Proceedings of the Standing Senate Committee on
National Finance
Issue No. 54 - Evidence - November 29, 2017
OTTAWA, Wednesday, November 29, 2017
The Standing Senate Committee on National Finance met this day at 6:45 p.m. to examine Supplementary Estimates (B) laid before Parliament for the fiscal year ending Saturday, March 31, 2018.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: I welcome you to the Standing Senate Committee on National Finance. I wish to welcome all those in the room and viewers across Canada who may be watching on television or online.
My name is Percy Mockler, senator from New Brunswick, and I chair the committee. I would like to start by asking senators to introduce themselves first, starting on my left.
[Translation]
Senator Forest: Éric Forest from the Gulf region of Quebec.
[English]
Senator Cools: My name is Anne Cools, Toronto, Ontario.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator Eaton: Nicky Eaton, Ontario.
Senator Neufeld: Richard Neufeld, British Columbia.
[Translation]
The Chair: I would also like to recognize the clerk of the committee, Gaëtane Lemay, and our analysts, Sylvain Fleury and Alex Smith, who team up to support the work of this committee.
[English]
Today the committee continues its consideration of the expenditures set out in Supplementary Estimates (B) for the fiscal year ending March 31, 2018, which was referred to this committee on November 23, 2017.
The first panel will give us an overview of their funding requests in the Supplementary Estimates (B). We have two organizations appearing this evening. Thank you for accepting our invitation so that we can then clarify questions we have to share with Canadians.
We welcome, from National Defence, Mr. Claude Rochette, Assistant Deputy Minister (Finance) and Chief Financial Officer; and Patrick Finn, Assistant Deputy Minister, Materiel. From Global Affairs Canada, we welcome Arun Thangaraj, Assistant Deputy Minister and Chief Financial Officer; and Shirley Carruthers, Acting Director General, Financial Resource Planning and Management Bureau.
We will start with Mr. Rochette and then follow with Global Affairs Canada. Following that, we will have questions from senators.
Mr. Rochette, please proceed.
Claude Rochette, Assistant Deputy Minister (Finance) and Chief Financial Officer, National Defence and the Canadian Armed Forces: Thank you very much, chair and members, for the invitation to present the Supplementary Estimates (B) for the 2017-18 fiscal year on behalf of the Department of National Defence. It is always an honour to meet with distinguished members before this committee.
Today I am joined by Patrick Finn, Assistant Deputy Minister, Materiel, and also by the Commander of Military Personnel Command, Lieutenant-General Charles Lamarre, and Chief of Programme Major-General Jean-Marc Lanthier.
[Translation]
The approved defence policy, titled Strong, Secure, Engaged, issued in June, confirmed the focus of National Defence and the Canadian Armed Forces in protecting Canada’s sovereignty at home, actively participating in the defence of North America, and being engaged in the world to contribute to international peace and stability. Defence continues to conduct missions as part of a whole-of-government approach to defending Canada’s interests and keeping Canadians safe and secure.
[English]
As I have said on previous appearances before this committee, the Department of National Defence and the Canadian Armed Forces maintain a laser focus on strong fiscal responsibility and careful stewardship of resources in recognition of the fiscal environment in which we are operating. We respect the trust Canadians have in us to make the right decisions. The magnitude, complexity and visibility of the defence budget demand a cohesive and strategic approach to maximizing the efficacy of our expenditures and investments.
As a consequence of that, the department continues to monitor and manage its fiscal requirements to ensure value for taxpayer dollars and support for government priorities. Last year before this committee, on this very same day, I stated that the department is committed to reducing lapsed funding. I’m pleased to report, Mr. Chair, that the department has achieved that commitment for fiscal year 2016-17 with zero residual lapse for the first time since 2008-09. The planned lapses related to frozen funding and budget carry forward totalled $846 million, again the lowest level since 2008-09 and significantly less than the $2 billion of lapses we had in 2014-15. All of this is compared to a budget of $18.7 billion.
Turning to the Supplementary Estimates (B), I would like to highlight key points to the committee on page 2-48 in the English version and page 2-61 in the French version.
The bottom line for National Defence resulting from these supplementary estimates is a request for almost $1.1 million in funding. This comprises $335 million of funding related to operating costs, $668 million related to capital assets, $69 million for employee benefit plans related in large part to increased salary costs, and finally the impact of net transfers out of $16.4 million to other organizations.
The major change in operating costs relates to military pay increases. The total increase of $333.1 million is based on a 1.25 per cent raise in pay and allowances beginning in 2014-15 and adjustments to some environmental and special allowances.
The balance of the vote 1 request is to receive approval to reinvest revenues from intellectual property and revenue from the sale or transfer of real property. Together these amount to roughly $1.9 million of the total request.
[Translation]
Capital investment in assets is required to establish and maintain Defence capabilities. With 333 capital projects included in the defence policy, the department monitors cash requirements on these projects to avoid lapses when projects are delayed and not going to use funding within the fiscal year or when projects are ahead of schedule and would normally require a request for additional funding.
We now have a new cash management approach approved by the Treasury Board that offers more flexibility. We are able to use surpluses in one project to fund demands in another project. This avoids unnecessary requests to relieve pressure in one area while funds are being lapsed in another.
[English]
Regarding the remaining $335.6 million in funding for 20 capital projects, this amount will ensure that approved funds are being used for projects that require funding now so that they continue to move forward. This request is a net request where the funding of 10 projects that will not spend the entire funding allocated in 2017-18 is being transferred to 10 projects that are requiring additional funding this year. The $335.6 million is a residual amount required after the transfers between projects has been completed.
The remaining seven projects require total capital funds of $332.4 million. These projects have been approved by Treasury Board, and the requested funds are within the overall amount approved for the project.
We will continue to monitor projects and measure progress in implementing our defence policy. Due to the timing needed for Treasury Board approvals, National Defence will be seeking funding for the defence policy initiatives in Supplementary Estimates (C).
In closing, I hope that I have confirmed the department’s commitment to monitor and manage our fiscal requirements to ensure value for taxpayer dollars and to continue our efforts in responsible spending. My colleagues and I would be pleased to address any questions or comments you may have.
The Chair: At this time I would like to ask the two senators who just arrived to please introduce themselves.
[Translation]
Senator Pratte: Senator André Pratte from Quebec.
[English]
Senator Andreychuk: Raynell Andreychuk, Saskatchewan.
[Translation]
The Chair: I will now ask the witness to make his presentation.
[English]
Arun Thangaraj, Assistant Deputy Minister and Chief Financial Officer, Global Affairs Canada: Thank you for the invitation to appear before the committee. It is always a pleasure to be here before you. I will make a few brief opening comments and will be pleased to answer any questions you may have.
Over the past year, Global Affairs Canada has advanced our country’s foreign policy, trade and development interests internationally in an increasingly dynamic and unpredictable global environment. We have worked to strengthen our relationships with key allies, such as the United States, and engaged constructively with emerging global players to advance Canada’s interests and values.
The department, in consultation with Canadians, developed Canada’s Feminist International Assistance Policy which seeks to reduce extreme poverty and build a more peaceful, inclusive and prosperous world. Through an active leadership role at the United Nations and at the G7, we are demonstrating our commitment to peace, security, sustainable development and prosperity.
[Translation]
An amount of $260 million was committed to UN peacekeeping operations and the launch of Canada’s Peace and Stabilization Operations Program in 2016-17. This enabled Canada to take concrete actions to prevent and respond to conflicts in areas including Mali, South Sudan, the Central African Republic, and the Democratic Republic of Congo.
Our trade commissioner service facilitated 1,000 commercial agreements between Canadian companies and their foreign partners, resulting in close to 3,000 new jobs in Canada.
Canada is recognized as a leader in providing humanitarian assistance to those affected by conflict and natural disasters. Our funding is provided through an established international humanitarian response system, which includes the UN and other experienced non-governmental organizations.
Specifically, through our funding to the World Food Programme — Canada’s largest humanitarian partner — the department contributed to providing timely emergency food and nutrition assistance to more than 80 million beneficiaries in over 80 countries, including in response to extreme food insecurity in Nigeria, Somalia, South Sudan and Yemen. Canada also provided funding, which contributed to the provision of humanitarian assistance to 13 million refugees and 36 million internally displaced persons.
In addition, Canada responded to urgent rapidly developing situations, such as the Rohingya refugee crisis — where Canada has allocated $25 million since the onset of the crisis — as well as humanitarian needs resulting from the impact of Hurricanes Irma and Maria.
[English]
The breadth, scope and international reach of our department’s mandate makes it one of the most complex departments in the government. With 178 missions in 110 countries, Global Affairs Canada provides a range of services to Canadians and Canadian businesses while also supporting the international work of the department and 37 partner departments, agencies and co-locaters.
Against this backdrop of complexity and volatility in our global environment, Global Affairs Canada continues to place an emphasis on prudent and careful financial management to deliver its mandate in a sustainable and efficient manner. To ensure that financial resources are well managed in the delivery of programs, the department has internal controls and effective oversight mechanisms in place to safeguard resources while maintaining flexibility in managing risks and ensuring that resources are allocated to our highest priorities.
[Translation]
Canada has a unique role to play on the toughest global challenges. The increase in funding requested through Supplementary Estimates (B) will allow Canada to continue making a real and valuable contribution to a more peaceful and prosperous world.
