Finance Committee on June 4th, 2020

[The Chair, Liberal, Wayne Easter]

I'll call this meeting to order.

Welcome to meeting number 34 of the House of Commons Standing Committee on Finance. Pursuant to order of reference from the House, we are meeting on the government's response to the COVID-19 pandemic. Today's meeting, for your information, is taking place by video conference, and the proceedings will be made available through the House of Commons website.

With that, I would like to welcome all the witnesses here. We appreciate your coming and making your presentations. We do have eight groups and quite a number of witnesses, so I would ask you to try as seriously as you can to hold your remarks to five minutes. That will give us more time for questions.

With that, we'll start with Brandt Tractor Ltd., Gavin Semple, chairman of the board and Don Switzer, chief operating officer.

Go ahead, Mr. Semple.

[Gavin Semple, Chairman of the Board, Brandt Tractor Ltd.]

Thank you very much, Chair.

Thank you to the committee for taking the time to meet with us today and to listen to us talk a little bit about Brandt and about the wage subsidy program and some of the issues we're having.

Perhaps it's beneficial to give a quick overview of Brandt. We're an 88-year-old, family-owned business headquartered in Regina, doing business across Canada with facilities in virtually all provinces. We have two facets to our business: manufacturing and distribution. We manufacture agricultural equipment and rail equipment that we sell throughout North America and offshore. Our largest business, however, is in the distribution business, and that is Brandt Tractor, which we're here to talk about today.

Brandt Tractor exclusively owns and operates all of the John Deere construction and forestry equipment dealerships in Canada. We have 56 locations across the country, 34 of which are in eastern Canada. We have 3,200 employees, and over 700 are in eastern Canada.

The construction equipment that we sell is used in road building, mining, sewer and water, residential development, forestry and so on, just to mention a few sectors. Since the pandemic hit us, our customers have been negatively impacted in virtually every market in which we operate. In the areas where work has resumed with some projects, it's at a much lower level, and there remains a high level of uncertainty about future prospects for the business.

We initially laid off 160 people, but we've been trying hard to retain our 3,200 employees in the hopes that we would qualify for the wage subsidy. As you know, to be eligible for the wage subsidy, we have to experience at least a 15% reduction in sales revenue in March, 30% in April and 30% in May, as compared to those same months in 2019. On that basis, Brandt would qualify for the program. However, in fall 2019, we purchased 29 dealerships in Ontario, Quebec and Newfoundland from a company called Nortrax, which was owned by John Deere. We purchased it on an asset purchase basis, even though we acquired the entire business; however, because we purchased it on an asset basis instead of a share basis, we do not qualify for the wage subsidy program.

The effect of that is that, when we go to fill out the wage subsidy application, we're required to include the 2020 sales of the combined company, but for 2019, we're precluded from including the sales of the company we acquired. It has the effect of looking like our sales have increased when we've had a substantial decrease. Furthermore, the seasonality of our business doesn't allow us to choose the alternative of using the average of January and February because they're not comparable months to March, April and May in the construction industry.

We've been communicating this issue to the ministry of finance through the Canadian manufacturers association, the association of equipment distributors, the chambers and other business organizations since early April, with no resolution to the matter at this point. I want to point out that this isn't just a Brandt problem; there are other companies affected in a similar manner.

I do want to compliment the government on the Canada emergency wage subsidy program. It's an excellent program. It's ideal for a company like ours in the current situation that we find ourselves. The objectives of the wage subsidy program are in complete alignment with Brandt's objectives. We want to retain our 3,200 employees, call back our laid-off employees, retain the benefits for the employees and keep them connected to the company so that when COVID-19 passes, we can resume our operations and not have lost all of the employees we've worked so hard to get for the last five years.

To sum up, due to a technicality in the wage subsidy program, Brandt is unable to access the subsidy, despite having adequately reduced our revenues to qualify. We want to keep our 3,200 employees and we need the wage subsidy to do it. We're hoping we can count on your support to help us with this matter.

We thank you, once again, for giving us some time today to explain the situation.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Semple. We hear you loud and clear. That was well explained as one of the situations that have fallen through the cracks, if I can put it that way, and 3,200 employees is quite a number.

We'll now turn to Colleges and Institutes Canada, with Denise Amyot, president and CEO.

Go ahead, Ms. Amyot.

[Denise Amyot, President and Chief Executive Officer, Colleges and Institutes Canada]

Good afternoon.

I appreciate the opportunity to represent colleges, institutes, CEGEPs and polytechnics.

Thank you to the federal government for your quick response, especially for your support for Canadian and international students.

