Government Operations Committee on April 23rd, 2009

[Ron van Wachem]

Thank you.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

I wish to know how long you have been doing business with the Government of Canada.

[Ron van Wachem]

It's been 25 years.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Have you felt the effects of contract consolidation, or heard about this?

[Ron van Wachem]

This is a problem that has been going on for many years. Now that the government has decided to spend a lot more money on defence, arctic offshore support, the coast guard, and those types of issues, it's becoming a much more important issue to me.

We are trying to survive right now. It's very hard for us to survive, given the local economy here with fishing and forestry. The government has shut down part of the salmon fishery on the west coast with the recent Pacific Salmon Treaty. That is also affecting us, and there was no consultation with the industry.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

In October 2007, you were invited by Michael Fortier, who was then the Minister of Public Works, to attend a meeting about his very commendable objective of granting 40% of the dollar value of government contracts to SMEs. Since then, if I understand correctly, neither you nor other businesses you know have noted any marked increase in the number of contracts awarded to SMEs in western Canada.

[Ron van Wachem]

That is correct, and I would say the situation is similar in Quebec and on the east coast.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Do you know the reasons why?

[Ron van Wachem]

I do not know why. I believe it should be treated with the upmost importance, given the amount of money the government is spending on this industry and the amount of money they will be spending in the future.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Mr. van Wachem, you are quite critical of the Office of Small and Medium Enterprises. To your mind, how effective is the office? I'm not asking you to compare it to the U.S. Small Business Administration. Do you consider it of little or no effectiveness?

[Ron van Wachem]

I would say they are not efficient. They need to have a mandate. They were given a mandate, and I don't see how they are going to reach it, given what they have done in the past. In the last two years nothing has happened, I can tell you that.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Do you know of businesses in your sector that would have had any dealings with SMEs?

[Ron van Wachem]

Nobody in our sector who I've talked to, on either coast or in Quebec, has dealt with OSME or had any benefit from OSME.

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

All right. Would you be so kind as to table with this committee the names of businesses that would have liked to deal with the Office of Small and Medium Enterprises, if you are aware of any? Of these businesses, if any dealt with the office, were any of them dissatisfied with it, or did any not obtain concrete results? This would allow the committee to judge its effectiveness and relevance.

[Ron van Wachem]

I could give you the names of many businesses. There might be too many to list. I would say that some of those businesses do not even know that OSME exists. I know they exist because they made a presentation to a forum I was at, and I saw that Minister Fortier was coming. At the recent procurement conference, OSME wasn't there, so how would they know it even exists?

[Diane Bourgeois, Bloc, Terrebonne—Blainville, QC]

Mr. van Wachem, I'm eternally grateful.

[The Chair, Liberal, Derek Lee]

Thank you.

Mr. Gourde is next for a round.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Good afternoon, Mr. van Wachem. I am a member from the Quebec region, from the south shore, near Lévis. In my family, we've worked in the shipyards. My father and some of my uncles worked for Davie Shipyards. My father is now 90 years old. I am therefore well aware of the peaks and valleys this sector has been through in the last 60 years.

What you are saying is very interesting. Through the use of reserved contracts, how could... What message would you have sent to Public Works or to the government to help SMEs obtain contracts?

Over the past 20 years, Canada seems to have had difficulty being competitive in the global shipbuilding markets, as regards certain ships. I believe that in the future, the sector will recover thanks to new technologies, the quality of our workforce, government support, and the abundant availability in Canada of raw materials such as steel, which is used in shipbuilding.

What can you do to help your sector?

[Ron van Wachem]

Thank you very much. I'm very glad to hear that your family was involved in this industry and it's in your blood. Sometimes it can get very difficult. It's in your blood, and that's why I'm here today.

We recently built ferries in Germany, as I mentioned in my evidence. BC Ferries spent close to $1 billion in Germany. They had one company, which was a large multinational on the west coast, that wanted to build them. They tried to have BC Ferries build them here and they would not do it. They went to a company in Germany that has been heavily supported by the government over the last 20 years. Germany looked at rationalizing the industry 20 or 30 years ago, and I think we're almost in that kind of a state now, or we're not going to have an industry at all.

Small and medium-sized enterprises are the innovators, and what we need, what we don't have, is this cooperation among everybody in the industry and in the government to try to create an industry here that is going to be here 30 years from now. Germany did that 20 to 30 years ago, and the result is that Canada is buying ferries from Germany. Canada is a maritime nation, with over 40 ferries in British Columbia alone, just in the B.C. ferry fleet. They also have highway ferries. New Brunswick, Nova Scotia, and Newfoundland all have ferries. You have ships plying the Great Lakes waters, yet we build not one of them.

Government procurement needs to be part of that solution, and we need to target those types of vessels that the government wants, and produce vessels, so that 30 years from now we have people working in this industry producing very high-value vessels to the international markets. We can do this. We have a large tug and barge industry on both coasts; we are producing tugs on the east coast for the world market.

With government assistance and with the government will to get this industry to sit down...as opposed to having small to medium-sized enterprises fighting with the multinationals, we should be cooperating to try to produce an industry. Government procurement, by giving the work to multinationals, is hampering our ability to compete worldwide. We need to look at the shipyard industry being supported from an infrastructure point of view, from a research and development point of view, and the government needs to look at this as creating an industry, as we are a large maritime nation. We need to realize that.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Mr. van Wachem, does the global market for shipbuilding hold promise for the next 20 to 25 years? These days, Canada is a small player, but can it take a greater market share based on these new concepts? Because really, a ship fundamentally floats on water...

[Ron van Wachem]

I think we can get our share of specialized vessels that will be built. For instance, Japan and Korea pretty well kept their numbers up internationally by specializing in vessels like liquid natural gas vessels in Korea and specialized freighter-type vessels in Japan. Certainly you see China picking up part of those markets, but you need to look at what Germany did. Germany said, what do we build and what do we need? They need naval vessels and they need ferries in their local economy, so they became very good at that.

We can do that in this country. We can build certain types of navy vessels. We can look at the SMEs and the multinationals being involved together over the next 20 years, with the help of government procurement and with the help of government, and we will be able to compete internationally, yes.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

Thank you very much. I know that the committee will take note of all of your recommendations.

[The Chair, Liberal, Derek Lee]

Thank you.

I'll turn to Mr. Bagnell now.

[Larry Bagnell, Liberal, Yukon, YT]

Thank you for coming.

I wonder if you could tell us if there's any difference or weaknesses in military procurement as opposed to regular procurement of boats or coast guard procurement of boats.

Just some background in relation to northern military boats, the government has been ordering or not ordering.... I guess it was a bit disconcerting when the Prime Minister said he was going to order three icebreakers and then cut it back to one; they said they were going to order ice-strengthened supply ships and then cancelled that order.

What about the northern patrol boats? Are you getting some of that business for the northern patrol fleets? I know they can only go through one meter of ice when there's six meters.

[Ron van Wachem]

No, we just can't bid on these contracts. They're far too large, and that's the issue. We should be benefiting from all these contracts. For the past contracts that were awarded, like the FELEX, the mid-life upgrade of the frigates, we should have received part of that work. That's $400 million on the west coast. We've already got 80% going to multinational. Why should it now be more? What do they want it to be, 100%? That's what's happening. The submarines are getting worked on out here. A $1.5 billion in-service support contract was just awarded. I'm not going to get a dime of that.

For some reason there's no interest in Public Works to be looking at the playing field they've created and how they're going to fix it, because it's so unlevel right now.