The department has requested an increase of $450 million, which will bring total authorities to date to $6.5 billion. The increase will allow Global Affairs Canada to: respond effectively to urgent humanitarian crises; protect our Canadian staff abroad; and provide life-saving vaccines. A sum of $264 million will be allocated to our crisis pool resources, which will allow Canada to respond quickly to humanitarian and other crises to provide emergency food assistance, health care, water and sanitation services, shelter and protection to some of the most vulnerable populations in the world.
This increase reflects the escalating global humanitarian need and will allow the department to respond to address the crises in north-east Nigeria, Somalia, South Sudan, Yemen and neighbouring countries. To ensure the government is fulfilling its duty of care obligations, Budget 2017 has allocated $760 million over six years starting in 2017-18 and $127 million per year ongoing.
The department has a rigorous risk and threat assessment framework to ensure that new funding goes to missions and regions that face the greatest and most pressing needs. This funding will allow Global Affairs to protect our people at Canadian missions and their dependants, secure the infrastructure that supports the delivery of our services abroad and protect our information security.
[English]
This funding will allow Global Affairs to protect our people and their dependants, securing the infrastructure that supports the delivery of our services across the world. Specifically, we will invest in infrastructure improvement for mission security and support relocations and consolidations where necessary. It will also provide personal security training for employees and dependants and bolster our threat-related intelligence work.
Budget 2017 also announced an increase of $110 million over three years in funding for the Global Fund to Fight AIDS, Tuberculosis and Malaria. In these supplementary estimates you see $36.7 million has been requested to supplement departmental funding and will allow Global Affairs to fulfil its commitment to allocate $785 million over three years to the initiative.
Of the $1 billion over four years announced in Budget 2016 to support clean technology, Global Affairs is requesting $2.9 million. This will support the development of a comprehensive clean technology strategy that aims at increasing Canadian industry access to global climate finance opportunities and enhancing resources abroad.
Looking forward, in January 2018 Canada will assume our G7 presidency. This will be an opportunity to demonstrate our leadership on important global challenges and issues important to Canadians, including protectionism, rising nationalism, climate change, mass migration, inequality and regional instability. Global Affairs will use this opportunity to engage with partners, allies and emerging global players to maintain and advance Canadian values and interests. At a time when universal values and standards are increasingly under pressure, we will continue to deliver integrated foreign affairs, trade and development policy and programs in a manner that exemplifies Canadian leadership.
Thank you, Mr. Chair. I look forward to answering your questions.
Senator Eaton: Thank you very much. It’s very nice to see all of you back here again.
Mr. Rochette, explain something to me. Over the last five years, DND has spent an average of $1.3 billion less than what was authorized by Parliament. Does this new arrangement you have with Treasury Board give you the flexibility — because I’m sure it’s because things were late in delivery or the design wasn’t finished, you didn’t have the bills — to put the money in a bank account for future expenses or for future bills as they come in, or do you have to start over again each year?
Mr. Rochette: Thank you very much, senator, for your questions. In fact, yes, we have more than one arrangement with our central agencies, not only with Treasury Board of Canada Secretariat but also with Finance. With relation to the capital program you’re referring to, under the new defence policy we have a new funding model where we have moved all capital funds under a capital envelope in the fiscal framework. In the old days, if I were here a year ago, I would be talking about two sources of funds, one that we called our A-base, our reference level where we have funding, and also funding we were drawing from the fiscal framework for large capital projects.
Senator Eaton: In the past, if you didn’t spend it you lost it, right?
Mr. Rochette: Depending on the fund, if we were asking for the funds and getting them, we were not always able to transfer that money to another year, but now we can.
Senator Eaton: Now you can do that, which gives you greater flexibility?
Mr. Rochette: Exactly.
Senator Eaton: That brings me to my next question, and perhaps Mr. Finn or you can answer this.
On the fixed-wing aircraft, I think in the estimates you’ve budgeted $161 million for the fixed-wing search and rescue aircraft replacement project. Could you tell me how many aircraft will be purchased? When will they be delivered? Is the project on time and within budget?
Patrick Finn, Assistant Deputy Minister, Materiel, National Defence and the Canadian Armed Forces: Thank you very much, senator, for the question. This is a project, of course, that has a long history. We completed the competition last year and signed the contract fairly late in the calendar year. That’s one of the reasons why we find ourselves asking for the money at this point in the financial year.
Senator Eaton: So you signed the contract in 2016, in December, say?
Mr. Finn: November-December, that’s correct, by which point the request for Main Estimates had occurred, so that’s why the timing of asking for this money at supplementary estimates.
Senator Eaton: Has the design been done and finished?
Mr. Finn: The aircraft in question is an existing aircraft. It is an Airbus C259 aircraft. We are really transforming how we do search and rescue. This aircraft will have a number of sensors and the ability to do very different searches from what we did in the past with the 1960s and 1970s aircraft, the Buffalo and the Hirsch H. The design of the aircraft exists. We’re going through the design process of putting in all the sensors and things I’ve talked about. The critical design review is happening actually within a few months. Construction of the first aircraft though has already started, so that is under way. We’re planning for the first aircraft to arrive in late 2019, and it’s about a three- or four-year transition. In fact, we will soon be breaking ground in Comox, where the training facility will be located, and these aircraft will be located at four bases. We will start the transition out in Comox first. Again, the last one in 2019 for 16 aircraft located at four bases across Canada.
Senator Eaton: Say you had to do a search and rescue in the Arctic Ocean. Do you have the capability of getting up North as quickly as possible? How long would it take you to get up North?
Mr. Finn: My colleagues in the Air Force would be better placed to tell you precise times and things like that. This is a capability that we may have to forward deploy through bases located up North and beyond. Yes, we can is the answer. For the response time, I’d have to ask my colleagues in the Air Force to speak to that specifically.
Senator Eaton: I think I read something in the newspapers. There is a lot of fake news saying it would take them a day and a half to get up North.
Mr. Finn: There is a lot of complexity to that, senator.
It gets into crew days, how many crews you put on a plane, what it is that you do. Most importantly, I think the air force ensures that the assets are located where the vast majority of the search and rescue efforts occur. So although some do happen in the North and the Canadian Armed Forces has historically and bravely responded to many of them, the vast majority of them happen in Southern Canada. And not surprisingly when more people are outdoors in the summer, there are more then as well.
But certainly, the air force has a number of plans to support it all the way into the North with both fixed-wing and rotary-wing aircraft. If General Hood was here, he would remind us that every aircraft in the air force has a secondary search and rescue role as well. We put a lot of effort into the evaluation to ensure that the solution selected had the highest probability of dealing with the historical search and rescue areas and responses.
Senator Eaton: Do I have time to ask Global Affairs Canada a question, or do you want me on second round?
The Chair: On a second round, please.
[Translation]
Senator Forest: My first question is about the supplementary estimates. You are requesting $333 million under the heading “Funding for the Canadian Forces pay increase.” Those are normally expenditures that were part of an agreement and that can, therefore, be covered. What is the explanation for that? After all, $333,096,765 is a substantial pay increase.
Mr. Rochette: Thank you for your question, senator. That amount is actually for only half of the pay increase.
Senator Forest: Half?
Mr. Rochette: Yes, the Canadian Armed Forces are four years behind in terms of pay increases. So we concluded a new agreement to give employees an increase of 1.25 per cent a year from 2014 to 2017, which totals about 5.34 per cent for the four years.
Since there was a wage freeze in 2014-15 and 2015-16, National Defence has to absorb those costs. So, about $290 million will be absorbed. We put money aside during the first two years to ensure to have the necessary funds. We can obtain the requested funds, which will be reimbursed by the Treasury Board.
Senator Forest: So, if I understand correctly, the first 50 per cent was taken from the reserves you created.
Mr. Rochette: Yes.
Senator Forest: And this other 50 per cent is the portion for which you had no reserve.
Mr. Rochette: It’s not that we didn’t have reserves; it was rather a matter of our authority. There was no wage freeze. So we had the right to request funding for the last two years.
Senator Forest: The situation in terms of capital is very worrisome. I am a senator from the Gulf region. We learned that you would not purchase a second supply ship. The Davie shipyard will soon deliver the first vessel to you. More than 800 jobs are at stake.
Would you be able to submit to the clerk, in the coming days, a document explaining that the impact on National Defence operations will not be significant if the department decides not to place that second order? This is a major source of concern because there are three large shipyards in Canada. Davie is the only one in Quebec, and this development is significantly compromising the industry right now. The shipyard is one thing, but there are also all the smaller suppliers to consider.
Mr. Finn: Thank you for your question. The argument is mainly found in our new defence policy, which focuses on protection, security and engagement. The policy considers all the needs of the Canadian Armed Forces, trade, and where to invest our money. For the navy, we are talking about combat ships, two cargo ships, joint support ships, and updates to submarines and offshore patrol ships.
We did not consider every project independently; we rather had on overall look at where we had to invest. The argument comes mainly from that approach.
The interim supply ship, as our minister pointed out, was meeting interim needs. This is a five-year contract until we start building interim supply ships and, at the same time, we are cooperating with our allies, Spain and Chile, which have provided us with those capacities that are common in NATO countries.
We can look, but the argument is mainly found in our defence policy, which presents the plan of all the capacities we will seek out. In addition, in those discussions — and not only for the navy, but also for all environments — we had to set some capacities aside. Over the long term and until 2050, we will really focus on building joint support ships to help the navy.
Senator Forest: You submitted the argument you are telling me about. Was it covered in a document that was submitted to the department or was it only an oral submission?
