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37th PARLIAMENT, 1st SESSION

Standing Committee on National Defence and Veterans Affairs

EVIDENCE

CONTENTS

Thursday, June 13, 2002

1535

The Chair (Mr. David Pratt (Nepean—Carleton, Lib.))

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

1540

1545

The Chair

Ms. Cheryl Gallant (Renfrew—Nipissing—Pembroke, Canadian Alliance)

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

1550

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

1555

The Chair

Mr. Claude Bachand (Saint-Jean, BQ)

Mrs. Elsie Wayne (Saint John, PC)

The Chair

Mr. Claude Bachand

The Chair

Mrs. Elsie Wayne

Mr. Alan Williams

Mrs. Elsie Wayne

Mr. Alan Williams

1600

Mrs. Elsie Wayne

Mr. Alan Williams

Mrs. Elsie Wayne

Mr. Alan Williams

The Chair

Mrs. Elsie Wayne

The Chair

Mr. Alan Williams

Mrs. Elsie Wayne

The Chair

Mr. Janko Peric (Cambridge, Lib.)

The Chair

Mr. John O'Reilly (Haliburton—Victoria—Brock, Lib.)

Mr. Alan Williams

Mr. John O'Reilly

1605

Mr. Alan Williams

Mr. John O'Reilly

Mr. Alan Williams

Mr. John O'Reilly

Mr. Alan Williams

Mr. John O'Reilly

The Chair

Mr. Claude Bachand

1610

Mr. Alan Williams

Mr. Claude Bachand

Mr. Alan Williams

Mr. Claude Bachand

Mr. Alan Williams

The Chair

Mr. Claude Bachand

1615

Mr. Alan Williams

Mr. Claude Bachand

The Chair

Mr. Claude Bachand

The Chair

Mr. Peter Stoffer (Sackville—Musquodoboit Valley—Eastern Shore, NDP)

Mr. Alan Williams

Mr. Peter Stoffer

1620

The Chair

Mr. Peter Stoffer

Mr. Alan Williams

Mr. Peter Stoffer

Mr. Alan Williams

Mr. Peter Stoffer

Mr. Alan Williams

The Chair

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

1625

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

The Chair

Mr. Claude Bachand

1630

Mr. Alan Williams

The Chair

Mr. Alan Williams

Mr. Claude Bachand

Mr. Alan Williams

The Chair

Mr. Janko Peric

1635

Mr. Alan Williams

Mr. Janko Peric

Mr. Alan Williams

Mr. Janko Peric

Mr. Alan Williams

Mr. Janko Peric

Mr. Alan Williams

Mr. Janko Peric

The Chair

Mr. Peter Stoffer

Mr. Alan Williams

Mr. Peter Stoffer

Mr. Alan Williams

Mr. Peter Stoffer

Mr. Alan Williams

1640

Mr. Peter Stoffer

Mr. Alan Williams

Mr. Peter Stoffer

Mr. Alan Williams

Mr. Peter Stoffer

Mr. Alan Williams

Mr. Peter Stoffer

Mr. Alan Williams

Mr. Peter Stoffer

Mr. Alan Williams

The Chair

Mr. Peter Stoffer

Mr. Alan Williams

Mr. Peter Stoffer

Mr. Alan Williams

Mr. Peter Stoffer

Mr. Alan Williams

Mr. Peter Stoffer

Mr. Alan Williams

The Chair

Mr. Bob Wood (Nipissing, Lib.)

Mr. Alan Williams

Mr. Bob Wood

Mr. Alan Williams

1645

Mr. Bob Wood

Mr. Alan Williams

Mr. Bob Wood

Mr. Alan Williams

Mr. Bob Wood

Mr. Alan Williams

Mr. Bob Wood

Mr. Alan Williams

The Chair

Ms. Cheryl Gallant

Mr. Alan Williams

1650

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

The Chair

Mr. Alan Williams

Ms. Cheryl Gallant

The Chair

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

Mr. Alan Williams

Mr. Robert Bertrand

1655

Mr. Alan Williams

Mr. Robert Bertrand

Mr. Alan Williams

The Chair

Mr. Claude Bachand

1700

Mr. Alan Williams

The Chair

Mr. Price

Mr. Alan Williams

Mr. Price

Mr. Alan Williams

Mr. Price

Mr. Alan Williams

Mr. Price

Mr. Alan Williams

Mr. Price

Mr. Alan Williams

Mr. Price

1705

Mr. Alan Williams

Mr. Price

Mr. Alan Williams

Mr. Price

Mr. Alan Williams

The Chair

Mr. Peter Stoffer

Mr. Alan Williams

Mr. Peter Stoffer

Mr. Alan Williams

Mr. Peter Stoffer

Mr. Alan Williams

1710

Mr. Peter Stoffer

Mr. Alan Williams

Mr. Peter Stoffer

Mr. Alan Williams

The Chair

Mr. Alan Williams

The Chair

Mr. Bob Wood

Mr. Alan Williams

1715

Mr. Bob Wood

Mr. Alan Williams

Mr. Bob Wood

Mr. Alan Williams

Mr. Bob Wood

Mr. Alan Williams

Mr. Bob Wood

Mr. Alan Williams

The Chair

Ms. Cheryl Gallant

1720

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

Mr. Alan Williams

Ms. Cheryl Gallant

The Chair

1725

Mr. Peter Stoffer

Mr. Alan Williams

Mr. Peter Stoffer

The Chair

Mr. Peter Stoffer

The Chair

Mr. Peter Stoffer

The Chair

Mr. Alan Williams

The Chair

1730

Mr. Peter Stoffer

The Chair

Mr. Peter Stoffer

The Chair

Mr. Bob Wood

Mr. David Price

Mr. Peter Stoffer

Mr. David Price

The Chair

Mr. Peter Stoffer

The Chair

Mr. Peter Stoffer

The Chair

Ms. Cheryl Gallant

The Chair

CANADA

Standing Committee on National Defence and Veterans Affairs

NUMBER 061

1st SESSION

37th PARLIAMENT

EVIDENCE

Thursday, June 13, 2002

[Recorded by Electronic Apparatus]

¹ (1535)

[English]

The Chair (Mr. David Pratt (Nepean—Carleton, Lib.)): I call to order this meeting of the Standing Committee on National Defence and Veterans Affairs. We are very pleased indeed to have Mr. Alan Williams, the assistant deputy minister responsible for materiel, here with us today on what I would describe as very, very short notice.

We certainly appreciate the fact that you were able to join us, Mr. Williams, on this issue that is important to members of the committee.

We should probably get under way just as quickly as possible, so why don't I turn the floor over to you, Mr. Williams, for a statement? I am sure that we're going to have quite a few questions to follow.

Mr. Alan Williams (Assistant Deputy Minister (Materiel), Department of National Defence): Good afternoon, ladies and gentlemen. It really is a pleasure for me to be here again with you.

It was almost exactly a year ago that I spoke to you about the operational readiness of the Canadian Forces from the perspective of my organization, the materiel group, and the framework called “Getting It Right” that I am implementing to deal with the increasingly complex environment in which we operate.

I know that Rick Burton, my chief of staff, and Navy Captain Yvon De Blois appeared before you last week and spoke in detail about the supply chain project. Today I would like to situate the supply chain project within the broader strategic framework of Getting It Right, and to clarify a number of important points on the project.

The last time we spoke, September 11 hadn't happened. I don't have to tell you that the tragic events of that day raised the profile and increased the recognition of what is termed the revolution in military affairs or RMA. If anyone didn't grasp the significance of the RMA or underestimated its impact, these notions have now been shattered. Heinous terrorist acts have brought it into clear focus.

There have always been challenges in the business of materiel. September 11 brought a new dimension and enhanced importance to the work of meeting them. The Canadian Forces have become an integral part of the campaign with the United States and our allies in the fight against terrorism, and the materiel group is fully engaged in support activities for the Canadian Forces directed overseas.

When we speak of the RMA, we speak of: the presence of asymmetric or non-conventional threats; the requirement for quick deployment; coalition warfare; and the rapid rate of technological change, and in particular, software change.

This RMA reality has clear and critical implications for me in the materiel world. It means getting goods and services quickly to our military. It means ensuring interoperability with our allies. It means introducing a revolution in business affairs commensurate with the revolution in military affairs.

[Translation]

Our framework for this business is the Materiel Group's stategic framework - Getting It Right. As you may recall, this framework is designed to obtain the right goods or services at the right time for the right price, while ensuring the right support and applying the right rules, all with the right people.

It has three main thrusts - leveraging the strengths of the industry and allies, introducing best practices and enhancing contract structure and management. In other words, we will reduce acquisition times if we apply best practices with industry's valued input and then cement our arrangements with appropriate contracting structures.

The Getting It Right framework is working. For example, using commercial and military off-the-shelf technologies rather than new developmental ones, lowers our risks, costs and timeframes. We can speed up our acquisition process by not “reinventing the wheel“. For example, by locking up into an existing process developed by the germans to implement an air-to-air refuelling capability, we have cut out three years of acquisition time and saved the taxpayer $59 million dollars.

We are relying more and more on the private sector to maintain a lot of our weapons systems and reduce our acquisition times. This is not unique to us. Our allies, too, are following the same path.

[English]

Combining initial acquisition with long-term support, or what we call total package procurement, ensures that we minimize life-cycle costs and provides incentives for industry to consider long-term investments. Timely support is assured. It is, in fact, the approach that we are following with respect to the maritime helicopter project.

We have also introduced the tailored weapons system support concept, in which we identify the optimum balance of departmental and industry support required for a given system. In other words, as we move to optimize our cost-effectiveness, we evaluate whether it is appropriate for the private sector to undertake in-service support tailored to each weapons system.

Some examples of these tailored support agreements include: Air Canada providing the parts and maintenance for the Airbus platform; Bell Textron managing the parts inventory for the Griffon helicopter, with only limited holdings at squadrons; and a contractor providing in-service support to our maritime coastal defence vessels.

We are increasingly committed to consulting with industry before requests for proposals are written. When we tell industry exactly what we need, but not how to provide it, we are leveraging industry's skills and innovation, tapping into their best practices, and ultimately reducing costs and improving service for ourselves.

It is critical for us to explore new and better ways to deliver goods and services to our military. It would be negligent of us not to do so. In the year 2000, for example, we put in place a pilot project to contract out certain support services in Bosnia. It was the first time that support operations for an overseas mission were contracted out on such a wide scale and it represented an important step in improving the quality of life for our often overextended soldiers. It also allows the government increased flexibility to respond to requests for support that our military forces might not otherwise be able to provide. We are very satisfied with the contracted support for our forces currently deployed in Bosnia.

The supply chain project is another of the initiatives in the Department of National Defence that looks at contracting support services in order to focus scarce resources on core business. Unlike the Bosnia contract, it is an initiative to outsource the management and operation of non-combat logistics functions at depots, bases, and wings across the country. Let me stress the non-combat part of that sentence. Military logistics in theatres of operation would continue to be under military control. Buying decisions and establishing supply arrangements for all acquisition activity, including inventoried items, will be retained by the department.

¹ (1540)

[Translation]

As you know, Tibbett & Britten Group Canada was competitively selected to be the contractor for the Supply Chain Project in August 2001. Tibbett & Britten is a well-established third party logistics provider in Canada whose North American headquarters is in Toronto.

Right now, the Department is refining its Supply Chain Project business case with Tibbett & Britten Group Canada. We are asking two basic questions. Can this supply and distribution work be done by the private sector? And can it be done in a more cost effective manner while maintaining or enhancing the service level?Tibbett & Britten has a year - the duration of the refinement phase- to convince themselves and us that the answer to both questions is yes.