Colleges and institutes also mobilized rapidly to shift to online delivery, support students and contribute to local efforts by donating equipment and deploying their research teams to help local companies retool operations. This rapid response has played out at colleges in your own communities, serving as a compelling reminder that 95% of Canadians and 86% of indigenous people live within 50 kilometres of a college campus.

Today I will focus on three recommendations needed in the short term.

First, in each of your ridings, you are watching local companies struggle to adapt, prepare for the new reality and reimagine their business models. Our members are seeing this too. They have solutions to offer and know how to help implement them. We recommend an investment of $165 million over two years, starting this August, to identify and respond rapidly to the range of applied research and technology solutions that SMEs and non-profits need to retool and pivot to succeed in the evolving and new economy.

I'm tabling with the committee our detailed submission developed in collaboration with our partners.

Second, I know that you are all aware of the important role that infrastructure investments will play in driving recovery in your own communities. Colleges and institutes have identified over $3.5 billion in shovel-ready projects, and we recommend in phase one a targeted investment in college and institute infrastructure to make our campuses more sustainable, more accessible for students with disabilities, more welcoming for indigenous students and more responsive to the innovation needs of your communities.

I am tabling a summary of our survey of infrastructure needs.

My third recommendation falls outside the scope of what federal MPs are accustomed to hearing from the post-secondary sector. Like other sectors and types of employers, the college sector has been hit hard by the crisis. While education is of provincial-territorial jurisdiction, colleges are only partially funded by their governments with virtually all institutions relying on funding from other sources such as corporate training and tuition from international students. Many institutions are projecting significant shortfalls. This means layoffs of faculty and staff.

CICan had a third party financial impact analysis done that projects losses and additional expenses over three scenarios. Just for 2020 to 2021, it ranged from $1.8 billion to the worst case of $3.5 billion. Over three years, in the worst-case scenario, losses of up to $8 billion are projected. Based on spring and summer data, the middle scenario is so far observed.

I have tabled with the committee the executive summary of this analysis.

Based on this analysis, we are asking that the federal government provide Canada's colleges and institutes with exceptional emergency funding of up to $3.3 billion. This funding will maintain and boost the capacity of colleges and institutes and ensure the college system can effectively support resumption and recovery.

In closing, you can be assured that colleges and institutes from coast to coast to coast will work with you to sustain our communities across the country.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Denise.

We'll turn to the Canadian Art Museum Directors Organization, with Mr. Anthony Kiendl, president.

[Anthony Kiendl, Executive Director and Chief Executive Officer of MacKenzie Art Gallery, and President, Canadian Art Museum Directors Organization]

Thank you, Mr. Chair and standing committee members.

Good afternoon.

Thank you for the opportunity to speak to you today.

I am speaking to you today from Regina, Saskatchewan, Treaty 4 territory, the traditional territories of the Cree, Saulteaux, Ojibwa, Dakota and Lakota, Nakota peoples and homeland of the Métis.

My name is Anthony Kiendl. I am executive director and CEO of the MacKenzie Art Gallery and president of the Canadian Art Museum Directors Organization.

I acknowledge our council board with representatives from across Canada, and our executive director, Moira McCaffrey.

CAMDO represents about 100 chief executives of our country's diverse and dynamic public art galleries and museums. Our mission statement asserts that CAMDO strengthens the ability of Canadian art museum and public art gallery directors to champion art and its significance in society. It is in this spirit we address the committee today.

Our members and their organizations are being deeply impacted by the COVID-19 pandemic. All art museums and galleries in Canada were forced to temporarily close our doors out of immediate concern for public health and safety. A handful of our organizations have recently begun to open to the public. However, many are predicting extended closures for a variety of reasons.

We understand that the government's first priority is saving lives and supporting all Canadians, many of whom are in critical, life-threatening situations, including our front-line workers and essential services, to whom we are grateful for their dedication and service.

CAMDO members believe passionately that art museums and galleries help people to imagine and create a better world. In these unprecedented times, Canada's art museums continue to offer information, learning opportunities and solace to the public. By connecting us, art and culture foster empathy and understanding of the broader human condition beyond our lived experiences.

We are inspired by the creation and outpouring of art in all its forms, which have made the last few months not only more tolerable but have transformed people's lives and helped us all see things from a different perspective. Over 95% of our galleries have shifted programming online and have continued to share resources with artists and our communities. Statistics Canada estimates that the direct economic impact of culture was $53.1 billion in Canada in 2017, or 2.7% of overall GDP. In visual and applied arts alone, that includes $10.2 million as key contributors to the gross domestic product.

We applaud and are grateful for the various measures the Government of Canada has undertaken to support the sector during COVID-19. Of note are the various wage subsidy programs as well as additional sector-specific funding, including $500 million from Canadian Heritage. Of special note has been the proactive and positive engagement of the Canada Council for the Arts.

