Government Operations Committee on April 1st, 2022

[The Chair (Mr. Robert Kitchen (Souris—Moose Mountain, CPC)), Conservative, Robert Gordon Kitchen]

Welcome to meeting number 12 of the House of Commons standing committee.

It's one o'clock, according to my clock, and we want to make certain that we're done by three.

It's meeting number 12 for the Standing Committee on Government Operations and Estimates. Today the committee will be continuing its studies of air defence procurement projects and of the national shipbuilding strategy.

The committee will be considering each study separately. The study of air defence procurement projects will be discussed during the first hour, and the study of the national shipbuilding strategy will be discussed during the second hour. The witnesses discussing air defence procurement projects will make an opening statement of three minutes maximum at the start of the first hour. After that, the rest of the hour will be taken up with the questions from the members. The witnesses appearing as part of the national shipbuilding strategy will make an opening statement of three minutes maximum at the start of the second hour. After that, the rest of the hour will be taken by questions from the members.

Today’s meeting is taking place in a hybrid format, pursuant to the House order of November 25, 2021. Members are attending in person in the room as well as remotely by Zoom. Regarding the speaking list, the committee clerk and I will do our best to maintain a consolidated order of speaking for all members, whether participating virtually or in person.

I would like to take this opportunity to remind all participants to this meeting that screenshots and taking photos of your screen are not permitted.

Given the ongoing pandemic situation, and in light of the recommendations of the public health authorities as well as the directive of the Board of Internal Economy on October 19, 2021, to remain healthy and safe, the following is recommended when attending in person.

Anyone with symptoms should participate by Zoom and not attend the meeting in person. Everyone must maintain two-metre physical distancing, whether seated or standing.

Everyone must wear a non-medical mask when circulating in the room. It is recommended, in the strongest possible terms, that members wear their masks at all times, including when seated. Non-medical masks, which provide better clarity over cloth masks, are available in the room.

Everyone present must maintain proper hand hygiene by using the hand sanitizer at the room entrance. Committee rooms are cleaned before and after each meeting. To maintain this, everyone is encouraged to clean the surfaces, such as the desk, chair and microphone, with the provided disinfectant wipes when vacating or taking a seat.

As the chair, I will be enforcing these measures for the duration of the meeting, and I thank members in advance for their co-operation.

We will continue our study on air defence procurement projects.

I would like to welcome the witnesses and invite them to make their opening statements.

We’ll start with Mr. Collins, then Mr. Fergusson and then Mr. Kasurak.

We'll start with Mr. Collins, please, for three minutes.

[Dr. Jeffrey Collins, Adjunct Professor, University of Prince Edward Island, As an Individual]

Thank you for the invitation to speak to you all today on the most important of topics, Canada's air defence procurement projects.

The 2016 report of the Standing Committee on National Defence on Canada’s air readiness noted that “the international security environment is both unpredictable and in constant evolution”. I think the events of the past eight months, to say nothing of the last five weeks, have reiterated just how true this statement is. All of this has implications for Canada’s air defence and the wider defence policy.

Rapid changes among friend and foe alike, like Russia's invasion of Ukraine, call for a clear-eyed assessment of Canada's role in the world and what investments we collectively need to make to effectively defend our sovereignty at home and uphold our alliances on the continent and overseas. This duty falls on the shoulders of the government, parliamentarians and citizens alike.

However, the approach adopted in equipping the Canadian Armed Forces over the last several decades is no longer satisfactory. To be sure, in the air realm, both current and past governments have replenished fleets of aircraft, like the C-130J Hercules, or acquired new capabilities, like the C-17 strategic lift.

Progress has also come in supplying new fixed-wing search and rescue aircraft, like the C-295s, and modernizing the CP-140 Aurora patrol planes. These are both welcome initiatives, as is the plan to acquire new strategic tanker capability by the end of the decade.

However, with these few exceptions, the procurement process for key air defence projects remains frustratingly hindered by both the politicization of projects and a cumbersome status quo process split between central agencies and defence procurement bureaucracy. By DND’s own admission, it typically takes 15 years on average to deliver new equipment to the CAF, but this is an average; it can often take longer.

