Committees (44th Parliament, 1st Session)

REPORT OF THE COMMITTEE

Tuesday, July 9, 2002

The Standing Senate Committee on National Finance

has the honour to table its

Twentieth Report

Your Committee, which was authorized by the Senate on Thursday, June 6, 2002 to examine and report upon the administrative contract now in existence at the Goose Bay, Labrador airfield, as well as the Request for Proposals to review the contract, now tables its report.

Respectfully submitted,

Lowell Murray
Chairman

MANAGING AND MARKETING THE GOOSE BAY, LABRADOR AIRFIELD

Standing Senate Committee on National Finance

Chair: The Honourable Lowell Murray, P.C.
Deputy Chair: The Honourable Anne C. Cools

July 2002

COMMITTEE MEMBERSHIP

Chairman:	Senator Lowell Murray, P.C.
Deputy Chair:	Senator Anne C. Cools

Members:	Senator Tommy Banks Senator Roch Bolduc Senator Sharon Carstairs, P.C. (or Robichaud, Fernand)* Senator Joan Cook Senator William Doody Senator Isobel Finnerty Senator Noël Kinsella Senator John Lynch-Staunton (or Kinsella, Noël)* Senator Frank Mahovlich Senator William Rompkey Senator Terry Stratton

Other senator who participated in this study :
Senator J. Michael Forrestall

From the Parliamentary Centre
Martin Ulrich, researcher

Tõnu Onu
Clerk of the Committee

*Ex-Officio Members

ORDER OF REFERENCE

Extract from the Journals of the Senate of Thursday, June 6, 2002

The Honourable Senator Rompkey, P.C., moved, seconded by the Honourable Senator Banks:

That the Standing Senate Committee on National Finance be authorized to examine and report upon the administrative contract now in existence at the Goose Bay, Labrador airfield, as well as the Request for Proposals to renew the contract, to ascertain the effectiveness of this method of base operations in Canada in providing services for both military and non-military training activities;

That the Committee submit its final report no later than July 12, 2002; and

That the Committee be permitted, notwithstanding usual practices, to deposit the report with the Clerk of the Senate, if the Senate is not then sitting, and that the report be deemed to have been tabled in the Chamber.

After debate

The question being put on the motion, it was adopted.

Paul C. Bélisle
Clerk of the Senate

Table of Contents

Context

Perspectives and Findings
        1. The Host Community
        2. The Department of National Defence
        3. The Province of Newfoundland and Labrador

Conclusions

Summary

Witnesses List

Context

The Canadian Forces Base at Goose Bay was built by Canada and the United States during the Second World War, when it served as a vital military air link between North America and Europe. By the end of the war 24,000 Canadian fighters and bombers had passed through Goose Bay on their way to Europe. Facilities at the base were extended during the 1960s and early 1970s, largely by the United States, when the base played a key NORAD (North American Aerospace Defence Command) role in protecting North America from the threat of aggression from the Soviet Union. It now plays a diminished but not insignificant military role, principally supporting the training of NATO allies’ aircrews. Germany, Great Britain, Italy and the Netherlands have signed a Multinational Memorandum of Understanding with Canada for such training.

The air base is located in a sparsely populated region of central southern Labrador, about 150 kilometres from the coast. The location is excellent for its military roles, but did require the creation of a permanent host community now called Happy Valley-Goose Bay. Not all new residents came from elsewhere. For example, approximately 50% of the members of the Labrador Inuit Association live in Goose Bay, and many work on the base or for businesses serving the base. Although the town of approximately 8,500 residents now serves a regional role for government services, an alternative landing site for international carriers in an emergency and an air transportation hub for the small, largely Innu and Inuit, Labrador villages along the coast, it remains a “single industry community.” Its well being depends predominantly on the Goose Bay military role.

As the Department of National Defence (DND) was rationalizing its operations in the mid-90s in response to budget cutbacks, Goose Bay became an early target for the application of the government’s Alternative Service Delivery (ASD) policy. The government policy, in addition to reducing costs, is seen as:

a) improving services to clients;

b) shifting decision-making closer to the point of service; and

c) improving the effectiveness of programs.

These objectives, particularly cost-savings, were directly relevant to retaining foreign training at the base. Accordingly, a five-year contract to provide site services was let to Serco Facilities Management Incorporated. It is a subsidiary of the UK Serco Group, a private sector firm with experience in serving such roles elsewhere. This contract will terminate in March 2003 and the Department of National Defence has just released a Request for Proposal for a follow-up 11-year contract for similar services.

