a 10- or 20-year contract with somebody separate from the initial acquisition—that problem might still arise. In either scenario, surprises can occur. My only point is that you're far better off bundling it with the initial acquisition than not.

Mr. Leon Benoit: So you're saying that the military wouldn't pay for the 20-year support if a major electronics replacement had to be done before the end of the 20 years?

• 1720

Mr. Alan Williams: No, I'm not saying that. In fact, under any scenario there might be something we hadn't foreseen, or something so significant that it falls outside what we'd have to do.

Mr. Leon Benoit: But over a 20-year period, you'd expect there'd be a change.

Mr. Alan Williams: I would expect so. But for the things that are within the contract, my point is that you'd probably get a better price by bundling it with the initial acquisition instead of separating it.

I'm trying to compare apples and apples here. In either scenario, surprises may occur. But I would argue that the initial 20-year support contract will be less because you bundled it with the initial acquisition than if you just did the acquisition and then subsequently tried to do a 20-year contract.

Mr. Leon Benoit: Yes, but that wasn't the question.

You made some comments earlier about saving money on this military helicopter procurement over 1992, because now you don't have to pay for development—you can buy it off the shelf. I found that a particularly interesting argument: you're saying you can wait to purchase leading-edge technology until it's kind of outdated, so you can buy it off the shelf. That's the way to save money?

Using the same kind of logic, you could argue that you saved a lot of money by putting off the replacement for the Sea Kings for ten years. But does that make good sense for the men and women serving in the forces?

Mr. Alan Williams: Let's be clear: nobody is saying—I'm surely not suggesting for a moment—that we buy outdated equipment. On the contrary. But back then, we were paying for the cost of creating something that didn't exist. What we're buying now is leading-edge. But there's a big difference between buying leading-edge equipment and having to pay yourself to build things that don't even exist. That's the cost we're avoiding.

Mr. Leon Benoit: Do you recommend that as a normal procedure in the military?

Mr. Alan Williams: Absolutely. I think every major country, as far as it can, is going to be buying off the shelf for commercial or military needs rather than having to incur huge development costs. Absolutely.

Mr. Leon Benoit: So you think the military showed a real lack of judgment when it chose to develop this technology back then?

Mr. Alan Williams: Not at all. It wasn't just the military. At that time, if you were trying to acquire helicopters, there was no competition—there were no products out there. We had no choice but to do what was being done back then.

But the fact is, by delaying until now, we're able to take advantage of a much more competitive environment and a much more advanced technology than there was a decade ago. That's today's reality. We're benefiting from that.

Mr. Leon Benoit: Could that argument be made for any new technology? If you wait until you have more than one available source, you're going to save money. But what matters is what you get, and how quickly it's outdated.

Mr. Alan Williams: Yes, but as with many other acquisitions at any time, if there are products out there then you have vigorous competition. But this was a case when there wasn't competition, and there weren't products.

The Chair: Mr. Benoit, I'm going to have to cut you off there.

Mr. Stoffer, a very quick question. You said 30 seconds—I'm going to hold you to that.

Mr. Peter Stoffer: It's a statement, actually.

I just wanted to say that I look forward to your book, and perhaps you can autograph it for us.

And secondly, would you not agree that the Stadacona band in Halifax is the best military band in the country?

Some hon. members: Oh, oh.

Mr. Alan Williams: I enjoyed all the questions, Mr. Chairman.

The Chair: Thank you very much, Mr. Williams, Brigadier-General Lashkevich.

We have two very quick items to deal with by way of housekeeping. We have a fifteen-minute bell, so we do have a few minutes to get back over to the House to vote.

First, I'd like to bring to your attention that in your offices you should have a draft report on plans and priorities. We would like to get this introduced in the House, so if members have any changes they would like to make to this document, I would ask them to please let me know as quickly as possible. Also, please let me know if you think we should schedule a separate meeting to deliberate on this. We may have to schedule a special meeting.

The second item is with respect to changes that have been made to the Standing Orders concerning the videotaping and televising of committee proceedings. We've been asked to provide feedback from our particular committee with respect to how much notice is required. The suggestion has come forward that perhaps 48 hours notice would be appropriate to allow the necessary arrangements to be made. Again, I put that out to committee members for feedback.

• 1725

So perhaps you would get back to me with respect to those two items. Again, the first is the report on plans and priorities, and the second is the notice period with respect to videotaping. That would be appreciated.

The meeting is adjourned.