Government Operations Committee on April 5th, 2022

[The Chair, Conservative, Robert Gordon Kitchen]

I'd like to welcome Ms. Sloan to our meeting.

We have with us Ms. Sloan, Mr. Shimooka and Mr. Huebert. We're just going to have some opening statements. The witnesses will start and they'll have three minutes, please.

This is on national shipbuilding. We'll start with Mr. Huebert.

[Dr. Robert Huebert]

Thank you very much.

I want to reiterate a point, because I can't make it enough. We're heading into a new security environment that is increasingly going to put pressures on Canadian maritime security. This maritime security, of course, faces a threat from the ongoing battles that we see occurring in the Ukrainian war but also in terms of the Asia-Pacific region, which is increasingly going to become an area of conflict. As a result, we need to ensure that we have as nimble and as capable a procurement for naval capabilities as possible.

The second point I would like to make once again reflects what we talked about in the first session. We have an almost perverse desire to focus on platforms rather than understanding that what we need to have, in terms of responding to the development of Chinese and Russian naval threats that are now developing, is a system of systems. We can't simply talk about the development of an AOPS, a submarine or a surface combatant. We have to talk about what this ultimately gives us in effect and the ability to fight, as the future environment will obviously put pressure on us.

In terms of the types of challenges that we face concerning how we meet this future threat, we of course had a very good start with what was the Canadian shipbuilding strategy, in an effort to try to introduce a certain rationality in terms of how we approach these particular issues.

One would dare say that, once again, we are seeing a certain element of politicization as the issue of whether or not we should have two yards or three yards has arisen, but we've also seen other types of difficulties, where we are only focused on what the costs and cost difficulties are, rather than asking how we are able to fight, how we are able to resupply and how are we able to repair.

I will end my comments by saying that it is a good start to see the AOPS actually coming into operation. I will be happier when we start seeing actual construction on the future surface combatant so that they're actual surface combatants. We are going to have to address the issue of submarines sooner rather than later.

Thank you very much.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Huebert.

We'll now go to Mr. Shimooka.

[Richard Shimooka]

Thank you again.

My views on shipbuilding and specifically the Canadian surface combatant program are largely derived from my paper on this topic, released several months ago. In it, I went through the history of the program and identified key factors and objectives that guided the CSC program, three of which I find particularly relevant for this discussion. These are the desire to recreate a sustainable domestic Canadian government shipbuilding industry, the need to acquire highly capable vessels for the Royal Canadian Navy that can seamlessly operate alongside allied navies, and the lack of project management and design capacity within the Government of Canada resulting from cutbacks to the procurement workforce in the 1990s and 2000s.

The first two are policy choices the government may be able to alter, but the third is a capacity and experience issue that cannot be easily addressed. It must be rebuilt over time and at a significant cost, which has helped to determine how the program has unfolded. It lead to the umbrella agreements in which the shipyards took on a much more significant role in the production and management of the CSC.

My study did not suggest that the CSC is an optimal outcome. Like many other major government programs, it is the product of a less than ideal set of compromises, circumstances and intents. Still, it is difficult to challenge the program's outcome unless the government is prepared to modify either its desire to build these ships in Canada or to accept a significantly less capable vessel. To put it bluntly, there are no free lunches in defence procurement.

The CSC experience is not totally out of line with our allies' experiences with their own programs. For example, the recent U.S. budget submission suggested that the cost of the first Constellation class vessel, a very rough comparison to our CSC, has gone up by over 30% in the past two years, from $900 million U.S. to $1.3 billion U.S., with the Congressional Budget Office suggesting they go as high as $1.6 billion U.S. Good factual comparisons and understanding the challenges of establishing a shipbuilding industry are essential.

I do not believe there is an easy approach to finding major cost savings on the CSC program as it is currently constituted, even with a different ship design. There might be opportunities to curtail some costs by reusing the existing hull design to produce a less capable vessel, but even that brings a whole host of other challenges and may not result in cost savings.

I'd be happy to discuss this further in questions.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Shimooka.

Now we will go to Ms. Sloan, for three minutes, please.

[Dr. Elinor Sloan, Professor, Department of Political Science, Carleton University, As an Individual]

Thanks very much.

I'll start by saying that I agree fully with what Mr. Shimooka and Mr. Huebert just said.

Thanks very much for the opportunity to speak here today.

In the past 10 years, since the government signed umbrella agreements with Irving and Seaspan to be strategic partners in building combat and non-combat vessels, as we know, the projected costs have escalated and the timelines have continually expanded. A key contributing factor from the outset, in my view, has been the lack of an appropriate governance structure for shipbuilding in Canada. An interdepartmental committee of deputy ministers, chaired by the DM of PSPC, governs the shipbuilding strategy, as everyone here knows. With decision-making shared among DND, PSPC and Innovation, Science and Economic Development Canada, responsibility for moving the shipbuilding strategy forward lies everywhere and nowhere.