The revenue to cover the approximately $90 million per year cost of operating the base comes primarily from our four NATO allies now using the base for training. According to the cost-sharing provisions of a 10-year Memorandum of Understanding with the NATO allies, the costs are apportioned relative to actual use. This agreement is scheduled for renegotiation and renewal in 2006. At present the base is operating at well under 50% of the targeted maximum use level, 5,000-6,000 rather than 18,000 flights per year. The marketing of the facility for extended use and the renewal of this agreement with our allies are in the hands of DND. The base is managed by a DND official, General Manager, Goose Bay Office, located at National Defence Headquarters in Ottawa. This would appear to be at odds with the stated objectives of ASD policy, noted in the preceding paragraph, to bring decision-making closer to the point of service.

Perspectives and Findings

The central issue is whether the management of the base can be improved to:

a) maintain and strengthen the value of the considerable investment (estimated to be worth $1 billion) in the Goose Bay airfield; and

b) enhance the social and economic benefits to the community, the region, and the Province.

1. The Host Community

The witnesses from Happy Valley-Goose Bay, the Labrador North Chamber of Commerce, and the Union of National Defence Employees, in particular the local president of the union representing Serco employees, voiced concern about the way DND has managed the airbase and the training program and how it has dealt with the local interests in doing so. The weaknesses they mentioned included poorer services to the international clients, labour disruptions, and slower decision-making. While the emphases among these witnesses varied, the overall pattern did not.

Although its history is relatively short, the community is now in its third generation and considers itself permanent. Moreover, it is a community that has strong personal connections with Canada’s American and European allies. It feels it has played an important role for North America and Canada and is culturally well-suited to continue to do so. This together with its natural advantages and acquired skills and infrastructure are, in the eyes of the community, a considerable asset to the province and to Canada. However, it feels that all these assets are at risk because of the way in which the military role of the base is managed.

Decisions affecting the livelihood of many citizens of Happy-Valley-Goose Bay, even the continued existence of the town, are seen by them to be made in distant places by people working in large bureaucracies under unknown pressures. Moreover, witnesses noted that officials from DND have asserted in the past that the base is of little military value to it. They noted other, possibly positive, developments as well. However, in an environment of weak communication and trust, positive interpretation cannot be assumed even when positive steps have been taken. This in itself is challenging enough, but the particular history of the introduction of Alternative Service Delivery (ASD), and the coincident reduction in jobs, exacerbates the situation. That the introduction of ASD at Goose Bay was messy was most vividly communicated by the testimony of Mr Lawrence O’Brien, the Member of Parliament for Labrador.

Some of the recent developments, such as a study by the Dutch military about consolidating North American training at a base in the United States, a decrease of allied training in recent years, reduction of certain infrastructure on the base by DND, the seeming greater use on the part of the allies of facilities elsewhere in Canada, and the almost token presence of the Canadian Forces at the base all contribute to an environment in which some will see evidence of a strategy on the part of DND to phase out completely its military involvement at Goose Bay. The location of the Goose Bay Management Office in Ottawa re-enforces this interpretation.

2. The Department of National Defence

Witnesses from the Department confirmed that the Canadian Air Force has limited operational need for the Goose Bay airfield. At the same time, they did indicate that the international training role at Goose Bay is important to DND, that they are very active in marketing the facility and the training program, and that they were renewing the site services contract for 11 years to provide more assured services to the allies. They also feel that they now are engaging the community and the province more actively in developments regarding the base.

The General Manager, Goose Bay Office at the hearings described Goose Bay as valuable to DND for three broad reasons, namely that it:

a) enhances the collective defence capabilities of the alliance;

b) supports good diplomatic relations with allies; and

c) is an important economic asset for Canada.

While no information was provided as to how much the department would be willing to pay for these benefits, any reduction of the burden on the DND budget clearly remains important. And one way of reducing the burden on the DND budget would be increased use of the facility by our allies.

The DND approach to marketing the base was described as one that focuses on keeping current clients satisfied and responding in a positive manner to any proposals from them for expansion of services. As military tactics have evolved low-level flight has become relatively less important. However mid-level flight, allowing laser guided practice bombs, use of remote piloted vehicles and supersonic training were mentioned as areas of allied interest. They said that the department is actively looking into the environmental and other implications of such extensions. In addition, steps have been taken to keep other allies aware of the potential value in joining the program.

