Operating and Maintenance Support for Military Equipment—National Defence

Opening Statement to the Standing Committee on Public Accounts

Operating and Maintenance Support for Military Equipment—National Defence

(Chapter 7—2016 Fall Reports of the Auditor General of Canada)

1 May 2017

Michael Ferguson, CPA, CA
FCA (New Brunswick)
Auditor General of Canada

Mr. Chair, thank you for this opportunity to discuss our 2016 fall report on Operating and Maintenance Support for Military Equipment. Joining me at the table is Gordon Stock, the Principal responsible for the audit.

In our audit, we examined whether National Defence managed equipment support in a cost-effective manner. We selected six types of major military equipment: the Globemaster strategic airlift aircraft, the Cyclone maritime helicopters, the Chinook medium-to-heavy lift helicopters, the 130J Hercules aircraft, the Victoria-class submarines, and the tactical armoured patrol vehicles.

Overall, we found that National Defence did not adequately manage support for the selected equipment in a cost-effective manner, and it made some initial planning assumptions that underestimated support costs, overestimated equipment use, and under-resourced personnel requirements. Consequently, National Defence paid for a higher level of service than it used.

We found that National Defence assumed that the cost to support the 130J Hercules aircraft and the Cyclone maritime helicopter would be no more than the cost to support the replaced equipment. This assumption was not realistic because both the Hercules 130J and the Cyclone maritime helicopter have increased capabilities, their systems are more complex and consequently cost more to support.

We also found that National Defence did not use the selected equipment as much as it had originally planned due to delays in equipment delivery and a lack of personnel and funding for operations and maintenance. For a number of years, the funding and personnel allocated for the Victoria-class submarines, the 130J Hercules aircraft, the Globemaster aircraft, and the Chinook helicopter were significantly below what was required to meet operational and training requirements. Equipment support contracts included fixed minimum payments, but not using the equipment as planned meant that National Defence paid for a higher level of service than it used. National Defence has since renegotiated one of its equipment support contracts to improve its value for money.

Furthermore, National Defence assumed that maintenance personnel for new equipment would come from crews operating and servicing existing equipment, but this did not happen. National Defence also did not have enough trained pilots, technicians, weapons systems managers, and contracting staff. Without the right complement of personnel, equipment cannot be made available and used at the planned level of operation and training.

National Defence created new oversight bodies to improve its resource management. However, we found that these oversight bodies focused on acquiring equipment and did not give as much attention to equipment support. National Defence needs to use an integrated resource management approach that incorporates all aspects of the equipment’s life cycle, including acquisition, materiel, support, and personnel, from a cost and operational perspective.

While it is difficult to forecast how much it will cost to support major military equipment, the decisions that National Defence makes today about which equipment to buy and how it will support that equipment will have significant financial impacts for decades to come.

We made eight recommendations in our audit report. National Defence has responded that it will address each recommendation.

Mr. Chair, this concludes my opening statement. We would be pleased to answer any questions the Committee may have. Thank you.