Government Operations Committee on Dec. 9th, 2020

[Rory Olson]

I think it would be extremely difficult to calculate what the degree of subsidy is relative to a given contract. A company like Nuctech is fully sponsored by the Chinese government, and as such, the financial commitment that the Chinese government has made is endless. There is nothing finite about it, so anything they do.... We have been in bids against Nuctech around the world, and in these reverse auctions, they will just continue to go lower and lower and lower. There is absolutely no floor. How do you quantify what the value of the subsidy is and then offset that and add it back to their price?

It would be extremely difficult, in my opinion.

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

Thank you for your straightforward answer. I greatly appreciate it.

A number of foreign companies, especially Chinese companies, have representatives in Canada who are Canadian citizens. I'll focus on the Chinese companies.

As you know, in 2017, the intelligence law was enforced. This law required every Chinese citizen to provide information to the government.

In your opinion, if a Canadian citizen is hired by Nuctech, are they also subject to China's 2017 law?

[Rory Olson]

Is that a question for me?

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

If you can answer it, yes, Mr. Olson. If not, perhaps Mr. Buric could answer it.

[Rory Olson]

Go to Mr. Buric by all means. I'm not qualified to answer.

[Sime Buric]

I'm not an expert in government policy, especially foreign government policy, so I can't comment on that.

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

Mr. Bergen, can you answer my question?

[Benjamin Bergen]

I'm not able to comment on it, but it is an interesting question for sure.

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

Thank you.

[Neil Desai]

Maybe I could provide some...not to the specific, but to the general question being asked.

As a Canadian company trying to sell in 94 different countries, as you move up market in security, significant questions come from foreign governments, such as how many nationals you employ, or if you have a separate board of directors for that country where the majority of members of that board of directors are nationals of that country.

As you, again, move further up the security spectrum in terms of risk, then it becomes “Is the development for this product done in country? Can it be validated in country? Would there be opposition to that if the deal size got to a certain level?” Among astute countries in the cybersecurity and broader security space, there's usually a risk opportunity matrix in the policy, where they have expectations of the vendors that increase as the risk increases.

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

Mr. Olson, do you have anything to add?

[Rory Olson]

I'd like to add that small companies like ours spend many millions of dollars a year developing their research and development. To be sure, a minuscule amount comes back to us through SR and ED and other potential subsidies, but not nearly what we put out. To look at the fact that a Chinese company, or any other company, can just hire a couple of people here and all of a sudden that makes them on par with a Canadian company deploying and spending millions, employing hundreds of Canadians, creating and participating in the economic ecosystem and supply chain, I don't see how that equation could ever work out.

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

Thank you.

Mr. Desai, in your opinion, should the government automatically implement security provisions when purchasing equipment with electronic components?

I'm talking about high-security provisions.

[Neil Desai]

I think it really depends on the type of technology being procured and where the security risk assessment is done. I think other witnesses have talked about leading agencies within the government context that have those technical skills to review the nature of a procurement and what the security risk is and then what mitigation should be put in within the procurement program.

I feel as though we're focused in very narrow lanes when it comes to procurement. It's buying at the lowest cost and then security is a separate consideration after the fact. Economic development is another consideration for another group of people at ISED. I think we need to be able to walk and chew gum in our public policy. We need to start looking at them as competing priorities but ones we want to reconcile. We're never going to get it perfect but we need to consider them through the procurement and also start looking at them as highly iterative. The actual technologies are built in an iterative way but the procurements are not. They are long—

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Desai. I apologize for interrupting you.

Mr. Green, you have six minutes.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you.

The first question I have is for VOTI. I understand that you provide technologies through your partners, through X-rays and security solutions. I believe you have a contract with CBSA, and I'm just wondering if you'd care to expand on the services you provide CBSA.

[Rory Olson]

We've supplied CBSA, in response to a tender, with X-ray machines, smaller tunnel-size 60-40 machines and one-metre-by-one-metre tunnel-size machines. We have provided them with quite advanced technology per their request. We worked very much hand in hand with them, and we continue to. I believe the fruits of that labour will have bestowed great benefits for CBSA in terms of their detection capability.

[Matthew Green, NDP, Hamilton Centre, ON]

That's a good opportunity for a good sales pitch there. Obviously you were successful in that bid. In your opinion, based on the discussions that we're having here, if Nuctech had also bid on that similar technology, do you believe that, based on CBSA's procurement, you would have been underbid and potentially would have lost that contract as well?

[Rory Olson]

Yes.

[Matthew Green, NDP, Hamilton Centre, ON]

Can you comment on the differences between the two? Was it the RFP or the RFQ that pre-qualified you in a different way? Are there any distinctions between the two bidding processes that you might be able to highlight for this committee?

[Rory Olson]

I don't even know if Nuctech bid on that.

[Matthew Green, NDP, Hamilton Centre, ON]

That's fair.

The question I had for K'(Prime) when I was floating around there in the beginning was about the millimetre wave technology, which I saw on their website, that they offer to their partners. Is that specifically for X-rays or is that also transistors and other big stuff?

[Sime Buric]

Millimetre wave technology is a complementary technique. It's meant for body screening. It allows for screening of anything through clothing material. It doesn't penetrate your skin, so it's not meant for packages. This technology we are bidding on right now is a human screening technology.

[Matthew Green, NDP, Hamilton Centre, ON]

This is tangential, only for my own personal information because I'm interested in the conversations about Huawei. What application does it have to 5G?

[Sime Buric]

Currently, it's not connected to 5G in any way in terms of how the technology is being used.