Many of these options do have an impact on the environment and on the traditional use of the land. The current practices provide for consultation. For example, DND worked with the Innu when the allies wanted to use laser-guided bombs, a development which would restrict access to a larger buffer zone. The Innu conducted their own environmental assessment. Their study was done on time, was factual and led to a mutually satisfactory agreement that provided for use of the laser-guided bombs.

The General Manager, Goose Bay Office also mentioned that a “growth committee that would be led by the top air force officers of allied nations and the Department of National Defence” would be established this summer. Such senior level international consultation focused on how to increase the use of Goose Bay could be an important positive step.

A number of provisions in the new Request for Proposal were described as improvements. The length of the contract has been extended from 5 to 11 years. It provides additional assurance regarding workforce stability. In addition, there has been greater consultation with allies, industry and the community in its preparation.

3. The Province of Newfoundland and Labrador

Witnesses from the government of Newfoundland and Labrador outlined clearly the importance of the Goose Bay airbase and its training programs to the province and the community, described their own investments in the facility, and stated their concerns about DND management of the facility. They see the Department as not treating it as an important asset and not communicating well with the province. However, they do note recent improvements in consultation. They also proposed a number of ways that the risks to the future of Goose Bay could be mitigated.

Much of their testimony focused on the economic value of the base and the international flight-training program, which according to a study referenced by the witnesses concluded that the federal government recovers in taxes most if not all of its net cost from the increased economic activity at the base.[1] If so, there would be almost no cost to the general Canadian taxpayer for the military, security and international relations value of the base. They do recognize that such tax benefits do not directly accrue to DND, and that the Air Force might well prefer spending the approximately $20 million of direct cost to them in other ways.

They also noted that the tax benefits accrue as well to the government of Newfoundland and Labrador, and that this facility adds valuable diversity to the province’s natural resources oriented economy.

In addition, they outlined the continuing interest of Newfoundlanders and Labradorians in the military. They pointed out that they comprise almost 10% of the Canadian Forces, while the province has approximately 2% of Canada’s population. They also indicated that about 1% of DND spending occurs in their province.

In light of this value to the province, they indicated the interest of the government of Newfoundland and Labrador to be an active partner in ensuring that Goose Bay meets the needs of allied governments for military training. They also encouraged an approach that provides a greater role for the private sector. As an example, they cited the experience of the NATO Flight Training in Canada (NFTC) program, which has Bombardier as its private sector partner.[2] Serco, on the other hand, is limited in its Goose Bay contract to providing site services. They suggested that the NFTC program might be extended to include Goose Bay, or that it serve as a model for a strengthened Goose Bay program.

Foreign Affairs and International Trade Canada (FAITC) and the Atlantic Canada Opportunities Agency (ACOA) were invited to send witnesses, but decided not to do so. Had they participated, they might have provided further insight into the international policy importance of Goose Bay and its multi-national training program and a broader perspective on the economic benefits of Goose Bay.

Conclusions

The Committee concluded that the current approach to the management of the Goose Bay air base does not achieve the returns possible for Canada, the Province and the community.

a) Managing and Marketing Goose Bay

Most witnesses saw Goose Bay as a valuable economic asset, but to retain and extend that value they felt that the Canadian Forces must be a visible and operational presence at the base. In the aftermath of the recent World Trade Centre and Pentagon incidents a number of Canadian Forces airplanes were shifted for a period of time to Goose Bay. This was cited, as evidence that Goose Bay might well be quite important in the new security environment.

A number of witnesses saw a need to strengthen the marketing of the Goose Bay training program. In addition, they saw the more broadly based NATO Flight Training in Canada (NFTC) program as complementing or incorporating the Goose Bay program.

The Committee, accordingly, recommends that DND re-examine both the allied flight training and its own military role at Goose Bay and in particular whether its operational involvement should be increased in a way that would complement the international training role.

The management challenges at Goose Bay are complex. Many attractive ideas were proposed during Committee hearings, such as engaging the private sector more as a partner than a service provider, and strengthened local involvement in the management of the facility. A number of major airports in Canada have come under local management, and this was seen as strengthening their economic vitality in ways that benefit the local community.