Mr. Finn: No, it was not only an oral submission. I don’t know whether an actual document exists, but there was a two-year process that has been examined many times. Although we have a considerable budget, it is not limitless. We had to consider a number of matters before we could decide where to invest. Once again, I am not sure whether there is a specific document on that capacity.
Senator Forest: In terms of capacity, is there $1.3 billion in authorized capital that has not been allocated?
Mr. Finn: I did not understand the question. Are you talking about $1.3 billion in appropriations?
Senator Forest: I am talking about capital appropriations over a three-year period that are not in reserve. Do you have agreements with the Treasury Board?
Mr. Finn: Are you talking about the budget for joint support ships?
Senator Forest: I am talking about capital.
Mr. Rochette: Can you repeat your question?
Senator Forest: My understanding is that $1.3 billion in capital appropriations was authorized and has not been allocated to capital projects. Have you understood my question?
Mr. Rochette: For the second ship?
Senator Forest: For the second ship.
The Chair: In your budget.
Mr. Rochette: In the budget. However, the money is protected so that it would be allocated to another project for vessels that will replace the interim ship.
Senator Forest: But the money is protected.
Mr. Rochette: Yes.
Senator Forest: It was not returned to the consolidated fund.
Mr. Rochette: It is protected.
Mr. Finn: The money is protected for specific projects. All of the money is associated with specific projects.
Senator Forest: The money is allocated.
Mr. Finn: Absolutely, be it for combat ships, joint support ships, fighter jets, and so on. The process consisted in considering all the needs of the Canadian Armed Forces and deciding where we would invest over the coming years.
Senator Forest: Would you be able to send to the clerk the philosophy and the conclusions of that two-year reflection?
Mr. Finn: Concerning conclusions, we can provide you with the document that was created, which is our defence policy that describes exactly what our investment-related decisions led to. That is a public document we can send you.
Senator Forest: The basis of your decision-making critical path.
Mr. Finn: I believe that is covered in the policy document. We could send it to you.
[English]
Senator Marshall: My first question is for Global Affairs Canada. In your opening remarks, you refer to the increase in funds. It says: “. . . reflects the escalating global humanitarian need. . .,” and it is for northeast of Nigeria, Somalia, South Sudan and Yemen.
Is that what the $264 million is for?
Mr. Thangaraj: The $264 million is for a response fund that we have within our budget. And so with those monies, a big portion of our budget has already been spent for those types of crises.
Senator Marshall: So you’re replenishing.
Mr. Thangaraj: It’s to top up that fund to allow us to continue to respond to crises. For example, we committed $225 million for the Rohingya crisis.
Senator Marshall: So it is not all committed.
Mr. Thangaraj: It is not.
Senator Marshall: You’re just topping up what you had.
How is the funding disbursed? Do you give it to Care Canada? Is it dispersed to some humanitarian agency?
Mr. Thangaraj: Yes, there are a number of agencies we will work with, depending on the crisis. For example, we could work with the World Food Programme to provide food assistance. We would work with Canadian partners such as the Red Cross.
The partners we choose are dependent on the type of intervention we want, given the conflict; if it’s in a refugee camp, it would be a specific partner. We make sure all the partners we work with have the capacity not only to deliver the aid but to ensure that the aid dollars or the food aid gets to the actual recipients.
Senator Marshall: That was my next question: How do you know that what you paid for actually gets to its destination?
Mr. Thangaraj: That goes back to the selection of the partners we use. We use partners that have a proven capacity to deliver aid. We do an institutional assessment of any partner we use, either Canadian, if it’s an NGO, or a multilateral partner in the UN system. We look at their track record and their internal controls. Do they have an inspection function on the ground to ensure that assistance does not get diverted?
Part of the reason we use multilateral organizations in a lot of those fragile contexts is because they do have all the on-the-ground logistics and oversight mechanisms to ensure aid arrives.
Senator Marshall: You look at that up front. Is any sort of evaluation done after?
Mr. Thangaraj: We do evaluations generally. With our multilateral partners, everyone will have an inspector general function, which has an audit and evaluation component. Given that we sit on the boards of those organizations, we do have oversight over those.
Senator Marshall: So you have a double-pronged organization.
The Global Fund to Fight AIDS, Tuberculosis and Malaria — the reference there is for Budget 2015. I think you mentioned in your opening remarks that it was $110 million over three years. Is this the final year now?
Mr. Thangaraj: Sorry, I might have misspoken. It was Budget 2017 where the funding was announced.
Senator Marshall: In the document it says 2015. I don’t remember you mentioning in your opening remarks, but it’s actually in the supplementaries —
Mr. Thangaraj: We have been a contributor to the Global Fund for a number of years. There was a replenishment last year. That’s the $110 million announced in the budget. So in budget —
Senator Marshall: It wasn’t 2015, because I couldn’t find it.
Mr. Thangaraj: It was 2017. So the $36.7 million is the first year of the three years.
Senator Marshall: Thank you.
My next question is for National Defence. I have some further questions on the fixed-wing search and rescue, but I will look at the light-armoured vehicles. The way the funding is requested — like these odd dollar amounts — these are usually contracts that are tendered, is that not correct? Okay, these are tendered. When the contracts are tendered, when you select the successful bidder, aren’t the instalments defined as so many on April 1, so much on July 1? I’m looking at these odd amounts and thinking it’s odd. Why wouldn’t these be rounded amounts?
Could you explain how you arrive at these dollar amounts?
Mr. Finn: They are tendered. In this case, the specific contract is with General Dynamic Land Systems-Canada in London, Ontario. Generally, we do a lot of payments instead of milestones by year, as you indicated, which can happen sometimes early on in design. Otherwise, we’re particular that we pay upon delivery. In this particular case, it’s vehicles. It could be vehicles, spare parts or any number of things.
For this particular case for the light-armoured vehicles, we have a fleet of 550. Three hundred and nine have already been updated, and we issued another contract. We had 141 vehicles that had been partially upgraded while they served in Afghanistan. So we had two configurations that were suboptimal. We had the opportunity to invest further to bring all the vehicles up to the same standard.
Senator Marshall: This one, though, is for the contract amendment, isn’t it? It’s for the 141 vehicles.
Mr. Finn: Yes, it is. We were also able to accelerate delivery. We brought in more money to do more vehicles this year to advance that work. Sometimes, we have odd amounts because there could be components that are sourced in the U.S., so the contract could be subject to foreign exchange and other things of that nature. In this case, I know we’re introducing the money because we’re advancing vehicles and getting them through production upgrade quicker, but we’re also upgrading existing simulators and other systems. That is why you’ll see, in some cases, hundreds of thousands. Some components could be in the tens or hundreds of thousands, but we pay, generally, on delivery so that we can do our quality assurance and make sure we’re getting the product that operates how we’ve contracted.
Senator Marshall: What was the total value of the contract amendment — this $57 million? Would you have that figure there?
Mr. Finn: I have the figure for the overall project.
Senator Marshall: How much for the overall project?
Mr. Finn: The overall project is $1.7 billion. That is 550 vehicles, plus simulators, spare parts, technical data and initial cadre training — a significant number of things.
Senator Marshall: Did you say that was payable in American currency? Or you gave that as an example?
Mr. Finn: There could be — and I don’t know all the breakdowns. The vehicles are largely payable in Canadian currency, but if the company is exposed to certain foreign exchange fluctuations, we’ll negotiate the risk. If we say, “Canadian dollars only,” the bidders will usually increase their price to make sure they are covered for that risk, depending on the negotiations. But that would be an example of times when you see fluctuations in, I’ll say, relatively small dollar amounts.
Senator Marshall: But the amount you expect to pay over any fiscal year — you don’t put it all in your Main Estimates? When was the amended contract? When was it signed?
Mr. Finn: Exactly that, senator. It was late last year again, so the timing of it did not line up with the annual reference level update. Next year, for example, we’ll anticipate — and we’ll get all the vehicles done through next year — that it will be in our mains. Unless there is some fluctuation of delay or advance, we would be unlikely to be back for supplementary estimates.
Senator Marshall: For the 16 fixed-wing search and rescue aircraft, is there a decision as to where they will be located?
Mr. Finn: They’ll go to the four main operating bases. When we went out with that competitive request for proposals, it was very performance-based. That was some of the work we did. We told bidders that if they wanted to propose alternate locations for a better solution, they were responsible for the overall cost, so they lined up with our four traditional bases.
Senator Marshall: So there will be four at each of the four?
Mr. Finn: Yes, at Comox, Winnipeg, Trenton and Greenwood for the fixed-wing search and rescue.
Senator Marshall: Thank you.
[Translation]
Senator Pratte: I have two questions. I will first follow up on what Senator Forest was saying about the Davie shipyard — an issue of great concern in my province. Did the Department of National Defence consider the Davie company to be a reliable supplier?
Mr. Finn: Yes. I am a former marine engineer, and I worked with Davie for decades, as well as with all Canadian shipyards and most of the suppliers. That is why we have a contract with them for the interim supply ship. We are also planning other future projects for which Davie could bid — something that certain companies that build warships and supply ships on the West Coast cannot do.
A third party is currently overseeing Davie’s work on the interim supply ship, and we are receiving positive reports. The construction of the vessel is three or four months behind schedule, which is acceptable for a project of this magnitude. That is what we see at most shipyards.
Senator Pratte: You know that, over the years, Davie has been left out of some major contracts — and perhaps there was a good reason for that. The decision regarding the second supply ship was disappointing to many and will lead to layoffs. Davie’s future is once again in doubt. So, many are wondering whether the government in general, and the Department of Defence in particular, see Davie as a second-rate facility compared with the two other large Canadian shipyards.
