National Defence Committee on Sept. 15th, 2010

[Claude Bachand, Bloc, Saint-Jean, QC]

I want to end with two questions.

If I understand correctly—and I think everyone has understood the same thing—you are disregarding your economic benefit policy to take part in the production chain. Is that correct? Yes, that is it.

Canadian companies will compete for contracts with the companies of eight other nations, including the United States and Great Britain. I want to know whether there is a mechanism in place to protest or, at least, contest if Canadian companies are not treated fairly. That is my first question.

My second question is this. Is it possible for end support service to be covered by a separate contract and for Canada to receive some protection, in terms of the $9 billion that will likely be awarded, so that the majority of end support service is provided by Canadian companies, as far as the Canadian contract goes?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

I can answer that question. It is not true that we have a different economic benefit policy. Canada's aerospace industry is telling us that it is important to have access to the global supply chain. This agreement with General Electric/Rolls-Royce, with Pratt & Whitney Canada and with Lockheed Martin guarantees that contracts are possible for all the aircraft—perhaps 5,000—and not just Canada's 65 planes. This is an increase in global competition that our industry may have in the future.

[Peter MacKay, Conservative, Central Nova, NS]

I would only add that the ongoing maintenance contracts, as I've said, in terms of the cost to taxpayers will be determined once we start taking receipt of those aircraft. So there are negotiations, there will be opportunities for Canadian aerospace industry as well to participate in the maintenance, and the $250 million is the per annum estimated cost that will be borne by the government as a result of this decision to place these aircraft in the two main air bases that we have now.

This is all factored in. As the Chief of the Air Staff has said, vigilance and readiness equal deterrence, and we're making that decision.

[The Vice-Chair, Liberal, Bryon Wilfert]

Minister, I'm going to have to move to the next round, and I'm sure we'll come back to the question.

Mr. Harris, you have two and a half minutes.

[Jack Harris, NDP, St. John's East, NL]

Thank you.

We now have a hard number, I think, of $250 million. That is in support and maintenance costs. Is that correct, Mr. Minister? So we are looking at about $10 billion in addition to the procurement costs.

I want to ask a question going back to the IRB point, the industrial regional benefits, because that's the program that we require and expect in a competitive bidding process, dollar for dollar. If you are abandoning that for a right to bid here in the competitive process in what is the most sophisticated, perhaps most complex, and globally most competitive kind of project, doesn't that really say that we don't need an IRB for any other kind of procurement, that IRBs are—

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

No, because this is a unique project in the world. Never before have nations come together to create a fifth-generation fighter plane that allies will utilize in an interoperable way. There is no precedent for this.

You keep asking why we are doing it this way or why we aren't doing it the other way. This is the first time this has ever been done this way. The upside, as I keep saying, for Canadian industry is that they are part of leading-edge provision of parts and service that will open the door to global supply chains for decades to come.

If you want proof for that, the proof is that already, through the MOUs that Industry Canada has signed with the primes, 85 companies have already been identified as potential contracts for the primes. Now, you say, well, 85 companies have been identified, and ask what that means. So far--so far--60 of those companies have signed contracts.

So if you're asking me whether it is working for Canadian companies, the answer is yes.

[Jack Harris, NDP, St. John's East, NL]

You said in response to an earlier question that you want these jobs guaranteed, such as those talked about by Mr. Wallace, but of course there is no guarantee in this project at all. As you say, it's a list of potential contracts, and that's where—

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

No, these are secured contracts. There are $350 million of secured contracts already, plus the Avcorp contract of up to $500 million. That's reality.

[Jack Harris, NDP, St. John's East, NL]

It's pretty small potatoes, though, in a $9 billion construction—

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Well, that's not bad for the first week.

[The Vice-Chair, Liberal, Bryon Wilfert]

Thank you very much.

We'll now conclude with Mr. Hawn, for two and a half minutes.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Thank you, Mr. Chair.

I want to make a couple of observations, and I hope we have time for a quick question.

The industrial participation process, the contracting process, has evolved. The Canadian industry has evolved. The departments have evolved. The Canadian Forces have evolved. The opposition has not evolved.

When I started the...as part of the new fighter aircraft program in 1977, which became the CF-18, the plan there was phase-in plus 15 years and we'd be acquiring a new aircraft. That meant in 1988, plus 15 years, we'd be acquiring a new aircraft. This is overdue. We are getting on with it finally.