Let me emphasize one point in particular. At all phases of this project, we have consulted extensively with all our unions, including the Union of National Defence Employees and the Public Service Alliance of Canada. They have provided invaluable input. In fact, they have helped to raise the bar leading to the offer Tibbett & Britten has made to the employees affected by the Supply Chain Project.

[English]

Fair treatment of our valued employees has always been at the forefront of the supply chain project. The civilian human resources strategy was developed in full consultation with the unions. One hundred per cent of the affected permanent employees will be guaranteed employment for seven years, with salaries equivalent to or better than public service rates of pay. I don't believe that any of us here today have a seven-year employment guarantee, nor do most Canadians.

Employees affected by the supply chain project are also entitled to a full range of benefits, including health, dental, disability, and pension. While not identical to the public service compensation package, the HR package put together by Tibbett & Britten is identified as a reasonable job offer under existing workforce adjustment agreement provisions.

[Translation]

When I reviewed the transcript of last week's appearance, I noticed two areas that were a particular focus of concern - security and the effect of the Project on local procurement.

With respect to security, it should be recognized that our supply chain is currently managed by a mix of military and civilian personnel. This will not change under the Supply Chain Project. Personnel who become employees of Tibbett & Britten will be held to the same security performance standards we demand for our Public Service staff. Canadian troops will not be at risk.

Again, I will emphasize that we are talking about our domestic supply and distribution system, not about operations in combat zones. The Supply Chain's purview is the supply and distribution business that we undertake across Canada.

Let me now turn to the issue of local procurement. The Supply Chain Project wil have very little impact on local procurement because the buying decisions will still be made by the Department of National Defence. What we buy and from where or from whom it is ourchased remains the purview of the Crown. These buying decisions will not be transferred to the private sector.

¹ (1545)

[English]

I believe that it is the responsibility of public servants to continually strive for improvements to make better use of taxpayers' dollars. I am convinced that, especially since September 11, we have no option but to continue to explore new and better ways to more quickly deliver goods and services to our military. I believe that initiatives like the supply chain project, which use the skills and performance of the private sector, are a way of allowing us to accomplish this objective.

Before responding to your questions, there is one other issue I would like to address. In reading the transcript of your discussion last week on the supply chain project, observations were made regarding the logistical readiness and support of our troops in Afghanistan. Let me set the record straight. First, with regard to clothing, the Chief of the Land Staff made the decision as to which uniform should be used in Afghanistan, based on threat levels, operational conditions, and the Battle Group Commander's recommendations. Second, the 850-person Battle Group was deployed with 142 vehicles and trailers, including state-of-the-art GM Coyote reconnaissance vehicles. Third, with respect to transportation, as of May 24, the Canadian Forces used 523 flights or ships to transport 2,306 personnel and approximately 8.7 million pounds of freight, including 69 sea containers. It is particularly noteworthy that, included in the totals, Canadian Forces transported 945 U.S. personnel and 3.8 million pounds of freight for the U.S. Conversely, the U.S. transported 850 Canadian personnel and 4.2 million pounds of our freight. In other words, it was a fair and balanced assistance relationship between two allies.

Finally, with regard to rations, water, and accommodation, it was agreed early that the support at Kandahar in Afghanistan would be the same for the Canadian and the U.S. forces. The ration plan is based on a camp concept, whereby all personnel in the camp, regardless of nationality, eat the same meals. This “one feeding standard” has contributed to the positive morale of both the U.S. and Canadian troops in the camp and has been deemed a success at the Battle Group level. Since the beginning of the operation, Canadian and U.S. troops have been eating a mixture of Canadian and U.S. rations, thus offering a wider choice and variety to the troops in Afghanistan. However, if required, Canadian rations are available in theatre at all times. As for water, this commodity is being supplied by a Canadian reverse osmosis water purification unit and is supporting the entire camp in Kandahar.

Thank you very much.

The Chair: Thank you very much, Mr. Williams, for providing us with what I think is some very important additional information in connection with the comments made last week.

I see from my list that your dance card is filling up quite quickly. We'll start with Mrs. Gallant, for seven minutes.

Ms. Cheryl Gallant (Renfrew—Nipissing—Pembroke, Canadian Alliance): Thank you, Mr. Chairman, and through you, to Mr. Williams.

Mr. Burton isn't here today. He mentioned that he was going to be moving to Treasury Board. Has he already left?

Mr. Alan Williams: No, he hasn't.

Ms. Cheryl Gallant: So when it comes to accountability and any statements that have been made, he really won't be held to them because he is being transferred. Is that a fair statement? Or do we have a way of...?

Mr. Alan Williams: Mr. Burton works for me and I'm accountable for the project.

Ms. Cheryl Gallant: Thank you.

Last week, the witnesses testified that this proposal is being considered on the assumption that there may be no new resources for defence, so in effect it's sort of a last-ditch effort to cut costs as a result of successive budget cuts. The object of the exercise is to save money. Is the 1998-99 MOS review still valid? That's the study that identified core versus non-core and essential versus non-essential positions.

Mr. Alan Williams: Let me make what I think is a very critical point. Undertaking the supply chain, frankly, is independent of the department's budget. That's why I was so clear on saying that it doesn't matter how much money we have or don't have, we have to try to continue to do things better. Whether our budget stays the same or increases or decreases, I will always be looking at ways of doing it better, smarter, and faster.

As for the status of the MOS, frankly, again, it is slightly irrelevant to what I'm doing in the sense that there are pressures on people in these skill sets. These skill sets are lacking today and they'll be lacking tomorrow. The review is certainly trying, as you've all been informed, to do aggressive recruitment to try to address these gaps.

¹ (1550)

Ms. Cheryl Gallant: Thank you. With that study, will the positions that were identified as non-core or non-essential be eliminated through attrition?

Mr. Alan Williams: There's a difference between non-core and non-essential. Those aren't the same terms.

Ms. Cheryl Gallant: Are those positions, either one or both, going to be eliminated through attrition?

Mr. Alan Williams: I'm not sure what positions you're talking about.

Ms. Cheryl Gallant: The supply techs who have been identified as non-core and/or non-essential: will those positions be eliminated? I'm trying to find where the savings are going to be, but if you would, please answer that question.

Mr. Alan Williams: We are talking about both military and civilian people being affected. In terms of the military people being affected, they remain military personnel. In fact, to be more precise, we are not even telling the private sector firm that they will be given x number of people. What we're really telling them is that if they take over this project over, they can count on x number of hours of work from our military. If they take a certain number of people and multiply it by a certain number of hours, in terms of their bid they can count on that as people. They remain military personnel, managed and directed by the military, not by the private sector.

In terms of the civilians, that in fact is where they have, as you know, made offers to all the civilian people who are affected to come on over with them for full salary and for a seven-year pay guarantee.

Ms. Cheryl Gallant: You mentioned the number of hours that are going to be guaranteed. Is that on a per person basis?

Mr. Alan Williams: Yes.

Ms. Cheryl Gallant: You still didn't answer the question. Are the positions that have been identified as non-core and/or non-essential going to disappear through attrition, the ones relating to the military supply techs?

Mr. Alan Williams: No. The military positions remain military positions. Nothing is happening to them.

Ms. Cheryl Gallant: All right. Now in terms of the number of hours per troop that are going to be embedded in the contract, just break it down. By the time they've fulfilled the commitment to the company TBG and have gone through their two hours of PT every day, with the allotted time for time off, there's really no extra time to practise military exercises and operations. How do you expect them to...?

Mr. Alan Williams: Because we are only guaranteeing the private sector the number of equivalent hours they would spend on the supply business. The time they would have to spend on their military business is not part of the commitment to the private sector. We've allowed for both.

If someone spends hours a day doing military business, we will not say to the private sector, “You can count on those hours.” If someone spends three hours a day on the supply business and five hours on military business, it's the three hours that we would pass over, not the eight hours in total.

Ms. Cheryl Gallant: I'm just concerned that the number of hours allotted per person per year isn't going to allow for both.

Mr. Alan Williams: What I'm saying is that it will because we're not duplicating. We are only passing over the time they're spending on the supply business, not on the military business, so that eventuality cannot occur.

Ms. Cheryl Gallant: Okay. So on the topic of the non-essential and non-core, these positions, you said, are not going to disappear. They're still going to remain.

Mr. Alan Williams: Let me just--

Ms. Cheryl Gallant: What I want to know--

Mr. Alan Williams: I think there's an important point here, though, because to equate non-essential with non-core is wrong. Everything we do is essential or we wouldn't be doing it.

Ms. Cheryl Gallant: I understand that.

So these positions are not going to be eliminated. I'm trying to find where the savings are, then, in terms of the people. Both are still going to be there, the embedded and--

Mr. Alan Williams: Sure. That's a fair question. I'll know the answer more precisely when I get their report on how they're trying to convince me that they can save all the money they say they can.

Let me make a couple of observations that might shed some light on this. We have a couple of thousand people involved in this business. The company, as you know, is the largest third-party logistics company in Canada. In North America they have about 12,000 people already involved in this business, so one could expect that over time, with technological improvements and efficiencies, they would have more economies of scale and scope to absorb into their operation large numbers of people in a more cost-effective way.

I wouldn't be surprised if in five or 10 years from now, given their size and their capability, they might have the same 12,000 people managing not just all the businesses they're in to date plus ours, but another half dozen businesses as well. They have that capacity because of their size to absorb people over a long-term timeframe, much more than we do.

¹ (1555)

The Chair: Thank you, Mrs. Gallant.

Mr. Bachand.

Mr. Claude Bachand (Saint-Jean, BQ): Mrs. Wayne, did you want to go ahead?

Mrs. Elsie Wayne (Saint John, PC): Yes, thank you, Mr. Bachand.

If I could, Mr. Chairman, because I have to leave by 4:30...?

The Chair: Mrs. Wayne, seven minutes.

Mr. Claude Bachand: But I'm not losing my turn, am I?

The Chair: No. Future considerations, Mr. Bachand.

Mrs. Elsie Wayne: Thank you very much.

Mr. Williams, we do have major concerns, there's no question about it. I was passed this copy of a military supply chain petition to the House of Commons. It's from people in Newfoundland and Labrador, including Gander.

This petition states, according to the men and women who work there right now, that the contractor, TBG, has failed to provide to those workers the information that is essential to ensure their future, and that there is no indication this company will respect existing collective agreements and terms and conditions of work.

We had our union men in last week and they also were very, very concerned. They made an excellent presentation.

My question, and I guess you've answered it, is that they haven't proven to you yet the savings for us. In the presentation made by the captain last week, he told us they first thought they were going to save $70 million, but now they have to sit down because they're not sure.

I know that TBG is very much involved with Wal-Mart, but I'm concerned when I look at what's going to happen across this nation of ours in all those areas where at the present time there are warehouses, with men and women working there and contributing to the economy. It's not just military, it's the economy as well. I'm really, really concerned about what we are doing in this privatization.

Mr. Alan Williams: Let me tell you that I share the concern. I think where people are sort of getting ahead of themselves is in presuming the decisions have been made. In fact, I would argue that we've taken a very cautious approach in terms of what we're going to do. We have laid out a business case. The company, along with ourselves, is taking a year to assure themselves and us that it makes sense.

I do not know, based on what they determine over the course of the year, whether they think they can achieve those savings. This year is being given to allow them to make those determinations and then to report back to me, and not just to tell me yes, they can do it, or no, they can't. I'll have to be convinced and assured that they can and that it's worthwhile for us to undertake this kind of initiative. So I would just say, let's let the process unfold.

In terms of information, I guess you can never have enough information, but I will point out that our people, along with the company and the unions, had 43 site visits and 23 town hall meetings. We have a website where all the questions and answers are put up for everybody to see. If someone has more questions, they can easily put them on the website or use the 800 number to get answers to their specific questions.

