[Recorded by Electronic Apparatus]
Tuesday, March 4, 1997
.1530 
[Translation]
The Chairman: Order! Good afternoon all. Pursuant to Standing Order 108(3)(d), the committee is now meeting for consideration of chapter 34 of the November 1996 Report of the Auditor General on National Defence, and more specifically, on support productivity.
Before proceeding with the Auditor General's preliminary statement, I would ask the witnesses to please introduce themselves and we'll start with you, Mr. Desautels.
Mr. L. Denis Desautels (Auditor General of Canada): With me today are Mr. Peter Kasurak and Mr. David Rattray who were both responsible for the chapter under discussion today.
Ms Louise Fréchette (Deputy Minister of National Defence): I am Louise Fréchette and I am Deputy Minister of National Defence. With me today are Vice-Admiral L.E. Murray, Acting Chief of Defence Staff; Mr. Pierre Lagueux, Assistant Deputy Minister in charge of Materiel; and Lieutenant-General A.M. de Quetteville, commanding our Air Forces.
The Chairman: I have already raised the matter of cell phones during committee meetings. As committees are an extension of the House of Commons, I would ask those who have cell phones to please use them outside the committee room and to render them non-operational while they're in the committee room. They're a bother for everyone. The rules that apply in committee are the same as those that apply in the House of Commons.
That said, I give the floor to the Auditor General of Canada, Mr. Denis Desautels.
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Mr. Desautels: Thank you for giving us this opportunity to discuss the results of our chapter 34 of the November 1996 report, on support productivity at the Department of National Defence. As this committee knows, our office has been concerned since at least 1984 with the need to improve productivity in the largest operational department in the federal government. Over the years we have reported on the high cost of running defence hospitals and training establishments and maintaining its bases. In 1994, we reported that the department still could not adequately measure its costs or performance.
At hearings held by this committee on our 1994 chapters, the department acknowledged its difficulties and presented its plan to become more efficient. At that time, the department stressed its need to change its culture from one that was risk averse to one that was more businesslike and entrepreneurial. It also emphasized the introduction of business planning and operational budgets in its 1994 response to this committee.
This audit was intended to compare the productivity of support functions at National Defence with that of our other providers of similar services. We also wished to report the effects of the department's renewal efforts.
[English]
Renewal and reform of support services at National Defence is, in our view, an urgent and pressing necessity. Our audit of peacekeeping operations, which we reported to Parliament in May 1996, concluded that land force equipment and training were far below the required standards set by the Canadian forces themselves. Armoured vehicles were deficient in armour, firepower, and mobility. Training standards had not been met. The number of beds available in field hospitals was below the estimated requirement.
Furthermore, we note currently that in the minister's outlook document, capital equipment spending is forecast to fall from 24% of the defence budget to 20%. So unless savings can be found in areas such as support services, it's unlikely that these deficiencies and others like them can be made good.
The deputy minister, in her statement tabled with this committee on 11 February 1997 in the hearing on our materiel management chapter, recognized the need to transfer resources from support to the operational sharp end. As she said:
- The overriding goal of departmental restructuring and renewal...is to preserve the operational
capability of our multi-purpose, combat-capable forces.
These efforts have reduced overheads that we reported in 1994 were far too high relative to the size of the forces. The department has also made commendable efforts in trying to forthrightly assess its own management culture and values.
On the other hand, however, we found that progress in other areas is proceeding more slowly or is even in decline. Although the department has become smaller, not all parts have become more efficient. We found that many projects required to streamline support operations were still in a conceptual stage at the time of our audit and that managers could not say what levels of productivity they hoped to achieve by the end of the renewal process.
While the department is still confident that its renewal program is on track, we're concerned that it has not paid adequate attention to improving its performance at the local level, where most resources are actually consumed. Quantified goals and measurements are necessary to support a cultural change. They're an absolute requirement for the success of business planning, productivity improvement, and genuine accountability.
Our audit work shows that there are few technical barriers to measuring the performance of support activities. It also indicates that units that measured their work tended to perform better than ones that did not.
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[Translation]
We are not suggesting that everyone ``downtool'' until performance measurement systems are in place. Rather, we are suggesting that the department place more emphasis on the extent to which base managers are focusing on performance right now. Measurement is merely part of this focus. I hope your committee will consider whether the department's strategy warrants further consideration.
Before I ask Peter Kasurak, the Principal responsible for the audit to outline the major specific findings of the audit, I would like to make one more point. Over the last several months I have been aware that several critics of the department have suggested that military organizations should not be doing business planning and that resource management should not be part of officership but should be left to civilians. There is nothing in our audit that lends support to this view. While ``business planning'' may not be the best term to use for linking resources to operational objectives in the military, I believe that the concept is sound. Where military officials have taken control of measuring their performance, productivity has improved, thus freeing resources for training and operations. Overall, measurable goals are an essential element of good management and accountability. The department's objectives should be both to improve accountability in the Canadian Forces as well as the efficiency of support services.
[English]
Mr. Peter Kasurak (Principal, Audit Operations, Office of the Auditor General of Canada): Our audit of support productivity at National Defence focused on two levels: corporate, department-wide initiatives and the level of productivity actually being achieved at the coalface in Canadian forces bases across the country.
Our first major observation is that at the corporate level, the department is implementing business planning, but some plans still lack adequate cost and performance data. Without these data, the value of these plans is very limited.
The second major initiative the department put before this committee in 1994 was operating budgets - that is, increased delegation to lower-level managers to make choices among civilian personnel, operations and maintenance, and local capital spending. This is intended to allow local managers the initiative to make their operations more efficient.
While the department has delegated budgets, local managers have been preoccupied with meeting required personnel reductions. Savings have been achieved through these reductions, but we found little evidence to suggest these savings were attributable to the operating budget concept itself.
We found, however, that the major shortfall in productivity improvement was at the local level. We looked at three major support functions common to all Canadian forces bases: supply, transportation, and vehicle maintenance. We also examined two other costly support functions: individual training and aircraft maintenance. None of these areas had adequate performance information at the time of our audit, and only two appeared to be using the data that were available at the time. Local managers could not tell us whether or not their own productivity was improving or how their units compared to similar ones at other bases.
[Translation]
The lack of performance data is very troubling, in that they are an essential element to the department's business planning strategy. If managers do not know what their outputs and performance trends are, they cannot make useful business plans - they can only continue in a custodial role over the resources they have been given.
Our second major observation was that in the two areas where there were sufficient data to examine trends and productivity - supply and individual training - things were not improving. In both these areas, cost per unit of output increased. In the supply function, productivity was down by about 10%, while the productivity of individual training had fallen by 40% since 1990. While officials have told us that both these functions were in transition because of downsizing, we are concerned that productivity is not being managed closely and the transition will take longer than necessary. Training is a particular concern, since the department promised in response to a 1990 audit that it would put measurement in place and compare itself with other providers.
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Overall, we concluded that although some areas show improvement, current productivity levels of support functions are still low.
[English]
The third general observation that can be made from our audit is that local management can make a difference. In most areas we audited we found one or more managers had taken the initiative and had dramatically improved the performance of his or her base. For example, Base Esquimalt reduced local procurement staff from 76 to 27, negotiated shipping cost reductions with suppliers, and freed up 30% of the warehouse space on the base. Base Montreal cut transportation overhead by almost 50% and expects to triple the productivity of base transportation by this year. This would move Base Montreal from the second-lowest performing base in transport to close to the top five. Air maintenance squadrons at Winnipeg and Cold Lake were able to reduce costs dramatically for Dash-8 and CF-18 aircraft maintenance. Maintenance costs for the Dash-8 were reduced by over 50%, while Cold Lake reduced its labour requirement by over 30%.
Follow-up work on our infrastructure management chapter found additional areas of increased productivity. This committee had recommended that the department explore ways to cut costs of maintenance services. We found the department is taking steps to achieve this. A pilot study on alternative service delivery in construction engineering at Base Kingston reported savings of at least 10% to 20%. While the department could not provide statistics for the construction engineering function overall on total savings expected, it had completed its review and it had set targets for itself.
Additional measures such as the performance measurement and reporting pilot project at the Edmonton supply depot, which the deputy minister reported to this committee in her February 11 statement, indicate more progress is being made.
[Translation]
These results indicate that there is nothing preventing Canadian Forces bases from becoming more productive. This shows the magnitude of the gains possible. As such, they give rise to optimism.
Nevertheless, our consultations lead to concerns that there has been insufficient focus on establishing objectives for productivity improvement at the base level and on a timetable for achieving them. As the Auditor General has already said, we believe there should be some urgency attached to this. This committee might consider asking the department for such a timetable and obtaining commitments from the department for improvements.