These lifelines have had a meaningful and significant impact and enabled most of our organizations to continue and have widely kept our employees on the payroll.

I want to draw the attention of the committee to a significant portion of our member galleries and museums that may fall through the cracks with regard to federal support. Those are the myriad university and municipal art galleries from coast to coast that serve wide public audiences but are ineligible for federal funding due to jurisdictional structures. We would like to respectfully suggest that more could be done for university and municipal art galleries, which are ineligible for the wage subsidies due to their provincial mandates.

CAMDO conducted a national survey in April to explore how art museums are being affected and 62% of our galleries indicate increased costs of doing business, while at the same time about 75% are reporting lost revenue. In the commercial gallery sector worldwide it was reported that galleries expect a 72% drop in revenues and that one-third of commercial galleries worldwide do not expect to survive the crisis. The implications of this are profound, with an anticipated effect through the visual arts sector, including both individual artists and larger institutions.

Our sector anticipates new challenges as we emerge from the pandemic and seek ongoing support as part of the recovery. Added costs of ensuring public health and safety measures, such as increased staffing, digital technology and programs, IT to manage timed entry and contact tracing, plexiglass shields and cleaning, all of these will strain our resources, even as we expect reduced attendance and reduced revenue in the near term to support these costs.

We believe it is imperative to ensure that all Canada’s public art galleries and museums will receive additional support to cover these urgent items that have not otherwise been supported through previous programs, including the wage subsidies or the Canada Council for the Arts funding.

Over the long term, changes to tax incentives for philanthropy and matching endowment programs enacted by the federal government will be required to foster greater resiliency, reduce reliance on government funding and ensure that the dramatic and devastating impact of the pandemic does not occur again.

In conclusion, thanks in large part to the measures taken by the federal government so far, Canada’s art museums and public art galleries are well positioned to be active participants in leading us towards Canada’s economic recovery. Further support is an investment that will position art galleries and museums to be part of the recovery, to foster social inclusion, kick-start the economy and spur domestic tourism. These are roles Canada’s art museums and galleries are uniquely positioned and excited to realize with your support.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Kiendl.

We'll turn to Kevin Lee, with the Canadian Home Builders' Association.

[Kevin Lee, Chief Executive Officer, Canadian Home Builders' Association]

Thank you very much, Mr. Chair.

As you know, CHBA represents 9,000 member companies across Canada and an industry with over 1.3 million jobs and $142 billion in economic activity—under normal circumstances.

While the sector has been operating through the pandemic in some capacity, it has not been business as usual. Sales of new homes and starts have tailed off dramatically during the pandemic. Renovation companies have also slowed dramatically or stopped, especially when it comes to projects within people’s homes.

CHBA has very much welcomed the work of the government to provide emergency programs to support workers and businesses. We've also appreciated how responsive the government has been to feedback to make changes to close gaps and maximize impact. In particular, the Canada emergency business account and the Canada emergency wage subsidy program have helped support many businesses.

Changes to the reference period for the wage subsidy and the ability to use the cash or accrual accounting method have been very important, as have changes to CEBA to lower the minimum payroll threshold and to render dividends eligible. We're very thankful for those on-the-fly adjustments that have been made that have allowed many more of our challenged companies to qualify.

At the same time, though, as we have expressed in our ongoing dialogue with government, there remain outstanding challenges, particularly with regard to the wage subsidy program. The challenge is that in residential construction the revenue cycles are long and essentially 95% of the revenues don't accrue until the close of the home when the keys are handed to the homeowner. A sale made in early 2019, for example, with a small deposit of typically 5% is financed over many months or years, and revenue comes at closing.

Due to this revenue cycle, closings have still occurred in recent months from construction over the past year or years, but new sales have dried up. In these circumstances, many businesses haven't been able to meet the revenue-decline criteria of the wage subsidy program because of closings. Meanwhile, sales have plummeted and as a result many companies have very little or no new work and, therefore, no new financing and won't until sales pick up. As a result, they have laid off and will continue to lay off workers. Unfortunately, neither the changes to the reference period or to allow cash or accrual accounting capture this situation.

To make the program work better for this situation, CHBA has been recommending that the program criteria be amended to allow the fair value of contracts signed to be used in calculating the revenue. This would capture the steep decline in sales, which is the measure needed to capture these situations and keep workers employed or get them back.

A quick note, too, on financing is that our members will need to have the financial system meet the credit requirements of businesses trying to stay afloat in the short term and scale up construction over the longer term. Unfortunately, some of our companies are having issues securing the capital they need when opportunities present themselves during this difficult time, or to extend financing due to delayed closing and lost sales. It would be important that the measures put in place by government to provide more liquidity to the financial institutions actually translate into the financing requirements of businesses in our sector and other sectors.