Britain has recognized the problem with a committee approach to government activity as complex as naval shipbuilding. Like Canada, Britain has faced significant cost overruns and delays in building its naval vessels. In its 2017 national shipbuilding strategy, Britain announced a new shipbuilding governance arrangement. It created a cross-government sponsor group chaired by the deputy chief of the defence staff, with representation from many ministries. This group owned the national shipbuilding strategy.

Just two years later an independent review of progress in implementing Britain's shipbuilding strategy found that the sponsor group did not appear to be strong nor effective, and was primarily used to share information. Another independent review into national shipbuilding governance structures found that “activity across Departments was fragmented with a lack of alignment and empowerment and without clear lines of [authority].”

The British Prime Minister responded to this in the fall of 2019 and appointed the Secretary of State for Defence, the equivalent of our Minister of National Defence, to be the government's “shipbuilding czar”. This term has been assigned formally. The Secretary of State for Defence and shipbuilding czar, as he introduces himself, is the single ministerial-level appointment responsible for implementing the national shipbuilding strategy in Britain. It brings together input from other government departments. A national shipbuilding strategy refresh that came out of Britain about a month ago went still further and created the National Shipbuilding Office, which reports directly to the shipbuilding tsar. It's led by a rear admiral who has been appointed chief executive, and the office is responsible for driving forward the shipbuilding strategy.

There are many concerns surrounding the ships of Canada's national shipbuilding strategy, including costs, timelines and, in the case of the CSC, the Canadian surface combatant, possible performance issues around weight, for example. In my view, a fundamental underlying factor behind many of these issues is the lack of an appropriate governance structure that assigns accountability for progressing Canada's national shipbuilding strategy to a single government minister.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Ms. Sloan.

For the witnesses, just so you are aware—and as you've probably assumed—we have distributed the documents you provided to us to our committee members, so they have them in advance and are aware of things. If you missed something in your opening remarks, they will have seen that.

We'll now go to questions, and we will start with Mr. McCauley for six minutes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Great. Thanks very much.

Mr. Shimooka, I'll tell you quickly that I was googling you, and when I put in your name this comes up: “Is Shimooka alive?” I think I can answer that one.

[Voices]

Oh, oh!

[Kelly McCauley, Conservative, Edmonton West, AB]

Mr. Shimooka, I want to ask you, quickly, how you think we best build up, in the short lead time, better project management. Then maybe the two others can answer that. We obviously have a shortage. Do we contract it out to our partners or allies in the States? How do we build this up so that generations from now we're not repeating the sins of today?

[Richard Shimooka]

I think what we've done in the past couple of years here—and I know you've had Mr. Perry discuss this as well to some degree—there has been a significant push to increase the procurement workforce, and we've accelerated a significant number of individuals. Basically, we've promoted them.

I would look to the United States and also the United Kingdom, and utilize some of their educational institutions. The United States has the Defense Acquisition University. There are various courses within the United Kingdom that can help us accelerate the development of that knowledge.

I would suggest maybe looking at the Canadian Forces College or other areas and developing an institution that has the expertise to teach individuals within our government to better operate within this environment and really evolve that. If you look at other countries, they have people who move up the system who have decades of experience in how to undertake procurement. They have MBAs and whatnot that give them real management knowledge and capacity. We don't really have a similar situation in Canada, and I think that really hurts us.

[Kelly McCauley, Conservative, Edmonton West, AB]

Is there anything you can think of in the real short term—next year, in two years, in three years—that we can do to address this? Obviously this is longer term.

[Richard Shimooka]

This is a longer-term problem.

It's similar in businesses in the private sector as well. You can't create somebody who can operate a $100-million or $1-billion program and manage that. It takes time to develop that capacity. Maybe we can hire people from the private sector. That might be a possibility. That would require significant changes to how we administer the human resources within the departments and within government. That might be possible, but that's also fraught with challenges as well.

[Kelly McCauley, Conservative, Edmonton West, AB]

Ms. Sloan, do you want to chime in?

[Dr. Elinor Sloan]

Sure.

I appreciate that it's a challenge. It's a long-term process, and it needs to start now. The starting piece is appointing that one person who's in charge, who can then develop the workforce—it will obviously be over several years—to rebuild that project management capability that was decimated in the mid-1990s.

The starting point needs to be now. It starts with one person and then rebuilding in that manner. It won't be easy. It will take time. Yesterday would have been better, but today is the best time to do it.

[Kelly McCauley, Conservative, Edmonton West, AB]

Great.

Dr. Huebert.

[Dr. Robert Huebert]

First of all, I agree with everything that Richard and Elinor are saying.

I want to stress to the committee that building a naval ship is a very difficult challenge. The Americans are just about to literally junk an entire new class of vessels. Their Freedom-class littoral ships were supposed to be like Corvettes. They can't make them work. They've spent billions, and they will be scrapping them. They've spent probably about $2 billion extra on getting their Ford aircraft carrier class working.

We have to appreciate that this is a long-term, very difficult challenge, so we need someone at the top who will benefit, who will gain. Give them a political payoff for doing the job well and also hold them responsible.