[English]
Finally, I would draw your attention to the consequences of failure to improve defence support productivity. In the minister's Outlook document the government has stated its intention to maintain roles and capabilities while making budget reductions that will lower the department's purchasing power by 30%. The only way this can be done is if support productivity begins to increase at once. Our audit indicates the department has the capacity to continue to move resources from overhead to capital and training. The committee may wish to ask the department how many dollars can be diverted from support to operations and by what date.
Thank you, Mr. Chairman. We would be pleased to answer any questions.
[Translation]
The Chairman: Thank you, gentlemen. We'll now give the floor to Ms Fréchette, the Deputy Minister of National Defence.
Ms Fréchette: Mr. Chairman, I would like to thank you and the members of the committee for inviting us to appear today to respond to the Auditor General's comments on support productivity in the Department of National Defence.
Admiral Murray and I provided the Clerk with a detailed statement before today's meeting. So I'll just make a few brief comments.
We welcome the focus on support productivity in National Defence and we share the Auditor General's view that improving productivity in support activities is crucial to maintaining Canada's military capability in this era of reduced resources.
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The many management renewal measures we have taken all have the same objective: to devote maximum resources to maintaining the forces' combat capability while decreasing the cost of our support activities.
What the Auditor General presented in his report in November is a snapshot of the organization as over a year ago. The situation has evolved significantly since then. Renewal in the Department of National Defence is truly a work in progress as we have just begun the third year of a five-year renewal program.
The Auditor General's report suggests that the department is heading in the right direction, but that much work still needs to be done. We agree with his assessment. The leadership of DND and the Canadian Forces is strongly committed to the ambitious renewal goals that we have set for the organization.
In our detailed statement we offered information and specific examples which we believe demonstrate that progress is being made on all fronts. As the Auditor General himself noted, management renewal in the Department of National Defence is taking place in the context of deep cuts in our budget. I know you have heard this before, but I shall reiterate.
The National Defence budget is being reduced from $12 billion in 1994 to $9.2 billion in 1999, a 23% decrease.
By 1999, military personnel will have been decreased by 32% from the 1989 level, from 88,000 to 60,000. The Armed Forces today are just above the 61,000 mark. By 1999, civilian personnel will have been reduced by 45% from 36,600 to 20,000 over the same period; we're just over 22,000 today.
These reductions in themselves, along with the cuts and reorganisations in other areas, result in an increase in productivity. But beyond that, we have a number of formal initiatives underway to renew how we conduct our business, and, as I've said, the management of change is a top priority for the senior leadership.
In terms of ensuring consistency across the system, we also agree with the Auditor General on the need to coordinate change. Even though our special re-engineering team will be disbanded as planned this summer, the Chief of Management Renewal Services will continue to coordinate management renewal initiatives. In addition, major organizations will continue to have a ``Defence 2000'' cell to promote change and communicate successes in their area.
We do not believe, however, that we should institute a system of centralized management of change. The very foundation of our program is to devolve authority and resources to allow people to carry out their job. We also see no need for each base and each unit to operate in exactly the same way: Base Commanders and Managers must be given the leeway to make decisions on the best use of resources.
To this end, we want to build on the success of Base DelegAAT which shows that managers are quite good at finding ways to save. That said, we are actively using all means available to us to communicate good ideas and best practices.
In his report, the Auditor General noted that many renewal projects were still at a conceptual stage. Since then, most of these projects have entered the implementation phase. For example, our civilian personnel management organization has been completely restructured and, in the area of materiel management, we have implemented the concept of multi-skilled equipment management teams.
[English]
Mr. Chairman, in terms of business planning in the department, we have come a long way in three years. The Auditor General correctly observed that last year the department had only its highest-level plans in place. This is no longer the case. Today, some of our plans go down as far as four levels, most go down two or three levels, and those that have held steady at level one are for the most part smaller staff-oriented organizations with specialized outputs.
Probably the Auditor General's strongest criticism of DND's business planning was related to performance measurement. While it is true that at the strategic level the department's Defence Planning Guide 1997 only included a strawman performance measurement framework, we are continuing to develop it. Our activity in this area is in keeping with Treasury Board's recent initiatives on improved reporting to Parliament.
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The revised strategic performance framework will seek to clearly link defence activities and their associated resources to the results desired by the department. In this way we will be able to report to the government in a more meaningful way and we will also be able to confirm the relevance and value of the activities themselves, as well as the organizations responsible for the activities.
We expect a developmental framework that is under way to produce a detailed framework of results-based indicators and standards later this year. The framework itself will be articulated in the Defence Planning Guide 1998.
With respect to our strategic-level operational performance reporting system, our old operational readiness evaluation system, or ORES, is being replaced by an improved system called the Readiness and Capability Report. Instead of telling us how the Canadian Forces are doing or have done, this report is designed to tell us how they are doing now and how we think they will be doing in the future.
We also recognize both the importance of defining our costs in relation to our activities and of providing the cost data to support business planning at all levels.
We do have systems in place that provide us with cost information. While they were state of the art when we acquired them, they have been outpaced by the rapid change in technology. These systems are now being upgraded and refined with a higher degree of integration, which is consistent with Treasury Board's common systems initiatives. By the end of the day, these and new systems under development will provide us with a fully integrated department-wide financial and managerial accounting system.
Finally, the Auditor General noted that significant changes in the culture of our organizations are required if our renewal initiatives are to succeed. We are blessed in that members of DND and the Canadian Forces bring to their work a set of very positive values. These are commitment, professionalism, courage and integrity upon which the organization can build.
Through various initiatives, we are encouraging the kinds of qualities that are needed to manage in the new environment. We must bear in mind that the Department of National Defence is only part-way through a massive effort to downsize, restructure and renew. Results take time to materialize. We still have work to do. But we believe we have made good progress on a number of fronts and we continue to do so. We are confident that we can meet the challenge and we are determined to do so, as is every member of the defence team. Thank you.
[Translation]
Vice Admiral L.E. Murray (Acting Chief of Defence Staff, Department of National Defence): Good afternoon, Mr. Chairman. It's also a privilege for me to have the opportunity to address this committee.
I will speak briefly about our efforts to increase productivity in the areas of base management, base supply, transport, vehicle and aircraft maintenance and training. Additional details on all these subjects are included in the statement we have already tabled.
A major renewal goal in DND has been to delegate greater authority to the base level. In the last two years, bases have had to absorb cuts in their budgets of 20% or more. Numerous re-engineering initiatives are underway to reduce costs at the base level so as to maintain the required level of support.
We could cite numerous examples of our initiatives, several of which are described in our tabled statement.
The Auditor General noted in his report that while significant improvements in productivity in base supply could be observed at a few bases, notably at Esquimalt, the situation has failed to improve elsewhere. Since then, however, most bases across Canada have begun to apply the lessons learned in Esquimalt. This is especially so at Kingston, Trenton, Ottawa and Borden.
Transportation is also changing rapidly. Increasingly, transportation requirements are being met by multi-skilled employees who also perform other duties rather than strictly by professional drivers.
.1600
As regards vehicle maintenance, our vehicle fleet management is undergoing a revolution at all levels and resources devoted to maintenance are in steady decline. Expenditures have dropped from $17.2 million in 1992 to $11.5 million in 1996.
The Auditor General noted that air maintenance productivity was improving. Air command efforts to further increase productivity are continuing.
The sweeping initiatives at Cold Lake that were cited by the Auditor General are now being assessed by other air maintenance squadrons. A few examples are included in our tabled statement and if you have any questions the Commander of the Air Command, Lieutenant General de Quetteville, will be pleased to elaborate.
[English]
The Auditor General's finding with respect to the productivity of training in the department and the Canadian Forces gave cause for concern. However, as indicated in our response, the number of students fell at a faster rate than we could adjust our teaching staff, thus leading to a temporary decline in productivity, at least based on the ratio of students to instructors. Since then the strength of training and support staff in the schools administered by the Canadians Forces recruiting, education, and training system has been reduced by 33%, from 1,204 to 801 compared with 1994. The headquarters overhead supporting these schools has been reduced by a full 66%, from 298 to 101 personnel.
In addition, numerous schools have been amalgamated or closed. A specific example is the consolidation of all officer and enlisted recruit training into one school in Saint-Jean, Quebec. Also, we are increasingly using the private sector where comparable technical training is available at lower cost. In addition, many Canadian Forces schools have entered into or are exploring partnerships with community colleges.