As I know many of us are starting to think in these terms as well, I'd like to speak for a moment on recovery.

While the forecasts vary on the impact that COVID-19 will have on the housing market, there is no question that government policy can and should help to ensure housing markets remain stable, rather than dampen activity or slow the recovery. Housing can and should be a solid part of economic recovery as it has been in the past.

For those Canadians who have maintained their financial situation through the crisis, there should be opportunities for them to act on home ownership or to renovate their homes to meet the evolving needs of their situation. For many, COVID has placed new priorities on their needs and aspirations regarding their homes. A multiplier effect in residential construction to other related goods and services and jobs is extensive. Economic recovery and housing recovery go hand in hand.

In terms of recovery programming, the good thing about housing is that it can achieve many other policy objectives too. To that end, we have some recommendations.

One is removing the GST or HST on new housing across the continuum for 2020 and 2021 to improve affordability immediately, and post that period, index the existing rebate program to better reflect current house prices.

We recommend introducing a home renovation tax credit for 2020 and 2021 for all types of home renovations, and connected to that, a permanent energy retrofit tax credit to tackle climate change now and into the future.

As for mortgage financing, we need to encourage and enable those well-qualified Canadians still in a position to invest in home ownership to do so. Now more than ever, it makes sense to give them the option of a 30-year amortization on insured mortgages to help well-qualified buyers enter home ownership and also to free up much-needed rental space as our supply challenges remain.

It's also time to move forward with the previously announced changes to the stress test benchmark that were to come into effect on April 6 but were suspended.

Given the Bank of Canada's recommendation to move to longer-term mortgages, we also recommend supplementary changes to the stress test to better mitigate risks for Canadians and the financial system by incenting longer-term seven- and 10-year mortgage terms through a stepping down of the 200-point buffer for the longer-term mortgages with respect to the stress test.

These are changes that keep sound controls on consumer indebtedness risks while also enabling those still with the means and the dreams to achieve home ownership, this at a time when that activity can also be pivotal in the economic recovery.

Thank you very much. I look forward to any questions you may have.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Kevin.

We will turn now to the president of Fanshawe College, Peter Devlin.

Mr. Devlin.

[Peter Devlin, President, Fanshawe College]

Good afternoon, Chair Easter and members of the finance committee.

As Fanshawe's president, I am pleased to have the opportunity to speak on behalf of our 43,000 students and on the critical role that colleges play in preparing people for jobs.

COVID-19 has reinforced the significance of colleges within our communities and as stimulators of the economy across our country. Colleges and Institutes Canada, as well as Polytechnics Canada, have emphasized this, and we are proud members of both organizations.

What is important to remember is that colleges are agile. We quickly transformed our manufacturing and research capacities to produce PPE and to assist with research. We will be able to pivot just as swiftly in the recovery period. Colleges offer industries turnkey solutions for industry needs, providing creative solutions and developing programming in order to have the talent pipeline meet workforce demands.

I need to emphasize that COVID-19 has had a serious financial impact on Fanshawe. We anticipate a tuition and ancillary fee revenue loss of $54 million. In addition, we expect supplementary COVID-related expenses of $2 million to equip the workforce with remote accessibility and to prepare for a safe learning environment. This year's fiscal projected loss of $56 million, which represents 15% of our overall annual budget, is being mitigated by significant expense reductions and a hiring freeze.

Our priority remains safeguarding our students, faculty and staff, and giving our learners the best experience possible in creating a pathway for their success. We believe the government can play an important role as we look to the other side of COVID.

For a number of years, the Government of Canada's innovation and skills plan has been important in helping Canadian businesses grow, scale up, innovate and export, while creating quality jobs and wealth for Canadians.

As noted, in February Fanshawe embarked on a $58-million investment to create “Innovation Village”. Funding has been secured from the City of London, and we hope for similar support from the province and the federal government. Innovation Village is a physical and virtual hub that brings business, industry and the not-for-profit sector to the front door of Fanshawe, fostering student experiential learning, business growth, scale-up and innovation to support wealth generation and job growth within the region. The total annual projected impact by 2030 will be $64 million, generating $137 million each year in increased economic spinoff.

This leads to my final point this afternoon, the importance of the two upper levels of government engaging with municipalities, colleges, universities and other public sector organizations to drive the economy through infrastructure investments.