I guess you can never do enough communication, but I would argue that we have certainly done our best to try to communicate. If any of those people have more questions, they need only write in or call in, and they'll get the answers within days.

Mrs. Elsie Wayne: According to the information that we've received, the minister apparently referred to the date of September 1. Is that when the year you're referring to...?

Mr. Alan Williams: I think we signed the contract on August 30. There's nothing set in stone, but we hoped, within this current year since then, for them to take the time.... I expect a report back from them probably sometime in July. We will then take our time to review and discuss it amongst ourselves, with the unions, and with our employees, and make the right decision, but we are not going to make a decision that undertakes a major initiative like this and doesn't have savings attached to it. We're not going to do it unless we make sure our people are well taken care of and that it makes sense for the department, our people, and the taxpayers.

º (1600)

Mrs. Elsie Wayne: The most important thing here, I guess, is whether or not it's good for the military, not necessarily whether we save or we don't save. It's whether it's good for the military.

Mr. Alan Williams: For sure, but one way of looking at whether it's good for the military is if it's enhancing or at least maintaining service. If at the same time we can save money, which we could redeploy or use elsewhere for the military, that's smart business.

Mrs. Elsie Wayne: The union representatives last week, Mr. Chairman, if you'll recall, also told us that the seven-year job protection timeline began with the beginning of the contract, not from the time the employee was transferred from the government payroll to TBG.

Now I'll put it another way. If the DND civilian employees were transferred to the control of Tibbett's in the second year of the contract, according to the union representatives they would only have five years' job security. Is this your understanding?

Mr. Alan Williams: Absolutely. What we're telling people is that if we sign the contract with Tibbett & Britten for phase two, then from that point they have a seven-year job guarantee. The fact that they may be working for a greater period of time with the public service before transferring over frankly doesn't really matter. What we said to them was, “If we sign off on September 4, 2002, then until September 3, 2009, you can be assured of full payments and salary, whether you're paid from here or you're paid from there. You're only going to be paid once, but you're going to get your salary for that full seven years.”

That was our commitment and I don't think anything else makes any sense. It's not seven years from the time you go on board; it's a seven-year guarantee from the time we agree to move in this direction.

The Chair: You have time for a very quick question, Mrs. Wayne.

Mrs. Elsie Wayne: Finally, on your last comment with regard to our Canadian and U.S. troops over in Afghanistan and the rations they're eating and so on and so forth, I have to tell you, Mr. Williams, that I have had many, many phone calls from the parents, because they've received information from their sons and daughters over there, who are--according to what they're telling them--hungry and asking their moms and dads to send them food.

So somehow, if what is supposed to be happening is that they are being well fed, according to what we are being told that is not the case.

The Chair: A short answer, Mr. Williams?

Mr. Alan Williams: Certainly I'll get back to our people and see if there are any of these cases, and if people would let me know--write to me or phone me or fax me--I'd be happy to look into it.

Mrs. Elsie Wayne: Okay. Thank you.

The Chair: Have other members of the committee received similar comments?

An hon. member: No.

The Chair: Nor have I.

An hon. member: Yes.

The Chair: You have?

Mr. Janko Peric (Cambridge, Lib.): Of course. My son was there. What are you talking about? About the food?

The Chair: About the food.

Mr. Janko Peric: Let's not talk about the food. We'll talk directly to Mr. Williams.

The Chair: Okay. Let's continue along here.

Mr. O'Reilly, you have the floor.

Mr. John O'Reilly (Haliburton—Victoria—Brock, Lib.): Thank you very much.

I wanted to touch on a couple of items that are beyond the Tibbett & Britten contract. I realize that everybody thought that because it was Tibbett & Britten it was a British company. Maybe its head office is, but it's actually been in Canada since 1989. Your notes are wrong; it's a Hamilton address, not Toronto. Everybody thinks Toronto is the whole area down there, but the head office is actually in Hamilton, closer to Burlington. The vice-president is a Canadian. I checked him out on their website and I invite everybody else to do that because it gives you a lot of information.

I was interested in the other theatres, in peacekeeping. For instance, when I was in Bosnia there was a company over there, ATCO Frontec, which supplies firefighting services, carpentry, food, maintenance, some vehicle maintenance, some parts supplies and so forth.

Mr. Alan Williams: Yes, and laundry, a whole range of services, 13 to 15 different kinds of services.

Mr. John O'Reilly: Yes, and that, in a peacekeeping area, frees up a lot of people to do other things.

My concern with this is that when we're recruiting people for the armed forces we're eliminating a lot of trades and areas young people might go into. I would have gone into the armed forces as a cook because that was my trade very early in life. Now that would be eliminated. I wouldn't be able to go in for that. This is of concern to me. I'm not concerned with the services being provided because as near as I could tell they were excellent.

Now when you go into something Happy Valley-Goose Bay and Serco, I'm not sure that didn't damage the economy of that area because a lot of people rely on that base for jobs and for part-time work and that type of thing. I would be interested in knowing if that actually saved money and how much it cost the community, because I think this does have an effect on the community. I would like you to comment on that first.

º (1605)

Mr. Alan Williams: Let me comment on both.

In terms of Bosnia, we signed a three-year contract with ATCO Frontec for $128 million to do a wide range of the basic kind of support services we are talking about. During that time, the objective was the exact opposite of the fear you have. It wasn't that we were eliminating these trades by putting these people in; it was recognizing that we have a shortage. Therefore, because we have a shortage, rather than having people deployed to Bosnia, going back home, and then being torn away from their families again six months later, we said, “Let's see if we can help our people by using the private sector until we can get more people in.” We're using between 140 and 160 of the private sector people while maintaining the current people we have.

This is in fact not a cost-saving thing. It's costing us totally incremental money in order to do this. It's a quality of life thing. If you wanted to join and be a cook, we would grab you. We would grab you, assuming your cooking was good. There are certain standards.

Mr. John O'Reilly: I don't know. You can look at me. How good is it?

Mr. Alan Williams: So your job wouldn't be harder to get into. It's just that we know there aren't enough, so to the extent that we can help our men and women by using the private sector, that was our objective.

With regard to Serco and Goose Bay, I think that (a) we've saved money. The contract that we thought was going to cost $44 million started off at $22 million. As you know, we had problems or the issues surrounding the HR issues, which added another $5 million cost to it, from $22 million to $27 million, but yet we have saved. There are 22 different functions that are being undertaken there. From that perspective, we have benefited and taxpayers have benefited.

There are also a lot of misconceptions about the business that was done in or about Happy Valley. The fact is that of the purchase orders 78% was done in the Happy Valley area. That's in terms of volume. Fifty-five per cent of the value of all the contracts was also in Happy Valley, and if you include Newfoundland and Labrador, it's over 67%. Much of the business remained in the Happy Valley area.

I would argue that the taxpayer benefited and the department benefited. It was a learning experience for us. We are about to renew it. We've learned from it and hopefully we will be even more successful the next time. We've had meetings with the local mayor. Our RFP that's going out will in fact ensure there is a minimum of 300 full-time employees, of which 90% must be hired from the local community at the kinds of salaries we're talking about. We think we're going to be successful again there, or even more successful.

Mr. John O'Reilly: How do you deal with the fact that on September 11 at Trenton air base there was a union picket line around the air base and a strike was on?

I'm a former chapel chairman of a union. I think unions have done a lot for labour and will continue to do a lot for labour, but somehow you have to strike that balance. Is this an essential service? Certainly I thought that Trenton air base would be--

Mr. Alan Williams: It is.

Mr. John O'Reilly: Yet there was a strike going on at the base at the time.

Mr. Alan Williams: It gets back to my comment about essential services. Everything we do, I hope, is essential. If it's not essential, we ought not to be doing it, but in everything we do, we ought to find the best and smartest way of doing it.

We live in a democracy. We have labour laws, and labour is entitled to take full advantage of those laws. When they think they want to picket or protest or go on strike, they are entitled to do that within the framework of law. We have to be able to accommodate that and work with that, and we do. When they strike, we do what we can in terms of management to continue the services, hopefully in a successful way.

Mr. John O'Reilly: Thank you, Mr. Chairman.

The Chair: Thank you, Mr. O'Reilly.

Monsieur Bachand.

[Translation]

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

I want first to congratulate Mr. Williams. I see that he carefully read the transcript from last week's meeting. He answered some of my questions but there are other parts of the transcript which he has not mentionned. I will try to do it with him.

Mr. Williams, if I understood you correctly, you have said that Tibbett & Britten must convince itself and convince yourself too that it will be able to save 70 million dollars for the public purse. If Tibbett & Britten succeeds in convincing you that it will save 70 million dollars for the public purse, while cutting your employees' pay, benefits and working conditions and laying off 1 400 people with open-ended contracts, you will say yes because of the 70 million dollars savings.

Is it fair to say this is your position?

º (1610)

Mr. Alan Williams: No. I should add that this company must not only convince me that it can reach our objectives; it must also do it in a manner that is acceptable to us. It will be easy to determine if its proposal goes clearly one way or the other.

[English]

If they tell me they can save $70 million and they're treating people magnificently well, it's very easy, great. If they tell us they can save $4 million and in so doing they are going to treat everybody badly, it's also very easy to say no way are we going ahead.

The challenge will be if we're talking about somewhere in the middle. If it's going to save $20 million or $30 million and we're not quite convinced about how they're going to treat our people, then it's going to be important for us to take our time to understand it and to examine it. But there is absolutely no doubt in our mind: I certainly didn't join the public service in order to treat people badly. That's not why I came in. I will do everything within my power to assure myself and ourselves that--if it was my child being affected or my brother or my sister--I would be comfortable with that way in their proposal before I would action it.

[Translation]

Mr. Claude Bachand: You seem to have adopted the point of view of a reasonable man and this is very important. You say they will have to convince you and that you will act as a reasonable man would. You seem to show a lot of interest for this matter. You even seem to be totally focussed on it. For how many years have you been deputy minister in the public service?

Mr. Alan Williams: First, I am assistant deputy minister. I have been working in the public service for 31 years.

Mr. Claude Bachand: Do you think the National Defence Committee can not only be consulted about the decisions which may have to be made in a year or so but also have some influence on those decisions or do you think that you have come here to inform us and that we won't have anything more to say after that and that the Department of National Defence will be able to do what it wants? Have you ever seen a committee take such a stand on a particular issue that it forced the government to somewhat modify a policy it seemed bent on adopting?

[English]

Mr. Alan Williams: Perhaps one of the reasons I've lasted 31 years is that I know when I should answer a question and when I shouldn't answer a question.

Let me just say I personally value the input I get from you. I treat, and I think my people treat, seriously everything the committee says. When we get feedback, we try to look at how we can entertain those ideas and concepts in what we do. It perhaps would be outside my area of accountability to comment on the extent to which a committee could or should have a say in terms of policy.

The Chair: If I could interject here, I think Mr. Williams answered the question very appropriately, but this committee is free to make whatever recommendations it wishes to the government from that standpoint. We are not fettered in any way, other than by the majority vote of the committee.

[Translation]

Mr. Claude Bachand: At the beginning of my question, I said that you had read the transcript of last week's meeting, but there is an aspect you have not adressed. When one decides to play the financial game and goes on the stock exchange, all kind of things may happen. What concerns me is that there is no provision in the Canadian Labour Code which protects the working conditions when another employer takes over. You do it with Tibbett & Britten but what will happen if Honeywell or Raytheon buys Tibbett & Britten and refuses to implement the contract between Tibbett & Britten and the Department of National Defence? I think this is an important aspect. Canadian Forces have stormed the GTS Katie because it didn't want to pay. What if we have no chain of supply because somebody does not want to pay? I think that could be a serious problem. I would like to know what you think of that threat.

