Government Operations Committee on March 29th, 2022

[Kelly McCauley, Conservative, Edmonton West, AB]

Mr. Williams, go ahead.

[Alan Williams]

I would make a few comments.

First, as David said, we don't know. I'm not sure we really want to know, but that's the way the game is played around the world. I'm not so sure we would want to do a disservice to our industry relative to what's going on everywhere else.

I will make the point that the change in how we use ITB to select a winning bidder is, to me, completely flawed. As you are aware, the old industrial and regional benefits structure basically said that any winning bid is going to be decided by the technical bid and the price. Every company would have to submit an industrial plan, which was rated pass/fail. Everybody knew how to play the game and nobody failed the industrial plan.

What we've done now, though—and we've seen it in the F-35 competition—is assign up to 20% to ITB. It didn't happen in this case, but I would say that there is a high risk going forward that if you put this much weight on industrial benefits, you are basically saying that you will be sacrificing optimum solutions for theoretical jobs in the future.

I'm putting on my former ADM—

[The Chair, Conservative, Robert Gordon Kitchen]

Excuse me, Mr. Williams. I apologize again for interrupting you. Unfortunately, it's due to time.

[Alan Williams]

That's fine.

[The Chair, Conservative, Robert Gordon Kitchen]

If there is a further response that you feel you can add to that, please submit that to the clerk in writing. I'd appreciate that.

We'll now go to Mr. Kusmierczyk for five minutes.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Thank you, Mr. Chair.

I really appreciate the opportunity today to ask a few questions of Professor Leuprecht, whose book Spheres of Governance, which he co-edited with Professor Lazar, really influenced my thinking around multi-level governance. I was really looking forward to this exchange.

In a 2016 Toronto Star article, Professor, you talked about the Danish fighter jet procurement process. You stated then that “which jet Canada buys and how many is secondary to having a proper process”. Today we heard the testimony from Mr. Williams, who called the sole-source procurement process that took place under the previous government “an abomination”. We heard Mr. Perry talk about the lack of trust that defined that particular procurement process of the previous government.

Can you tell us why, in your opinion, a transparent and independent procurement process for these fighter jets is important?

[Dr. Christian Leuprecht]

In any procurement, you have three objectives. You want to make sure that you get what you are buying on time, on budget and with the capabilities you need.

It seems that in this country, we have great difficulties doing any of those three with the procurements that we ask for, let alone getting all three of those right. I think a proper process can get us much closer to hitting, hopefully, all three of those targets.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

What's the benefit of having a competitive process, as opposed to a sole source, which was the model used by the previous government?

[Dr. Christian Leuprecht]

Aside from the outcomes that we might get in a market situation, there is an important component of legitimacy to a proper competitive process. I think my colleagues alluded to the fact that considerable damage has been done to the credibility of the procurement process and the confidence that Canadians have in that process.

I do think that perhaps too much of the blame is frequently assigned to the department, the armed forces and the civil servants. Not enough blame is accepted by the politicians who ultimately make the decisions, as well as the opposition that tries to score political points on procurement.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

I'll switch gears a little bit.

You've written quite a lot about Canada's support for the mission in Latvia and specifically NATO's enhanced forward presence.

What do you think the benefits will be of having these 88 fighter jets delivered in the future, in general for Canada? Specifically, how do you see this new capability supporting or impacting Canada's role in NATO's enhanced forward presence, if at all?

[Dr. Christian Leuprecht]

As I've remarked repeatedly in recent weeks, we can talk about deterrence, but that actually involves, for instance, having a fighter jet that can defeat Russian air defences. The F-35 is the one plane that can actually perform on that particular metric. In terms of military deterrence, it goes a long way.

However, to deploy these planes effectively, we need to understand that we're not first and foremost buying a plane. I think David alluded to this. We're buying a data platform. As we know, in the 21st century, warfare is first and foremost about data and dataflows.

Significant modernization is required within the department, both on the network side—and government has not foreseen additional investments in networks, so we're starting to tread water and will quickly start falling behind—as well as in the capacity of the department to have a data strategy and to digitize the entire department.

Talking about the fighter capability of the F-35 is one component of a much broader conversation to which we still need to pay close attention.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Thank you.