There's a point that Elinor raised. We need to constantly have systems by which we review what is happening. The success of the British system is that they were willing to look at what they'd tried, and then they had an independent capability ask the question, “Is it working, or is it not working?”

We tend to say that we will create the means to make it work, and then we never come back to it. There has to be the acceptance that this is dynamic, and there has to be the acceptance that of course there is a fair system of review, to see if in fact we have the problem the British ran into or if we're actually solving it. That's a mindset that also has to come forward.

[Kelly McCauley, Conservative, Edmonton West, AB]

We have to accept and be open to the fact that things could fail and might fail.

Just quickly—

[Dr. Robert Huebert]

They actually do fail very badly. Let's be very clear, naval construction.... The French built an aircraft carrier that could not land their largest aircraft. They had to put the De Gaulle back in after she was out for about.... They took her out for the first tryouts and discovered their anti-submarine aircraft could take off, but they couldn't land it. You sit there and ask, “How did you get that so wrong?” This is the challenge of shipbuilding in a modern era.

[Kelly McCauley, Conservative, Edmonton West, AB]

I think we have to be ready to walk away from something that's not working rather than pour money into it.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you.

We'll now go to Mr. Kusmierczyk for six minutes.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Thank you, Mr. Chair.

I'm excited to ask a question of Professor Sloan, as a Carleton University grad myself.

You co-authored, Professor, a paper on agile procurement: “Toward Agile Procurement for National Defence: Matching the Pace of Technological Change”. Recently I came across a terrific quote from a former air force chief of staff, General David Goldfein. When he was talking about fighter jet procurement in the United States, he said, “I grew up flying fighters, and I will tell you, when I see the F-35, I don't see a fighter. I see a computer that happens to fly.”

The challenge of technological change applies to warships as it does to fighter jets, so Professor, I want to ask if you can comment on the role of agile procurement in the national shipbuilding strategy. What role does it play?

As to my second question, I know you're currently undertaking a study that is funded by SSHRC. It's a research project on naval shipbuilding that compares the U.K., Australia and Canada. What are the differences in how different shipbuilding programs around the world keep pace with the fast pace of technological change? Are there lessons that can be learned from some other countries? Where is Canada at in terms of being able to keep pace with technological change?

[Dr. Elinor Sloan]

Thanks very much for those questions.

In terms of agile procurement, really we're talking about applying a business model to government procurement, which can be very difficult. Of course, in the business world things turn around very quickly. If you were to create, let's say, a shipbuilding czar in Canada in the form of the Minister of National Defence, then that person could drive the rebuild of procurement officers. As I understand it, there were 1,200 or 1,500 procurement officers working on the Canadian patrol frigate back in the early 1990s. We don't have that capability right now. That's the part you need on the government side. That office could also drive the business plans and business methods to bring agile procurement capabilities into the shipbuilding strategy. All of that would be driven from the top by the shipbuilding champion, so yes, it is absolutely a key role because technology changes so quickly.

In terms of the three different countries, all countries have problems with shipbuilding. Canada has its problems, Australia has had lots of problems and the U.K. has problems.

The U.K. I would say is responding most quickly to the problems it has had. The problem it had was that one big shipyard built its ships and got very behind, so they decided to break it up into several shipyards that would build different vessels. Also, they adopted an export strategy, which is another whole conversation. They are building in agile procurement and complex technologies through the process of breaking up the different locations into hull builders and technology components. A warship is about 80% computer and 20% hull. It's much different, let's say, from the AOPS or a Coast Guard vessel.

Australia has had a number of things it's learned in terms of how to build a ship, which are other things we can possibly apply here in Canada. One of the things that Australia learned was not to build modules in different locations and try to bring them together into one location, because they had trouble with that with their Hobart-class air warfare destroyer.

Britain is going in the opposite direction. It's building modules in different places around the country. I think Canada would want to take note of the solution that Australia found. Britain, of course, is a small country and can build things in different locations. I don't think Canada would want to do that. We're building our modules, let's say, at Seaspan and putting them together at Seaspan, and I think that's a good idea.

There are different learnings from the different countries. I'm not sure if I've answered your question.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Would you say that Canada does a good job in its system in terms of bringing in innovation and adapting to technological changes as it designs and implements and builds these ships? Are we able to keep up to the really fast technological changes that are taking place every single day on the software side, on the computer systems side? As you said yourself, 80% of a warship is a computer now, a software system.

Are we doing a good job in terms of keeping up with those technological changes, relative to other countries?

[Dr. Elinor Sloan]

Really, that's a company question. Lockheed Martin is doing a very good job in keeping up in the technology changes that are.... I apologize. I think my dog's barking.

As the combat systems integrator, Lockheed Martin is doing a very good job in adapting to technology needs in Canadian surface combatants, but there are other aspects within Canada that are lagging because of the lack of capacity in national defence headquarters in ADM materiel to truly drive all of this. It's a capacity issue in terms of many of the elements in the shipbuilding strategy.