Opening Statement to the Committee On Public Accounts

Chapter 3 – National Defence - Equipping And Modernizing The Canadian Forces (April 1998 Report)

David Rattray, FCGA
Assistant Auditor General

Thank you, Mr. Chairman. We are pleased to have this opportunity to meet with the Committee to discuss Chapter 3 of the April Report, Equipping and Modernizing the Canadian Forces. I have with me today Peter Kasurak, Principal responsible for this Chapter.

We looked at the challenges facing National Defence to keep the Canadian Forces modern and combat-capable. As I’m sure you recall, the 1994 White Paper on Defence calls for Canada’s forces to be able to “fight alongside the best, against the best”. Of course, this doesn’t suggest that our forces will have every military capability. But it’s reasonable to expect that they have these components they need to maintain their core capabilities.

However, the White Paper does not define the commitments the Canadian Forces will take on, and we are concerned about this. We expected that National Defence priorities and plans would ensure that the Canadian Forces were equipped and ready to meet defence policy commitments if called upon to do so. But we found that the Canadian Forces will take on a commitment today only if the tasking does not demand more than the capabilities of the equipment they have on hand.

As we note in our chapter, the Deputy Chief of the Defence Staff is reviewing the capability of the Canadian Forces to deploy the contingency forces called for in the White Paper. This effort by the Department to assess its capabilities is encouraging, but it looks only at the current situation. It is equally important to look at the long-term prospects for Canada’s forces and the kind of military capability and performance Canadians should be able to expect.

The Department is addressing equipment deficiencies as funding permits. However, finding the right balance between capital spending for equipment and spending on personnel, operations and maintenance has been difficult. We’ve seen over the past few years that capital spending has diminished in order for National Defence to meet its cost requirements for personnel, operations and maintenance. If this trend continues, capital spending could fall to an unacceptably low level -- one that mirrors the situation faced by the military in the early 1970s when “rust-out” became a serious problem.

The Department has three options -- it can maintain the status quo, which is eroding its ability to modernize; it can correct reductions in capital funding through increases to its reference levels and with internal efficiencies; or, with guidance, it can re-examine the long-term capabilities and structure of the Canadian Forces.

Right now the second option -- to increase funding for capital equipment -- is preferred by the Department. But to make sure this course of action is successful in stemming the downward trend in capital spending and that Canada is provided with a modern, well-equipped defence force, there needs to be more attention given to long-range planning and priorities and to military performance.

Parliament can play an important, key role in helping to guide defence capability and performance. Indeed, the Special Joint Committee on Canada’s Defence Policy in 1994 called upon Parliament to play an increased role in defence issues. It saw the need for regular review of defence policy as well as budgetary and procurement issues.

The Special Joint Committee made several suggestions that should now be considered for implementation. Its recommendations, we believe, would provide the needed guidance and oversight that we are calling for in our chapter.

Our first recommendation supports National Defence’s efforts to review its force development framework. We believe that this planning framework is key to ensuring that the Canadian Forces use their resources in the best way. The Department should be encouraged to continue this and to focus on the future, especially on the resources it will need to do its job.

The Special Joint Committee noted that Parliament could contribute to this planning process. We agree that the type of increased oversight recommended by the Committee, perhaps as part of a comprehensive annual review or an in-depth review of the Defence Estimates, would help guide Department spending.

Focussing on the future means that National Defence must broaden its current outlook. Plans are now tied to a five-year time frame. But equipment is expected to last 30 years or more. What the Canadian Forces buy now impacts on how they will operate over the long term. Fundamental questions need to be answered: for example, which capabilities must be maintained, how much is enough and what risks should the military be prepared to face?

Guidance on these questions comes from defence policy that states what the Canadian Forces are to do. The Special Joint Committee called for parliamentary scrutiny on future defence policy reviews and an annual day of debate on defence policy. We believe that such oversight is needed to review how well the Canadian Forces are able to implement Canada’s defence policy.

Our second recommendation calls for improved reporting to Parliament. Better information on defence capital plans and priorities would help Parliament monitor defence spending and defence budgets. We note in the chapter that National Defence has had some success in developing performance measures, but there is still important work to be done. Meaningful performance indicators must be developed. We believe that National Defence should show the link between what it spends and the capabilities and military performance Canadians receive.

If National Defence could improve reporting on its capabilities and performance, Parliament could better challenge the Estimates. National Defence has told us it will have meaningful performance information available within the next two years, at which time the Committee may wish to monitor defence spending patterns.

Ultimately, we hope that the Department could achieve the same success that some other countries are now realizing. These countries are doing a better job of matching their defence resources with their defence policy objectives. In other words, Parliament should be told whether the Canadian Forces can do the job they are being asked to do with the resources they have been given. Parliament should know what the Department can and cannot achieve.

Other countries have taken the lead with positive results. And Canada is moving in a similar direction by implementing accrual accounting and developing performance reporting systems. These are encouraging and, we believe, will improve information on defence. But other countries are also reviewing defence at very high levels and, in some cases, have established agreements on what can be delivered. We agree with the Special Joint Committee that similar high levels of review would be of benefit to Canada.

Mr. Chairman, National Defence is at the beginning of a phase to renew its major weapons systems, where affordable. As examples, I point to the recent decisions to buy search-and-rescue helicopters and also submarines, as you are well aware. This Committee can help guide the Department to ensure that its efforts make the best use of available resources and that the focus is on long-term expectations.

Mr. Chairman, this concludes my statement. We would be pleased to answer any questions.