February 13, 1939

LIB

Ross Wilfred Gray (Chief Government Whip; Whip of the Liberal Party)

Liberal

Mr. GRAY:

Are they complaining about this contract?

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

Well, my hon. friends opposite seem to imply that because they say that this discussion was preventing us from getting contracts. Half a dozen hon. members have said so.

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LIB

Ross Wilfred Gray (Chief Government Whip; Whip of the Liberal Party)

Liberal

Mr. GRAY:

Future contracts.

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

I deny it. I repeat, the best way of securing contracts is to let the British government know that they will get a fair deal.

Another statement I made was that this was patronage, and the minister replied heatedly that it was not. What is patronage? My definition of patronage is that it is favouritism to friends of the government in connection with government business to the exclusion of all others. I think that is a very simple definition. Surely this is favouritism to friends of the government in connection with government business to the exclusion of all others. What makes it worse is the fact that it is patronage in connection with munitions, something which should be above and beyond politics.

Then I made a statement about Lieutenant Jolley. I simply quoted the commissioner who pointed out that Lieutenant Jolley was inexperienced. Some hon. member then said, forsooth, that I was making an attack on youth. As a matter of fact I made no attack on youth. I know something of the problems of youth. I have three youths myself who have had their troubles in getting established in life. I know something first-hand about the problems of youth, and I have every appreciation of the difficulty of those problems. I based my remarks on the statement of the commissioner, who said that obviously Lieutenant Jolley was without the business experience and judgment necessary for a job such as he was given.

I said that there was no competition in connection with a contract where millions

Bren Gun-Mr. Manion

were involved. I said it was an injustice to others, many of whom were more capable than Major Hahn. I pointed out that Major Hahn had no special experience for this work.

Then I pointed out that this was a cost-plus contract with ten per cent going to Major Hahn. There are times when cost-plus contracts cannot be avoided, but I do not admit that this was necessarily such a time. A cost-plus contract is one of the most dangerous types of contract to give unless you are very sure of the man to whom you give it. There is generally an inclination to increase expenses under the contract, because the higher they are the greater the profit. Ten per cent on the cost of the work was allowed by this contract. Such a contract is always undesirable if it can be avoided. It was stated that there was no competition possible. If there was no competition possible as far as price was concerned, there must have been competition in connection with the percentage allowance. There may have been many who would have been willing to take this contract on a 71 or 5 per cent basis instead of ten per cent.

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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

That is

what it is, 7-76 per cent.

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

My friend says that, but

I cannot find it. I based my statement on the contract, which says that it is ten per cent. I am going to deal with the matter on the basis of ten per cent. There may have been someone willing to take it for five per cent. There are outstanding men in this country who are patriotic and loyal enough to be willing to come forward and get together an organization to make these munitions without profit at all. That is what should have been done.

In connection with the interdepartmental committee the commissioner states-I do not intend to read the whole report-that they were given much misinformation with regard to the British government's preference for Hahn. He said also that they were overruled with regard to competitive bids and that their efforts were rendered futile by the attitude taken by the Department of National Defence. I ask, why the hurry? Under this contract no guns were to be delivered until the lapse of nearly three years, at which time some 500 odd guns were to be delivered. So far as the Canadian contract was concerned, they were within its terms if within two or three days before the end of three years they were able to make this delivery of guns. That is my understanding of the contract. Since it was to take three years to make delivery, why the hurry?

I pointed out also that the placing of the defence purchasing board recommended by the commissioner under the jurisdiction of the Minister of Finance rather than under the Department of National Defence was a complete condemnation.

Now I intend to touch upon a few points in the contract itself. I did not deal with these the other day. I had read the contract at that time, but since then I have read it again two -or three times. I am going to point out a few items in the contract which seem rather extraordinary to me. So far as my experience goes, and I have had some experience as a minister in awarding large contracts, there is nearly always a clause in these contracts which forces the contractor to give something in the way of bond or marked cheque, sometimes for twenty-five per cent of the value of the contract, which is retained until the contract is practically completed. There is nothing of that sort in this contract. The financial solvency of the contractor is not assured so far as the government is concerned.

Then the licence is for ten years, and may be renewable for further periods of ten years. That makes it appear as though this is to be a continuing business which will go on for a very long time. The hon. member for Kootenay East (Mr. Stevens) referred the other day to the fact that the contract allows the costs of preliminary investigation. I venture to say that there is not a day in the year with the exception of Sunday on which there are not business men in the city of Ottawa looking for government business. Never in my life have I heard of a contractor or business man being paid his preliminary expenses for coming down here to look for a contract from the government.

