Tuesday, October 26, 2010

Auditor General waving red flag

The report she issued today on recent helicopter purchases also serves as a warning on the F-35 sole-source process. Sole-sourcing on a military purchase of magnitude is a recipe for cost overruns and flawed accountability and transparency from our government. Here is some useful reading on the subject this evening which speaks for itself: "Auditor slams Ottawa’s helicopter purchase and warns of fighter-jet risk," "New look needed at F-35s," and pogge's take.

While Peter MacKay professed in the House of Commons today that his department is taking in the Auditor General's criticisms of the helicopter purchases, it's not clear how or whether they will go about remedying what is shaping up to be history repeating itself in a bad way. There is no evidence that the F35 process the government is undertaking is anything but a recipe for pain for taxpayers in coming years.

Here's one part of her report which speaks to the helicopter cost overrun problems and why they occurred:
National Defence did not develop full life-cycle plans and costs for these helicopters in a complete or timely way. In addition, total estimated costs were not disclosed to decision makers at key decision points. Some costs have yet to be completely estimated and some elements needed for the capability are not in place. Without adequate cost information, National Defence cannot plan to have sufficient funds available for long-term operation and support of the helicopters. Moreover, without sufficient funds, National Defence may have to curtail planned training and operations.
This is what would need to be properly done in an F35/fighter jet competitive bid process with integrity. That basic cost diligence has not been demonstrated by the government and it could significantly impact the Defence budget down the road. In other words, the government that claims to be doing what's right for the military may not be at all.

I'll also point you to this recent Commons committee testimony on point from Alan Williams , former defence procurement official, which also speaks to the issues today in a straightforward manner:
It is very important, in my estimation, for the public to understand why the requirements we select are necessary. To continue--and here I'm going to give you the credit--if I went to a car dealership again and wanted to buy a mode of transportation, I would first have to decide if this mode of transportation was for myself; my wife; myself, my wife, and my ten kids; or whether I need to transport furniture and equipment. The requirements are very specific to the role and the need.

It may be that we need a fifth generation. If so, let's be able to articulate why we need a fifth generation, how that fits into the defence policy we have, and how that fits into the role we see our military performing in the future. If it gets by that hurdle and it turns out that's the only one, that's fine. But we can do that openly. Having someone sitting behind closed doors and saying this is what we need because they say so is frankly not acceptable when you're spending $16 billion of our money. That's the key point you want to make.

Secondly--and this is another point I didn't mention in my oral presentation, but it's in the notes--if after I chose my requirements and went to the dealers that had what I wanted to meet those requirements someone said to me, “Monsieur Williams, it's going to be $1,000 down now, but I'm not going to tell you what the monthly payment will be”, would I buy the car? Of course I wouldn't buy the car. To buy something, commit to something right now when you don't even know the costs, to me is the height of absurdity.

I think the Joint Strike Fighter is a great program and it may turn out to be the perfect aircraft. But we're sole-sourcing a product that right now is four years late in development, its cost has escalated dramatically, and it's under the Nunn-McCurdy compliance review test in the States, where the Senate is cutting back on the numbers it is producing year over year right now because they're missing all the deadlines. It seems to me that we're getting ahead of ourselves. Why are we committing to something now when there are so many risks with this program? I really don't understand it. It may turn out to be the perfect aircraft for us, but I don't think there's any evidence for that today.
The questions about the F35 process have been accumulating since the government made its announcement, throw in all the allies hedging on their purchases. With the Auditor General waving a red flag now, will this Prime Minister listen? Do they listen to anybody?