Mr. Finn: Thank you once again, senator, for your question. The shipbuilding strategy was connected to a contract. We issued a call for proposals in 2010; the competition was launched and the other two shipyards won the bid. In all of the areas in which we work in Canada, we hire a lot of suppliers and we are very pleased with their efforts and the quality of their work. In this case, there was a competition and two shipyards were chosen.
Some work was also set aside. Approximately $2 billion was invested in building smaller ships, and in maintenance. Recently, the Davie company has done a lot of maintenance for the coast guard. It will probably do more in the future, and perhaps also do some for the navy. When we finish building our supply ships and our Arctic offshore patrol ships, these ships will need maintenance. Historically, Davie has been very active in this area. I have worked on projects for which Davie built three frigates and modernized some destroyers. You asked the question, and my answer is that these efforts were fruitful. The strategy was competitive, and the two other shipyards won the competition.
Senator Pratte: My second question may be a bit simplistic. You spoke, Mr. Rochette, about a new way of doing things which was approved by the Secretariat of the Treasury Board. This allows you to use the surpluses from certain projects and transfer them to other projects. Is there not a risk of confusion? It is already not easy to track funds from one year to the next. In addition, you will be transferring funds from one project to another. Is there not a risk of creating more confusion and of making it more difficult to follow the money among projects, from year to year?
Mr. Rochette: No, not at all. All of our projects are accounted for separately and have their own financial codes. For instance, when Mr. Finn prepares the contracts, there is always a very close follow-up.
This year, for instance, we had about $129 million we did not need, which had been allocated among 10 projects. We are going to use that amount for other projects for which we need more funds because these progressed faster than expected. Even if funds were expended, we can always identify exactly the amounts that were used for the projects. Next year, we will adjust the books to ensure that they receive the money. Everything is accounted for.
Senator Pratte: This may be simple to you, but not to parliamentarians. You should find a way of making things simpler for us.
Mr. Rochette: We could try and find ways. One of the advantages is that we can reduce the amounts that are requested. In the past, we used to freeze funds which were not used and at the end of the year, we had to return them. Now we can at least reduce the funds. There are advantages and disadvantages.
Senator Pratte: In percentage terms, how much money is transferred from one project to another in the context of all capital assets, in the course of a given year? Is it a large percentage?
Mr. Rochette: No, not that large. As I mentioned, the amount is approximately $193 million this year out of a budget of about $4 billion. So it is relatively minimal. However, we feel that it is very important to account for everything right down to the penny.
[English]
Senator Neufeld: Thank you, folks, for being here. I want to go back to the fixed-wing search and rescue aircraft replacement project. I visited your website. You say that steel cutting has started on Canada’s fixed-wing aircraft. This is in June 2017. You started the process in December 2011, and I think I understood you to say this is more of an off-the-shelf airplane from Airbus, other than maybe some special things that Canada wants put on it.
Is that a normal time frame to go from getting funding to actually starting to build the airplanes? Will they be in service by 2019 or by 2022, which actually is a lot further yet? If it’s 2022, it’s 12 years. Maybe you could help me a bit here.
Mr. Finn: Senator, thank you for the question. Is it typical in the case of something off the shelf like that? We have many examples that would say no. Our C-17 strategic lift aircraft were acquired rapidly. Our C-130J Hercules tactical lift very quickly. When we get into complex systems and sensors, if I give the example of our maritime helicopters and some of the challenges that have occurred there that we’ve kind of worked through and are now in delivery, we find a bit of a struggle and at times a perception regarding how we establish requirements and what it is that we’re doing.
In the case of the fixed-wing search and rescue aircraft, in the early years that you describe, there were some concerns about the way that we were proceeding and that requirements were specified. We opted to go out and have an independent third party look at it. The National Research Council did that. That took time while we stood back and had an independent third party look at the approach, the requirements and how we would do it. That’s where we came up with this performance-based approach, where we would largely specify the historical locations and say to industry come and tell us how you would solve the number of aircraft, location, et cetera.
To your question about timing, right now we’re coming to critical design review. They have started production. In this particular case, the aircraft are being produced in Spain and Europe. A lot of the integration will happen elsewhere. It will happen here. There was a Canadian in-service support integrator in Newfoundland. Right now we’re on track for late 2019. I would never guarantee it in the sense that there could be some slippage and issues, but given the production line and the rate at which they’re producing airplanes for many customers, we’re not seeing the kind of risk we might see in more bespoke projects.
Senator Neufeld: So the 16 craft will be in service, you’re saying, by 2019-20 at the latest?
Mr. Finn: No, the first aircraft by the plan gets delivered in the fall of 2019. It’s about a four-year transition. They’re not building 16 aircraft in parallel. There will be a kind of drum beat of delivery.
More importantly, when we transition fleets — that is, transitioning a base, the air crew and the maintainers — you don’t really want to do it one plane at a time. Again, my air force colleagues are a bit more expert at this. The idea is we will transition one base at a time. We will start with Comox. The school will be there. That’s where we currently operate the Buffalo aircraft, which are our oldest.
Senator Neufeld: I’m aware of that.
Mr. Finn: It’s about a four-year transition to get all the way across Canada and to get out of the legacy aircraft and fully into the new aircraft. If the air force is able to do that transition quicker, it could be accelerated. However, as you can appreciate, it needs to be done in a way to maintain the service, flight safety and all the things we do.
Senator Neufeld: What year will they all be in service?
Mr. Finn: By 2023, senator, they will all be in service.
Senator Neufeld: They’re all in service by 2023 at the very latest?
Mr. Finn: Correct.
Senator Neufeld: There was another company that bid. You’re aware of that, I know. Airbus was $1.3 billion over your estimate but received the contract.
Are there any legal ramifications happening with that process?
Mr. Finn: It is before the courts. I’ll just say that the other company — and it’s public — is a European company called Leonardo, and it has chosen to pursue a legal challenge. It is before the courts, so I won’t say more than that about it.
Senator Neufeld: I appreciate that you can’t do that.
This government has embarked — in fact, the last government also — on reducing greenhouse gas emissions. I don’t know how that affects the Armed Forces, but when it comes to using aluminum for the airplanes, Canadian-made aluminum emits much less greenhouse gas in its production than China, for instance. In fact, the difference is seven times; it’s huge. The same for ships. Canadian steel will emit about one tonne of greenhouse gases to make one tonne of steel. China is about three tonnes of greenhouse gases for one tonne of steel.
Is there something in your procurement strategy that you’re asked to do to actually look after Canadian business but also the reduction of greenhouse gas emissions in that sense?
Mr. Finn: Again, thank you for the question, senator. I’ll take maybe two different lenses there.
For Canadian interests, our colleagues at Innovation, Science and Economic Development Canada have the Industrial and Technological Benefit Policy. So for every dollar we spend, if a dollar goes offshore, the prime contractor has to find an equivalent in Canada, whether it’s direct to that project, or it could be indirect to other things. That is why for Airbus and its partners, for whatever work is done in Europe from a Canadian economic benefit perspective, that is covered in that fashion generally.
In the context of greenhouse gases, we have a strategy, of course, in the department. We are a big emitter just because of our footprint. A lot of work is being done by my colleagues in infrastructure from a procurement side. We call up all of the Government of Canada standards of how we build but also how we operate in service.
I can’t speak to the aluminum piece. Interestingly, I can speak to the steel piece in the context of ships. Most people don’t actually build ships with North American steel because of the precision with which it’s created for that purpose, and it would not be cost-effective for most North American steel manufacturers to kind of tool up to do that.
We have looked at it and tried it. The techniques of welding, preheating and those things are such that in the past when we’ve tried it, we have not been able to get certification to use it. So it’s generally not Chinese steel but European steel in those cases. Again, when that happens, the manufacturers have to provide economic offsets when they source anything offshore.
The aluminum aspect, senator, I don’t know, but I can tell you the standards we call up in emissions for propulsion and fuel efficiency in aircraft are standards that we now have to bring to all of our non-militarized land vehicles, of which an increasing percentage has to be hybrid or alternate fuel. These are all things we are doing to try to pursue that.
Senator Neufeld: I’ll get back to Dofasco, but you would say Dofasco is not efficient enough or can’t produce the quality of steel that you can get out of Europe because Europe emits about the same amount of greenhouse gases to create one tonne of steel.
Mr. Finn: The point I’m trying to make is about the specific hardness and certain qualities of the steel, and Dofasco and others are aware of this. Should they invest in upgrading all of their processes they could, but for them, they could probably run the steel for our ships in a couple of days. The issue is what North American steel plant wants to make that kind of investment for what is a relatively small customer?
Senator Neufeld: Well, I’ll be certain to write Dofasco and give them your testimony, because I’ve been there, and they told us that they can produce quality steel. So that’s interesting.
I have one more question to Global Affairs. You said the Trade Commissioner Service facilitated 1,008 commercial agreements which resulted in close to 3,000 jobs in Canada. Could you give us some idea of what kind of jobs they are and where they’re at? If you don’t have that information — we’re running short of time — you can provide that later.
Mr. Thangaraj: I will provide the committee with precision on those things.
Senator Neufeld: Thank you.
Senator Andreychuk: In light of the time, I’m going to turn to Foreign Affairs, Trade and Development.
