National Defence Committee on April 17th, 2007

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Sir, I would disagree with that. The United States government owned the basic intellectual property. I was part of those programs, and in every program, we sat side by side with our military colleagues from either the State Department or the U.S. Navy-Marine Corps, because there were things we couldn't do with that airplane without their cooperation, which we got.

[Allen Conrad]

You're correct, initially.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

That program developed over time, which is my second point, to the point where we were self-supporting with the CF-18.

[Allen Conrad]

Yes.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

I understand personal business imperatives and fear of the future. I understand the solid working relationships that we've had with defence partners over many decades.

Is there some irrationality, in terms of fear of the future, that maybe we should temper with the knowledge of what we've done in the past, and the good experience that we're having right now with similar and very large programs?

[Allen Conrad]

The difference with the F-18 is that there was an investment made up front to build a capability at Mirabel, CAE, and Bombardier, and to build a capability within the Canadian Forces.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Also, the ISS contracts we're talking about now are being competed across Canada. Would either one of you disagree with the statement that these programs are being competed across Canadian industry?

[Allen Conrad]

It's how it's fragmented. The problem is that for a foreign company to be held to a fixed-price, performance-based contract, they have to be able to make trade-offs and control all the levers. If they run into an issue, they have to be able to trade off training, maintenance concept, design, sparing--all sorts of things. They cannot divulge that.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Also, nobody at this table knows what's going to happen in 30 years. When we started the F-18 program, we didn't foresee what was going to happen today in some areas, versus when we started the program.

[Allen Conrad]

But we bought that in-service support integration capability with the F-18. That's what's not on the table right now. The foreign OEM will parcel things out as they see fit. They will maintain the control, because they have to, with the performance- based contract.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Regarding the IRBs and the ISS, that's how it was initially done with the F-18 program too.

McDonnell Douglas went around the country and scoured Canadian industry for the industrial offsets and in-service support. The coordinated package on the in-service support and IRB sides, which were part of what we're talking about here, was done by McDonnell Douglas, in conjunction with the department, which had a different name then.

[Allen Conrad]

Except that we invested a central capability in Canadair back then. In the last few years, under the optimized weapon system management initiative, we basically pull the levers and controls with L3-MAS.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Within the last two years. That's correct.

[Allen Conrad]

And we had the ability to do that.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

It developed over time.

[Allen Conrad]

Yes.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

ITAR has been around for a very long time. Correct? ITARs are nothing new.

[Allen Conrad]

Yes.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

I would submit to you that the reason we're having a problem with ITARs right now is the fact that over the past decade or more, the U.S. lost confidence in Canada's ability to step up to the plate in foreign affairs and contribute in a meaningful way. They also lost confidence in our ability to maintain security.

Canada always had exemptions from ITARs, and those gradually eroded. Those are coming back now because of our involvement in foreign affairs, and negotiations between Canada's Department of Foreign Affairs and the U.S.

So to say that ITARs are the bogeyman is misleading. I don't know whether you would agree with that or not.

[Allen Conrad]

I disagree, because what changed with ITARs is the dual citizenship. That's the sticking point right now, because it's in violation of our Constitution.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

That was always there with ITARs, and we had exemptions from them. The list of prescribed countries has grown as world affairs have changed.

[Allen Conrad]

It was the dual citizenship thing that was new. In fact, there was an article in Canadian Defence Review a year ago that described this, saying, okay, that's what changed and that's what's causing problems for us.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

That problem has been easing through negotiations with Canada's Department of Foreign Affairs and the U.S., because the U.S. is gaining confidence in Canada's ability to be a partner.

Mr. Rowe, you touched on it, but I want to clarify it. There's a suggestion that 60% of industrial benefits, or 60% of some programs, should go to companies because they've always done it. Do you think that is a logical way to do business, or do you think that companies should compete and earn the business to keep the business?

[Kenneth Rowe]

You are repeating what I said. I agree to that. I'm not saying that someone should get business because they've had business. We've always won every major contract. We work right now—and one of your colleagues on the other side asked the question previously— with the Aurora; we still do the Sea King, which is being replaced with the new maritime helicopter; and we won competitively the search and rescue helicopter. We do that too. They are the three aircraft we maintain. It's not because we had Sea Kings that we won the search and rescue. We won it competitively on a properly issued competition by the Government of Canada.

What is the point of your question?

[Laurie Hawn, Conservative, Edmonton Centre, AB]

The point is to make a point, and I think you agree with this, that government should not direct business to any particular area or company just because they've had business in the past. Companies should earn it.