º (1615)

Mr. Alan Williams: There is no doubt that changes in the industry could change the situation.

[English]

To the extent we could, we would try to ensure, I think, from a contractual standpoint--and in fact I think we'd be able to ensure--that the legal obligations the company would have as per the contractual arrangements with us would be applied to or would be required to be fulfilled by any subsequent takeover by TBG should they be successful and if somebody else took them over five years from now.

[Translation]

Mr. Claude Bachand: Do I have any time left?

[English]

The Chair: Actually, you're pretty tight on time, Mr. Bachand.

Mr. Claude Bachand: Will we have a second round?

The Chair: Absolutely.

Mr. Stoffer.

Mr. Peter Stoffer (Sackville—Musquodoboit Valley—Eastern Shore, NDP): Thank you very much, Mr. Chairman.

Mr. Williams, I put it to you that you also didn't join the public service to be contracted out either and that's precisely what's happening to 1,674 employees.

Sir, you indicate the salaries will be guaranteed for seven years, but something you forgot to mention in your report is that the benefits are not guaranteed. They are not. We've double-checked this. A person's salary is not just based on what they make per hour; it's also based on the benefits package. That is going to be changing. That is a change from the original concept when this was first discussed. I'd like you to respond to why there has been a change.

Sir, I've asked the minister many times in the House of Commons, “How much money you will save?” He consistently has said $70 million. He doesn't just pop that figure out of his head. Somebody within his department--and you answer to him--gave him that information. Now we're told that we don't even know if there will be any savings. Why the contradiction?

Mr. Alan Williams: With regard to the nature of the benefits, I will look into that. I won't prejudge.

I am aware of the benefit package that was committed to the employees. My understanding is that the benefit package in terms of what it was to offer, taking into account the rates of change and all those kinds of things, was going to be provided to them for the seven years. I will look into it to see to what extent it is or is not guaranteed.

With regard to the money, there is no contradiction. What we have consistently said is that when we first looked at the merits of contracting out this part of our business, the warehousing and distribution, it appeared to us, based on our analysis, that there was a potential for an additional $70 million in savings. That's a large sum of money. If it could be achieved in a way that was fair to our employees, it would be something worth considering. Redirected and reapplied within the department, $70 million can do a great deal. So we said to industry, here is what we think, so bid on this business. They did. One company won.

Now we have said, time has passed, we're a couple of years into it, and to give our people full credit, they haven't just sat on their hands, either. A lot of really innovative kinds of improvements have been made from coast to coast in our bases, wings, and depots. So the question now remains, how much potential savings are out there? Is the $70 million, which we thought and the company thought was there back at the beginning, still there? We've said, “Take your time and confirm to us.” We will wait and see what they say. The $70 million is the figure we had hoped to achieve by doing this event. If it turns out that they come back to us with a different number, we will, as I indicated to one of your colleagues earlier on, have to make some very sobering decisions as to whether or not it merits going ahead.

Mr. Peter Stoffer: Sir, I do believe there's a contradiction. When we ask a question in Parliament, that question is available and can be heard by anyone in the country. When the minister says $70 million will be saved--and will be saved, not “we discussed it” or “we're going to look into it”.... The fact is, the evidence we've heard so far indicates that there is no proof, and if there is proof or if there's going to be proof, you've said, “It has to satisfy me.”

I challenge you, sir. I think what should happen is that this committee and Parliament--

º (1620)

The Chair: Excuse me, Mr. Stoffer. Could you direct your questions through the chair?

Mr. Peter Stoffer: Sorry, Mr. Chairman.

I will ask the deputy minister. The people who should be satisfied as to whether this is or is not a good deal are the members of this committee and the members of Parliament in the House of Commons who represent Canadian people from coast to coast to coast. It shouldn't be just one person who assumes full responsibility as to whether or not this is a good deal. The fact is that it is the taxpayer and the military men and women who are affected by this alternate service delivery.

Sir, what can--

Mr. Alan Williams: May I just make one comment to clarify one point?

Mr. Peter Stoffer: Go right ahead.

Mr. Alan Williams: I won't be making the decision unilaterally. The decision or the recommendation will come to me, and it will be examined by me and by a lot of other people. As I said, we will have discussions with the unions as well as with our employees. Undoubtedly, the final recommendation will go up to the deputy minister and the CDS. This isn't one person making a decision. This is a group of people looking at a complex issue from many different perspectives.

Mr. Peter Stoffer: Sir, the fact is that you're basically taking the supply chain and changing it into “War-Mart”. That's a little play on words.

The fact is that another aspect that gets overlooked is that there are over 3,000 small businesses throughout the country that are attached to the supply chain. In my discussions with CFIB, they said they're very nervous about this. First, they were hit, Mr. Chairman, with the concern about the CCRA and the sole-sourcing of all the documentation. They will lose access to that type of business. Now these 3,000 small businesses across the country will lose access to the ability to bid on small tendered projects through the supply chain. We're talking of a hardware store in Gander and a little computer shop in Shearwater. It's bad enough that 1,674 employees will be gone, but these small businesses, which rely in large part on the military, especially on the smaller bases across the country, will also be seriously affected. I don't believe that the government has taken that into account. I'd like your comment on that.

Mr. Alan Williams: That is totally not correct. As I commented, it's very important to understand what the supply chain is and what it isn't. This is not a buying decision. This is not outsourcing who buys what from whom and when.

This is a company that's going to take stuff that we bought and move it from one point to another point, hopefully in a more cost-effective way than we could.

All the buying decisions, what we buy and where we buy it from, remain with the crown.

So the access does not change whatsoever with regard to the small businesses that are currently selling goods and services to us from coast to coast.

Mr. Peter Stoffer: Then why would the CFIB and 3,000 businesses say otherwise?

Mr. Alan Williams: I don't know what information they're getting. Clearly if they're getting that information from us, we're doing something wrong. That is not what we're saying. We've tried to make that clear through all these town halls and site visits. All of our communications say the same thing.

There's fear. Of course there's fear, but that's why we're continually trying to set the record straight, so that at least we're not fearful of things we ought not to be fearful about.

The Chair: Thank you, Mr. Stoffer.

Mrs. Gallant.

Ms. Cheryl Gallant: There was an ASD study done in Base Petawawa in 1998-99 to determine if the base resources could be effective as a contractor for ASD. What were the results of the base study? Was it a forerunner to the supply chain project? Was this project independent or part of DND as a whole?

Mr. Alan Williams: I don't have details on the Petawawa study.

Ms. Cheryl Gallant: So the study was done but it wasn't provided to...?

Mr. Alan Williams: No, I just don't have information on it. I came prepared to talk about the supply chain, but I'd be happy to look into that.

Ms. Cheryl Gallant: Okay. With the supply chain, they haven't detailed the specifics of how they're going to get it from a warehouse to, eventually, the individual unit that needs to use the part. Do you intend to make that part of the contract?

Mr. Alan Williams: I intend to get information on that as part of their information flow to me before we have to make a decision. That's what the report has to provide to us.

Ms. Cheryl Gallant: If a part is ordered IOR, do you have an idea of how they're going to be able to accomplish that? By that, I mean, for example, if there's a downed helicopter or if a Coyote needs a part, if it is out of commission and they need it up and running in 24 hours, is that mechanism in place?

Mr. Alan Williams: That's exactly the kind of question we'll be looking for when we get their report.

Ms. Cheryl Gallant: Okay.

If the experiment to commercialize this aspect of our national security goes ahead and proves to be a failure, will the supply chain revert to being a DND responsibility? Is the medical supply chain included in this?

Mr. Alan Williams: First of all, this is not an experiment to, as you said, commercialize, or to outsource national security whatsoever. There's no security element in this whatsoever that is in any way, shape, or form being tampered with or put at risk, none whatsoever. This is simply a question of getting someone or a company that thinks it can move things from point A to point B, store them, and warehouse them better than we can. We'll see if that's the case or not.

º (1625)

Ms. Cheryl Gallant: If it fails, are they just going to find another contractor or will they revert to doing it the way it's being done now under military responsibility?

Mr. Alan Williams: One of the best things about this business is that it's a tremendously competitive, vigorous, rigorous marketplace for this. We had five very competent bids come in. If we have to outsource this again years from now, and in fact, no matter what we do, if we decide to take it and we do re-compete it, there's a vigorous marketplace for this. Finding companies that can do this will never be the problem.

Ms. Cheryl Gallant: Okay. So that answer is a no, it won't revert to military responsibility.

Is the medical supply chain included in this?

Mr. Alan Williams: No.

Ms. Cheryl Gallant: Okay.

Is it the intention of TBG or the shell company, Mission Logistics, to utilize the upgrade, the CFSSU? That's the computer system that was purchased from a New Zealand mining company, in which the taxpayers of Canada have now invested $300 million to $400 million. They tweaked it to be used for our supply chain. It just came online last October. It should be noted that the item managers are not yet on the same system; the software systems do not interface. Does the company intend to utilize this system?

Mr. Alan Williams: This system is one of the two major materiel systems that are my responsibility, this one, which looks after inventory, and the materiel acquisition and support information system, MASIS, which looks after managing the full life-cycle engineering requirements for $23 billion in assets. As for our understanding to date, they plan to maintain both these systems, as far as we know. However, again, I'll only know what their plans are for certain when they submit their report to me.

Ms. Cheryl Gallant: Okay.

In Meaford, no fewer than eight amendments were made to the private contract for commercial outsourcing, and no savings were realized. In fact, the venture became so expensive that the militia training, which originally had been in Base Petawawa and was transferred to Meaford, has returned to Base Petawawa. Only now, since the housing for the militia has been torn down, they're living in tents.

What fail-safe mechanisms are being incorporated to ensure that cost overruns do not leave Canadian taxpayers with a hefty bill, a broken supply system, and the loss of yet another military capability?

Mr. Alan Williams: You're just really talking about how we manage contracts. I would argue that in Canada we probably do a better job than in any other jurisdiction that I'm aware of. I'm very proud of our record.

We will put in place all of the knowledge we've learned over the past years in ensuring that there are incentives, disincentives and off-ramps in order to make sure that the taxpayer, as well as the military, get the value they've asked for.

Ms. Cheryl Gallant: So if any of the 1,400 embedded military supply techs are deployed, how would this affect the terms of the contract? Will it be spelled out in writing in the contract? While we're talking about spelling out things in writing in the contract, will the company guarantee, in writing, to continue to purchase through the small, local businesses now providing the supplies to the military supply chain? Will they guarantee to continue to purchase through them in the way they have for the full length of the contract and for any extensions added to it thereof?

Mr. Alan Williams: As I said to Mr. Stoffer, they're not doing any of the buying, period. They won't have to commit to anything to us in terms of where they're going to buy stuff, because they won't be doing any buying. They're moving things from point A to point B and storing them.

The Chair: Thank you, Mrs. Gallant.

Mr. Bachand, five minutes.

[Translation]

Mr. Claude Bachand: I have a few short questions.

I would like to come back to the possibility of a takeover. You said that legally, you could probably find a way to provide in the contract that the new company shall honor the contract and keep providing the required services. But have we considered the next possibility? If the company itself is in trouble and cannot survive, what will happen to the supply chain?

The Americans refuse to contract out their supply chain to the private sector, probably because of the uncertainties. I will give you an example which some might call extreme. If Tibbett & Britten receives an offer from an important Iraqi businessman and decides to sell the company to the Iraqis, will we stand by and let the supply chain be taken over by interests whose philosophy is completely opposed to our? This is my first question.