In summary, Mr. Chairman, the department still lacks reliable performance measurement instruments to track in a comprehensive and meaningful manner changes in productivity of support activities. Developing such essential management tools is a priority for the department. There is, however, considerable empirical evidence that suggests the department is succeeding in reducing support costs and preserving resources for operations. Despite deep cuts in the defence budget, the Canadian Forces are maintaining an intense level of activity, participating in operations in Bosnia, Haiti, Zaire and the Golan Heights, and meeting all of Canada's commitments to the United Nations, NATO, and NORAD.
Currently, almost 2,300 of our military personnel are taking part in UN peacekeeping and related operations. The performance of our units, whether in missions abroad or at home, demonstrates the high quality of the Canadian Forces. At home, our capacity to respond to a wide range of tasks has not diminished. We continue to provide support to other departments in the form of fisheries patrols, drug interdiction, environmental monitoring, search and rescue and disaster relief, as was demonstrated last summer in the Saguenay area.
In the army, 2,200 combat soldiers have been added to the field force or the sharp end since 1994. By this summer, the 3,000 objective will be met in keeping with the government's white paper commitment.
This committee also heard a few weeks ago of the profound changes taking place in the area of materiel management, from innovative procurement arrangements to the consolidation and modernization of our warehousing facilities. Changes to our infrastructure management processes have also significantly reduced the cost and speed of construction of new facilities. Major re-engineering projects at our ship repair facilities on both coasts, carried out with the full cooperation of the unions, have succeeded in reducing costs significantly and have introduced sound business management principles in the shipyards.
Our alternate service delivery program will submit a broad range of non-core activities to market testing. Our goal is to identify the most cost-effective way of delivering the services required to support the Canadian Armed Forces. In many cases our in-house units will compete with the private sector, an approach which was successfully implemented in the United Kingdom and Australia and which will give a fair chance to our employees to maintain their jobs in the public service if they can provide the services at a competitive price.
It must also be remembered that the department is only part-way through a massive effort to downsize, restructure and renew. Results take time to materialize. We still have work to do. We have made good progress on a number of fronts, and we continue to do so. We are confident that we can meet the challenge. Indeed, we are determined to do so, and so are the many thousands of dedicated and highly professional members of our defence team, both military and civilian.
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[Translation]
Thank you. We're now ready to answer your questions.
The Chairman: Mr. de Savoye has informed me that he'll have to leave for an interview with the media so we'll give the floor to Mr. Silye for 10 minutes.
[English]
Mr. Silye (Calgary Centre): Thank you, Mr. Chairman. First of all, I would like to welcome Mr. Murray to this committee. I would like to tell him I hope he doesn't think this committee is as tough as the Somalia inquiry. Maybe he can relax a bit.
One of the observations of the Auditor General on page 5 of his presentation, item 18, was that management can make a difference. That's certainly true. We all know that. And you always have to look for good personnel. He indicates one or more managers had taken the initiative to implement some of the renewal programs. Base Esquimalt reduced local procurement staff from 76 to 27, increased warehouse space by 30%. Base Montreal cut transportation and overhead by 50%. Air maintenance squadrons at Winnipeg and Cold Lake were able to reduce costs dramatically for Dash-8 and CF-18 aircraft.
My question is this. Did any of the managers responsible for these improvements get fired, retired, or promoted sideways?
The reason I ask is I've heard if people take initiative in the civil service and they do well, sometimes they are told to slow down. I'm not trying to be facetious, but were they dehabilitated, if that's a word?
Ms Fréchette: I think when we're talking about a change of culture in DND and the Canadian forces we are trying precisely to give value to people who do take initiative and show innovation. Certainly the message they would receive uniformly from the senior management in DND and the Canadian forces is that indeed this is expected, this is applauded. We have put in place a number of awards and recognition measures to show we really do support and applaud the very impressive innovations -
Mr. Silye: No raise in pay, but a compliment.
Ms Fréchette: No, I would be very surprised to see...
Some people are very good and frankly are courted by the private sector because they have demonstrated how good they are.
Mr. Silye: The reason I ask it and I lead off my question in this way is that when I look at the Auditor General's work on this the report card is not a good report card. If a person looked at this on the surface, they would say there are problems in the defence department. Defence says, in defence, promises, promises; we promise we'll do better. And you know what? Yes, you're right, out of a five-year renewal plan, our first two years were lousy, were poor, but this third year we've shown improvement.
But if we go back to what the Auditor General has looked at to date, it's still lacking. On page 4 of his submission today he talks about how he looked at five areas of support, five support functions: supply, transportation, vehicle maintenance, individual training, and aircraft. After promises by Defence in five areas, and after two years, here's his conclusion: ``None of these areas had adequate performance information at the time of our audit and only two appeared to be using the data''. So how can you come before this committee and in all good conscience tell us you agree with the Auditor General, which means the first two years were crappy, but you have made significant improvements in the third year and you have some people who did do it, and they got compliments, yet...
What I'm leading to is accountability and responsibility for the lack of progress. Why did it take three years to get this thing kick-started? I've heard the testimony you've given on why you feel satisfied now that you are headed in the right direction, but for the general public, for a politician such as myself, it's hard to understand where and why, if your intent is to be more businesslike and more entrepreneurial, it would take two years to get to where you are at today.
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Ms Fréchette: I will leave my colleagues to provide you with more specific answers, but I think one has to draw a distinction between the assessment of where we are in terms of bringing about new, innovative management methods showing evidence of savings and the problem we still have in having a reliable, meaningful system of measurements.
Mr. Silye: So you don't have one.
Ms Fréchette: We are in the process of introducing a comprehensive one. We have in some places fairly meaningful or useful performance measurement indicators in place, but this is still spotty. We still have to develop a much more usable, helpful, and meaningful system of performance measurements and cost measurements. We accept that we have some way to go. In my presentation I indicated that this is a big priority and that we're making progress every year, but this is rather complicated. We're not the only department that has problems.
Mr. Silye: I know, but you're the only one that's here today, so my job is to question you.
Ms Fréchette: There's a distinction to be made between the fact that we still have some progress to make in establishing a good system of performance measurement and concluding that we're making no progress on anything. In fact, there's a lot of evidence that shows that savings are being realized in a number of activities.
Mr. Silye: Right. Madam Fréchette, you are making progress, I admit, but it seems to me that if it weren't for Finance Minister Doug Young saying that you're going to spend $9.6 billion instead of $12.2 billion and that you're going to cut back by this and this, the renewal plans would not achieve nearly the kinds of savings given by the evidence we've seen to date. We'd still be spending$11 billion even if we reduced staff from 88,000 to 61,000 in terms of troops.
This leads me to a specific issue that I still have a problem with. I asked you this before. We were under material management at that time but now it's a little more open here and I think this question is appropriate. You are looking for a more defined role, for people and managers to assume responsibility and to be held accountable at various levels. This is your job description.
On page 2 of his brief, item 6, the Auditor General mentioned that the renewal had mixed results. The base changes and consolidation of bases is an example I use. CFB Calgary was closed down and moved to Edmonton. A whole bunch across Canada were consolidated; they were all moved and they're shrinking down.
We were told for the Calgary one that there would be savings here of $26 million, that yes, the initial outlay might be $40 million, but the savings will be in the area of $26 million after this is done. The cost to date just for the move from Calgary to Edmonton is over $100 million.
This is why I say there is confusion out there among the public and politicians as to who has erred. Who was in charge of this and who's responsible? Who's accountable? Is it the Minister of Defence? Is it the deputy minister who's responsible? Is it your assistant? Is it the person you delegate it to? Who will account for the more than $60 million of overspending? It's probably$120 million plus of overspending. Is somebody going to be reprimanded? Is somebody going to be held accountable? Will we ever know that person's name?
We want to know how this happened. How can this happen? We're now three years into this renewal plan and this is happening in the fourth year of the renewal plan. Could the deputy minister shed some light on this, please?
Ms Fréchette: In terms of Calgary to Edmonton, I think you raised that question last time. I have reviewed the figures and I think I provided them to your office earlier this week. The estimates and the current estimates are exactly in line with what we had estimated two years ago. The savings we were projecting to make are still the projections we think we will be making on this. So in this particular instance -
Mr. Silye: What about this expenditure of the move?
Ms Fréchette: It is in line with what we had projected at the time. I've sent you a breakdown of numbers for your consideration.
Mr. Silye: Thank you.
Mr. Murray, on page 2 of your testimony you conclude by saying: ``Despite deep cuts in the defence budget, the Canadian Forces are maintaining an intense level of activity''. I agree they are. I'd like to compliment the defence, our military and our Canadian Armed Forces, for the work they are doing at peacekeeping. They're doing an excellent job, notwithstanding the inquiry into Somalia.