Several years ago, the federal government rolled out the strategic infrastructure fund. The application process was efficient and the decisions on the awards were announced quickly. It was one of the most effective tools we have seen to support the building of communities through strategic partnerships. Fanshawe took advantage of SIF and created the centre for applied research and innovation in biotechnology, or CARIB. CARIB advances biotechnology, chemistry and environmental technology programs through research and innovation with industry collaborations and partnerships. In one current example, industry and our CARIB researchers are conducting cutting-edge research that may translate into effective treatment for COVID-19. Testing is currently under way and the preliminary results are showing promise.

Fanshawe research is also working on additional studies, including the ability to manufacture potential therapeutics on a large scale and examining cannabis extract therapies that have the potential to treat blood clots and inflammation that occur in life-threatening COVID-19 cases. The work being done in applied research at Fanshawe is very responsive to Canada's immediate needs. The collective knowledge and advanced facilities within our institution allow our team to address emerging challenges. SIF supported the development of modern labs, which, together with the wisdom and devotion of faculty and staff, allow us to produce tangible results that are critical in today's world.

Similarly, a new infrastructure program supported by the federal and provincial governments will allow Fanshawe to continue doing the work that has lasting and profound results.

An investment in Canada's post-secondary infrastructure also ensures training can occur in an environment that responds to physical distancing and other safety protocols while supporting green retrofits. Fanshawe has two shovel-ready projects ready to go as soon as the program is announced.

Thank you again for providing time for Fanshawe. We are part of your post-recovery solution and look forward to working with you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Devlin.

We'll now turn to Genome Canada, with Rob Annan, president and CEO; and Pari Johnston, vice-president, policy and public affairs.

The floor is yours, Mr. Annan.

[Dr. Rob Annan, President and Chief Executive Officer, Genome Canada]

Thank you very much, Mr. Chair.

I am very pleased to be here today on behalf of Genome Canada. I'm joined by Pari Johnston, who is our vice-president of policy and public affairs.

Today I'm going to talk to you about genomics, which is the branch of science that looks at the molecular underpinnings of living things. It is responsible for today's most cutting-edge biotechnologies, from DNA sequencing to synthetic biology to gene editing. I'm going to talk about how this science is helping us address the COVID pandemic. First I will say a couple of words about who we are.

Genome Canada is an independent not-for-profit that invests in large-scale Canadian science and technology to translate discoveries into valuable services and products across all sectors of the Canadian economy. We work to translate cutting-edge science into real-world applications that are transforming health care, the environment, agriculture, forestry, fisheries, energy and mining.

We work closely with provincial and regional partners through a federated collaborative model with six regional genome centres, matching national breadth with regional depth. We partner with universities, small and medium-sized companies, hospitals and public health labs.

This year is our 20th anniversary. Those 20 years have seen the birth and early growth of genomics, and Genome Canada, through the support of the federal government, has driven the development of a world-class network of Canadian researchers, infrastructures and technology. Today, those investments are proving essential as we mobilize quickly on the COVID pandemic, a rapid response that was 20 years in the making.

I will say a few words about how genomics helps us in the current moment. Viruses are simple but tricky. They're simple insofar as they're composed of just a string of nucleic acid—DNA or RNA—with an envelope that surrounds them. However, they are tricky in how they infect us, how they evade our immune system and how they mutate and spread.

Genomics provides us with the tools to read those nucleic acids, to get the viral blueprint, to understand the basic building blocks of the virus. That information can help inform development of vaccines and therapeutics and is invaluable in helping us track and trace the spread of the virus within Canada and around the world. Genomics can also help us understand the wide variation in responses among those who get sick and explore the genetic factors that might be involved.

Canadian researchers have been engaged in COVID-19 research from the earliest days of the pandemic. Researchers at Sunnybrook Hospital and McMaster University were among the first in the world to isolate and sequence the genome of the virus. Other related activities have been happening in pockets across Canada. As a result, Genome Canada has pulled together the Canadian COVID Genomics Network, or what we call CanCOGeN, a grassroots effort led by Genome Canada but driven by Canadian scientists, government public health labs and genomics institutions. It is dedicated to mounting a coordinated, connected national genomics response to COVID-19.

On April 23, CanCOGeN was allocated $40 million in federal support to achieve several key objectives: first, to sequence up to 150,000 viral samples and 10,000 samples from Canadian patients; then to coordinate data collection and data sharing across the provinces; then to pool the data for analysis and share results with public health authorities; and finally, to share those results globally with partners in the U.K., the U.S. and in global open-source databases. CanCOGeN will contribute to better public health policy, will inform drug development, will enable studies of future novel viruses and will ensure that Canada has a sustainable national genomics infrastructure to combat both the current pandemic and the next one.

What's next? Already looking ahead, Canada's genomics enterprise will be a partner in Canada's resilient recovery. We are ready to deploy made-in-Canada solutions through science and innovation to address Canadian issues unique to our geography and our population.