Now, about the transportation between point A and point B, I understand your point of view. I understand that right now the acquisition policy of the department has not be transferred to Tibbett & Britten. But most Canadian warehouses are situated on military bases and we should ensure that Tibbett & Britten does not charge to the department for the warehousing, because that has already been paid for by the Canadian taxpayers. I would like to hear you on that.

It could also happen that two years later, Tibbett & Britten decides to use warehouses outside the military bases. This raises a security concern and I would like to have your opinion on this.

In my county, we suffered from the icestorm. You have not mentionned this. Canadian taxpayers will eventually be victims of natural disasters, like floods, icestorms, etc. We asked at that time National Defence to send people in to help us because they were under the authority of the department of National Defence. People from the supply chain were asked to work around the clock to help the residents of the area. What will happen if this activity is contracted out to a private company? Will the Canadian government ask the company to step in and pay a surcharge? How will it work out? It seems quite easy when this comes under the Department of National Defence but when this is given to a private company, it will be more difficult, I think. I would like to know your point of view on this.

º (1630)

[English]

Mr. Alan Williams: I hope I remember all the questions.

The Chair: You have about three minutes, Mr. Williams.

Mr. Alan Williams: Okay, starting with the last one, I'll be as quick as I can. Let me emphasize again that the military people remain military people. We're just guaranteeing the company certain numbers of hours so that in the event there's an ice storm--in fact, this is exactly why we've done it the way we've done it--all the military people we have will be able to be mobilized in short order to do the same kind of work they have done before. That's why we've established it the way we have: so as to ensure that we have control over the people.

Mr. Claude Bachand: I'm talking about the civilians.

Mr. Alan Williams: The civilians, the people who are involved in the movement of goods from point A to point B in the private sector, those people would in fact be part of the private sector to do that part of the business. The company would have to respond to our needs in moving goods and services using those kinds of resources.

The argument would be that if they are more efficient than we are, then they will be able to support us in any of these disaster-like things more efficiently. Perhaps they could get goods and services to us even more quickly than we've been able to do heretofore.

In terms of warehousing space, it is surely quite possible that over time any company might find it more economical to use their warehouse space and their location. If that were in fact the case, we would be put in a position of closing down and selling different warehouses and generating revenues that we would use to best serve the needs of the crown. That would be the logical extension, to sell or offload things and hopefully get a good amount of money, and not have to incur those costs on an ongoing basis. Again, it would be a cost-effective business decision on their part, which would be beneficial to us in that it saves us money.

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

Mr. Peric.

Mr. Janko Peric: Mr. Chair, through you to Mr. Williams, I'm still a little bit confused.

You said that your goal is to save $70 million. You knew that before the $5 million contract to the private sector. Now, how will the private sector save $70 million under the same or the present conditions? Where would they save that? Why can't you save $70 million today?

º (1635)

Mr. Alan Williams: There are a few points. One is that I'm not sure they can. That's what they have to prove to me with their report.

Mr. Janko Peric: Let's say that they come to you with their report and say, “Okay, we can't save $70 million, but we'll save $40 million.” Would that be acceptable to you?

Mr. Alan Williams: I can't--

Mr. Janko Peric: What is acceptable?

Mr. Alan Williams: I don't know yet. I do not know and I cannot say until I see the report. It's not just the money, but as we have commented before, it's in terms of how they're treating our people, IM/IT, and whole series of issues. We have to be convinced that it's the right kind of decision, so I'm not going to say yes to this number and no to that number.

I forgot the other thing I was going to say.

Mr. Janko Peric: Why can't you save it?

Mr. Alan Williams: Yes, why can't I save it? We touched upon this a little earlier. The business that we're talking about started off as a $600 million a year business. It's now down to $350 million or $360 million. We have done a great deal of rationalizing, removing excess inventory, and cutting out warehouses. We've done a great deal. Where they potentially have a benefit or an advantage over us is the fact that they have, even in North America, as I've said before, an employee base of 12,000 people. Even with an annual attrition rate of 10%, with their 12,000 people they can easily absorb our 1,000 or 1,500 people in a year or two. They can do this much more easily than we can, because that is all we do in the area. I'm just hypothesizing here, but for them, potentially, they can see down the road, using new technologies and approaches, being able to integrate these people into their broader business, and thereby, because of economies of scale, they could do much more business with a certain number of people than we could.

I would think that would be a key part of their long-term plan. It may not be in the short term, but they're taking a long-term approach. This could potentially go on for 11 years, and five or six years from now, with attrition of 10%, they would have room to absorb another 5,000 to 7,000 people into their organization as a whole. This is a small part of it. They might feel that they can do this business, and perhaps even others, with that same workforce of 12,000. They can achieve savings that we cannot, because, for us, they are doing this. We need these people to do this and that's the end of it. We don't have any other business that we can amalgamate with this and achieve those economies of scale.

I would think that is probably some of their long-term strategic thinking. We cannot do that because for us it's 100% of our business. For them, it's 10% or 15%. It's a lot easier for them to build on that kind of capability.

Mr. Janko Peric: Thank you. That's it.

The Chair: Thank you, Mr. Peric.

We'll go to Mr. Stoffer now, for five minutes.

Mr. Peter Stoffer: I thank you again, Mr. Chair.

I'd like to quote Nycole Turmel of the PSAC union, who said that on:

April 16th, 2002, the Auditor General emphasized that departments must not allow a management structure to evolve that gives contractors the authority and responsibility for program management, operation, administration and the ability to sub-contract, responsibilities that typically rest with departments. The SCP will remove an integral part of the Canadian military framework from Parliamentary and public scrutiny. The contractor answers to its shareholders, not Parliament.

I'd like you to comment on that paragraph, please.

Mr. Alan Williams: That's incorrect.

The fact remains that in this business I am accountable for it. The fact that I may be using the private sector to deliver it does not remove my accountability to make sure that the goods and services are moved from point A and arrive at point B. The key decision-making hasn't changed. The accountability hasn't changed. The key decisions that government ought to take haven't been off-loaded.

They're not making buying decisions. They're moving goods from point A to point B and they're storing them. That is what we're talking about here and we ought not to make this into something that it isn't.

Mr. Peter Stoffer: Sir, you said that the union was fully involved and fully cooperative in terms of the discussions at 23 different sites.

Mr. Alan Williams: Yes.

Mr. Peter Stoffer: With that sort of cross-section of information, and sitting at the same table discussing the same issue, how could the president of the national union, a union that is well respected throughout the country, get it so wrong?

Mr. Alan Williams: I don't know.

º (1640)

Mr. Peter Stoffer: Mr. Chair, this is the type of difficulty I have when we have witnesses of great credibility like Mr. Williams and someone like Nycole Turmel, and they sit at the same table, discuss it 23 different times, and come up with a completely different version at a committee hearing.

Mr. Alan Williams: The only point I would say is that I know that John MacLennan, for instance, was there the whole time. I know that he was at most of them, if not all. I cannot speak as specifically about Nycole Turmel. It could be that the information flow to her hasn't been as precise because of that.

Mr. Peter Stoffer: Just so you know, his signature is on this as well.

Mr. Alan Williams: Okay. I think--

Mr. Peter Stoffer: So who's going to audit? If this contract goes ahead, who will do the audit to ensure that Canada's security, scrutiny, and savings will be as the department indicates they may be?

Mr. Alan Williams: I think, as with any major contract, there are safeguards, either internal audits or external audits. The Auditor General is free to audit and we have our internal audit. There'll be enough capacity. This committee may suggest that it wants to review all sorts of different contracts or ASDs. I obviously would be prepared, happy, and willing to have anyone examine any decisions I've made in this regard.

We're going to try to make the right kinds of decisions that will be open to examination by anybody. I'm not going to be bashful about this, because if I am we ought not to do it.

Mr. Peter Stoffer: Sir, are you saying, then--and correct me if I interpret your statements wrong, and I apologize if I am--that before the government or you sign on to this project, the Auditor General, and/or this committee, and/or Parliament, will have a thorough review and discussion if this project goes ahead?

Mr. Alan Williams: No.

Mr. Peter Stoffer: Why?

Mr. Alan Williams: I'm not saying why; I'm simply saying that this is one of many contracts that we undertake. I think there's an accountability regime put in place that goes from our minister to the deputy minister down throughout the organization, and we try to enforce that.

Having said that, I obviously would comply with any direction that I'm given by my deputy or by my minister.

The Chair: Mr. Stoffer, if I could interject here--and I don't want to take away from your time and I won't take away from your time, I'll give you a little bit of extra time--I want committee members to think about the sort of precedent that might be established if we were to interfere on a regular basis with DND procurement decisions on the basis of concerns that the committee may have, either real or imagined.

Please continue.

Mr. Peter Stoffer: Thank you.

Sir, I understand you are our representative to NATO as well.

Mr. Alan Williams: Yes.

Mr. Peter Stoffer: Are there any other NATO countries that have alternate service delivery of their supply chains?

Mr. Alan Williams: I'm not aware of any of them that are doing it within the country as we are trying to do it. A number of them, of course, have it for their external operations in theatre.

Mr. Peter Stoffer: So you have no real prior example or sort of litmus test on which to study this?

Mr. Alan Williams: No, I don't.

Mr. Peter Stoffer: Don't you think that's a bit risky?

Mr. Alan Williams: I would look at it from the other way. It gets back to my point. I have to tell you that when I compare what we do in Canada logistically and militarily to what other countries do, I would put us at the head of the line, not in the middle and not in the back. We have one thing going for us that other countries don't and that's our size. Frankly, we're just the right size so that we can do things smartly that others can't, because they're either too big or too small.

Frankly, I would think that others might look to us--and they do. I know that we go to many countries that are trying to emulate exactly how we do our business on a regular basis, all over NATO countries and in other countries in the world. I think that others look to us for leadership. I certainly look to us to be the leader, not a follower.

Do we take risks? Absolutely, but I would hope that's what you'd want us to do, with caution, reasoned, but at the end of the day not to simply say “let's follow others” , and instead to say that there are times when, if we think there's good value for Canada, we ought to pursue this, cautiously but with foresight, and I think that's what we do.

The Chair: Thank you, Mr. Stoffer.

Mr. Wood.

Mr. Bob Wood (Nipissing, Lib.): Thank you, Mr. Chair.

Mr. Williams, a few minutes ago you talked about taking your budget from $600 million down to $350 million. How did you do that? Who helped you along the way?

Mr. Alan Williams: Actually, this was done over a number of years prior to my getting there. In the mid-nineties the department undertook a wide range of studies as part of its commitment to reduce its budget the same way all other departments did.

I am not aware of--others might be more aware--whether there were private sector firms that came on as consultants or that kind of thing.

Mr. Bob Wood: Did you not have the unions involved?

Mr. Alan Williams: I would imagine that the unions were involved. I can't say for certain. I know what we did by, as I said, eliminating warehouses, having single-tier distribution and warehousing systems, and rationalizing base operations. That's how we achieved it. As for the extent to which there was more or less communication with unions and whether there were private sector companies that assisted us, I can't be more precise at this time.

º (1645)

Mr. Bob Wood: What I'm getting at is that obviously you did need to have the help of the unions to get to this--

Mr. Alan Williams: Sure.

Mr. Bob Wood: --and you've saved $250 million over what, 10 years maybe?

Mr. Alan Williams: Yes, though probably less.

Mr. Bob Wood: Now you're looking for another $70 million. Isn't this a slap in the face to the unions and to everybody else who worked their butts off to help you save $250 million? Now you're saying you're looking for $70 million, which is probably peanuts compared with the $250 million.

Why wouldn't you ask for more cooperation with the unions--maybe you did--and have them help you save the $70 million rather than go through all this rigamarole of outsourcing to other companies that maybe don't have the same interest in Canada that these people do?