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I would also like to compliment you and whoever else is in charge of deploying these troops to so many different places on an instant-call basis like that, notwithstanding the criticism as to who's ready, who's trained and who's not trained, and at what level.
It is good, and a few bad apples won't spoil my opinion on that. But there's a lot of talk these days, and I don't know whether it is just the spending cuts or the fact that the troops are shrinking in size. I find it particularly interesting that you don't mention that despite deep cuts in the defence budget, in the size of the troops, etc...
What I'm getting at is the morale. Is the morale being affected by these spending cuts or the reduction in troops, going down to 61,000 from 88,000? Is the problem getting enough of these managers and base managers motivated enough to find savings when they see politicians just come in and slash and burn and cut budgets, as these terrible Liberals have done to the defence department?
VAdm Murray: From my perspective, the question of morale frequently comes up. The reality is if this committee were to meet the members of the Canadian forces - and I said this to SCONDVA a week or so ago, who will have the opportunity to do so - you would find that morale actually is quite good.
Are people happy about the pay freeze over the last four or five years? No, they're not very happy about that. Are they proud about what they do? Do they think they do a professional job? Yes. Are they unhappy with what they perceive to be unfair coverage of their good efforts? Yes, they are. Are they Canadians who do understand that this country has had a very serious deficit and national debt problem to deal with since 1989? Yes, I think they understand that as well.
I think you would find that, like the rest of Canadians, they have a pretty good understanding of all of that. And I think you would find that generally morale, certainly at the operational level, is quite good. If you visited the troops doing operational things, certainly that's what you would find. Most of the base commanders are actually military folks as well, and I would say in almost every case they're doing their very best.
One of the challenges for us, which the DM didn't touch on, is to try to ensure that we do achieve this cultural change, that we do not revert back to a hierarchically structured organization. Because base X is doing something good in their specific geographic area, we don't want to try to turn that into a cookie cutter across the country, where there are differences.
As this cultural change occurs and as people see things happening - and it does take time - that is good for morale as well. We are turning the corner, although it is tough; there's no question about it. But it's tough on a lot of other industries in this country as well.
The Chairman: Thank you.
[Translation]
Mr. Savoye now has the floor for 10 minutes.
Mr. de Savoye (Portneuf): Mr. Auditor General, Madam Deputy Minister, Vice-Admiral, I had a look at the document that says ``Statement for Tabling, Check Against Delivery''. I presume the document has been delivered as is because you no doubt did not have enough time to read it word for word during my brief period of absence. Am I wrong, Ms Fréchette?
Ms Fréchette: No, we did not read it word for word.
Mr. de Savoye: I'd like to refer to this document then to get things going. I'll have a few comments and put a question to you.
On page 2 of the document, in the English version, you say:
[English]
- These cuts and reorganizations in themselves result in an increase in productivity.
The fact that expenditures have been cut and that there has been a reorganization do not mean, on their own, that there was an increase in productivity, but I don't see anything elsewhere to support your statement.
On page 4 of the same document, in the last paragraph, you mention performance measurement and you say the Auditor General had his strongest criticism in that area. He was quite right. In the document you've tabled, there are no graphs or comparative figures. You're only making statements. You give us indications.
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You admit that despite your feeling that there have been improvements, you're not in a position to give us any figures on them. I'm disappointed. I'm disappointed, this coming from an organization whose budget is $10 billion a year. It's an enormous budget and you should have better tools.
When you talk about measurable objectives, you can talk about measurable performance, but you still need to have the objectives. You must have an implementation plan and a schedule and a quality assurance plan. I haven't seen either nor heard of that in there. You have to establish audit points. You say nothing of that. You have to identify and prepare means for measurement and audit. In fact, if I've understood this correctly, you've hardly started elaborating objectives and measurable performance indicators.
What priorities, what budget and what schedule does your department have to set up planning, quality assurance and result measurement instruments so that when you come back to see us we can have a real document that will allow us to compare the past and the present and congratulate you? For the time being, that's not the case.
Ms Fréchette: I indicated in my opening presentation that at the corporate level, for the system as a whole, we took a first step this year in setting up a general backdrop for productivity measurement.
For next year we are in the process of developing a detailed definition of productivity and performance measures we would like to see result from the new business planning system. It should be in place next year.
That does not mean that there are not already performance measures in different departmental sectors of activity, that we do not already have instruments for evaluation and cost comparisons along with the beginnings of performance measurement in certain sectors of the department's activities.
At present we are lacking a fully integrated and coherent system. The development of such a system is a major exercise but it is a priority for us. I hope that when we come back next year, we will be in a position to provide you with data based on a more coherent system of measurement than that which we now have.
Mr. de Savoye: A good way of appreciating the priority given to a matter by an organization is to put the very simple question, how much money have you invested in this project?
Ms Fréchette: I can't answer that question but I'll give the committee an evaluation.
Mr. de Savoye: You understand that until these instruments are in place, you do not know whether you are meeting your objectives, you do not even know whether you are making progress towards achieving them. You may have a certain impression and you may observe certain facts in isolation but it is very difficult for you to be certain of your results.
Even worse, we have seen organizations make a great effort to achieve results but in the final run their results have proved to be no better in terms of productivity and efficiency than the previous ones.
You tell me that you have a two-year timetable. Within this period how do you intend to bring about a real improvement in your performance and your productivity and deliver your programs at a lower cost?
Ms Fréchette: There are a number of macro-measures to which Admiral Murray has already alluded. They are the ones that relate to the frequency of the Forces' activities, the operations they conduct, the number of exercises, the amount of time spent by ships at sea and the number of air sorties. These measurements provide us with a certain number of parameters at the operational level. Insofar as these activities remain constant or increase, we do at least have certain indicators. Our savings are made in the field of support services.
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Mr. de Savoye: Even if you do maintain all your activities at their present level at a lower cost, you still have not demonstrated that these activities meet performance criteria, namely that they achieve the results necessary for the mission.
Perhaps you could achieve the same results with half the number of sorties or perhaps it would have to be at 150%. That would mean increasing them by 50%. These are measurable objectives that you have not put into place.
Ms Fréchette: I could ask Vice-Admiral Murray or Lieutenant General de Quetteville to explain to you our reference framework and our objectives at the operational level, in other words the means by which we are able to say that so many days and so many air sorties are necessary. This is linked to a concept of Forces preparedness that is not completely arbitrary. Perhaps I can have one of my colleagues answer you on this.
VAdm Murray: In the operational field, the problem is somewhat simpler than in search and rescue. It is possible to have measurements for our capability, for example
[English]
a number of operational-ready C-130, F-15C and CF-13 cruise aircraft, departure within 30 minutes of notification, aircraft departure within two hours of notification. In other words, when we're doing operations measures of capability it's actually easier to deal with.
In the navy, we have a very coherent and we think cogent measurement of operational readiness. The army is establishing one. And in the
[Translation]
Air Forces, we have the same thing. The problem we face is establishing measurements that are as efficient in the case of support. In Esquimalt and other bases we now have such measurements. The problem is to develop a system at the strategic level and to link the two. At the present time the system is not perfect but I think that we are among the best in the government in this field. This was made necessary by the introduction of business planning and our operational experience has been of assistance to us in developing a system.
Mr. de Savoye: I have one last question for the Auditor General. The implementation of measurable objectives and tools for performance measurement will take two years. You heard the answer given to me by the deputy minister. Are you satisfied with this answer? Do you think it will make achieving the objectives possible? Should the implementation of these instruments be accelerated?
Mr. Desautels: Quite honestly, I share a number of Mr. de Savoye's concerns. I think that what we are hearing is encouraging. Many things have been done since we concluded our audit but it is still quite difficult to judge. What is the combined effect of all these measures and in what way are we brought closer to achieving the ultimate objective?
Personally, I would suggest that we give the department a few more months to make progress on a number of issues, including performance measurement. When I say a few months, I think we could wait until next fall for a progress report summing up what has been done and how close we are to the ultimate objective.
I don't know whether six months is too much but they could give us a progress report around the end of 1997 or the beginning of 1998 to provide us with the assurance we are seeking.
Mr. de Savoye: Auditor General, I would like you to clarify one of your comments. Do you think it would be possible for the department to provide us with its quality assurance plan?
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Mr. Desautels: Its quality assurance plan?
Mr. de Savoye: Yes, that is the means it will be implementing to ensure there are measurable objectives for performance, with appropriate evaluation to ensure that its activities are measurable and delivered.
Mr. Desautels: I think it would be possible for the department to make an assessment of the situation within a few months and to inform us what progress it has made and what measures it will be taking to ensure that it will achieve its objective within the timeframe. I think that this could be part of the same progress report we could request from the department.