Canada is a world leader in large-scale biodata production and analysis, gene editing, synthetic biology, novel diagnostics and much more. Genome Canada supports diverse projects, such as green automobile manufacturing; improving feed for fish, poultry and swine; bioremediation of oil spills; and personalized diagnostic tools for lung transplants for children with rare diseases.

We're supporting the transformation of Canadian sectors. The demand for our programming is growing across industries, helping to drive business investment in innovation in Canada. A new report by McKinsey predicts that 60% of physical inputs to the future global economy could be produced from biological sources, identifying a biorevolution that could result in a direct economic impact of $4 trillion a year over the next 10 to 20 years.

In conclusion, Genome Canada was able to mobilize so quickly in this crisis because Canada has invested wisely in genomics science and technologies for 20 years. It's impossible to predict where today's research will be needed in the future, but it's clear that today's investments in research and researchers are essential for addressing tomorrow's challenges. Our rapid response was 20 years in the making. As Canada rebuilds, we at Genome Canada are working to address the challenges and seize the opportunities of the coming decades.

Thank you for the invitation to be here today. We'll be happy to answer any of the members' questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Annan.

We'll now turn to McCoy Global Inc., Mr. Rakievich, president and CEO.

[Jim Rakievich, President and Chief Executive Officer, McCoy Global Inc.]

Thank you, Chairman.

Good afternoon and thank you for inviting me to speak to the finance committee regarding the federal government's response to the COVID-19 pandemic.

I am the president and CEO of McCoy Global Inc. McCoy was established in 1914 as a blacksmith shop in Edmonton, Alberta. Over the decades, the company has adapted, evolved and grown. McCoy is now a publicly traded company listed on the TSX. We have operations in Texas, Louisiana and the United Arab Emirates. Edmonton remains home to our corporate headquarters, which is where I am based.

I do want to add that I very much appreciate the inclusion of all the universities and colleges and the groups that represent them today. I am a graduate of the Northern Alberta Institute of Technology. Over the years McCoy has been a big supporter of NAIT and other institutions, including the U of A. When I look at our corporate folks here in Canada, most of them have graduated from one institution or another. Particularly in Alberta, NAIT has been a big difference for us. I wanted to give a shout-out there.

What do we do at McCoy? We design, produce and distribute technologies that are used by global service companies during the completion stage of well construction. Typically, our customers are drilling for oil or natural gas, both land and offshore, but may also serve customers servicing geothermal wells. Our technologies are both mechanical and digital. Typically, we ship products or provide technical support to an average of 50 countries across the globe annually.

What has been the COVID-19 impact on McCoy? McCoy Global has been significantly impacted by the COVID-19 pandemic. As well as for most of our industry peers, the February production war between Russia and OPEC provided the perfect storm for a historic industry collapse. McCoy has not yet felt the full impact that the pandemic will have on the demand for our products and services. Our issue is not the present; our issue is the headwinds we will face over the second half of 2020 and well into 2021.

In our business, we entered 2020 with a reasonable backlog of orders that has provided the company with work that can carry us through the first half of this year. However, order intake for the back half of this year has been, and will continue to be, significantly challenged. McCoy has taken proactive steps to prepare the company for what we are expecting to be a very difficult period. These actions include salary and wage rollbacks globally, unfortunately some layoffs, negotiations with landlords, significant reductions in general and administrative expenses, and curtailment of budgeted capital expenditures for technology development plans.

McCoy has a history of prudent balance sheet management, but this market backdrop has created a significant liquidity crisis for the entire oil and gas industry. Major banks in Canada and the United States have almost zero appetite for providing credit facilities in our industries, and the capital markets are not open for business in the current environment. We have been communicating with several Canadian chartered banks to partner with us so that McCoy can restructure its debt in order to provide relief and so that we can weather this storm. We have a great relationship with EDC and are currently in discussions with them and a Canadian chartered bank to bring two credit facilities together.

McCoy has significant operations in the United States. We were fortunate to qualify for the paycheck protection program, or PPP, loan, which will be a critical piece to our survival as well.

I would like to make some points on the Canadian government COVID-19 response to businesses. I will keep my comments focused on McCoy's experience as a business and on specific areas for improvement.

My first comment is regarding clock speed. It has been frustrating, frankly, to hear announcements of funding and to then wait and wait for details, rules, application forms and so on. These things take time, and I understand that.

The designated funding for oil and gas companies was expected in days, if not hours, after the announcement. That turned into weeks. This eventual announcement was very specific to well abandonment efforts, which was welcome, but nothing was done to support the ongoing industry specifically.