You’re requesting $264.9 million for the Crisis Pool Quick Release Mechanism, the new name for a fund that’s been around. It went, if I’m correct, from $55 million to now $264.9 million. You say that’s because of the increasing crises in the world. I find that a bit difficult, because we have had the natural disasters, the food crises, the conflicts and the political upheaval, not just recently.
What I’m concerned about is that in the old days you could look at what was foreign policy, what money they were allocated and what they did with it. It would be for the traditional foreign policies, such as trade and all the political security issues. Then we had development assistance, and within development assistance they touched crises, et cetera. We created this small pool in Foreign Affairs originally for crisis intervention. I understood the first definition, but over the years now with successive governments, you’ve got it now that it covers everything, basically.
Who makes the decision to use this fund? I think I know the answer, but what are the criteria? Have any been set? That certainly hasn’t been the case.
If we don’t know what the criteria are for using this fund and just how the decisions are made, this fund will continue to expand and be siphoned off from what was development. I’ve been through the process where there was no money for a crisis, so we’ll just take development assistance money and put it into crises or into security. Have we got a fine plan of how we’re going to readjust all of these?
Mr. Thangaraj: We do, and I think some of that was part of the Feminist International Assistance Policy, where we said we need to maintain our humanitarian spending given the complexity that’s emerging in the world but look at multi-year humanitarian spending to provide more predictable funding and more predictable responses to these crises.
Maybe I’ll give you a little bit of a bird’s-eye view of our humanitarian spending. In our Departmental Performance Report last year, we spent, in 2016, about $850 million on humanitarian assistance across the board. That would include what we would have allocated, for example, for the Middle East crisis. In that is what we would have used from the Crisis Pool Quick Release Mechanism. That essentially allows us, after the supplementary estimates period is over, to provide funding if our budget is insufficient.
Last year in our crisis pool we had about $120 million. We used $55 million. If you go through the public accounts, you’ll see an amount of $55 million and an unspent amount for the remainder of that. But our overall allocation for humanitarian was about $850 million.
This year we plan on spending that. Precisely as you said, not to take away from development spending, we wanted to have a specific source of funds to enable us to react and respond to these crises in the world without taking away from long-term sustainable development, whether that is an education project or a maternal and child health project.
In terms of the criteria, it has to be a natural disaster; it has to be extraordinary, something like a famine or a humanitarian crisis as a result of conflict, political instability, or if there is a sudden intensification of a conflict. Those are the criteria we have to meet in order to draw funds from the crisis pool to use for humanitarian spending. It’s in consultation with the development minister, the foreign affairs minister and also the finance minister to use those funds.
Senator Andreychuk: I think $800 million is probably not enough for all the crises around the world, so how do you determine when we’re going to get involved and for how much money? I think that’s the thing that is troubling. Why did we recently say money for food, trying to get food into Yemen, and we’ve also done Rohingya, but we haven’t done some other crises that are erupting? Who do we respond to on the crisis? Is it international organizations that are coming to you, or is it the minister determining where Canada can be, or is it what it seems to be: If it’s on the front pages of the newspapers, there is a political need to respond? Two weeks later there is still that political need, but we’ve moved on to another crisis. It’s still a very difficult situation for people on the ground.
Mr. Thangaraj: There is an international framework that surrounds humanitarian responses. We work in consolidation with multilateral organizations and other donor governments so that we don’t duplicate funding and efforts. We work within the United Nations system. For example, when there is an emerging crisis, they will have an appeal for funds. We look at what our historical burden share has been for those, and we meet those commitments. We see, for example, what our other partners are doing. We want to ensure that our funding is effective and goes to where we know it can make a difference and, again, where it’s not everybody tripping over each other but where Canada can play an important role.
Senator Andreychuk: You have funding to support the promotion of Canadian artists and cultural industries abroad in the amount of $5,357,542. Is that the total or is that a request? And is it new?
Mr. Thangaraj: This is new funding. The total that the government has committed is $35 million, $15 million of which was for Global Affairs, and $5 million is for the supplementary estimates for this year. The remainder will be in our Main Estimates for next year.
Senator Andreychuk: I would love to follow up on that one.
The Chair: Thank you, senators.
I have a question for Defence. You’re asking us to consider a vote of a little over $668 million. You can find that on page 2-48. It’s capital expenditures.
I’m sure you don’t have the list, because we’ve asked the question in the past, looking at our records. Can you provide us with a complete list of the impact of your capital expenditures on our military bases across Canada, province by province?
Mr. Rochette: Yes, we can.
The Chair: To the witnesses, this ends your presentation and the questions. I would like to remind you that senators have asked for information. If you could provide that information as soon as possible so that you can position our Finance Committee to make an accurate report to the Senate, we would appreciate it. Thank you very much.
Honourable senators, we welcome our second panel.
[Translation]
From Shared Services Canada, we welcome Alain Duplantie, Senior Assistant Deputy Minister, Corporate Services and Chief Financial Officer, and Sarah Paquet, Senior Assistant Deputy Minister, Strategy.
[English]
We also have officials from Indigenous and Northern Affairs Canada, Mr. Paul Thoppil, Chief Financial Officer, Results and Delivery Officer, Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada; and Mr. Joe Wild, Senior Assistant Deputy Minister, Treaties and Aboriginal Government Sector, Crown-Indigenous Relations and Northern Affairs Canada. Thank you for accepting our invitation to come and defend the supplementary estimates that you’re asking the Finance Committee to consider.
At this time, I would ask Mr. Duplantie to make his presentation, followed by Mr. Thoppil and then questions from the senators.
[Translation]
Mr. Duplantie, you have the floor.
Alain Duplantie, Senior Assistant Deputy Minister, Corporate Services and Chief Financial Officer, Shared Services Canada: I am pleased to appear before the committee today to discuss Shared Services Canada’s 2017-18 Supplementary Estimates (B). I am accompanied today by Sarah Paquet, Senior Assistant Deputy Minister of Strategy.
Shared Services Canada was created in 2011 to modernize how the government manages its information technology infrastructure.
[English]
The department is mandated to provide a range of services that are essential to delivering Government of Canada programs and services to Canadians. These enabling services include the delivery of email data centres and network and workplace technology services, as well as cyber and IT security for Government of Canada networks.
Every time Canadians cross the border, check the weather or apply for key benefits, Shared Services is there working behind the scenes.
Turning to our Supplementary Estimates (B) for 2017-18, we are seeking $23.5 million. This increase reflects $14.7 million for operating expenditures and $8.8 million for capital expenditures.
This funding request can be further broken down into three areas: new funding, transfers and reprofiling of funding.
[Translation]
Under new funding, we are seeking $1.2 million to provide information technology services to customer departments and agencies. This includes $200,000 to support Library and Archives Canada in its work to acquire, process and make accessible the private records of the Right Honourable Stephen Harper.
Under transfers from other departments, we have identified $8.8 million to be used for projects and initiatives. This includes $7 million to support Public Services and Procurement Canada for additional IT infrastructure supporting the pay modernization project, Phoenix.
[English]
We have reprofiled $13.5 million in funding for projects and services. This includes $8.7 million for the renewal of the high-performance computing storage and services at Environment and Climate Change Canada. I would note that this new supercomputer was recently unveiled in Montreal this fall, at an event with our minister, the Honourable Carla Qualtrough.
It is a good example of state-of-the-art IT infrastructure being put in place by dedicated SSC employees who work hard to renew, stabilize and consolidate aging IT infrastructure. We are very proud of this achievement. It is the fastest recorded computer platform in the Government of Canada and will produce weather information that drives and underpins services that increase the safety and security of Canadians.
[Translation]
Mr. Chair, I would add that SSC has made important strides in addressing the IT needs of its customers in a timely manner, and that satisfaction with its services is improving. The results of the department’s monthly customer surveys which measure factors such as timeliness, process improvements and engagement experience, show this clearly. Overall, SSC went from a rating of 2.8 out of 5 in December 2015, to 3.4 out of 5 in October 2017.
This monitoring work is part of a “service first” management and program delivery approach to ensure SSC excels as a customer-centered IT service provider. In 2016-2017, we established a service management strategy and implemented service management processes and tools such as service-level expectations for each of the IT services SSC delivers, which have greatly improved services to customers.
[English]
In addition, SSC is refining its plans to deliver IT services that enable digital government in support of programs and services to Canadians. Our plans are grounded in sound financial management, project management and service management and are focused on a service-first approach to deliver for our customers.
This completes my opening remarks. We are pleased to now take the committee’s questions.
[Translation]
Paul Thoppil, Chief Financial Officer, Results and Delivery Officer, Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada, Indigenous and Northern Affairs Canada: Thank you, Mr. Chair, for the invitation to discuss the Supplementary Estimates (B) for fiscal year 2017-18, for Indigenous and Northern Affairs Canada, which is soon to be the Department of Crown-Indigenous Relations and Northern Affairs and the Department of Indigenous Services.
[English]
I would like to take a moment to touch on the announcement by the Prime Minister, on August 28 that our department will transform into two new departments, the Department of Crown-Indigenous Relations and Northern Affairs, which will advance reconciliation objectives and will lead on northern programming and Arctic policy, and the Department of Indigenous Services, which is charged with improving the delivery of programs and services and closing socio-economic gaps.
[Translation]
The creation of these two new departments is a giant step forward in making the national journey of reconciliation a reality. Structural changes of this magnitude naturally take time and will result in legislative amendments.
Slide 4 provides a notional breakdown of Supplementary Estimates (B) according to the two new departments. As you can see, these supplementary estimates will provide $432.6 million to the Department of Crown-Indigenous Relations and Northern Affairs and $12.6 million to the Department of Indigenous Services.