To quote Mr. Simms, an aircraft's speed capability is a measure of performance. By his logic, the CF-104, which is a Mach 2 airplane, will be superior to both the CF-18 and the F-35, and of course that is nonsense. Both airplanes, the F-35 and the CF-18, carry Mach 4 missiles. That's the point. Some of these comparisons don't show a total understanding of the situation.

We've been focused on the air sovereignty mission in the Arctic. That's only one mission that this aircraft is going to perform. The aircraft is going to perform many missions—all the missions the CF-18 performed and probably more. The fact of stealth doesn't actually make the airplane invisible. A Russian bomber or anybody else will actually see us when we fly up beside them. They will know we are there. They just won't see us approaching at nearly the range that we were used to before. So there is a tremendous lack of understanding of some of the basics of this kind of a program and this kind of an aircraft.

I have a quick question, probably for Minister Clement, through you, Mr. Chair. We talked about the competitive process. If we rolled the clock back and we started the competitive process, would that not equal delay? Would that not equal lost contracts? Would that not equal lost jobs? Would that not equal damage to the Canadian economy?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

You've hit upon a key point here. Some people ask why sign the contract now. Well, here's the deal. The global supply chain is going to be pretty well put in place by the end of this year. If we did not act now, if we did not move now, we would be running the risk of Canadian companies not being able to bid and compete as part of the global supply chain. Indeed, that's what we were hearing from Canadian industry for the months leading up to the contract. The risk of starting the process all over again is that our companies will not be able to be part of this deal.

[Peter MacKay, Conservative, Central Nova, NS]

If I might just add to that briefly—

[The Vice-Chair, Liberal, Bryon Wilfert]

I'm sorry, we're right on time and we are now finished.

On behalf of members of the committee, I want to thank all three ministers for attending. I'm sure it's because I was chairing today.

I do appreciate the cooperation of all the members.

We will now suspend for five minutes.

Thank you.

[The Vice-Chair, Liberal, Bryon Wilfert]

Members, we will start with the second round of witnesses.

With us today is Dan Ross, assistant deputy minister for materiel. We also have Lieutenant-General Deschamps, Chief of the Air Staff. We have Michael Slack, F-35 project manager, director of continental materiel cooperation. We have Colonel Burt, director, new generation fighter capability, Chief of the Air Staff; Tom Ring, assistant deputy minister; and Johanne Provencher, director general, defence and major projects directorate.

I understand that only three people are presenting, and we'll start with Lieutenant-General Deschamps.

I welcome you, General. You know the drill. We're going to have five minutes for your presentation. We will then go to a seven-minute first round, followed by five-minute rounds. This is an opportunity for members to ask as many questions as they can.

General, I turn the floor over to you.

[Lieutenant-General J.P.A. Deschamps, Chief of the Air Staff, Department of National Defence]

Thank you, Mr. Chair, committee members. Thank you for the opportunity to discuss the acquisition of the F-35 Lightning II Joint Strike Fighter as Canada's next fighter aircraft.

The CF-18 Hornet has provided outstanding service to Canada for more than 28 years. It will remain our front-line fighter until the 2020 timeframe, when it reaches the end of its life expectancy. This will allow for phase-in of the Lightning II.

Manned fighters are essential to our ability to maintain control and sovereignty over our airspace, whether in Canada or during operations abroad. This is a fact of modern air power. All industrialized nations acknowledge it.

Neither unmanned aerial vehicles nor any other air platform can carry out this demanding and complex task, whether they are operating in the air-to-air or air-to-ground environments. If you do not control the airspace over which you are operating—maritime or land—you will likely fail or take unacceptable losses. You must be able to deny an adversary use of that airspace to win. This need is recognized by the government's commitment in the Canada First Defence Strategy to acquire new fighters.

Analyses of our mandatory requirements for Canada's next fighter have made it clear that only a fifth-generation fighter could satisfy those requirements in the increasingly complex future security environment. The Lightning II is the only fifth-generation aircraft available to Canada. Not only that, but the F-35 offers the best cost value of any fighter available to us.

The F-35 Lightning II and the joint strike fighter program bring unique advantages. The F-35 Lightning II is designed with stealth technology--that is, low observability--that significantly reduces its electromagnetic signature and reduces detection by enemy sensor systems. It provides lower risk and improves survivability for the pilot, and provides enhanced intelligence, surveillance, and reconnaissance capabilities.

The Lightning II incorporates advanced sensor and data fusion technology to gather, synthesize, and display information. This will help pilots understand the tactical situation at a glance, make complex tactical decisions quickly, and take decisive action.