Businesses are desperate for help. I urge the federal government to break through any of the barriers to speed up the process. As company leaders, we are also navigating through a business environment with no charts or instruments, but we have to pivot and be decisive quickly.

Our application for funding from EDC was made on March 10. We are anticipating funding, at the earliest, in August 2020.

In the U.S. as a comparison, our application for the PPP was clear and straightforward. Application submission to full receipt of funds in our bank account occurred over five business days.

My second point on the COVID-19 response is on the confusing and changing rules for funding. Canadian banks, BDC and EDC have all been challenged in understanding the application requirements and the rules under which programs companies can apply. For example, when the BCAP was announced, it appeared to be an easy decision for a chartered bank to step up to the plate, since the federal government, via EDC and BDC, was backstopping the bank loans significantly.

The problem was the 12-month support period, which in business terms is a blink of the eye. Finally, this issue was addressed with an extension to 60 from 12 months, but here again we were told the rules for the change were not yet clear, and they have not yet been clearly communicated.

There also seems to be a lack of transparency. McCoy appeared to qualify for debt facility from BDC, and that application was made prior to COVID-19. This application in turn was eventually sent up the chain for final committee approval, where we were denied. The criteria looked like a perfect fit, but the final decisions appeared subjective. These programs should be based on clear, transparent rules applied on a fair and consistent basis.

In summary, McCoy and many of our peers in Alberta either need liquidity help now or very soon. My message today is that the oil and gas industry in many cases is just beginning to experience the full impact the COVID-19 pandemic will have on revenues. Contracts and order backlogs are being completed with nothing coming in to fill these voids. If we are left to our own capital resources, bankruptcies and continued layoffs will result.

We are definitely not looking for a handout. What we are asking for is balance sheet support to survive and eventually thrive again. I ask that the finance committee look at these programs and consider how to clearly and efficiently support Canadian companies through fair and transparent loan financing before it's too late.

Thank you for your time. I appreciate having the opportunity to provide our view on the impact of COVID-19. I look forward to any questions later.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Rakievich. We, too, appreciate your remarks and as you see it from your perspective.

Before we go to the National Research Council of Canada, this is a heads-up to committee members on the speaking order in the first round. We will start with Mr. Cooper, then Mr. Fragiskatos, Mr. Brunelle-Duceppe and Mr. Julian.

We're turning now to the National Research Council of Canada. We have Roger Scott-Douglas, secretary general. I'll let you introduce the others with you, Mr. Scott-Douglas, or whoever is starting.

[Roger Scott-Douglas, Secretary General, National Research Council of Canada]

Thanks very much, Mr. Chair, committee members and other witnesses. It's a pleasure indeed to be here.

I'm Roger Scott-Douglas, secretary general of the National Research Council. I'm very happy to be joined today by David Lisk, vice-president, industrial research assistance program; Jean-François Houle, the vice-president responsible for our COVID pandemic challenge response program; and Lakshmi Krishnan, director general, human health therapeutics branch.

Like others, I will begin by briefly explaining a little bit about the National Research Council.

We are the largest federal science organization, with close to $1.2 billion in expenditures. Over the course of the last 104 years that we've been existence, we've served as an instrument of the federal government in trying to find scientific and technological solutions to significant challenges, which is very much the call of the moment. We do that in two principal ways. We have a research and development side where over 2,000 scientists, engineers and technicians work in 14 research centres across 22 sites. On the IRAP side, the industrial research assistance program side, we also have about 400 people of whom 255 are industrial technology advisers working with close to 8,000 firms annually—high-potential, early-stage innovative firms that are so important to the innovation economy of the country.

In the context of COVID, the National Research Council, as part of the Prime Minister's announcement of the $1 billion that's been given over to COVID, received funding and support for, effectively, seven measures, which I would like to briefly outline. Then my colleagues and I would be most interested in answering any questions that members might have. I'll walk through each of them at a very high level, explaining a little bit of what lies behind them. I might, before getting into those details, talk about the important work the National Research Council, along with other science organizations across the country, has tried to provide to the community.

We've had over 350 requests for technical advice, for short-term support for companies, to provide such things as the quality assurance on N95 masks that the Public Health Agency has asked of us, and for other measures that support the community, individuals, the provision of personal protective equipment, and so on and so forth. This I say only to show how connected we are with both the larger federal group as well as communities across the country.

In terms of specific measures, I'll run through the seven key things.