[English]
I look forward to discussing the results of the transformation into two new departments in future appearances. Meanwhile, our day-to-day work continues, which brings me back to the supplementary estimates.
[Translation]
I would like first to draw the members’ attention to a deck that I have tabled, 2017-18 Supplementary Estimates (B) for the fiscal year ending March 31, 2018.
[English]
On slide 2, you can see that Supplementary Estimates (B) includes initiatives totalling $445.1 million and will bring total investments for the department to approximately $11.3 billion for 2017-18 to address the needs of indigenous peoples and northerners.
With respect to financial highlights, slide 3 shows that the net increase of $445.1 million comprises primarily the following: $200 million for the Crees of Eeyou Istchee settlement payment, 91.8 million for comprehensive land claims and treaty-related and self-government agreements, $52.2 million for specific claim settlements, $23.7 million for Budget 2017 investments in Urban Programming for Indigenous Peoples, and $21.6 million for Metis rights and Metis relationships with the federal government.
In terms of voted expenditures, $91.9 million will flow through vote 1 operating expenditures, primarily for Operation Return Home and for comprehensive land claims and treaty-related and self-government agreements; $0.5 million will flow through a new vote called vote 7b, debt forgiveness, related to comprehensive land claims and treaty-related and self-government agreements; $0.1 million will flow through another new vote, vote 9b for debt write-off, related to writing off loans; and $350.1 million will flow through vote 10 for grants and contributions, again primarily for the Crees of Eeyou Istchee settlement payment for comprehensive land claims and treaty-related and self-government agreements and for specific claims settlements.
[Translation]
I will now briefly describe the major items included in Supplementary Estimates (B).
On slide 5, the largest item in these supplementary estimates is $200 million for the Crees of Eeyou Istchee settlement payment. This item will allow the department to make the final settlement payment to the Crees of Eeyou Istchee as per the Cree Nation Governance Agreement.
[English]
On slide 6, the second-largest item in these supplementary estimates is $91.8 million for the continued negotiation and implementation of comprehensive land claims and treaty-related and self-government agreements. This funding will allow the department to continue its ongoing engagement and policy development to renew federal approaches to address rights protected under section 35 of the Constitution Act.
[Translation]
On slide 7, the third item of $52.2 million is required to fund specific claims settlements and Specific Claims Tribunal awards.
[English]
The fourth item on slide 8 totals $23.7 million and is related to Urban Programming for Indigenous Peoples. This funding will help build on the existing network of indigenous service delivery organizations that deliver holistic, culturally appropriate front-line programs and services to assist urban indigenous populations in transitioning to and from, and living in, urban centres.
The item on slides 9 and 10 for $21.6 million is related to Metis rights and Metis relationships with the federal government. This funding will provide ongoing flexible governance and capacity for the core business of the Métis National Council and its affiliates to continue specific activities related to the ongoing program implementation.
[Translation]
Finally, the last slides provide information pertaining to additional key initiatives, including objectives, outcomes, and status.
These supplementary estimates will enable us to continue to make concrete steps to address the needs of indigenous peoples and northerners.
[English]
I look forward, together with my colleague Joe, to discussing any aspects of the supplementary estimates with you and welcome your questions regarding this presentation. Thank you.
The Chair: Thank you.
Senator Eaton: Thank you very much. My question is for Mr. Thoppil.
I see that $13 million has been allocated to adapt to the impacts of climate change.
We know that some First Nations have recurring problems because their communities are on flood plains. You and I have discussed for many a year, Mr. Thoppil, that the houses are not built to code and there’s mould in First Nations’ housing. Is any of this money going to deal with these problems?
Mr. Thoppil: Thank you, senator. Again, it’s always a pleasure to see you and have this conversation.
In terms of the question, the money allocated for adapting to the impacts of climate change is primarily for the North, and it is to bring communities in the North — north of 60 — off diesel. We have already started workshops with northern communities to figure out plans for projects primarily of a renewable state that can be contemplated in order to bring them off diesel. It is in that context that that money has been allocated.
Senator Eaton: There is another thing. Excuse my ignorance, but I’m sure you’ll educate me regarding funding to support Metis rights and Metis relationships with the federal government. Now, we know that First Nations and indigenous people have status and that thanks to a bill that’s about to be amended in the House of Commons, indigenous women’s children will now be considered indigenous as well. But what constitutes a Metis?
Joe Wild, Senior Assistant Deputy Minister, Treaties and Aboriginal Government Sector, Crown-Indigenous Relations and Northern Affairs Canada, Indigenous and Northern Affairs Canada: In this particular context, we are talking about Metis who have section 35 rights, so we’re talking about the test that was set out by the Supreme Court of Canada in the Powley case. That established a set of historical criteria that one has to examine to determine whether there is a modern-day set of beneficiaries of a traditional Metis community that had a culture and a language that was distinct from both European and First Nations. So you’re talking about what we call the Powley Metis, who are Metis that meet the Powley test.
Senator Eaton: I know this is the Finance Committee, but can you tell me a bit about that test?
Mr. Wild: Sure. The test has several components to it. It basically looks at whether there was an existence after European contact but prior to European control. For some parts of the country, that has to do with when a province came into Confederation, and for other parts of the country it’s about when certain colonial orders were issued and the Crown took control of the territory.
If there was a community of individuals who had a culture distinct from European and First Nations cultures but was a blended community of people from European and First Nations descent and, prior to that notion of control, had a community, language, culture and a sense of some form of governance around how they handled their own affairs, then the court looks to whom the modern-day successors to those individuals — their heirs — recognize as being in that community.
For most of these particular communities we’re talking about, which are predominantly in Ontario, the Prairies and British Columbia — some would say Manitoba is obviously the homeland of the Metis Nation — all of those different organizations that have established that they have that Metis community under the Powley test have a registry where they look at all of the individuals. They trace back their genealogy to the founding families of the Metis community to find out whether these are modern-day descendants and whether the community is prepared to recognize these modern-day descendants as also being Metis.
That’s how the test works. It’s about tracking back, genealogically, to the history of the originating families and whether the modern-day community accepts these people as being part of that community.
Senator Eaton: So the Metis community, obviously, as they have children, will continue to grow. With the $21.6 million, do we anticipate that they will end up having the same rights as our indigenous Canadians?
Mr. Wild: Metis who meet the Powley test have rights that are protected by section 35 of the Constitution Act of 1982.
Senator Eaton: They don’t have to pay taxes and they have all the same rights.
Mr. Wild: No. They have rights that are protected by section 35, but those rights are not necessarily identical to those that certain First Nations have. There’s even variety within the scope of rights of various First Nations, and you can also contrast that with Inuit. So each distinctions-based group — First Nation, Metis and Inuit — has unique sets of rights that evolve out of their unique place in Canadian history and where they come from.
There can be commonality in those rights, in terms of harvesting rights that will be similar in nature, but they come from different sources and places in terms of their history, and the exact scope and extent of the right will vary depending upon the circumstance.
What you’re really trying to establish through what section 35 is seeking to do is to recognize that there were, prior to either European contact or the exercise of European control, First Nations, Metis and Inuit people that existed in this country and had their own forms of societies and were seeking to say that those forms of societies are part of the fabric of the nation and are deserving of constitutional protection in terms of the rights that they were exercising, and that includes the right to self-determination.
Senator Eaton: Thank you.
[Translation]
Senator Forest: My first question is for the officials from the Treaties and Aboriginal Government Sector of Indian and Northern Affairs Canada.
You are requesting supplementary votes of $445 million. Does the restructuring and division into two departments affect the system costs? Has the reorganization of your basic systems led to this increase?
[English]
Mr. Thoppil: The first thing we have to acknowledge is that the government is clear, moving forward, on addressing both the socio-economic gaps that exist between indigenous and non-indigenous peoples, as well as the agenda on reconciliation and advancing self-determination.
It’s very hard, and even RCAP identified this 20 years ago as a guiding principle; it’s hard to focus on both at the same time. Based on that principle of 20 years ago in RCAP, the government has decided to essentially take advantage of those recommendations and create two ministries focused on that.
There will be costs associated with transformation in any organizational change, whether in the private or the public sector. There will be financial costs. The intent is to minimize that but to focus on the public policy objectives of each organization consistent with the RCAP recommendations.
[Translation]
Senator Forest: We are not in any way questioning the government’s desire to take very effective action and acknowledge the reality of aboriginal peoples, but do you know how much of these additional amounts, rather than going to the department’s client group, will instead be used internally by the organization for the operation of the two departments? Have you assessed the system costs?
Mr. Thoppil: Not yet. There has been no study in that regard, unfortunately. It is clear to me that the priority of this new department, the Department of Indigenous Services, is to improve the services offered to aboriginal peoples.
Senator Forest: I think we share that objective, but perhaps it would be helpful to assess the impact in terms of increased votes for operations. I understand that you do not have that assessment right now, but if you get one, it would be helpful if you could forward it to the clerk.
Mr. Thoppil: Okay. You have to understand though that the long-term objective of this department is ultimately to eliminate the department and transfer control for its programs and services to aboriginal organizations. There might be a stage, when the department is created, when costs might increase, but at the same time it is clear that the long-term objective is to eliminate the department.
Senator Forest: We share that objective.