The Chairman: Thank you.
[English]
The Chairman: Mr. Pagtakhan, you have ten minutes.
Mr. Pagtakhan (Winnipeg North): Thank you, Mr. Chair.
Mr. Auditor General, just to be clear, the issue of the need for improvement for productivity and support services has been a twelve-year issue and is going into the thirteenth year. Has it been going on since 1984?
Mr. Kasurak: Yes. We started comprehensive auditing of the department in 1984 and we raised issues for the first time then for many of the same areas that appear in this report.
Mr. Pagtakhan: In your presentation - and with the deputy minister and the vice-admiral - you define the need for a change in culture. At one time you spoke about, or at least the deputy minister acknowledged, the need for the change in the culture of the organization. Then in a subsequent paragraph it was about the culture of management. I look at the culture of management as one aspect of the overall culture of any organization. I would like to know if we are speaking of a change in culture in the same terminology so that we can at least understand each other.
I would like to know from the Auditor General what we are speaking about when we say there has to be a change in culture. Is it change only in the culture of management, or is it change in the overall culture of the organization?
Mr. Kasurak: What we're speaking of - and I think the department and ourselves have a common view of this - is that it's in the management aspects of the culture. It's about how people approach activities and how poeple approach the control and use of resources. But we're not restricting that to ``managers''. It would have to go all the way down to the individuals at the lowest level in the organization. I think this is a shared view between the department and ourselves with respect to what we mean by the cultural change and cultural shifts the department is trying to tackle.
Mr. Pagtakhan: That's very heartening. At least there is a commonality of understanding.
In the statement to be tabled, the lengthy document, a point is made on page four:
- A new cultural awareness training package is now being developed, with the first three-day
session to be held in May, which will involve all members of the Defence Management
Committee.
Ms Fréchette: First of all, there are a large number of activities taking place throughout the department at the corporate level, the command level, and in individual groups to prepare people to function in this new environment, which values innovation, flexibility, teamwork and all of that.
In addition, we felt it was important to define cooperatively as a group what these new values and this new culture should be. Following a number of consultations with a cross-section of our employees, we have come to the conclusion that it would be useful to have short sessions that would expose a large number of our employees across the board to discussions and debates on these new ways of doing things in DND and in the Canadian Forces.
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We have agreed that the first group to subject itself to this exercise should be the management committee itself. Therefore, it will be both an occasion for the management committee members to discuss amongst themselves how this change of culture is proceeding, and also a way to judge whether this package is the right one to use for our employees. So we're going to be the first cobayes of this exercise.
VAdm Murray: If I could just add to that, you raised the issue of culture. You'll appreciate that in our organization we have lots of different cultures. Therefore, this issue is not a simple one.
We have to use great care in how we do it, because some people feel threatened. If they're commanding an infantry platoon or driving a warship, some of this business planning and these new ideas can be threatening to people. We have to use a lot of venues - seminars and so on - to ensure that the CO of the ship or the battalion commander understands that what we're talking about is not how he or she fights the war or the battle, but rather how to make maximum use of resources, how to take maximum advantage of other ideas and that sort of thing.
So the whole issue of culture in the Department of National Defence and the Canadian Forces is a multifaceted challenge.
Mr. Pagtakhan: On page 5 of this detailed document, you acknowledge the difficulty of having the performance indicators at hand at this point, a major thrust of this meeting. Then you indicate the results and roles that you are trying to divide and subdivide in terms of what will be used as the basis for the development of these standards - the defence of Canada, participation in peacekeeping, cooperation with the United States, fostering emergency preparedness.
Then later, in the middle of the page, you say: ``the developmental work that is otherwise expected to produce a detailed framework of results-based indicators and standards later this year'', meaning the end of this year, 1997. Can we indeed expect it to be finished by the end of this year?
VAdm Murray: I think it's fair to say that we'll do our very best and we're putting a lot of effort into it.
To give you an example of what we're talking about, so that you get some idea of the complexity, we're trying to come up with what we're going to call a performance reporting accounting system.
One example would be the mission statement, to defend Canada and Canadian interests and values while contributing to international peace and security. The business line, so to speak, is defending Canada. The outcome or goal we're after in this particular case would be to assist other government departments in achieving national goals. A key result would be that DND supports the Department of Fisheries and Oceans in fisheries protection, which is one of the missions assigned to Maritime Command. Then in terms of performance measurement, we have to go through each of these things and determine how we measure regulatory compliance and what the indicators are. Is the number of fishing vessel boardings an indicator? And what's the standard? In other words, is boarding 50% of the fishing vessels in a particular patrol area the standard?
If you take that across the whole spectrum of the department and the Canadian Forces...and this is one of the easier areas. As I've said, when we're talking purely about defence capability and missions, it's more straightforward than a largely staff-oriented structure of some sort. But that's the level of detail we're into, and we're trying to do it across the system.
The point that didn't come out previously is perhaps an impression that we're not measuring anything because we don't have an all-up system. In fact, in our departmental outlook document report to Parliament in 1996, we gave a very detailed status of where we were in terms of downsizing, base closures and all that stuff. It's not as if we're not tracking things.
What we're saying and what the Auditor General is saying is that we don't have the kind of all-up performance measurement system that we need, along with all-up costing data to do proper business planning throughout the system. But we're doing an awful lot of work to keep track of what's going on, the percentage of downsizing and all that. What we don't have is a system like the one we would like to have. We're working on it, but that doesn't mean we're not measuring things to the best of our ability in a number of areas.
Mr. Pagtakhan: The Auditor General, in his presentation, proposed a lot of questions to the committee for the department to answer. Starting from the last suggestion, item 23, may I ask the department how many dollars can be diverted from support to operations and by what date?
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VAdm Murray: I think that with a lot of effort we probably could come up with what we've achieved to date. I think it would be very difficult, at this stage of the game, to come up with exactly what we would achieve by 1999, which is really the end date we're working on for the defence white paper implementation. But certainly we are comfortable that in most of our initiatives, when we go at a support activity of one sort or another, we are achieving about 20% to 30% savings. However, I would be misleading you to say that I could give you the number off the top of my head this afternoon. I certainly couldn't.
Mr. Pagtakhan: Again in terms of terminology, there was some question raised about the term ``business planning'' being applicable to the military organization of the department. Have you come up with any alternative terminology? I would suggest perhaps we could call it productivity planning.
VAdm Murray: It's possible. It really goes back to the cultural issue that you raised and that I explained. We have several different cultures, and one of our challenges is not to have people feel threatened or challenged because we use different terminology from the military terminology they're used to. I think business planning is one most people are comfortable with, so at the moment we are continuing to use that term.
[Translation]
The Chairman: Before we begin our five-minute round, I'd like to put a question toMs Fréchette. What is the percentage of the Defence budget this year assigned to support?
Mr. Robert Emond (Assistant Deputy Minister, Finance and Services, Department of National Defence): The problem we face is making the distinction between support and operations. If I may, I'll attempt to find the appropriate document.
We have calculated the change in the percentage of the Defence budget allocated to support functions, that is overhead functions, as well as training and operations. The budget allocated to overhead functions has decreased from 52% four years ago to approximately 47% today. There has been a change. Once again, it is difficult to precisely define the difference.
The Chairman: Let me explain why I ask the question. Paragraph 34.8 of the Auditor General's report says in the last line:
- National Defence devotes 46% of its annual budget to support functions.
Ms Fréchette says:
These reductions along with cutbacks and reorganisation methods applied in other areas have resulted in an increase in productivity.
The Auditor General sings a different tune in paragraph 34.117:
- 34.117 The Department has reduced its size but its support services still have not increased their
productivity.
Mr. Emond: Thank you, Mr. Chairman. This has given me the time to find the section to which I was referring earlier.
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I am basing my remarks on our definitions but I cannot confirm that the definitions are the same. In 1991-92, the Defence budget allocated to operations was 49% and in 1996-97, it amounted to 56% for operations and training. As for the percentage allocated to overhead, it went down from 51% to 44% but the timeframe is different.
Let me give you an example of a productivity measurement, the amount of resources allocated to headquarters. The 1995 department budget indicates a drop of 50%, that is from 14,000 to 7,000 for headquarters. We have already achieved 25%. So we're halfway there. Although we cannot demonstrate that this results in direct productivity gains, because our system is not yet fully implemented, we are measuring indicators until this system is in place.
The Chairman: Mr. Desautels, is your figure of 46% the correct one?
Mr. Desautels: Yes, the figure of 46% was correct when we calculated it. It's a calculation which was done close to that time. It's quite close to the 47% figure calculated by the department.