The first—and this is Jean-François Houle's responsibility—is the pandemic response challenge program. We were fortunate enough to receive $15 million in the medical countermeasures announcement by the Prime Minister. There are essentially four themes or pillars to that work. All of these are collaborative programs where the National Research Council scientists pair up their expertise with individuals in academia and the private sector to come up with technological and scientific solutions to these challenges. These are short-term applied scientific efforts. The first theme is around rapid detection and diagnosis. The second theme is around therapeutics and vaccines. The third theme is monitoring and surveillance, data analysis, tracking for testing and that kind of thing. The fourth is around enabling adaptive responses, including innovative solutions for the delivery of health care. We have in the organization both the human health therapeutics branch, of which Lakshmi is the director general, and also the medical devices lab, which Jean-François will be able to speak about.

The second big thrust is the announcement of, in total, about $44 million that will be used by the National Research Council to upgrade and enhance the capacity of our Royalmount biomanufacturing facility.

It's currently a research lab. We're going to be upgrading it such that it obtains levels of good manufacturing practices and enables us to provide testing for promising vaccine candidates. Ultimately, once a candidate has been found, we hope it provides the successful industrial production for first responders and so forth.

We have three vaccine collaborations as well, with VBI Vaccines , an Ottawa-based company with an attachment to Massachusetts; VIDO-InterVac from the University of Saskatchewan; and CanSino Biologics in China, which is one of the leading international vaccine researchers.

In addition to that, on the IRAP side, which I mentioned Dave Lisk was responsible for, we're working with Innovation Canada under the innovation solutions Canada program. We have been given $15 million to set up challenges for which innovative SMEs and others will provide technological solutions. We've launched three challenges so far, surveying and assessing quite a few proposals for low-cost sensors, for diagnostic kits and for made-in-Canada filtration material. We'll be launching a couple more in the days ahead.

In addition to that, IRAP has kind of red-circled, if I can put it that way, and reallocated $12.5 million of its budget to help innovative SMEs develop proposals for the kinds of products necessary for the COVID response, such as PPE, testing diagnostics, and tracking and detection products, and that kind of work. We've also organized subject matter expert teams around those broad themes to provide expert analysis when we can.

The next area, the wage subsidy, is a very significant support. Several of the witnesses have spoken about it. Some groups fell between the gaps, particularly early-stage pre-revenue innovative firms, high-potential firms. The government has provided $250 million to IRAP for the innovation assistance program, which effectively provides highly qualified personnel with a wage subsidy—it's about $10,000 per employee, retroactive to April 1—with the idea of delivering the program as quickly as possible. Unlike others, it is not an entitlement program; it's a discretionary program. We're evaluating firms with the highest potential to go forward. We're happy to say that as of May 28, we have already established 1,939 contribution agreements for close to $200 million.

The final thrust of work, which is a critically important part of our future, is youth, particularly those highly qualified future STEM innovators. In that regard, we have a couple of very important programs under way. The government has a long-standing youth employment program. It was topped up to the extent of about $153 million—IRAP will have a portion of that—and will be targeting SMEs, meeting their needs to keep graduates. Within the National Research Council, we have a need to bring on STEM grad students and post-docs, and we've allocated $7.5 million to do that.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you to all the witnesses for their presentations.

I'm going to have to cut us back to five-minute rounds so we can try to get everybody in for questions.

We'll start with you, Mr. Cooper.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Thank you, Mr. Chair.

I'll direct my first question to Mr. Rakievich of McCoy.

Did I hear you correctly that McCoy has applied for an EDC loan?

[Jim Rakievich]

Yes, and I can update you on that.

We have an existing facility with EDC. What we are trying to do with EDC is to consolidate that debt with another debt that is due in 2021, which we know with the upcoming revenue drop is going to cause us some liquidity issues. We've been working very hard with EDC.

Here's the good news. Since writing and submitting my script, I got a term sheet. I got it last night and signed it. I feel good about that. The issue is that you need to have a bank participate in the three-way get-together, and that is always difficult, especially when banks do not have an appetite. However, it looks like we've been able to work around that in the last 24 hours.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Right, sure. That's good news, but I just want to, first of all, make sure that I understand you correctly. You applied on March 10, but are now waiting until August 20 to receive a dime.

[Jim Rakievich]

Yes. What happens is that with EDC, like most conventional lenders, even though I signed the terms sheet that's drafted, it has to get up to committee approval. Then once that starts, the lawyers have to do their thing, and we have to provide a bunch of documentation. There's a whole bunch of back and forth, and literally—

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

There is all of this back and forth, though, months and months of back and forth. You noted that in the United States, McCoy or its U.S. affiliate received liquidity virtually within days.

[Jim Rakievich]

Five business days.

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

Five business days. There's quite a contrast between the U.S. approach and this government's approach. I would submit that it's a failed approach if it's taking months. Would you not agree?

[Jim Rakievich]

I would say that it has significant room for improvement.