Debates of October 2, 2015 (day 87)

Thank you, Madam Chair. I’d like to welcome the department here today, bringing forward another supplementary estimate before the House.

Kind of dovetailing on what we’ve heard earlier from Mr. Bouchard regarding the additional costs here for the 802 bombers that we’re purchasing, I tried to pay particular attention to some of the description used earlier as to how come we kind of know this was coming. We know this was a multi-year purchase and that these airplanes are bought in US dollars. That’s a given. That’s how the industry works. But I want to zone in on one of the things that was said today that the deputy minister indicated, “We’re looking for a facility or institution for more certainty.” Can I get an explanation of what that really meant?

Thank you, Mr. Dolynny. Mr. Aumond.

Speaker: MR. AUMOND

Thank you, Madam Chair. By “institution,” I mean one of the banks that we deal with, and the facility would either be the hedge vehicle or another vehicle for which we could try to protect ourselves from currency fluctuation.

If Members remember, last year we were accelerating the program to take advantage of, I believe, the dollar, I think, if memory serves me right, and now we’re, this year, looking at a cost varied to the currency value.

I guess my question is: What did we learn from this project and what changes are going to be made to mitigate purchases of this magnitude, especially in US dollars in the future? Has the department managed to come up with a different set of policies or directives on how to deal with purchases in US dollars?

Speaker: MR. AUMOND

I think the learning opportunity from this experience is, as I said earlier, we will look to set up an agreement with one of our financial institutions that we deal with to try to see what may be possible in terms of mitigating our exposure to currency fluctuations. At the time when we did this, we did the acceleration, we had savings of about $335,000 US offset now against this requirement for $400,000 Canadian.

We’ll look to do that under the limitations that we have, given that for ’16-17 the money will not become available for the government to spend until April 1st. So we’ll have something set up prior to that and then be able to make a decision on what would be appropriate at that point in time. Again, I think this is, in terms of buying goods or services in US dollars, the exception to the rule. Nevertheless, we want to mitigate our exposure going forward.

I give some credit where credit is due. This is a bit of an exception to the rule, but notwithstanding, I’m sure this is not the first time our government has had to purchase expensive items in US funds and I’m assuming we will continue to do so for years to come.

My role here as a legislator is to protect the public purse, and in doing so it’s incumbent upon me to make sure the department is working towards the betterment of processes, the betterment of procedures so that we have a high degree of certainty when we do a desktop analysis as to what these projects will cost in the future. As I said, every year it seems to be something different with respect to these 802 Fire Bosses. This year now it’s about the evaluation of the Canadian currency vis-à-vis the American currency, so I’m a bit disenfranchised that through it all we’re still looking into it. We may see we still don’t have a project or a directive or a policy that clearly says these are the things to do when we’re buying items. These are the issues of hedging or whatever the case. Whatever you’ve heard from the previous Member here that clearly give Members on this side of the House when we’re buying something for millions of dollars in this case.

My next question is that, if memory serves, this project was a little over $30 million, I believe, a three-year period. We know that there’s another installment coming forward in infrastructure possibly for next year. So, what does that mean for next year now? If the dollar stays the same, are we going to be facing the same type of question next year for those who are going to be here and for the future 18th Assembly?

Thank you, Mr. Dolynny. Minister Miltenberger.

Michael Miltenberger

Thebacha

Thank you, Madam Chair. The issue of buying in US dollars anything of significance, both gentlemen at the table here have a combined experience of over 50 years, and this is the first situation of this nature that either one, with that extensive experience, has experienced or been involved in. I have much less experience in the finance field but could add a few years to that as well.

As the deputy minister indicated, we are taking the steps with one of the institutions and a facility to be ready, should that need arise, and we’re going to, of course, be prepared, and this has now been documented that if that issue comes up and as we move forward before we get to the stage of having to actually pull the trigger on some type of investment, the US dollars, between ourselves, the very qualified staff we have, all the experts we use and of course the due diligence and vigilance of the communities and the Legislature, that I’m sure that we will make sure that we are well prepared. Thank you.

Thank you, Mr. Miltenberger. Anything further, Mr. Dolynny?

Thank you, Madam Chair. I appreciate the astute knowledge of the Finance Minister in reply, but the one question that was not answered is we know there’s another installment of this project in the next capital budget. We know we’re faced here with a discretionary amount due to a fluctuating dollar. We know that the original project was somewhere in that $30 million range. My question was, and still stands, what do we anticipate for next year’s appropriation and how does this affect the overall evaluation of the total project in terms of the cost? Thank you.

Thank you, Mr. Dolynny. Mr. Kalgutkar.

Speaker: MR. KALGUTKAR

Thank you, Madam Chair. In ’15-16 the total payment that was due to the contractor, based on the revised cash flow that we were able to negotiate, was based on a cost of $8.9 million Canadian. But when that payment was required, that obviously had devaluation in the Canadian dollar compared to the American dollar, which is what’s driving the need for this supplementary appropriation because of that item to actually come here. The amount of exchange rate required us to make the payment to increase the amount that was due to the supplier. Going forward, as Mr. Aumond said, we will have a facility in place with our bank to try to hedge the ’16-17 and ’17-18 payments due to the supplier. Thank you.

Thank you, Mr. Kalgutkar. Mr. Dolynny.

Thank you, Madam Chair. Again the question is still not answered. What does this impact have on the total cost evaluation or whole asset cost of the purchase of the 802 bomber program? Again, originally told and brought to the House as a project that was going to be a $30 million project. Has that price, or will that price increase over the life of this contract? Thank you.

Thank you, Mr. Dolynny. Mr. Miltenberger.

Michael Miltenberger

Thebacha

Thank you, Madam Chair. We are not that prescient that we can foretell what the exchange rate will be by next year, which is why we’re going to set up this facility to help us try to hedge and hopefully pick appropriately as we’re hedging what exactly it is we’re going hedge and how much. So I appreciate the Member’s concern. We can tell you what we’ve spent to date with the actual cost of what we came forward with, the money we saved by advancing the project last year to the money that it cost us with the exchange rate drop. All combined, that money has been paid. We can tell you to the penny now what that has cost us. The next installment we are going to be taking all the steps we’ve talked about here to make sure that we hedge against another type of loss related to exchange rates. Thank you.

Thank you, Mr. Miltenberger. Mr. Dolynny.

Thank you. Again, I’m getting a very blurred response, Madam Chair. The money saved last year is definitely being spent this year. So at the end of the day, the net impact is zero. The question still remains with the two installments that we’ve had already on this project, there’s a third installment left on these 802 firebombers. It’s going to be a small residual left, according to the math if you’re looking at the appropriations. Again, are we still on target of a slightly over $30 million project for the purchase of the 802s? Thank you.

Thank you, Mr. Dolynny. Minister Miltenberger.

Thank you. Yes.

Thank you, Minister Miltenberger. At this time I’m going to recognize the clock. We had not planned to sit beyond two o’clock. I let Mr. Dolynny conclude his general comments. We’ll resume with general comments on this document when we come back on Monday. I’d like to thank Minister Miltenberger and his staff for their attendance here today and wish them a happy weekend. Colleagues, I’m going to now rise and report progress.

Report of Committee of the Whole