Mr. Alan Williams: I would only say, as I have said, that I am tremendously proud of what our people did.

Mr. Bob Wood: Yes.

Mr. Alan Williams: Absolutely. I think they've done a phenomenal job, and if you visit our depots, bases and wings, you can see the great stuff they've done.

That being said, there are still, because of the reasons we've talked about in terms of economies of scale, things we just cannot do. The question is, can somebody else do it? Now, I'm not sure that they can, and if we don't think that they can, then we will again see what we can do within that same kind of framework.

The economies makes a big difference. More and more companies today thrive because they're the biggest in the business since they can have these economies of scale nationally and internationally. We just don't have that, and I would think that if in fact there were some hope that we could achieve these kinds of savings beyond what we've already achieved, and at the end of the day that money gets turned around to allow ourselves to support the military in other ways, $70 million could go a long way in that regard.

So I think it's a worthwhile initiative to undertake, but we have to approach it cautiously, which we have. We didn't just sign on to this last year. I can't think of another situation where we've said, “Listen, we want to be absolutely certain you're not just giving us hollow promises that you can achieve something. We want to be absolutely certain that the savings are there because we're going to hold you to account for them, and take the time to get it right because we're not going to proceed until we are certain.”

I think we're trying to take a balanced, cautious approach and come to the right decision, both for our military and our civilian people.

Mr. Bob Wood: What would happen if the unions and other people came back and said they could get those savings for you without going through this? Is it too late to entertain a proposal from them?

Mr. Alan Williams: I think that at this stage of the game the first obligation we have is to see what industry provides us. If industry cannot meet that kind of commitment but meets a much lesser one, I may have to see if those lesser savings can in fact be achieved internally. That is something that is open to me.

Mr. Bob Wood: You say you're not alone in this, but you seem to be using “I” a lot.

Mr. Alan Williams: I think that certainly the deputy minister and the CDS are going to look to me for a recommendation. At some point in time someone is accountable, and my objective is not to tell you somebody else is accountable. It will come up to me for the final recommendation to the deputy minister and the CDS. It won't come from anybody else. I'm not prone to kind of obfuscating who's accountable at the end of the day.

The Chair: Okay, Mr. Wood. Thank you very much. I expect there may be time for some more questions later on.

Mrs. Gallant.

Ms. Cheryl Gallant: Thank you, Mr. Chairman.

If they do move the warehousing off base, how will the military supplies be protected in the event of a national security threat and who will do it?

Mr. Alan Williams: The commitment or obligations on the part of any private sector firm will be the same as ours. They will have to provide us with assurances that the goods and services they're moving are in fact going to be protected.

It is important to note that a company like this, right now as part of its business, has the mandate, as part of looking after large drugstores, to distribute drugs, which have certain legal obligations and regulations surrounding them, as well as liquor. It's not like being responsible and accountable for things beyond shoes and socks is foreign to these companies. They are typically involved with very sensitive kinds of businesses, like drugs, and in fact have learned how to ensure their security and account for them properly. They would have to do the same for us.

º (1650)

Ms. Cheryl Gallant: So even for munitions, if that were to eventually become a part of it--

Mr. Alan Williams: Absolutely.

Ms. Cheryl Gallant: --they would have the security.

Mr. Alan Williams: Absolutely. You have to remember, too, that a lot of our business right now is in the hands of the private sector. Let's not think that we're doing it all now and all of a sudden. That's why I gave you examples of weapons systems and all these initiatives that right now are going by just-in-time delivery right from the company to wherever they have to go, and they're accountable for doing that.

A lot of our very sensitive weapons systems today--the material, the parts--is in fact in the hands of the private sector today, as it will be tomorrow. This isn't some huge revolution with everything within the military and the department's accountability going to the private sector. To the contrary.

Ms. Cheryl Gallant: So then definitely our military will not be responsible for protecting these warehouses, wherever they might be.

Mr. Alan Williams: The company will be accountable within their area of accountability. If they're responsible for delivering something to us, that's what we'll hold them to, with all the requisite regulatory requirements that would be involved with that particular movement.

Ms. Cheryl Gallant: So this project is just to move and store. That's it.

Mr. Alan Williams: That is correct.

Ms. Cheryl Gallant: How do you envision the amalgamation of civilian and military operations?

Mr. Alan Williams: I'm not sure we are amalgamating civilian and military operations. I'm not sure that anybody said that was happening. I didn't say that.

Ms. Cheryl Gallant: All right.

I asked the other question kind of fast and I don't think I got the answer. If some of the 1,400 embedded soldiers were to be deployed and could not meet the terms of the contract, the 1,300-odd hours per person per year, what happens to the contract? Will extra money have to go to the company in lieu of these embedded soldiers?

Mr. Alan Williams: Any contract, if it's done right, puts accountabilities on the part of both parties. Ours will be to provide a certain number of hours to the company, which they can count on to get the job done. In the event that we don't live up to any of our commitments, or they don't live up to any of their commitments, there will be redress mechanisms that will have to be negotiated, but we plan to live up to ours.

Ms. Cheryl Gallant: How can you project what possibly could happen? We didn't expect September 11. How can you possibly put that kind of responsibility in a contract when you can't conceive of what all the threats are?

Mr. Alan Williams: You don't have to conceive of what all the threats are. We're talking about moving goods from point A to point B--

Ms. Cheryl Gallant: But they couldn't do it in Meaford. They had eight amendments that needed to be made, and that wasn't even operational.

Mr. Alan Williams: I'm not sure the fact that you change a contract eight times is bad. That doesn't necessarily mean--

Ms. Cheryl Gallant: But it costs every time.

The Chair: Perhaps Mr. Williams could be allowed to answer.

Mr. Alan Williams: Any contract is subject to negotiation and amendment; eight isn't necessarily good or bad. Very often during the course of a contract you make amendments because you're adding services or because the environment changes. The strength of a good contract is being able to do that in a way that's fair and balanced.

This is your specific question: if the world does change, if things do happen and if we're smart about it, which I hope we will be, we ought to be able to change some of the terms and conditions in the contract to allow certain exceptional circumstances to happen in the event that we need to change it.

Ms. Cheryl Gallant: Without a hefty increase to the taxpayer.

The Chair: Thank you, Mrs. Gallant. Your time has expired.

Mr. Bertrand.

[Translation]

Mr. Robert Bertrand (Pontiac—Gatineau—Labelle, Lib.): Thank you, Mr. Chair.

I was going to ask a number of short questions but most have been answered.

Mr. Williams, I would like to come back to the report that will be on your desk sometime in July 2002. If I understood correctly, Tibbett & Britten and the department will come together to discuss this matter. Will the company's report be confidential?

[English]

Mr. Alan Williams: I don't think so.

[Translation]

We will have to examine this question with the unions, management and our employees.

Mr. Robert Bertrand: And with our committee? Mr. Chairman, I think it would be important for the members of the committee to receive a copy of the report, once it is presented.

The figure of 70 million dollars has been mentionned by a number of people. You stated that these savings will come from the existing employees who will do this job, if I understood correctly your explanations. These people will join the company. You mentionned a while ago that Tibbett & Britten had about 12 000 employees and that the 70 million dollars savings would come from the 1 200 employees from the department who will join the 12 000 workers of the company, if I understood correctly.

º (1655)

[English]

Mr. Alan Williams: That's why I was trying to be very cautious. I am not the company. I cannot tell you here today how they are going to save the government $70 million. I am simply postulating that with their size they have much more capability, capacity, and economies of scale to do the kinds of things that could generate savings. Seventy per cent to eighty per cent of this business is people. Obviously if you're going to make those kinds of savings you're going to have to do it over time by saving time and money from the people.

How they do that, I can't be certain, and whether they have other aspects to their success, I don't know. I'll only know that when they show me in detail in their report how they plan to do it.

But you are quite right: they have a large operation that makes ours a very small percentage increase to them, whereas for us it's 100%. So they certainly have that kind of opportunity. Whether they are planning to increase their workforce from 12,000 plus, I don't know. I don't know any of those details about their operations. I simply want to point out that it's a lot easier to absorb, to motivate, and to look after people better when you have that kind of size compared to us.

[Translation]

Mr. Robert Bertrand: I would like to come back to a question which Mr. Stoffer asked earlier. It could be that the salaries will stay at roughly the same levels but it won't be the case for the other benefits. I doubt that the company will grant to the department's employees benefits that the other 12 000 workers of the company do not have.

[English]

Mr. Alan Williams: Vous avez raison.Their benefits package is managed by Clarica. We're not talking about a trivial company here.

Mr. Stoffer's comments that they are not guaranteed is something I want to look into, but you don't become as large and as successful as they have by manipulating and playing with people's benefits. You don't retain staff that way.

I would expect that their benefit package, which is comparable to ours, is going to be there. I'm just taken by your comment or suggestion that maybe they can modify it. My expectation is that at the end of the day to play with something as dramatic as that would cause an uproar in the company and they wouldn't be as successful as they have been, but I'm going to look at it anyway.

Their benefit package is an exceptionally fine package, which is a reason for why they've been so successful in terms of hiring, recruiting, training, and promoting people, because it is quite a positive factor that they have.

The Chair: Thank you very much, Mr. Bertrand. We have to go to the next questioner. Time flies around here, as we all know.

Mr. Bachand.

[Translation]

Mr. Claude Bachand: Mr. Williams, I would like to know what you have in stock for the future. I see a major company that specializes in what you talked about. You did say in English:

[English]

International supply chain management is the process of ensuring the right goods reach the right place at the right time on a global scale.

[Translation]

This is exactly what you want to say: from point A to point B. Now, Tibbett & Britten specializes in

[English]

food and grocery products, fast-moving consumer goods, computers, electronic equipment, clothing and textiles, general merchandise, and raw materials and components.

[Translation]

I would think that some of that would be alright for the Canadian army.

For now, this does not change the acquisition policy but I look at the list of clients of Tibbett & Britten. I see Wal-Mart, Marks & Spencer and Procter & Gamble. Could you tell us a bit more about what you have in store for us? How would you react if Tibbett & Britten told you that you are buying now pencils for the base in Happy Valley-GooseBay, but that Wal-Mart could provide those same pencils to all the Canadian bases for half the price? Since the department is in contact with major companies like these, why would he not do the same thing for his acquisition policy?

We are concerned for the local procurement. We fear that the department will tell the local businesses of the Saint-Jean area that he used to buy clothes from them but that from now on he will buy them from Marks & Spencer because he can get a better quality and a better price.

Can you tell us if you have in stock a second phase for the acquisition policy?

» (1700)

[English]

Mr. Alan Williams: I'm not aware of my having a second stage.

The fact is that Tibbett & Britten does not buy for Wal-Mart. They don't buy for JC Penney or Shoppers Drug Mart. They don't buy for the Alberta Gaming and Liquor Commission. They don't buy anything, and they're not going to buy for us either. We will buy what we need from where we think it's most appropriate and we'll ask them to make sure it gets to our clients, to our users, in the most cost-effective way.

I don't have anything beyond that. I want to get through this in one piece and see a success one way or the other before I do something else. This and helicopters keeps me going pretty well full-time.

The Chair: Do you have anything further for Mr. Williams?

Mr. Claude Bachand: Non, merci.

The Chair: Mr. Price.

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

We're not being easy on you today, are we?

Mr. Alan Williams: Oh, it's been fine.

Mr. David Price: You did say one thing that I thought was positive.

Mr. Alan Williams: In an hour and a half, I guess that's all right.

Mr. David Price: It was very positive, actually. It was that NATO does look to us to be on the avant-gardist side.