I wanted to switch gears one final time to economic benefits. There are well over 100 Canadian companies that have benefited from the F-35 program. When we're talking about economic opportunity, we're not just talking about a piece of the pie for the building of the 88 Royal Canadian Air Force jets contract. We're talking about a piece of the pie to build service and supply the thousands of F-35s that are expected to be built and flown in North America over the next 20 to 30 years. This was something that Mr. Perry, I believe, alluded to as well.

Can you talk a little bit about the economic benefits to the country, speaking from your experience of looking at other procurement programs?

[Dr. Christian Leuprecht]

As my defence economics colleague Ugurhan Berkok would likely tell you, there's no methodology to actually measure these particular benefits that is broadly accepted by defence economists. The benefits are whatever we say they are.

I would say that the investment in the benefits should primarily be in building capacity for Canada to become...and to maintain a high-tech defence technology capability, rather than how many jobs we might be able to provide in any one particular riding. That is ultimately the sustainable component—seeing ITBs as an investment in sustainability for Canadian industry more broadly, rather than benefits that might accrue to any one riding.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you.

Now we'll go to Mrs. Vignola, for two and a half minutes.

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

Thank you very much.

I will build on to what you just said, Mr. Perry.

Mr. Williams said earlier in his presentation that the participation of those 100 or so Canadian businesses was not related to an obligation to purchase.

Should Canada ultimately decide to go with the Gripen or any other aircraft and to redo the whole process, what would happen to the 100 Canadian businesses? Would F-35s take them out of their consortium again or would they remain partners in that consortium?

[David Perry]

From my understanding, the Canadian companies would essentially have lost the work. The program that governed that was an industrial participation program. If Canada had stopped participating in the program by indicating that we weren't going to buy the airplane, then we would have lost the participation from the companies. That work share was open to people who were intending to buy the plane. We had a spot held for us, essentially, so long as we remained a partner and the F-35 was still a potential selection by Canada, but if we had gone in another direction, I don't see why we would have expected to continue getting that work.

[Alan Williams]

I would just add one comment. That's exactly correct. I signed onto the agreement. Dave is exactly right.

Having said that, when it comes to ITBs, one would be shocked if the Gripen were not providing significantly more ITBs for Canada. You could argue that they're not the same kind of ITBs and that kind of thing, but the F-35 program is constrained in that it can't guarantee ITBs, whereas Gripen—and if Boeing were there—could guarantee benefits equal to the value of the contract.

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

Okay.

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

Thank you.

I would like to ask one last question very quickly.

The F-35 is not the same size as the F-18, among others. That may make landing on aircraft carriers difficult. If we decide to go with F-35s, will the design of our aircraft carriers need to be completely changed to be able to accommodate them?

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mrs. Vignola.

We'll now go to Mr. Johns for two and a half minutes.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Thank you, Mr. Chair.

One of the advantages of the F-35 is the upgrade ability and interoperability.

Mr. Perry, you talked about these big computers—that's what they really are. Can you talk about some of these upgrades, and also, can you speak about how they make us dependent on other countries? Will there be a bill from Lockheed every year for software, and what does it look like? Also, how can Canadians be involved in this?

[David Perry]

In terms of the bill, I'm not sure we really know the answer to that. I think the way the program is set up is that, because there's a large membership, all the different members will basically pay a percentage based on the size of their fleet, but I'm not really sure what the denominator is in that equation.

There's a pace of rapid rollouts of new block upgrades and new enhancements to the software that runs the aircraft and the avionics. My understanding is that this is basically designed to keep moving in perpetuity so that the aircraft is continually upgraded.

While we don't know the specific cost, I think one thing we do benefit from is that we are a relatively small chunk of a very big fleet, including the bulk of the American Air Force's R and D investment in tactical fighters.

[Gord Johns, NDP, Courtenay—Alberni, BC]

What will the role of the Aerospace Engineering Test Establishment and other similar groups be with the F-35? Maybe you can cite some Canadian-specific problems that might need to be addressed by in-house engineering.

Also, who trains our support personnel? Would they be civilian or military? What is the critical path in getting these aircraft operational in terms of equipment, pilots and maintenance?

[David Perry]

To be specific, I don't actually know with fidelity the answers to all those questions, but those are certainly good ones to ask government officials the next time they're back before you.