Government Operations Committee on April 5th, 2022

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Ms. Sloan.

I didn't let your dog cut into your time.

[Voices]

Oh, oh!

[Dr. Elinor Sloan]

Yes. I apologize for that.

[The Chair, Conservative, Robert Gordon Kitchen]

With that said, we'll now go to Ms. Vignola for six minutes.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

Ms. Sloan, in your presentation, you mentioned the lack of governance in relation to shipbuilding. You also described the process Great Britain went through to improve its governance.

Have Great Britain's decisions had the desired results? Could those decisions be applied here? What country would have the best example of governance in shipbuilding?

We know that all countries are currently experiencing difficulties, as shipbuilding is not easy. What would be the best kind of governance to ensure that the decisions are made quickly and correctly and that taxpayers' money is being used properly?

[Dr. Elinor Sloan]

Thanks very much for that question.

As I understand it, Germany does a very good job, but I have not studied Germany so I can't answer along that line. In terms of the U.K., Australia and Canada, the three countries I have looked at, basically nobody does a good job. Everybody has trouble. That's why all three countries have been looking at possible solutions.

In terms of the transferable lessons, I think the modular one is transferable to Canada. As I mentioned, I would not build in different locations and bring things together into one location. Australia learned that the hard way.

In terms of whether or not Britain's new top-down shipbuilding czar is working, it's only been two and a half years, and already they've decided to centralize it still more with this National Shipbuilding Office. However, there have been some successes in the British system. One of the successes is Britain's documentation, for example, with the national shipbuilding strategy refresh that was released about a month ago. It talks about export success. One of the export successes it talks about is exporting the Type 26 to Canada and Australia and the Type 31 to Portugal and Indonesia.

Some of the ways in which they're doing things are starting to have traction. Britain has experimented with a number of different things over the past 10 years, and this is where they've arrived. They have seen problems and have tried to adapt to the problems.

I would say that, in our case, we see problems but we have not changed our defence procurement strategy since 2014, since the committee of the deputy ministers, and we haven't seen any progress. I think it's time to relook at that.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you, Ms. Sloan.

Mr. Shimooka, in a report published in 2021, you said that Canada should go ahead even if its selected surface combatant is imperfect. What are the risks associated with the model and how could we decrease those risks, both for the builder and, as always, for Canadian taxpayers?

[Richard Shimooka]

Thank you for the question.

One of the challenges we have to realize is that we've already invested quite a bit of time and effort into the CSC as it currently stands, and any further delays to the delivery of these vessels will also incur significant costs because we'll have to modernize the existing Halifax-class vessels in order to serve well beyond their original life expectancy.

I think that's a dynamic that currently exists, and if we try to backtrack or make a different decision at this time, we will certainly incur further costs.

Dr. Sloan's comments about centralizing the governance structure, providing better reporting and understanding where we are in the process are very helpful and very useful to deliver better outcomes in this case. We're also at a very crucial stage within the program. Some of the most complex aspects of integration are being undertaken, specifically the radar on the vessel and modifying the design.

At this stage, in the coming months and in the coming year, I think we'll have a much better understanding of what the costs of the program are and what the value for money is. It's just that at this specific stage there are a lot of challenges. It's fraught. We don't know exactly where it's going to go.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, and thank you, Ms. Vignola.

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

[Gord Johns, NDP, Courtenay—Alberni, BC]

Thank you all again for your important testimony.

I live in Port Alberni, British Columbia. There's been no government program to build a dry dock. Transport Canada doesn't have a program in existence. The port authority there has been trying to build a dry dock, and they have the only deep-sea port on the west coast of Vancouver Island. We have a great company called Canadian Maritime Engineering. They have all the ingredients to take on this work.

I was at the Pacific NorthWest Economic Region conference, and we heard loud and clear that there's very little to no dry dock space between Oregon and Alaska. Companies are even booking dry dock space, even though it's not going to be utilized, just to reserve it, to make sure they have a space available to them.

I really appreciate Ms. Sloan talking about having a shipbuilding czar because clearly Transport Canada isn't talking to procurement. We heard from the PBO that shipbuilding costs are really high because of the lack of shipbuilding in Canada, and that there were a lot of shipbuilding capabilities lost over the last few decades.

I'd love to get your take on it. I know that B.C. Ferries wrote a letter in support of our floating dry dock, saying that they're going to make three and a half to four billion dollars' worth of infrastructure and new vessel purchases within the next 12 years, and they're spending $150 million in annual ship repair. They said that the biggest constraint is the scarcity of dry dock space.

These other yards actually impact the bigger yards, as you know, in terms of capacity.

Ms. Sloan, would you speak a little bit to that and what other countries are doing in terms of their strategies? We're losing out to Poland and Turkey, as we know, and Norway has created a strategy where they're developing capacity even in rural coastal communities. We have the longest coastline in the world.

Can you speak about that? I'll let others chime in as well.

[Dr. Elinor Sloan]

The core element of the national shipbuilding strategy is the idea that there can't be too many shipyards. It's meant to be a long-term thing with ships continuously over the years.

I've looked at shipbuilding since about World War I, actually. We've had many shipyards, upwards of 40 yards running at the same time. You can't have too many in Canada, so one of the core elements of the national shipbuilding strategy was to have fewer yards and a long-term plan. The fact that we're not churning out a whole bunch of ships right away is almost good because that's the whole point. It's supposed to be over the long term. That said—

[Gord Johns, NDP, Courtenay—Alberni, BC]

I'm sorry to interrupt. Maybe you can help me better understand. On the west coast, for example, B.C. Ferries has cited that one of their biggest constraints is getting dry dock space to meet their needs. They're doing a lot of work in other countries.