The minister says the profit is not ten per cent, but 7J per cent. I do not quite follow him, but at any rate a percentage is allowed on everything conceivable. To my mind, the provisions are far too wide. For example, under the contract he gets ten per cent on the cost of tools, dies, jigs and gauges purchased by the government. Can anyone tell me what justification there is for that? One of my hon. friends has just placed in my hand a clipping from the Globe and Mail of January 27, to the effect that contracts for a little more than $64,000 had been let in connection with machinery for this work. This is not a criticism, it is merely a statement of fact. It reads:

Ottawa, Jan. 27.-Six Canadian firms have been awarded contracts to supply machinery required in connection with the manufacture of Bren machine guns, national defence department announced to-night.

Bren Gun-Mr. Manion

The total figure given is $64,776, and this amount is to be paid by the Department of National Defence. Can anyone tell me why Major Hahn should get ten per cent of the cost of machinery purchased by the department? Yet there is a clause in the contract stating that. Surely there is no justification for it, He gets his percentage, whether it is 7J per cent or 10 per cent I am not arguing at the moment, on salaries, on wages, on travelling expenses, on maintenance and repair of plant, on insurance, on depreciation, on legal fees and on the interest on bank loans in some cases, when made for additions to plant. Major Hahn is to get his percentage on all these items. That is covered by the clause to which I have just referred. The government buys the machinery for the plant and he gets his ten per cent. Then in case he is not sufficiently covered, there is a blanket clause to cover a lot of other things. Perhaps I should read this clause, which appears on page 10 of the contract.

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LIB

Malcolm McLean

Liberal

Mr. McLEAN (Melfort):

Did the hon. leader of the opposition say that it is ten per cent on the capital cost of the machinery?

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

I have the contract here. Perhaps I should read the clause. It appears on page 5 and is as follows:

Ten per centum of the actual cost of tools, dies, jigs, and gauges purchased by the party of the first part or the party of the second part;

The party of the first part is the government, and the party of the second part is Major Hahn. He gets ten per cent of the actual full cost. Then the clause goes on to deal with the other things to which I referred.

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LIB
CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

It includes some material bought to manufacture that.

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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

Read the evidence on that point.

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

I am not going to plough through nearly five thousand pages of evidence ; I am going by the report and by the contract. The only attempt that has been made by my hon. friends on the other side to read the evidence, has been made in an effort to cover this up with words.

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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

The public accounts committee certainly will do it.

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

Let them go ahead and do it.

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LIB

Donald MacLennan

Liberal

Mr. MacLENNAN:

I do not take up much of the time of this house, and I would like to

ask a question. I think the hon. gentleman ought to listen to the explanation in connection with that item. What is the explanation of the suggestion made by the leader of the opposition that Major Hahn apparently was to get some percentage of the money that was to be paid?

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

I am afraid this is not much of a question.

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LIB

Walter Edward Foster (Speaker of the Senate)

Liberal

Mr. SPEAKER:

I do not think that is a proper question.

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CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

I do not say this with disrespect, but I do not think it helps matters at all. The hon. gentleman has an opportunity to make his own speech; I am sure he is not going to make mine.

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LIB
CON

Robert James Manion (Leader of the Official Opposition)

Conservative (1867-1942)

Mr. MANION:

I did not see much sign of it.

Then the government pays the cost of converting this factory into a gun manufacturing plant. Naturally, with all these things to be considered, the cost of the guns is unknown. I have heard it stated frequently, and I think the minister stated, that the cost of the guns is known. It is not; no one knows to-day what the guns are going to cost. Then, sir, on page 12 of the agreement there is a joker clause, which provides for payments in addition to the ten per cent, and I am sticking to the ten per cent because that is the figure used throughout the contract. Not only will the government have to pay that; under certain conditions they will have to pay more. It is stated that a standard price will be set for these guns; once that price is fixed, whether or not he gets anything in addition, will depend upon what Major Hahn does in regard to manufacturing costs. He can get a higher percentage if he manufactures these guns for less than the standard cost. Who is going to set that standard? It will be set by the minister and his department and Major Hahn. There is a very grave opening, to my mind, for some very peculiar work. This looks to me like a sort of joker in the contract.

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February 13, 1939