Mr. Alan Williams: Absolutely.

Mr. David Price: Many things we do here are looked at and are taken up by NATO and followed through on.

When you went out to tender on this first part of the project, did you ask the unions to do the same type of thing, to give you a tender to bid on this part of the project?

Mr. Alan Williams: No, and in fact one should never do that. In other words--

Mr. David Price: We did it in Goose Bay.

Mr. Alan Williams: Well, one has learned. In fact from a contracting standpoint, to have the private sector compete with the public sector is an action that one should never undertake. If you want to do that, what you would typically do is do the best you can internally, then put that aside, and say to the private sector, “Can you in fact beat that benchmark?”

We pride ourselves on a level playing field and you can never, ever, convince anybody, anywhere, that having an internal competition and an external one at the same time is level. You'll have the private sector firms always, and quite legitimately, saying, “Hey, all of the overheads and all of the other pressures that we have in the private sector, the internal organization does not have to absorb.” Even if you try to do it with sophisticated cost accounting, you'd never be able to psychologically get over that. So I think that is not the way to do business.

Mr. David Price: Then I don't have to ask the next question about if you subsidized it, as we did in Goose Bay.

Would the responsibility to move items into the theatres of deployment come under the contract?

Mr. Alan Williams: No.

Mr. David Price: Okay, that we would take care of ourselves.

On September 11 I happened to be in Trenton. Contractors immediately were moved off the base because the level of security became that much higher. Our DART team reacted immediately to get ready to go. They are basically a warehousing unit. Their whole operation works around having a huge inventory of whatever, and when an emergency comes up they get that ready and load it onto a plane. All private people were kicked off the base, basically, and they even had a problem there with some of the contractors who were doing service on the Hercs. There was a question and they kicked them off, but they were uncomfortable about it because they did want to continue. What do we do in that case?

» (1705)

Mr. Alan Williams: When we talk about this year and what we are spending this year doing, it's not just the company; it's us determining exactly what we want to include and what we want to exclude. We want to make sure we're able to handle these kinds of arrangements, these kinds of necessities, these exigencies that pop up. We're being more precise now and telling them, “This is in and this is out. We're not doing buying decisions, so all of these people who buy, don't consider them part of your organization. As for our organizationals, 3 CSG and 4 CFMCU, which are involved with ensuring that goods are sent overseas, don't consider them part of your business case. They're going to stay with us.”

We would go through it case by case, situation by situation, and say, “This is in and this is out. Now that you know what's in, what kind of business case can you propose to us?” They may say at the end of the day that they still think they can deliver on what they thought or they may say, “Look, you've changed the rules so dramatically now that this isn't going to pay off for us, so we're just walking away”, and a whole series of options in between.

Mr. David Price: But it isn't right across the board.

Mr. Alan Williams: That is correct.

Mr. David Price: What's included? What about subcontractors, part-time workers, and contract workers?

Mr. Alan Williams: That's a very good point. The job guarantee is for permanent people. That is sacrosanct. Having said that, let me say that they have certainly indicated to us.... Again, we're talking about a world leader here. They're not stupid. They know they need people. Not all permanent people are going to jump on the bandwagon and come on board. They're going to need people and they've indicated to us that they'd be taking on many--they're not saying all necessarily, but many--of the part-time people and other people who are good and capable, too. There is not the unequivocal commitment, an obligation on them as for the permanent, but they will do whatever they can in order to take on those other people to the extent that they're needed and that they're capable people.

The Chair: Thank you, Mr. Price.

Mr. Stoffer.

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

Sir, are the employees of TBG now unionized?

Mr. Alan Williams: I'm not aware of to what extent they are or are not. I can find out.

Mr. Peter Stoffer: Okay. I'm picturing this scenario, with 1,674 PSAC workers who now move over to the private company. They're guaranteed a salary for seven years, but the employees already with TBG don't have that guarantee.

I've worked in many union organizations. Look at Canadian and Air Canada and the employer merger there and the battles they had. I can't see a company that you say is so successful having x number of employees over here under certain working conditions, wages, and benefits, and then 1,674 people over there with a special clause. I've been in that environment too long, and I cannot see a smooth transaction in that.

But as for my question for you, sir, my colleague, Mr. Bachand, is on this, and I think he's right, and we're going to look into this further. It would be interesting to have the list of the board of directors of the Canadian version of TBG because I can just see this. TBG looks after Wal-Mart. Wal-Mart is a big buyer of all kinds of stuff around the world. They would tell TBG, “Look, we know that DND needs pencils”--or something of that nature--“and we can get those pencils. You deliver them and we'll save the department x number of dollars”. There goes the little employer. There goes the little guy in Goose Bay or Shearwater. I can see that happening, sir. I'd like your comment on that.

Mr. Alan Williams: I don't know how you can see that happening if I make the comment that they're not doing any buying; they're doing moving. I don't understand--

Mr. Peter Stoffer: I'm not saying they're doing the buying, but they would suggest this to the department. You're going to say to TBG that you are going to purchase this and you want them to move it. They could say, “Before you purchase that, we have a way of you getting it even cheaper somewhere else.”

Mr. Alan Williams: Again, we're mixing accountabilities here. Pencils are bought locally. We're not going to start getting into buying in terms of taking it away from the local base commander or wing commander and saying we're going to start buying their pencils for them.

We're looking at efficiencies here, not at complicating our lives, so I am not looking for Tibbett & Britten to do anything but what I've asked them to do.

» (1710)

Mr. Peter Stoffer: You've said many times they can do things you cannot do. The recent Logistics Quarterly, the official magazine of the Canadian Professional Logistics Institute, says that work practices in DND are described right now as “second to none”. So what are we not doing that TBG can do?

Mr. Alan Williams: Well, we're going to find out within a couple of months whether or not they can do things we cannot do. The only comment I've made--and we've commented about it a number of times--is that because of their size and order of scale, they potentially have the opportunity, and I say potentially, to do what we do at a lower cost. This is 100% of what we do; for them it's 10% to 15%.

Mr. Peter Stoffer: Sir, my final statement is that in 1990, a whole bunch of employees of the dockyards for DND did tremendous work in getting the three ships ready for the Gulf War. Years later, a lot of them were removed from their positions because of alternate service delivery. A lot of their work went to the private sector. That was their thanks for their work.

Now we have 1,674 dedicated employees in the supply chain and the PSAC union, which does great work according to everyone, and their reward now will be, “No thanks, you're going to the private sector.”

Once they're gone, sir, the government will have no obligation for their future at all. That's a fact and that, I think, is a sad statement on today. The military and the government owe those people a lot more than just contracting out for suspected savings.

Mr. Alan Williams: I couldn't agree with you more. We're not going to contract out for “suspected savings”. We will only contract out if there are the savings that we think warrant it, and if our people are treated as well as they ought to be treated. That's a commitment I've made.

It's unfortunate that the world has changed so dramatically, but the point is that contracting out is being done by many of the world's leading companies because it's more cost-effective; otherwise, Wal-Mart wouldn't be doing it. They contract out because they can deliver goods and services to Canadians at less cost.

I think we're no different in the sense that you should expect us to try to use taxpayers' money as efficiently, effectively, and economically as possible. That's what we're trying to do while at the same time taking care of our people.

I know that when people joined the public service 20 years ago they didn't anticipate this, and it's not easy for them, but on the other hand I have to tell you that a seven-year job guarantee is fairly well unheard of anywhere today. While that doesn't exactly compensate, perhaps, for someone being moved from the public sector that they so dearly loved to the private sector, it's not a bad cushion to have for the next seven years.

Given that we have to try to do our best for the taxpayers, from my perspective at least we're trying to do it in the most favourable and helpful way for our employees, who deserve nothing less.

The Chair: Thank you, Mr. Stoffer.

Thank you, Mr. Williams.

I'd like to ask a very brief question, Mr. Williams. To what extent has the process you're engaged in right now been driven from within the department or central agencies like the Department of Finance or the Treasury Board?

Mr. Alan Williams: I think this is being driven from within the department. As I said at the beginning, we pride ourselves, frankly, on trying to be innovative and push the envelope. That's what I hope you expect us to do,and what the taxpayers expect us to do. Attracting these kinds of people who are always thinking ahead enthusiastically, with innovation and creativity, makes for a department that I'm pretty proud of.

The Chair: Thank you.

Mr. Wood.

Mr. Bob Wood: Thank you, Mr. Chair.

Mr. Williams, you've talked off and on this afternoon about this seven-year guarantee and how you think it's a great deal, but isn't it really a two-year guarantee with a five-year optional? I'm led to believe they'll guarantee somebody a job for two years--we'll use my riding of North Bay as an example--and after that two years they'll be able to transfer them, to say, “Sorry, but your job is going to be in Petawawa”, or Camp Borden, or wherever, “and if you don't take it, you'll lose it.”

Mr. Alan Williams: There are two or three points. One, it's a seven-year job guarantee. It's funny how things get interpreted. The company has said, “For the first two years we won't even consider moving you.” All of a sudden that's being looked at pejoratively, as if that's somehow bad. They didn't have to do that.

Frankly, it's no different from the public service today. We get rid of jobs. We're moving jobs all the time. I was with the department back in the 1970s when it was moved to Shediac. People get moved. That's what's happening today in order to try to optimize service and reduce costs.

The fact that they may be moved is no different from the military where they get moved regularly, or even from the public sector, where they do away with jobs and move jobs as well.

I don't think there's anything surprising there. The fact still remains that they could get rid of my job very quickly. In fact, when they read this transcript, maybe they will--

Some hon. members: Oh, oh!

Mr. Alan Williams: --but the point is that these people are guaranteed a job for seven years, and I don't think we should minimize that.

Here's my final point. The questions about HR are somehow suggesting this is a company that is going to go ahead and take it out on employees, when of course the opposite is more likely to happen. I can't guarantee anything, but you don't become that big without taking care of your people, giving them promotion opportunities, and letting them advance. That's how you become good. I think there's much more likelihood of that happening than the kinds of dire scenarios we're trying to project.

» (1715)

Mr. Bob Wood: Going back to your savings of $70 million, that information has been made public many times and obviously Tibbett & Britten knows this is what you're looking for. They can do the front-end part and say you're going to get $70 million in savings, but what I'm looking at is the back end. I look at Serco in Goose Bay, which got the contract and then there was an employees' war down there. To my knowledge, DND stepped in and made up a difference of about $5 million.

My question to you, Mr. Williams, is, was it all worth it? How much extra time did your department have to put into the Green Bay, I mean Goose Bay--

Mr. Alan Williams: I'm starting to think of Bart Starr.

Mr. Bob Wood: I'm thinking of football here. I know you want to tackle this, so go ahead.

Mr. Alan Williams: Very good. Yes, with no holds barred.

Mr. Bob Wood: That's right.

Mr. Alan Williams: Do I think Goose Bay was worth it? I think we went through a lot of pain, but I think with where we are today, yes. The fact is, we still saved a fair bit of money, and we'll be smart as we contract it out the next time to make sure we continue to save money and maintain services.

I'm not sure what the front part of your question was. I got all caught up with Green Bay.

Mr. Bob Wood: It had to do with the $70 million, because everybody now knows how much you're looking at, right? You've given these guys a heads-up on what they should be--

Mr. Alan Williams: Targeting for.

Mr. Bob Wood: --targeting for. Now if they come in at $70 million, but you find out that you won't get those savings or that it will cost a bit more than you anticipate, then we're into the same deal as Goose Bay, are we not?

Mr. Alan Williams: No, I don't think we are. I think each scenario is totally different. The business is different and the complexity is different. This is a coast-to-coast kind of operation. This is a much more complex kind of business, frankly, than locating in one site.