The aircraft takes care of much of the data-gathering and synthesis that pilots now do themselves, which has become almost overwhelming in its quantity and speed. In effect, the aircraft is the co-pilot.

The aircraft will be interoperable with our allies. Nine like-minded nations are partners in the JSF memorandum of understanding, and our interoperability with them will be seamless, safe and effective within NORAD and NATO and on coalition operations. The aircraft is sustainable. We will be able to replace lost aircraft—or acquire additional aircraft if the future global situation demands it—because the production line will operate until at least 2035.

As well, software will be upgraded on an ongoing basis. Canada will not have to contract individually for upgrades, bringing huge cost savings and keeping the aircraft up to date as technology evolves.

There has been discussion about the safety of a single-engine versus a twin-engine aircraft. Modern single- and twin-engine fighter aircraft have virtually equivalent engine-related attrition rates. In other words, there is no statistical difference in survivability from either engine failure or combat damage, but the single-engine configuration has significantly lower procurement and maintenance costs.

In summary, the F-35 Lightning II will provide Canada with the greatest probability of mission success, and the greatest probability that our men and women will survive, returning safely from their missions.

We require the F-35 Lightning II to protect Canadian interests and to counter tomorrow's threats. Procured and sustained through the joint strike fighter program, the F-35 is the best value for our taxpayers' dollar and will keep Canada at the forefront of fighter operations, enabling our fighter fleet to remain relevant, flexible, viable, and sustainable well into the middle of this century.

Thank you, ladies and gentlemen.

[The Vice-Chair, Liberal, Bryon Wilfert]

Thank you very much, General, for your presentation.

We will now go to Dan Ross, assistant deputy minister for materiel. Welcome.

[Dan Ross, Assistant Deputy Minister (Materiel), Department of National Defence]

Thank you, Mr. Chairman.

Today, while responding to some of your questions, I hope to be able to clarify some of the information that has been circulating and to confirm that the F-35 is the right choice for Canada and for the Canadian Forces.

The F-35 is the only fifth-generation fighter available in response to the Canada First defence strategy. The only other fifth-generation aircraft, the F-22 Raptor, is solely an air superiority fighter and is not deemed exportable by the U.S. government.

A fifth-generation fighter is critical, as it encompasses technology such as stealth and sensor fusion, elements that cannot be added on to an existing aircraft; they must be designed in. These capabilities are critical to mission success and mission safety. Our new aircraft needs to remain relevant for 35 years. The threat is not standing still; it also continues to grow in capability.

In examining costs, it's important to recognize that the quoted $9-billion program cost includes a lot more than the cost of 65 aircraft. The $9 billion also includes almost $2 billion in contingency and currency escalation, as well as elements such as the integrated logistics support, weapons, infrastructure simulation, etc., all of which would be intrinsic in any fighter that you chose to acquire.

Canada first joined the international joint strike fighter program in 1997, as the minister has talked about, with a view to ensuring that we would have the most up-to-date information throughout the process. We had full-time participation in the joint project office from the beginning, initially with one person and now with the team we have there today.

You may also recall that during the early part of the joint strike fighter program, Canada and its eight partner nations participated in that vigorously fought but fully open and transparent competition process that again the ministers have referred to, which resulted in Lockheed Martin being selected over the Boeing candidate--the so-called battle of the X-planes.

I'd just point out as well that the partners, including Canada, had direct input into the operational requirements document. The United States Air Force and the United States Navy in the joint project office, with the full-time participation of allied officers, had input into what the requirement would be, and they needed to do that to ensure that the needs of the allied partners would also be met, without which they would not have continued to participate. We were fully briefed throughout that process, resulting in an announcement of the Lockheed Martin success in 2002.

Today, some 10 years later, we believe we were successful and the government has selected the most capable and affordable fifth-generation aircraft available to serve Canada's needs for the next 30 or so years. At the same time, Canadian industry, which has already received over $800 million in F-35 contracts, stands to be in a privileged position to participate in over $12 billion in upcoming opportunities over the life of the aircraft, a life that is only just beginning.

It's important to note that there is a surprising amount of Canadian content in the F-35, content that will continue throughout the life of the program for purchases of all F-35 aircraft. For example, components such as the thermal management control system, horizontal tails, and wing skins are all being produced in Canada. Additionally, Canadian industry will be well placed to ensure that the through-life support of all these aircraft in use around the globe could represent upwards of another $4 billion in economic opportunities.