Although the Multilateral Memorandum of Understanding with our allies does not terminate until 2006, three years is not a long time to re-think the role of the base, to reconsider the approach to management and to engage the relevant interests in doing so prior to the renewal of the international understanding.

In view of the importance of a continued Canadian Forces presence at the base, the committee recommends that the DND initiate a study of alternative management approaches to Goose Bay, based on its own analysis and the suggestions of the province and local community, examine the strengths and weaknesses of these approaches, and openly consult with other interests. To re-enforce the military visibility, the committee also recommends that the Goose Bay Office and its General Manager be moved to Goose Bay.

The committee also concluded that this is not the time to reverse the decision on ASD at Goose Bay. Nevertheless, the committee believes that the contracting for site services now underway should not preclude pursuit of options that could reasonably emerge from the preceding recommendations.

b) Engaging the Community

The Committee is not convinced that the community and the province have been adequately engaged in the management of the base. It recognizes that management is now addressing the environmental concerns more fully and communicating with the province, the town and the aboriginal communities more openly. However, the committee urges study of both the roles and the management of Goose Bay, matters of considerable interest to the community. Moreover, the Province of Newfoundland and Labrador can be an important partner in providing the services needed for an evolving flight-training program.

The Committee, therefore, recommends that as the strategy for renewal and expansion develops that DND engage the province, the town and the aboriginal communities in the development of these plans.

To continue to attract allies to train their aircrews at Goose Bay, the committee believes that DND needs to show the visible support of the Government of Canada, the Canadian Forces, the province, the town of Happy Valley-Goose Bay, and the aboriginal communities. Signing on to the agreement means a substantial investment by allies. If the agreement has broad and visible support, the allies will have greater assurance that their investments will pay off, that the services and facilities Canada promises will be reliably available. This in turn requires that there be broad Canadian and community support.

Summary

In summary, the Committee concluded that the Goose Bay Airfield is an important public facility that could better serve Canada’s and the community’s interests, if its assets were managed and marketed more effectively. This is not a criticism of the skill or effort of those assigned by DND to manage the base, nor does the committee wish to engage on questions of how DND pursues its military responsibilities. Rather, the committee recognized that there are important economic and social opportunities that also need to be considered and concluded these could be incorporated in a way that complements the military roles. Accordingly, it recommends that DND:

a) find the best combination of Canadian Forces and allied training roles in light of the military potential of the facility;

b) examine alternative approaches to the management of the base, keeping in mind both the military and socio-economic roles of the base;

c) undertake these studies in a way that is appropriate, but also one that fully engages the Province and the local communities in the spirit of partnership;

d) move the Goose Bay Management Office to Goose Bay; and

e) proceed with the Alternative Service Delivery contracting for site services, but not close off options that might emerge from steps a) and b).

WITNESSES LIST

June 18, 2002

From Department of National Defence:

Jim Richardson, Director, Major Service Delivery Procurement;

Frank Young, General Manager, Goose Bay Office;

Colonel Alan D. Hunter, Director, Air Force Employment;

Colonel Robert Bertrand, Director, Air Comptrollership and Business Management.

From the Union of National Defence Employees:

John MacLennan, National President;

Randy Ford, Local President of Serco Employees.

From the Government of Newfoundland and Labrador:

Doug Smith, Assistant Deputy Minister of Intergovernmental Affairs;

Rex Goudie, Assistant Deputy Minister of Labrador and Aboriginal Affairs;

Peter Woodward, Chair of Premier’s Advisory Council on the Economy and

Technology.

From the Town of Happy Valley – Goose Bay:

Dennis Peck, Director of Economic Development.

From the Labrador North Chamber of Commerce:

Dave Hunt, President;

John McGrath.

Member of Parliament for Labrador:

Lawrence O’Brien, M.P.

[1] Institute for Environmental Monitoring and Research, Economic Impact of Military Flight Training in Labrador and North-eastern Quebec, prepared by AMEC Earth & Environmental Limited and Gardner Pinfold Consulting Economists Limited, October, 2000, page 62.

[2] The NATO Flight Training in Canada (NFTC) Program is independent of the program operating in Goose Bay, although it, too, focuses on flight training. NFTC operates out of several bases in western Canada. Its private sector partner, Bombardier, plays a greater role than does Serco at Goose Bay. For example, it provides many of the aircraft used in training.