The Chairman: You tabled your report in November 1996. You obtained this figure during the summer. We are now at 47%.
[English]
Mr. Kasurak: Mr. Chairman, I think that the 1% difference is probably simply a difference in the base that we took when we made our calculations. I think what's important here is not so much whether it's 46% or 47%; I think what's important to understand is what we were driving at in our report versus what Mr. Emond is presenting.
What we were driving at in our report is the support services themselves that we looked at. Certainly training and supply had declined in productivity, and those were the two we were able to get sufficient data on to measure over a time period. So they've gotten smallerm, but the activity levels had decreased faster than the reductions in resources devoted to them. That was our concern.
What we didn't address is the headquarters reductions that were referred to, which lowered corporate overhead overall and I think would account for the figures the department is presenting to you. I think that in this case there are two different perspectives, one of which is including the corporate overhead, and ours, which was centred on the activity on the bases themselves. That's where our single concern lies, that those service areas had not yet been affected by the re-engineering program substantially and still represented a major opportunity for the department. In our report we tried to acknowledge the significant cuts that had already been made in the corporate level of the overhead.
I hope that explains the differences in these numbers, Mr. Chairman.
[Translation]
The Chairman: Yes. Mr. de Savoye, five minutes.
Mr. de Savoye: Auditor General, in the presentation you made at the beginning of this meeting, you said in paragraph 8:
- While the Department is still confident that its renewal program is on track, we are concerned
that it has not paid adequate attention to improving its performance at the local level, where
most resources are actually consumed.
Similarly, you say at the end of paragraph 9:
- I hope your committee will consider whether the Department's strategy warrants further
consideration.
[English]
Mr. Kasurak: We're attempting to draw the committee's attention to the actual conduct of work on Canadian Forces bases. The department and indeed the department's submission today have focused on the strategic level of management. The department has a challenge there. This is not an insignificant problem.
Our audit indicates, however, that there are additional opportunities for achieving savings by looking down at the lower levels, and that indeed where managers had taken initiative, they were able to generate considerable savings. It's this facet of management, the operational level of management, that we would direct the committee's attention towards.
[Translation]
Mr. de Savoye: If I understand you correctly, substantial productivity improvements can be made at the level of the military bases because that is where most of the resources are spent. Madam Deputy Minister, what is your opinion on the comment just made by the Auditor and how do you intend to follow up, if you are not doing so already?
Ms Fréchette: Perhaps I should ask General de Quetteville who, as Air Force Commander, is responsible for a network of bases. He can explain to you the kind of activities that are taking place in his sector as in the other two services.
Generally speaking, improvement at the base level is an important element of the Department's renewal plan because of the significant resources involved. As the Auditor General emphasized in his presentation and we also in our report, there are many examples of successful initiatives resulting in very significant economies.
The challenge for us is not to force each base to do exactly the same thing, but to leave it up to each of them to define the most appropriate model for their circumstances. At the same time we have to ensure that the bases have all the information they need in order to implement the best model for them.
We disseminate this information in various documents. There are now experiments and advice is available. This is a new forum.
Mr. de Savoye: Excuse me for interrupting. I understand that you want to leave it up to the bases to implement the model they find the best, but I imagine that you will not be leaving it up to them to determine their performance objectives. Otherwise, any model could be used to obtain any results. The reason I am asking the question is that the Valcartier military base is right on the edge of my riding.
It is located in the riding of Charlesbourg, but when people leave the base, they are in the riding of Portneuf. It is well known that events have recently occurred at Valcartier that have been mentioned and are still being mentioned in the newspapers. I am referring to certain financial misappropriations. I would like to know how much latitude you give the bases as regards resources, but also as regards objectives. How does all this fit together?
Ms Fréchette: I will turn the floor over to General Quetteville, who will explain how this works from bottom to top, but I would first like to say that we never give people permission to break the law, to commit fraud. That is why individuals are court martialed. Charges are laid against people who do certain types of things. So the latitude does not go that far.
General de Quetteville.
[English]
Lieutenant-General A.M. de Quetteville (Commander, Air Command, Department of National Defence): Mr. Chairman, thank you.
I might pick up and describe how we're doing this business in Air Command. Your supporting documentation does describe some of what we've done at Cold Lake as our test base for a lot of these principles.
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Cold Lake has the responsibility of producing combat-ready fighter pilots and maintaining two operational squadrons that have both NATO and NORAD commitments. So we have a pretty good measurement of the output we expect in them accomplishing their responsibility.
Going back a couple of years, we started by trying to assess all of the elements that went into producing the output of each of those fighter squadrons. Of course that gets you into the whole issue of the support role of the base, everything from construction engineering to transportation to supply and even to the wing commander and his headquarters, which are all there with the ultimate objective of producing combat-ready fighter pilots.
We went through a very elaborate process to map out all of those processes and then to develop a software called cost centre management, which I think you're again familiar with from the documentation, that allowed us to cost each of those elements. We used Cold Lake as the test and have now been able to roll all of that up. Around 1 April this year we'll be migrating that software to each of the other wings across the air force so we'll be able to measure those same sorts of things.
You're right; they don't just set their own standards out there to go and do whatever they wish to do. First of all, I'm given direction from the CDS and the deputy minister, in the context of the overall defence policy, on what I must do in this particular area of what we call aerospace control. That enables me then to pass down to the wing - in this case Cold Lake - a set of instructions around how many fighter pilots a year they must produce and how many they must have combat-ready. We produce a detailed training syllabus that tells exactly what flying events they have to conduct.
So that's the direction, and then I give resources to the wing commander and he must manage those resources using the methods I just described, the cost centre management methods.
You're also aware that there have been some great successes at Cold Lake by virtue of using this kind of technique. They have developed very many savings in their overhead that have helped us contribute to dramatic reductions in how we do the CF-18 business.
That's a bit of a description of how we're doing it in the air force.
[Translation]
Mr. de Savoye: Thank you, Mr. Chairman. That is one of the best answers I have heard this afternoon.
[English]
The Chairman: Mr. Silye, you have five minutes.
Mr. Silye: Thank you, Mr. Chairman.
I'd like to go back to the deputy minister. I want to get something cleared up here, because if I'm wrong, I'm misleading constituents. I want to go back to this consolidation of bases and the costs and the savings. I'm going to have to have help from the Auditor General on this, so I'll ask him questions as well in my five-minute section.
Are you saying, Madam Fréchette, that the costs of moving CFB Calgary to Edmonton are not over budget? This started back in the 1994 budget or the 1995 budget. I believe it was supposed to not cost us more than $40 million.
After the costs and the consolidation were implemented - after the money was spent to move them up there and the bases were consolidated - the annual savings were to be in the neighbourhood of $26 million. Obviously over time that gets us a return on the expenditure of $40 million.
So the projected savings are still there, which I can see, but the cost of moving it is not in excess of $100 million, which I've heard? Are you saying that's a fact, and do you say that because of the main estimates handed down last week?
Ms Fréchette: Mr. Adams, who's our assistant deputy minister for infrastructure and environment, has the detailed costs. I will ask him to describe for you what went into the estimate of the costs at the time of the announcement and what is the current estimate. It's in line with what we had projected at the time.
Mr. John Adams (Assistant Deputy Minister, Infrastructure and Environment, Department of National Defence): I'll run through it in a tabular format. I'll confirm what the original estimates were and then I'll give you our current estimate.
If you take construction alone, the original estimate was $121 million. Right now we're running at $119 million. The environmental clean-up was estimated originally at $43 million and we're currently at $33 million. The move itself was estimated at $19 million and we're still at $19 million. The custodial costs were $2 million and we're still at $2 million. The total original estimate was $185 million and our current estimate is $173 million. So we're within estimate.
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Now, the cost avoidance -
Mr. Silye: Sorry to interrupt, but that sure is different from the numbers we first heard, that the move to Calgary was only going to be $40 million. I guess that's where I'm making my mistake.
Mr. Adams: I don't know where you would have gotten $40 million. We'd have to find out where you got that. The figures I'm quoting you are figures that were given at the time.
Mr. Silye: I accept your figures.
Mr. Adams: There was a cost avoidance associated with the move, so that might explain it. We were going to expend $131 million in Calgary, had we stayed there. We didn't spend that. When you take that away from the $185 million, that brings you to $54 million. If you take that away from the $173 million, it brings you to $42 million. That might be it.
Mr. Silye: I see what you're saying. I guess I don't need your help, Auditor General. They've probably answered my question.
Thank you. I don't have any more questions.
The Chairman: Mr. Hubbard.
Mr. Hubbard (Miramichi): Mr. Chairman, I got hammered with a base, too. We have a sad story, too. I think John Adams is familiar with it.