I worry about our not having a strategy to deal with the needs and demands right now of many of the different companies. We heard from the PBO that it is actually critical in terms of labour costs as well to have more shipyards. We're getting two different arguments. They say we should be concentrated in those markets, but the markets that we're concentrated in have some of the highest costs of living in the country. Housing has gone through the roof. We know that the cost of living is massive.

Would you not think that it makes sense to develop more capacity to help lower the burden on those big yards?

[Dr. Elinor Sloan]

You have me thinking about this and the national shipbuilding strategy refresh I mentioned that was released March 10 in Britain. A big element of that refresh was to look at not just naval vessels, which are what I've looked at—naval vessels and the big Coast Guard—but also the whole marine industry. That shipbuilding czar is now looking at the full capacity within Britain, not just naval vessels. What you're talking about would be a refresh of our national shipbuilding strategy to take into account those other dimensions.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Does anyone else want to speak to some of the concerns and issues I'm raising, especially when it comes to the smaller-class vessels?

[Dr. Robert Huebert]

It's not so much the smaller-class vessels, but you're talking about dry dock. You're talking about the support facilities that are associated with them. Once again, the shipbuilding strategy is about a specific set of platforms—the Coast Guard, the navy. It's basically about what types of ships are to be built in that, but it doesn't deal with the supporting infrastructure.

This goes back to a point that Elinor was raising. If, in fact, we extended this to say that it's not just about building the ships but about going beyond, which gets back to some of the earlier discussion we had in terms of runways and airports, we'd need to break the system where we only look at the construction of a ship and only look at the construction of the AOPS. We have to be thinking about the system.

Obviously a dry dock is part of the system in terms of the overall maintenance, and this is of course always kept separate. That's why you've run into the political problem of not being able to get the funding necessary to proceed. I'm not saying necessarily that you would get the funding in such a system, but if we extend the overall parameters placed under the czar that Elinor talks about and say that the parameters are not only for the ship but also for how we sustain it, I think that would go a long way to at least giving you an avenue for being able to bring such proposals forward with a hope of having them supported.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Dr. Huebert.

We'll now go into our second round.

We'll go with four minutes for Mr. Paul-Hus.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you, Mr. Chair.

I will begin with Mr. Huebert on the topic of submarines.

We are talking a lot about aircraft and surface combatants, but we are not talking much about submarines.

I know that information is difficult to obtain for you, as you said at the beginning of the meeting, but do you have any information about advancement in submarine procurement?

[Dr. Robert Huebert]

I can tell you that we're definitely not talking with our American, Australian and British allies as they move forward with the consideration of Australia's next submarines. When we didn't have submarines, as in the period between the O class and the Upholders, we lost control of Canadian maritime sovereignty because we didn't know whose submarines were coming into our waters and near our waters. That information, even from our friends, is not shared, and we absolutely need it.

Because submarines are expensive, because they are complex.... When they succeed, they are out of the political discourse, and if you're not hearing about them, if they're not grounding and if they're not running into issues, everybody thinks they're not important. I can assure you that they are completely essential to Canadian maritime security, particularly on the west coast coming into the future.

It astounds me that at this point in time we seem to be having some discussions, with the navy at least trying to drive the agenda, but from the political side—and we keep bringing up this issue in terms of the political interest—we don't seem to see any mobilization of the recognition that we shouldn't just be talking about subs today. We should have a plan to have the next generation, just as the Australians are doing or as the Japanese are doing, or any of the other countries that know you need them for security against the Chinese threat.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you, Mr. Huebert.

I had an opportunity to go in a submarine, three or four years ago. I invite my colleagues to do that if they have an opportunity. We have a completely different perception when we spend 24 hours in a submarine at the bottom of the water. The vision we have of that is different. That's just a quick personal comment.

Ms. Sloan, I would like to know whether you agree that, as long is we don't have a minister responsible for military procurement, it will be difficult, even impossible, to implement performance measures [inaudible].

[Dr. Elinor Sloan]

It would be impossible to move forward...? I'm guessing that was the question.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Yes.

We definitely think it is essential to have a minister who is solely responsible for military procurement.

On the other hand, as far as responsibility goes, I would like to know what you think about the fact that the private sector often decides what process to use.

Can that be one of the reasons behind the increases and, more importantly, the cost over-runs in various projects?

[Dr. Elinor Sloan]

Once again it comes back to a capacity issue. If you don't have a minister in charge and the staff working within that organization to support the minister on this particular file, on shipbuilding and on submarines, then somebody else is going to do it. This is probably how Irving ended up being prime. There wasn't government capacity to be prime for the CSC, so Irving ended up being prime. You'll see this in any of the military procurements. If government doesn't have the capacity, if government can't move forward, then industry starts to fill the gaps. That's when you'll see industry sort of taking over and having cost increases, which you mentioned.

Once again, it comes down to that capacity issue.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Ms. Sloan.

We'll now go to Mr. Bains for four minutes.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Thank you, Mr. Chair.

My question is around recruitment. Mr. Shimooka, in a recent article by Global News you commented that extra spending should go towards recruitment. I want know, in terms of our academic institutions especially here in British Columbia, in Richmond, we have the British Columbia Institute of Technology. They have a world-class aerospace campus. They also train for shipbuilding.

What does this all mean for these academic institutions? What can they do to support the strategy in Canada?