Many have questioned the expected in-service support costs of the F-35. These costs clearly are not fully defined six years before we've taken delivery of an aircraft, but I can assure you that, as Minister MacKay said, they will be comparable to support costs of our current CF-18 or any other modern aircraft. For example, an F-35 returning to base from a mission will call ahead and tell the logistics system what exact replacement parts are needed before the plane lands.

We are currently working and cooperating with our joint strike partners to develop the most efficient global support concept possible for this fleet, such as the joint pooling of spares to reduce our overall service costs.

Ladies and gentlemen, that concludes my opening comments.

[The Vice-Chair, Liberal, Bryon Wilfert]

Thank you very much, Mr. Ross.

We will now go to our third and last presenter, Tom Ring, assistant deputy minister, Public Works and Government Services Canada.

Mr. Ring.

[Tom Ring, Assistant Deputy Minister, Public Works and Government Services Canada]

Thank you, Mr. Chair.

As you mentioned, my name is Tom Ring, and I am the assistant deputy minister of the Acquisitions Branch at the Department of Public Works and Government Services Canada.

As many of you will know, Public Works and Government Services Canada operates as a common service agency for the Government of Canada. Its activities are directed toward providing service and support to departments, boards, and agencies' programs. In accordance with the Defence Production Act, the Minister of Public Works and Government Services Canada has exclusive authority to buy or acquire defence supplies and construct defence projects required by the Department of National Defence.

The acquisitions process requires that departments define their operational requirements, including the essential characteristics of the goods or services being sought. Upon receipt of these requirements, Public Works examines the potential sources of supply, identifies applicable contracting issues, and develops a contracting approach. A key task in the procurement process is to ensure that the acquisition of goods and services meets the government's overall policy goals and objectives.

All of the above steps in the procurement process are done in accordance with the government contracting regulations and rules in a manner consistent with the principles of fairness, openness, and transparency, and all the while maximizing value for Canadian taxpayers.

With respect to the issue before us today, Canada has been a participant in the joint strike fighter program since 1997. This early participation in the program allowed NATO allies, as was mentioned by my defence colleagues, to participate in a program that did not include any obligation to purchase but allowed us to be directly involved in the competition that was held to identify which supplier would be selected to develop the joint strike fighter. It also afforded Canadian defence industries significant opportunities to be part of the overall program, and the government's announcement of its intention to acquire the F-35 on July 16 represents an important milestone in this process.

In the Canada First defence strategy, the government included a commitment to replace its fleet of CF-18 fighters with a next-generation fighter aircraft. Based on this commitment, the Department of National Defence developed a more detailed statement of requirements. My colleagues from National Defence have mentioned that already, and will speak further, I am sure.

As a result of this, National Defence advised Public Works that it had determined that only the F-35 Lightning II meets the requirements for a fifth-generation fighter capability. The Department of Public Works and Government Services validated this requirement, as established by the Department of National Defence. While other fifth-generation aircraft do exist, they are either not available to Canada or are in development with non-allies. Having determined that only a single source of supply exists to meet the approved requirement, the next stage of the acquisition process is to assess the options for how that good or service should be acquired.

As has been discussed already, the F-35 can be acquired through the joint strike fighter program memorandum of understanding. This approach offers numerous advantages over procuring through a foreign military sales option. Not the least of these advantages is an 8% reduction in cost. Thus, acquiring the F-35 through the joint strike fighter memorandum of understanding is consistent with the Government of Canada policy to acquire goods and services at the best value to Canadian taxpayers. Finally, the F-35 will meet the operational requirements as set out in the Canada First defence strategy.

I'd be pleased to respond to any questions you have.

[The Vice-Chair, Liberal, Bryon Wilfert]

I've been informed by my legislative assistant that Mr. Ron Parker, Industry Canada senior administration, industry sector, is in the room.

Mr. Parker, I would invite you to the table in case there may be some questions for Industry Canada--with the permission of the committee, which I'm sure I have.

We will now go to Mr. Simms for the first round of seven minutes.

Mr. Simms.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Thank you, Mr. Chair.

I have a question for Mr. Ring.

You spoke of the operational requirements desired, and DND had indeed presented to you that the F-35 was the only option available for air personnel.

When were these requirements, and when did that conversation take place, or when was the presentation made that the F-35 was it?

[Tom Ring]

I will leave it to my colleagues to answer specifically about the development of the statement of requirements, but the Department of Public Works was notified earlier this year.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Earlier this year; that's when they told you.