In terms of the DND and these Auditor General's reports, how are they perceived by DND? Are they perceived as being fair, kind, just or unjust, or something we don't want to receive every two or three years? What kind of reception do you get when Mr. Desautels comes up with another chapter?
Ms Fréchette: First of all, let me say that on this particular chapter we attached considerable importance to the report of the Auditor General. As you know, before the reports are issued there is an occasion for departments to comment. In fact, we chose to have several discussions throughout last summer, including Admiral Murray, myself, and Mr. Desautels. First of all, we certainly were concerned by some of their findings. We also wanted to explain ourselves in terms of our management plan.
I think it's fair to say that we had a very productive discussion. It certainly helped to draw my attention to a few key issues that have been on my mind more since I had this chat with him.
Secondly, I think we could always enter into disputes as to whether one particular indicator they've chosen is the one we would choose to use to assess whether we're productive or not. You will find in the report that in the case of transportation, they look particularly at kilometres per driver as an indicator. We would say maybe this is not the best indicator to tell the whole story. In our case maybe there are others. But we certainly would not dispute their findings.
Mr. Hubbard: So when it's received by DND, a collective group receives it and it must be sent down to lower ranks who have input and reasons to explain to senior management why these particular problems are existing. So somebody down at the driver level, which is probably the lowest level in your organization, suddenly is told by somebody in management that they're not driving far enough every day. The Auditor General has said the average is 100 kilometres a day, so you'd better get out and start spinning your wheels or we're going to get another bad report.
What type of system do you use? Is there somebody in DND who is put in charge to say this is not a good report and the public will be raising the dickens over it? Is there one particular general, colonel, major, or private put in charge of trying to improve this thing? Is there one person who's going to direct the effort to get a better report two years from now?
Ms Fréchette: First of all, we have a coordination office whose job it is to liaise with the Auditor General.
Mr. Hubbard: So one person is in charge of that office. Who is it?
Ms Fréchette: They're in charge of making sure that the Auditor General's report is distributed.
Mr. Hubbard: Could we identify who that person is in terms of this committee? Who is in charge of seeing that you get a better report two years from now?
Ms Fréchette: We are, the two of us.
Mr. Hubbard: So it's the deputy and Vice-Admiral Murray, the CDS.
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Ms Fréchette: Yes.
Mr. Hubbard: One problem we have in terms of being politicians is that we hope to get re-elected, but sometimes we don't. There are changes there, but in terms of this committee, it is the deputy minister and... You don't delegate to somebody to clean up the act here and get this thing looking better?
Ms Fréchette: There are responsibility levels throughout our organization. It's clear that when we're talking about the productivity of drivers at bases, we're not going to design a new system for drivers. That is delegated down through the commands, the groups, all the way down to -
Mr. Hubbard: I find it strange.
The other point I'm going to mention is that we had a major purging of the forces, which went from 88,000 people down to 60,000 people. On the street, we hear a lot of concern that the purging didn't happen in the right places.
I'm led to believe that you have nearly a hundred generals somewhere throughout the forces. That could include current, active generals and also retired generals who are part of your civilian workforce. How many generals do you actually have?
VAdm Murray: We had 120 generals, I think, in 1988 or 1989. We currently have 72 positions and 68 generals. The Dutch have 112 generals for a force of about the same size. The Austrians have a force that's very similar in size, but they have 131 generals.
In terms of benchmarking, the fact that we're at 68 generals is actually a reduction of something close to 40%. We will probably go lower than that. In comparison with nations of our size, we're not doing too badly, in my view.
Mr. Hubbard: I take it from your answer that this is a point you're very much concerned about, because you seem to have studied it.
The other point connected with this is in terms of the forces generally. We hear throughout the civil service - we've had major reductions - that we have to rejuvenate and bring in new blood and ideas. Is there any problem in terms of structure? We talked about culture. I guess Mr. Pagtakhan mentioned it. Is there a major problem in terms of getting new people into administration and into the forces?
Say we look at how the compulsory retirements, CRPs and so forth, actually happened. Is there concern in management that we really haven't been able to maintain a really active, rejuvenated, new-thinking type of military structure, which our country really needs? Are there concerns on that level?
Ms Fréchette: On the civilian side, I will say simply that there has been very little recruitment over the last few years. When you are going to ask so many people to leave, you have to give priorities to many people who can serve in the public service before you go out to recruit. So there has been very little recruitment.
In the longer term, it may create some problems for rejuvenation and the replacement of generations of those who will be retiring in the next few years.
I think we're going back now to a more normal pattern. I hope we can start recruiting more systematically in the near future.
Mr. Hubbard: Finally, Vice-Admiral Murray, could you give our committee some statistics on how many active and retired generals are involved as employees of DND? Could you provide that not on the spur of the moment, but in terms of our committee?
VAdm Murray: Certainly we can, yes.
I think I would want to make a point about any former generals that are employed as civilian members in the department or somewhere else where questions might be raised. We do have an ethics process through which all these folks go before they're hired. There seems to be a misperception about that. Certainly we can get you that information, I believe, sir.
The Chairman: Mr. Grose.
Mr. Grose (Oshawa): Thank you, Mr. Chairman.
With my question, I may be providing you with an excuse or a reason for the apparent slowness of the implementation of this plan. Heaven forbid that I do this.
We keep talking about business planning, business management, and so on. In outside business, you hire a manager who either acquired experience somewhere else at someone else's expense or who was trained by you and who does things your way.
In the military, of course, you hire people to be soldiers, airplane drivers, admirals, or whatever. If they have any special abilities, they'll probably rise to a command position. Now we're asking them to take on business management. Are we asking too much?
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Admiral Murray, you alluded to the fact that you are asking these people to do this and you don't want to scare them in the process. I'm really interested in this. Are we utilizing these people the way we should be? Are we expecting too much of them?
VAdm Murray: That's a good question, sir. Quite honestly, it's one that in my opinion... In fact I think the Auditor General raised it in his report and indicated that from his perspective being a good manager was an important aspect of being a good leader.
And certainly for this country, in my view, given the size of the armed forces, given the demands, and given the fact that we're giving 35-year-old commanders billion-dollar ships or an infantry battalion or an air squadron to operate that can spend an awful lot of money very quickly, I believe the Canadian people should demand that as we enter the 21st century the leaders of the Canadian Forces are not just good leaders - they have to be that for certain - but also good managers.
Have people of my generation been as adequately prepared as we should have been or could have been or did anybody predict it? No, maybe not.
So are we doing a fair amount of work in trying to revisit the curriculum of places like staff college, in emphasizing university training and a variety of courses, and in trying to ensure that we provide military officers with the tools they need to do the job? That area does require attention, and it's an area we're working on, but I would have to say we're not there yet. But it is something that I believe is a reasonable requirement in this country in this day and age, given that this organization has a budget of $9.25 billion. It's not unreasonable to expect people to be able to do both: to fight in an infantry battalion and to use the resources they're given wisely.
Mr. Grose: At the military college where you train your future officers, has there been a move of late to include business management as part of the training?
VAdm Murray: I think we're doing as much as we can everywhere. In terms of a place like RMC, sir, I think the issue would almost be what we are doing in the engineering program or in the commerce program, because the kids there go through a normal academic program. I would have to look at that. Certainly in other places we're trying to get more people in our management courses at the management school, as I say, and at staff college and that sort of thing. But for the pure degree-granting programs, indeed, we are looking at the curriculum at RMC, but I can't tell you we are emphasizing that without checking into it.
Mr. Grose: Thank you very much. You've answered my question.
Thank you, Mr. Chairman.
[Translation]
The Chairman: Before turning the floor over to Mr. Pagtakhan, I would like to ask you a brief question, Ms Fréchette.
Does the department have an overall vision? Does the department know where it is heading? For example, can you tell us what the staff and budget of the Department of National Defence will be in two years? Do you have any data that we could check?
I would also like you to give us an example in response to the interesting questions asked byMr. de Savoye. Give us two examples of specific objectives that you have at the moment for the next two years. I'm not talking about motherhood issues or wishful thinking, but rather measurable objectives that you have for the next two years.
Tell us, for example, that you will be reducing something or other by 12% and that you will be increasing something else by 18%. In that way, members of Parliament, in their capacity as trustees of taxpayers' money will be able to say that National Defence is doing a good job or that it is not.
Ms Fréchette: We will be reducing the number of military staff to 60,000 by the year 1999. We have almost reached this target. We will be maintaining the number of Reserves; we will be increasing it to 30,000. We will be reducing the resources for strategic headquarters by 50%. We have already reduced them by 25%. By the end of the year, we should probably have reduced them by 33%.