I have another very quick question. With regard to Shared Services Canada, the amount you requested in Votes b is not the highest. This morning we welcomed the Canada Revenue Agency, which will be creating a new call centre for business in June. No amount is indicated for your role with respect to this new call centre and, considering what has happened, the problems that have come to light regarding the Canada Revenue Agency, providing high-quality information and facilitating access to information for Canadian businesses should be a priority. Will you be responsible for this new call centre?
Mr. Duplantie: Shared Services Canada is responsible for creating the infrastructure for the call centre. This initiative is being monitored very closely. The assistant deputy minister is responsible for projects at Shared Services Canada. He provides updates and briefing sessions to the Revenue Canada deputy minister, to our deputy minister, and to the Deputy Minister of Human Resources and Skills Development Canada. Those updates are provided on a monthly basis. So yes, it is a major undertaking that is being monitored very closely.
Senator Forest: Has there been any testing? Are you sure that there will be a minimum of problems when the program is launched?
Mr. Duplantie: The project is being carried out on contract with a service provider. The contract was awarded in 2015. It took several months to finalize the implementation steps, and the service provider also attends the monthly updates given to the deputy ministers to provide progress reports and updates on every step. So it is all being monitored as closely as possible.
[English]
Senator Neufeld: Thank you, gentlemen, for being here. First question is to Shared Services Canada. The supercomputer going to Environment Canada, can you tell me who was awarded this contract and how much it was for?
Mr. Duplantie: This is a contract of a value of about $430 million, over a period of eight and a half years, awarded to IBM.
Senator Neufeld: This is a purchase?
Senator Eaton: It’s a lease.
Mr. Duplantie: I’m sorry?
Senator Neufeld: Is this a purchase or a lease?
Mr. Duplantie: It’s a lease over an eight-and-a-half-year period.
Senator Neufeld: It’s over eight and a half years. Now IBM is the same company that was responsible for the Phoenix system, is that right?
Mr. Duplantie: It’s my understanding. I don’t have any direct insight into that file.
Senator Neufeld: You don’t follow whether Phoenix was IBM or not?
Mr. Duplantie: I know it has a role. I don’t know exactly what the role is.
Senator Neufeld: Are you comfortable that IBM can provide the services needed for the supercomputer for Environment Canada?
Mr. Duplantie: We have reasons to believe that this is taking place in very good order. The period of transition was in the first year. Installing a high-performance computing facility is a highly complicated activity. It took a long period of time to go through the transition, which was part of the contract.
SSC took or accepted the readiness of the solution on time. We maintained the old supercomputer facility as a backup over a period of about a month, waiting and making sure that the new facility stabilized and all the testing took place. The old facility was not disengaged until those supervising that activity were satisfied. There has been no hitch. The primary user, Environment Canada, has been particularly pleased with the outcome.
Senator Neufeld: Thank you. I have a few questions for INAC. Can you explain the $13.3 million requested for climate change activities? What’s involved? What will take place? What will happen? What are your outcomes?
Mr. Thoppil: Thank you for the question, senator. The purpose of that program is to launch a series of workshops with communities to go through the options available to move off diesel. Essentially it’s to move from dialogue, to options, to prepping for design, and get them ready to actually move to a renewable project where they can move towards the elimination of diesel fuel at the community level.
Senator Neufeld: So these are just consultations. You’re going to spend $13 million talking to people about what options are there?
Mr. Thoppil: And moving forward in terms of helping them into the design element that will get them into a project stage.
There are a number of communities across the North.
Senator Neufeld: I’m aware of them.
Mr. Thoppil: Each will have their own unique factors and circumstances like geography. Essentially, what do they as communities want in order to move off diesel. It won’t be a one-size-fits-all by community in order to get them off diesel fuel.
Senator Neufeld: What kind of time frame do you think that it will take to spend $13 million to find this out?
Mr. Thoppil: Well, it’s only just a couple of years in order to get them into the project stage. Each community will engage at different speeds, so that is essentially a factor that’s embedded in the time frame, senator.
Senator Neufeld: Maybe, to help you along a little bit, the Standing Senate Committee on Energy, the Environment and Natural Resources did a study on exactly what you’re talking about, travelled to the North, and prepared a report for that. I don’t know whether you’re aware of that report. If you’re not, I’ll make sure one gets into your hands. It became evident that moving away from diesel fuel in some of those remote communities was going to be difficult because of how remote they are and where they’re at. In fact, the amount of greenhouse gases now is pretty small compared to some bigger emissions that maybe we should be looking at.
One of the things that became very evident is that some of those generation facilities in those communities are 50 years old, way past their lifetime. It shouldn’t take $13 million to figure out that maybe we have to look at a new type of generation for electricity, meaning probably staying on diesel fuel.
The other question I have is with respect to splitting. It’s further to Senator Forest’s question. You said that the aim is to move part of it out and into the communities, and then you will not have to fund it anymore. How are the communities going to fund it?
Mr. Thoppil: I did not necessarily say we were going to transfer to First Nation or indigenous-led people’s institutions, which we would continue funding. Essentially, the objective would be long term, that as we either program reform or create institutions that would, in a sense, support a third level of governance related to indigenous peoples, then we would transfer funding from program orientation to indigenous-led institutions that would essentially take over the bureaucracy’s role.
Senator Neufeld: The cost would still be there because the federal government would still have to fund it, right? They still have to transfer the funds, so the cost does not disappear in any way; it is still there.
Mr. Thoppil: The cost may not disappear, but there will be a heightened accountability dynamic that is different and a dependency factor, if I dare use that phrase, that is different, whereby it’s indigenous peoples at a community level getting accounting from their indigenous leaders rather than what is currently a bit of a dispersed role of accountability. That’s where, perhaps, you get better control of cost management down the road.
Senator Neufeld: Thank you.
Senator Marshall: Thank you very much. My first question is for Shared Services Canada.
The $3.8 million for improving the security of government information technology and cybersystems, is that part of the $77 million that was announced a couple of years ago?
Mr. Duplantie: That’s correct.
Senator Marshall: I think $77 million doesn’t seem like a lot of money for an organization the size of Shared Services. Is that the total, the $77 million?
Mr. Duplantie: Well, $77 million over a five-year horizon with $10 million ongoing was from Budget 2016 specific to a bundle of projects that were dedicated to enhancing perimeter security for the Government of Canada network, the ability to scan the network for weaknesses, access control, prescreening applications for the pre-approval and the use of those applications, so a group of projects.
Senator Marshall: It’s not the entire budget for IT security?
Mr. Duplantie: No.
Senator Marshall: Could you tell us something about the budget for the IT security? Do you have security breaches, or have you had security breaches?
Mr. Duplantie: In fiscal year 2016-17, the security operations centre triaged over 4,000 cyberevents and managed over 2,000 confirmed cyberincidents.
Senator Marshall: This is for all your systems under your control?
Mr. Duplantie: That’s correct, for the Government of Canada.
To your question about the cybersecurity budget, the budget allocation this fiscal year is about $127 million.
Senator Marshall: Okay, $127 million. Your departmental plan talks about enhancing collaboration with lead security agencies. Who would be the lead security agencies? Are you doing all of this work internally, or are you liaising with experts or other experts?
Mr. Duplantie: There is definitely a close relationship between the public safety security sector and CSEC, the Communications Security Establishment. Those are primary collaborators in the area of security and cybersecurity.
Senator Marshall: I don’t know if this is a fair question, but are you adequately resourced for security issues? When you look at your departmental plan, one of the risks in many of the things that you’re planning is that you will not get the resources or the personnel for the project. So my question is, if that’s a risk for your security, are you getting the resources that you require?
Mr. Duplantie: That’s a very important question. Of course we have to operate within the resources that are afforded to Shared Services as a department, which compels us to make some choices in certain respects. You are probably aware of the Gartner report, a review of Shared Services’ capabilities. This has fed into submissions and a plan going forward that is soon to be considered by cabinet, decisions from which we will learn probably in the new year, and then we will know better about a confirmation of the scope of the mandate, the cadence of our work, the projects we are to undertake where we’ll have alignment of resources with projects, plans, personnel and funding.
Senator Marshall: This is something you would expect that we will hear about within the next year?
Mr. Duplantie: We would anticipate, given the planned decisions lining up with Budget 2018, that we will be in a position to update our multi-year plan and have that unveiled in the spring.
Senator Marshall: Thank you. That is not quite what I was looking for, but that’s fine.
What is the status of the email transformation project?
Mr. Duplantie: The email transformation project has effectively, for the most part, been stalled since November 2015 as a result of difficulties in the delivery by the vendor of the expected functionalities. Since then, there have been no migrations until just recently. In the month of September-October, Health Canada had been caught in between at a time where migrations were stopped, migrations were completed. Indigenous and Northern Affairs Canada, also caught in the same situation, will have their migrations completed by December.
However, until such time as the functionalities are proven to be acceptable to Shared Services, there will not be any further migrations.
Senator Marshall: There will not be anything else. So the departments that were sort of in limbo, you are going to transition them over.
How much has been spent on that project?
Mr. Duplantie: Well, we would look at it from three perspectives. There is the project itself. Up until March 2017 we had spent $57 million on the project, separate from the cost of operating the email. There is a cost for operating the legacy email, the systems that are still out there from which departments have not migrated. That, until March, was $53 million. In that same period, we paid $12.6 million for the new system, of which $8.1 million was to the contractor, Bell.
Senator Marshall: Except for Health and Indigenous Affairs — transitioning them over — you effectively stopped?
Mr. Duplantie: Correct.
Senator Marshall: What’s the plan? Are you trying to fix something before you transition other people over, or have you decided that you can’t transition and use that system?