As I said, the savings alone are not the criterion upon which we're going to make a decision. We have to be comforted that not just the savings but the method by which they're going to be achieved are there. I do not want to make a recommendation to sign a contract and find out six months later that we're nowhere near achieving what we want. That is hell. We don't want that. So only if we're very well convinced that they can be achieved in the manner we think is appropriate, and we can put in the safeguards on a contractual basis only in that case, would we proceed.

Mr. Bob Wood: How long after they get the contract and you crunch all the numbers do you anticipate you'll be ready to make a decision? You've mentioned two months.

Mr. Alan Williams: They will submit the report to us some time in July. I imagine that it will be within four to six weeks, something of that order of magnitude. I don't want to be held exactly to that, because it's summer time and all that kind of stuff. We will sort of look at it expeditiously. Hopefully it'll be written in clear English that I can understand so that I can go through it fairly quickly and my team and my advisers can, and we can have good, fulsome debates on it fairly quickly.

The Chair: Thank you, Mr. Wood.

Mrs. Gallant.

Ms. Cheryl Gallant: Thank you, Mr. Chairman.

I understand that Tibbett & Britten is not going to do the purchasing, but by virtue of having their distribution system, which is a part of wholesale distribution for the private sector.... We were talking pencils, but let's talk about tools. Locally, tools worth $2 million are bought from maybe one company. Now if this same distribution system could get things wholesale through the Home Depot supplier, would the purchasers at DND not be compelled to save the Canadian taxpayer a million dollars now that this system is in place and these tools are accessible?

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Mr. Alan Williams: We're not going to change how we buy because we're signing this contract. I have enough on my plate to worry about without starting to change patterns of buying of thousands of people across the country. I trust that local procurement is done in the most cost-effective way, and I'm not going to start to impose other scenarios upon them to get them to change.

Let's have one thing at a time. Let's get this business right. People who do the purchasing from coast to coast know what they're doing. They have their authority levels, they have their accountabilities, and they will do what's right to best serve their needs. What I'm going to do is make sure that these goods move more quickly, perhaps, or at less cost from coast to coast than they have.

Ms. Cheryl Gallant: So then written assurances can be given to the local providers that the way of doing business is not going to change locally.

Mr. Alan Williams: I don't have to give written assurances to anybody.

Ms. Cheryl Gallant: Why wasn't the existing supply chain invited to tender?

Mr. Alan Williams: I'm not sure what you mean by “the existing supply chain”. There's no such animal.

Ms. Cheryl Gallant: I mean the people, the combination of civilian and military people. The civilian supply chain techs basically take their orders from the military. When they were asked to see how much they could save, they did save $350 million. When that suggestion was put forth, they did it. Why was this not put forth to the same people when it came to tendering for this particular project?

Mr. Alan Williams: The environment is a complex one in the sense that you can go to a particular depot and make phenomenal improvements--maybe our depots in Montreal or Edmonton, as we have done--and you can make improvements on bases.

When you look at it horizontally as opposed to from different silos, that's where having a company that can do the whole thing horizontally potentially has an advantage over us. We could try to optimize the individual parts. The question is, can they optimize the whole horizontally? I don't know the answer to that question, but I'll certainly get a better idea within the next couple of months as to whether they think they can.

Ms. Cheryl Gallant: You've explained the savings in terms of scales of economy. Could you just give us one example of how the money would be saved through scales of economy?

Mr. Alan Williams: Absolutely. Theoretically--and again, I'm not talking for Tibbett & Britten here--for us, we incur costs for 1,200 people and their salaries. Let's say we spend that kind of money on it. For them, those 1,200 people may, over two to three years, not be incremental to their workforce. Because of the 12,000 people and all their businesses and because of attrition, they may be able to stay at 12,000 people four or five years from now and deliver this extra business, and maybe this extra business plus two or three more. They could potentially, because of this scales thing, absorb another 10% or 15% of business with an existing workforce rather than have to hire additional people. That's their potential economy of scale advantage over us.

Ms. Cheryl Gallant: Right now with the work being done, if they could do it with fewer people, they would because they're so short of people. If they decrease the number of people, the service is going to have to go down, but we'll have the quality assurance, as you're saying.

Mr. Alan Williams: What you're saying isn't correct. There's no reason to surmise or to assess that somehow the quality is going to go down.

Ms. Cheryl Gallant: But that's been the experience. Look, for example, at when the janitorial services on bases were changed. We're paying twice the amount, some people have been cut, and the quality has gone down tremendously. Instead of certain tasks being done every day, they are being done maybe once a week, with one person doing several buildings. The place is dirty. The washrooms aren't kept up. The Department of National Defence military staff has to do it themselves, so we're paying a corporal $44,000 a year to change the paper towels in the washroom.

Mr. Alan Williams: You're talking about one situation. I'm talking about another.

Ms. Cheryl Gallant: And I'm giving an example of--

The Chair: Mrs. Gallant, your time is expired, actually more than expired.

I don't think there are any more questions over here.

Mr. Stoffer, we don't have a full five minutes for you, but can you give us some short questions?

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Mr. Peter Stoffer: That's quite all right.

Mr. Alan Williams: I'll listen more quickly, if that helps.

Mr. Peter Stoffer: Sir, you said the employees of PSAC have a guarantee of that, yet for the businesses, you just said you're not going to give any guarantees to the local suppliers and these bases across the country. You also said you're not going to tell the purchasers now how to do their business because you're too busy doing this other stuff. If you can't give the local suppliers any assurances or guarantees, then the CFIB and those 3,000 businesses are correct when they're very nervous about the fact that they're not confident about or assured that they will have access to the supply chain in the near future.

Mr. Alan Williams: To the contrary: we don't give those 3,000 businesses any guarantees today.

Mr. Peter Stoffer: I understand that, sir, but--

Mr. Alan Williams: I can't give them a guarantee today and I certainly can't give them a guarantee tomorrow as to how much business they will or will not get from the Department of National Defence.

My point is very simple. There is no reason to presume that they're going to lose business because of this action as much as they would lose any business from anything else I would do.

Mr. Peter Stoffer: This is my last statement, sir, and I thank you for your time. If you're so certain, when this comes back, that this is the best deal for Canada, because you actually work for Canada--

Mr. Alan Williams: Yes.

Mr. Peter Stoffer: --will you then allow us or Parliament...? If you want to be accountable and transparent and very clear, before signing on, will you advise the minister that his advice should be that we have a look at it, that the Auditor General has a look at it, before you sign on?

The Chair: Mr. Stoffer, that is well beyond Mr. Williams' capabilities--

Mr. Peter Stoffer: I know that, Mr. Chairman, but with all due respect to you and to him, he could make that his advice to the minister.

The Chair: Frankly, it is not part of Mr. Williams' responsibility to do that. As a matter of fact, I think he would be going well beyond his area of responsibility if he provided that advice to the deputy minister, to the CDS, or to the minister.

Mr. Peter Stoffer: Why?

The Chair: Why? Because that's a political issue, Mr. Stoffer.

Mr. Peter Stoffer: What? He could say, “Look, I've read this contract. I think it's a good deal. If you want this thing to pass a little smoother, tell the other members of Parliament.”

The Chair: I will go back to my earlier comments, Mr. Stoffer, with respect to the fact that it's Mr. Williams' responsibility to get best value for the taxpayer. That doesn't necessarily--and I'm going a little further here--involve the protection of public service jobs. It's the business of getting the best value for the taxpayer. He has to make decisions on an operational level, probably on a daily or on a weekly level, that will affect many people to different degrees.

It's not our job--I don't believe, at least, that it's our job--to reflect on that decision-making. It's perfectly within our authority to ask questions of Mr. Williams or any other departmental officials. If in its wisdom the Standing Committee on National Defence and Veterans Affairs wishes to pass a motion related to some aspect of this, then that's fine. We can deal with that on a democratic basis. However, Mr. Williams is not in a position, as I said earlier, to offer advice to the minister with respect to bringing the contract back before the committee.

I would like to ask you one question, though, Mr. Williams, related to the report produced by Tibbett & Britten and whether or not that report might be made public in its entirety. If there were, for instance, confidential corporate information contained in that report in terms of business plans, projections, those sorts of things, would that preclude that possibility?

Mr. Alan Williams: You're absolutely correct. We would have to subject it to the Access to Information Act and Privacy Act before we'd be able to release it, obviously, as with any document we would get.

The Chair: Right.

By my reading of the clock, it is now 5:30 p.m.

Mr. Williams, I want to thank you very much for being here today. We've had quite a number of questions, to say the least, coming from members of the committee. On behalf of the committee, I want to express appreciation for your frank and candid responses.

Mr. Alan Williams: Thank you.

The Chair: Members of the committee, perhaps we could take the liberty, because we're near the end of this session, to consider the business for next week. I would suggest that we perhaps make a decision in terms of who we would like to see before the committee next Tuesday. I have a couple of suggestions. One would be that we have representatives from ATCO Frontec come before the committee. They have some experience with respect to contracting out in terms of the Bosnia experience. Alternatively, one thing we did last year was to look at the plans and priorities of the department, and perhaps we could have the deputy minister, Ms. Bloodworth, before us. It is up to you as to whichever you feel is more appropriate.

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Mr. Peter Stoffer: I would like, if possible, to bring in some folks from Tibbett & Britten and ask them some questions. If they're bidding for a contract, they shouldn't have anything to hide from us when we're asking them some serious questions.

The Chair: It's all a question of availability in terms of where we're at right now.

Mr. Peter Stoffer: We've heard they were a big company. They must have a lot of people who can come in and say hi to us.

The Chair: What's the view of committee?

Mr. Bob Wood: I think it's a great idea.

Mr. Peter Stoffer: Why not?

Mr. David Price: I'll approach it from the other side, being a former contractor. When I'm in the process of bidding on something, I don't want to go and talk to a group like this. In fact, I would refuse to and legally I would have no problem getting away with it.

Mr. Peter Stoffer: It's understandable, David, but we're talking about openness and transparency. I want to know what they're going to do with these employees for seven years.

Mr. David Price: I know. As soon as they've tabled the recommendations.... Don't forget that these are only recommendations that they're tabling. A decision has to be made afterwards. At that point, that's when we can talk.

Mr. Peter Stoffer: Yes, David, but my fear is--

The Chair: I think that perhaps what we should do is this. At some point I'll make some attempt to get in touch with people and we can try to deal with this not necessarily in open session.

Mr. Peter Stoffer: You see, Mr. Chairman, my fear is that this contract will be signed, sealed and delivered when the House is not sitting. If that happens you're going to have some very pissed off opposition members.

An hon. member: And a few others, too.

Mr. Peter Stoffer: And a few others, too. Sorry.

The Chair: With respect--

Mr. Peter Stoffer: And I say that with respect.

The Chair: --I think I made my position clear earlier in terms of whatever this committee wants to do in terms of expressing its view that way.

Taking into account Mr. Price's comments--

Mr. Peter Stoffer: Will you ask them?

The Chair: --and taking into account your comments, what I can do is go to the company and see what they have to say. If that doesn't work out, I'll look at some other alternatives.

Mr. Peter Stoffer: Very good.

The Chair: I'm not suggesting that we meet next Thursday because I think we'd be hard-pressed to find enough members, quite frankly.

Ms. Cheryl Gallant: If we cannot get Tibbett & Britten, if it's absolutely ruled out, rather than looking at what's going on with the department could we look at ATCO Frontec? That's the closest thing we have to draw analogies from.

The Chair: As I say, that is within the realm of possibility, but I have a certain amount of direction from the committee at this point and let me take it from there. It saves us meeting as a steering committee.

All right? Everyone seems to be happy with that. The meeting is adjourned.