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By 1999, we will have reduced by close to 50% the resources for headquarters. We will have moved, we will have abolished the headquarters of the three services and brought them to Ottawa. One already arrived this summer. The Commander of the Land Forces is now at National Defence headquarters, and the other two will be coming next summer. I could give you some other examples as well.
We have very specific objectives, and each command has its own objectives, of course.
To come back to the explanations provided by General de Quetteville, that is what the whole business plan system is for. The business plans we had last year were less developed than those we have this year. In some cases, they include more details. The business plans are beginning to include some specific measurements. As General de Quetteville said, we are not starting from scratch; we are already very advanced. So, there are many quantifiable objectives.
The Chairman: Is this information available in a document that committee members could have as bedtime reading?
Ms Fréchette: The Department of National Defence's outlook document, which was tabled in Parliament last year and is renewed each year, contains many of these details. In addition, we have to prepare more detailed business plans for our operations. So such documents do exist.
The Chairman: Mr. Desautels, I was expecting that chapter 34 of your report on support productivity might not go there. Vice admiral Murray said that it was about supplies for bases, transportation, vehicle and aircraft maintenance, and so on. However, at the time the Collège militaire in Saint-Jean, Québec, closed down, we were told that the main reason for its closure was economic. From the fragmentary information we're getting from Kingston, however, we are hearing that apparently some fantastic amounts are being spent and invested in Kingston.
You have not looked into this matter, but will you be considering whether the decision to close the Collège militaire in Saint-Jean and to move everything to Kingston was a good decision in economic terms? Will you investigate to find out how much is being spent in Kingston? Will we see such a report during our lifetime?
Mr. Desautels: Mr. Chairman, we have not planned to look at the closing of the Collège militaire in Saint-Jean. As you know, we reported on some base closures in 1994. We discussed that here at the committee last year. We expect to review the issue of base closures at some point, but we have no plans to investigate specifically the Collège militaire in Saint-Jean or the base in Calgary.
We have reported on a number of bases that were closed, and we made some suggestions about future base closures. We have looked at the problem in general terms, without focusing on St-Jean or Calgary. I'm not ruling out the possibility of studying what happened at certain bases, as we've done in the past.
[English]
The Chairman: Mr. Pagtakhan.
Mr. Pagtakhan: Thank you, Mr. Chairman.
I would like to come back to why we cannot have the performance standards established much sooner. To follow up on the question of the vice-chair, Mr. Grose, while I know who is the leader of the defence department, the acting chief of defence, Vice-Admiral Murray, I want it to be clarified who really is the manager today.
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Ms Fréchette: If you're talking in terms of the elaboration of performance indicators, performance indicators have to be developed at several levels: the strategic level, the commander level, and you go down. At each level there has to be some detailed work to develop each indicator.
Mr. Pagtakhan: So if we have one main focus on the major shortfall in productivity that the Auditor General has identified at the local level, if the committee wants to know who is ultimately the manager for this, where the buck stops...
Ms Fréchette: At the end of the day it all comes back to the chief of defence staff and me, because it's all rolled up in the business plan of the institution.
Within Air Command it's General de Quetteville's responsibility to produce his own set, and so on within the maritime forces and so on. There is a responsibility at the Department of National Defence level to make sure each of the individual components fits in one integrated system.
You're asking why it is not possible to have it quickly. Not only is it quite a massive task to develop meaningful performance indicators for the thousands and thousands of things that have to be measured, but also you need workable information technology to make it comparable and compatible across the system.
The last time we were here I referred to the fact that we have a number of major information technology projects under way that should come on stream within the next couple of years. They will give you an architecture of performance measurement and a costing basis that will be comparable and coherent across the system.
Mr. Pagtakhan: In the little introduction I have to management, when you define objectives and would like to be assured that the objectives have been attained, inherent in that is to at the same time set the performance standards by which to measure the attainment of those objectives. Otherwise the attainment could happen by accident, an act of serendipity. But we would like to be better than that, so there would be some consistently good results.
So my question to the Auditor General is this. Here we see the dilemma of the defence department. Here you said this is a major shortfall. We have expertise in the country in management. My question is, Mr. Auditor General, when is it reasonable to have the set of standards you have envisioned as a consequence of your auditing?
Mr. Kasurak: You have to distinguish between the various levels of management.
For some of these measures, such as the ones for local managers to use to manage truck fleets and to manage schools, we don't think there's any technical reason those couldn't be put in place in a year or less. Most people can understand fairly well what's going on at that level of activity.
There are many pre-existing industry examples that can be relied upon to give guidance at the higher level. The deputy and the acting chief spoke today of strategic performance measurement. The department's been struggling with this for quite some time. I would think the program they've laid out, which says 18 months, would be a first cut. It will need refinement after that.
They've set some very ambitious goals for themselves and what they want their system to do. If they achieve that, even get it mostly right on the first cut, it will be better than anything I've seen elsewhere in the world. It's going to move the yardsticks. They've set a very high target for themselves. I don't think eighteen months to two years is unreasonable to try to achieve that. I guess the only regret now is that the department didn't start this process of refinement sooner.
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I would say that one level could be addressed fairly quickly, but the overall strategic level performance management system is going to be very difficult to achieve. I find their timetable to be reasonably ambitious.
Mr. Pagtakhan: You say ``fairly quickly''; I think this is crucial. This is the major observation of the Auditor General. Can you define ``fairly quickly'' in terms of months at the local level?
Mr. Kasurak: I would say twelve months.
Mr. Pagtakhan: So you are saying to the committee that an audit earlier than twelve months would not be reasonable.
Mr. Kasurak: No, I don't believe we'd find a lot of change. We'd find things part-way there. It would be difficult to come up with any real determination in anything less than that period.
Mr. Pagtakhan: So we assume that twelve months later, maximum time, the standards shall have been set. Then we will see the application of these standards to the activities that are going. How long a period of time would you expect for a reasonable assessment and application of those standards for performance appraisal?
Mr. Kasurak: Mr. Chairman, auditors like to work on the past more than the future. I think this will vary widely with the area we're talking about. In some areas, like transport, I think you would see results quite quickly.
For example, the base in Montreal is going from study to re-engineering in about 18 months. For a relatively straightforward proposition you'd see improvement in a year to 18 months. For others like air maintenance, which may well be more complicated, especially if we move to a different aircraft type, in re-engineering we may have to go back closer to the start. It might take longer than 24 months.
I would at this stage defer to General de Quetteville as to a time estimate there. I don't think it can be done globally. I think it has to be done function by function with some thought about the complexity of the task.
Mr. Pagtakhan: At the end of the year it is reasonable to have the set of performance standards at the local level, I hope. Could the deputy minister make an undertaking to this committee to submit that report to the committee?
If we have that performance standard at the end of the year, one year from today, the audit will not be done earlier than a year later. Then you're looking at two or three more years. The discussions that have taken place in this committee will have been forgotten in the life of a new Parliament. That is the concern I have. How do we ensure that there is continuity? Is it reasonable to request the deputy minister to perform?
That is my last question. Thank you.
Ms Fréchette: The word I get from one of the ADMs who's the closest to these issues tells me that a year is probably doable. I'm not sure that we can produce meaningful standards for every single activity for all the bases, but I think in a year we would have made significant progress. I certainly would be happy to report to the committee in a year from now, bearing in mind that many of these activities may very well be submitted to the test of the market in the meantime.
Mr. Pagtakhan: Thank you so much.
[Translation]
The Chairman: We're going to have to leave for a vote. I will turn the floor over to the Auditor General for his concluding remarks.
[English]
Mr. Desautels: Mr. Chairman, I don't need to add very much at this point. Let me say, however, that I think this is a most important subject. It's a little difficult to discuss it at times, but it's a very serious subject. I think it's most important for DND and I wish the current leadership of DND the best of luck in achieving success in their plans.
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My main concern, which I was going to suggest, is being taken care of. What we would like to see at some point is a more comprehensive, systematic accounting of how well the department is doing in its plans. I can wait. A period of six months would have been nice, but if it's more meaningful in a year's time, I think that's fine too.
I think that report could also include some target for actual savings to be obtained from productivity gains rather than just savings from imposed reductions. I think that would be quite helpful to the committee as well and it would answer some of the concerns that members have raised, Mr. de Savoye in particular.
[Translation]
The Chairman: On behalf of my colleagues, I would like to thank the witnesses for appearing before us. We were pleased to hear from you. I'm sure some of the witnesses found it more relaxing to testify before us than before the Commission of inquiry on Somalia. I'm thinking of Vice-Admiral Murray. Thank you.
The meeting stands adjourned to the call of the Chair.