Mr. Duplantie: I would say there are two parallel tracks. One, in the first instance, we are in a contractual agreement with Bell. It’s a contract that runs through until June 2020. If Bell is ready to migrate, we have to be ready to accept the migrations. That’s the contractual arrangement.
In the meantime, however, we have begun the task of preparing for the next contract, what’s going to follow. In fact, consultations with industry, with vendors, with thought leaders, with representatives of various departments began in August as we start to orient ourselves to the set of solutions that will be available to the government come 2020 and prepare ourselves for the next contract.
Senator Marshall: My understanding is that departments or agencies that have transitioned are not really happy, and you transitioned more. It would seem to me you have to make a decision whether you have enough confidence that the system can be workable before you start transitioning more departments and agencies. There has to be something done in that regard.
Mr. Duplantie: Agreed. In fact, discussions have occurred between the president of Shared Services and the CEO of Bell on that very problem. It’s the reason why there have been no migrations other than for the two departments that were caught in between since November 2015. Until such time that Shared Services is satisfied that the functionalities are in place and fixed and will be serving departments well, there won’t be any further migrations.
Senator Marshall: Well, my concern is that Phoenix is a problem. Additional employees are being put on the Phoenix system, which, in my opinion, creates a further problem. I wouldn’t want the transitioning of further agencies and departments over to the new email system and then end up with something similar that you have with Phoenix.
Senator Pratte: I want to go back to the splitting of the department into two different departments and the questions that were asked about the cost of this change. Just to make sure that you understand what I’m saying correctly, asking questions about the cost of this is not questioning whether this is a good thing or not, but I think it’s appropriate to ask about the cost.
When do you think you will have an idea of how much this will cost? Eventually, I suppose you’ll have to be able to cost the operation, right?
Mr. Thoppil: Yes, I believe at some point we’ll have an idea. It depends upon a number of factors, senator, in order to do that. Some of it will be dependent upon, for example, the degree of ambition of the government in order to consolidate indigenous programming that currently exists across the public service and to move it into indigenous services. That could be some years in the fruition as other departments move their programs into it. That’s one element that will have a cost dynamic associated with it.
The other thing we have to drill down related to another senator’s earlier question on systems is essentially we need to understand, for example, in the proposed immediate transfer as part of the creation of indigenous services, First Nations and Inuit Health Branch from Health Canada moving over, how many, for example, IT and system applications do they have and what are the costs associated with integrating that. There are a number of dynamics at play — I’ve just cited two — that may take some time to unpack.
The other issue is what level of corporate services support may be required or not to support the creation of two new ministries. We’re trying to minimize those costs with regard to minimizing the degree of duplication and trying to go with the concept of incremental workload and maintain the current corporate services base for the two ministries. Those are just three elements that will factor into the cost of transformation.
Senator Pratte: It’s getting very late, so I’ll leave it at that. Thank you very much.
Senator Andreychuk: I’m reading your slide 7 of funding for specific claims settlements. You’re anticipating 35 specific claim settlements in 2017-18. I understand that you don’t control the settlement of it; you’re anticipating it. Where can we find all of the known outstanding claims? I’m finding it harder and harder to track what claims are outstanding. Some of them have been around for years. Some of them have been contradictory because there is more than one claim on the same piece of land, et cetera.
This is for this year, but is there a global vision as to the time frames for when all of the land settlements that you are aware of at least show up on a chart somewhere?
Mr. Wild: To be clear, there are two different things in your question. In the last part of your question you mentioned land, and that’s completely distinct from specific claims in terms of what we call the comprehensive land claims, which is really about modern treaties and the settlements around those areas where there has been no treaty and no clarity.
Senator Andreychuk: I’m using old language because I’ve been listening to this for 40 years. Let’s bring it up to the modern language.
Mr. Wild: For specific claims, there is a website where as a claim is filed and it goes into our assessment process, those claims get listed. It’s a publicly available website, and people are able to see the progress of the claim as it moves from assessment into whether it’s accepted and then whether it’s being negotiated.
We receive, on average, 50 to 60 claims filed per year, so there is always an inventory of somewhere around 200 claims that are in some kind of process of negotiation. That’s distinct from the land claims, to use that language.
It’s hard to put an exact number on it sometimes, but we do have another document that we make publicly available that lists all of the modern treaty tables that are under negotiation. Yes, some of those negotiations have taken far too long. I don’t think any of us are satisfied with the pace at which those things have been advancing. That’s where we’ve been doing a lot of work on reform, to try to figure out ways to do that work better. There has been a lot of discussion about how to shift our policies and whether the process of land claims policy has kind of seen the end of its useful life, given that there are only a few, I would say, communities left that are actually willing to finish off that process.
We’ve been trying to find other ways to be able to address the business of self-determination that indigenous communities have across the country.
Again, there is a website that lays out where the modern treaties are. It gives a little bit of a sense of what stage we are in the claim, whether there is agreement in principle or whether we’re in final agreement negotiations. As you know, those are two distinct things. We do have websites that provide that information.
Senator Andreychuk: The concern is the amount of money being spent and it’s into negotiations rather than into resources for moving on, if I can put it that way, for the Aboriginal community.
The other part of that is we’ve now added the Metis under the case law. How does that factor into the projects you have going, the claims that you know? Are you anticipating a new category of claims? Do you have the staffing for that, et cetera?
Mr. Wild: We don’t have a specific claims process for the Metis. The discussions that we are having with the Metis are under the recognition of indigenous rights and self-determination tables. Those are tables where we are sitting down with Metis communities and having a dialogue about what their needs and interests are, in terms of self-determination, what they see as being the roles and activities of their governments. We’re doing that at the provincial level, so it’s with groups like the Manitoba Metis Federation or the Métis Nation of Ontario. Those discussions are really about sitting down together and working collaboratively to develop the kind of mandate the Government of Canada would need in order to meet the needs and interests of that community, as well as Canada’s interests in helping them to actualize their business of self-determination, to meet our obligations under the UN Declaration on the Rights of Indigenous Peoples and to fulfill section 35 of the Constitution Act.
Senator Andreychuk: It’s a huge task.
Mr. Wild: It’s a very huge task, and it’s not one that necessarily goes at the pace that anyone would like. With the Metis in particular, I think it’s important to note that these are conversations that have only begun recently. We certainly did not have tables with the Metis prior to 2016 where we were truly advancing a dialogue of this nature.
Senator Andreychuk: In that same vein, I remember when we really didn’t talk about urban resources to Aboriginal people, and now it’s embedded here. You have dollars, you have a program.
There is the statement where you say this funding — you’re asking for $23.7 million — is related to Urban Programming for Indigenous Peoples. You say this funding will help build on the existing network of indigenous service delivery organizations that deliver holistic, culturally appropriate front-line programs and services to assist urban indigenous populations in transitioning to and from, and living in, urban centres.
Now, having been involved in that before, who speaks for the urban indigenous? Is it still a difficulty between those who have come from reserves in my area into the urban? Federal-provincial funding was an issue. Who speaks to what is culturally appropriate? Is it those who have leadership on the reserves, or is there a way that you can identify this indigenous service delivery organization, because they keep changing?
Mr. Thoppil: So there is not just one organization.
Senator Andreychuk: Many. That’s what I’m saying.
Mr. Thoppil: There are many. For example, we provide $23 million annually for the Friendship Centre Movement. There is $1.4 million for Inuit organizations. There is $7.3 million to the Metis Nation. That’s because indigenous peoples are made up of those three distinct bodies. Then we have to think about the regional dimensions of the delivery of those services across the country.
We just received approximately 500 applications for our recent calls for proposals for organizational capacity and programs and services, so you can see the demand from indigenous organizations to provide. That makes sense given the significant number of indigenous peoples that are moving into the urban areas.
Senator Andreychuk: I don’t think the chair will let me go on, but the community interest and the individual interest is always difficult. I’d appreciate hearing to what extent the community gets involved in it, even if they may not be urban, and to what extent are the rights of the individual indigenous person.
The Chair: Thank you, Senator Andreychuk. On this, Mr. Thoppil, can you provide us with a chart of information about that question in particular, when you look at urban versus rural?
Mr. Thoppil: I would just want to make sure that I address the senator’s question.
Senator Andreychuk: Mine is more of a policy issue, identifying if there are problems. Yours is factual.
Mr. Thoppil: Factual. I’m not sure the chart would significantly address it. That’s why I hesitated.
Senator Andreychuk: We can start with that and then follow up.
Mr. Thoppil: Sure. We can do that.
The Chair: Before we go, I know housing is very important for our people. The Standing Senate Committee on Aboriginal Peoples has had many round tables, and they also did a study. This comes back to February 18, 2016, the study on best practices and ongoing challenges relating to housing for First Nations. Have you taken this report into consideration and have you moved on some of the recommendations? I see in your budget you want us to consider that there is a very important portion for housing.
Mr. Thoppil: You’re correct, Mr. Chair. On the issue of homes, the adequacy of homes is a huge issue. Budget 2017 provided $4 billion over 10 years for a number of infrastructure assets, including homes. So that important study by the Senate is being taken into account as we assess the allocation among the asset classes for that $4 billion over 10 years.
The Chair: As requested in some parts in the recommendations of the Senate report?
Mr. Thoppil: Yes, that is being incorporated into that assessment.
The Chair: On this, Shared Services and INAC officials, thank you very much for sharing your knowledge and giving us more clarity on the budget settlement votes that you’re asking us for.
(The committee adjourned.)