The fixed-wing search and rescue aircraft I noted earlier, for example, began as a project in 2002. The last aircraft is not expected into service until 2024, 22 years later. I need not remind you about the CF-18 replacement.

Finally, there is NORAD modernization, a high-priority item between both Canada and the U.S. that has been at the heart of our shared continental defence alliance since 1958. As is so often the case, the question remains as to what costs we are prepared to pay and what capabilities we are prepared to invest in. I sincerely hope the discussions, like the one being undertaken by this committee, will help shed light on these questions and inform the government and Canadians as a whole on the next steps.

I look forward to your questions.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Collins.

Now we will go to Mr. Fergusson.

[Dr. James Fergusson, Deputy Director, Centre for Defence and Security Studies, University of Manitoba, As an Individual]

Thank you very much.

I've had a chance to listen to some of the testimony at the committee on this issue, but I'll leave my remarks to questions regarding general issues surrounding defence procurement in this country.

I want to focus on two things. The first one is a puzzlement in my mind. This relates to the F-15 decision, if it is the decision. One the one hand the government seems to say it's going to buy the F-35, but somehow this Gripen is still on the hook. What I fear is that we're going to have a repeat....

One of the interesting things about defence procurement in Canada is that these things keep repeating themselves and we don't learn any lessons. What I mean by this is, if you go back to the late 1970s and the decision to acquire the CF-18, that was delayed because of an attempt to play off General Dynamics and the F-16 against the F-18 by Martin Marietta, in order to improve what was known then as “regional industrial benefits”.

The second thing related to this puzzle, to me, is this degree of seven months to a year of future negotiations. I'm not sure what is going to be negotiated here. If you recall, we are a member of the partnership on F-35s, with Lockheed Martin and many other countries. We have signed memorandums of understanding with the consortium regarding production, sustainment and follow-on development, which are to govern purchases and related sustainment and follow-on development. I would add that follow-on development and spares are going to be done on a cost-sharing basis. What is there to negotiate, if this is already in place and it should basically be an easy decision to move forward quickly?

The only thing that I can think of is that the government, National Defence, PSWGC—Public Works, or whatever they call themselves now; I can never remember—is perhaps looking to negotiate a repair and overhaul maintenance capability in Canada. That may be the objective. I'm not sure how that fits into the MOU. I'm not sure how the other allies who are partners and have acquired the F-35 have managed this. I would assume that would be the template for Canada to deal with this issue as well.

It remains a puzzle where exactly we're going. Are we going to delay another year after all the delays that have occurred? I think this is extremely problematic.

I also want to comment on estimates. I went back and looked at the estimates from 2011 and 2012 and the big debate on the F-35: the Auditor General's report, National Defence's response and the parliamentary budget office. I find it really interesting and strange, and it tells us something about this estimate problem.

The amount agreed upon between National Defence and the Auditor General's office, in 2012, was basically higher to purchase 65 aircraft than the amount that the government has now announced of $19.1 billion, I believe it is, to purchase more aircraft. This should raise big questions on the part of the committee about exactly how reliable the estimate process is.

Finally, on air defence as a whole, I fear that the F-35 decision and the replacement of the North Warning System are really problematic, as are the other elements of air defence purchases on the future surface combatant. For the army, it's too much a reflection of silo-based interests rather than a broad strategic perspective on the requirements of North American air.

I would add that what we're really talking about here is missile defence. You can't look at this in terms of those particular two things. There are much bigger things about integrating all of the domains and capabilities, along with networking and all of the issues that come out of that. To consider air defence procurement for North America and the Canadian Forces, this needs to be a much bigger picture than what we're currently getting.

I'll close my remarks there.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Fergusson.

We'll now go to Mr. Kasurak.

[Peter Kasurak, Fellow, Centre for International and Defence Policy, Queen's University, As an Individual]

Thank you, Mr. Chairman.

Thank you for the invitation to testify before this committee.

First, allow me to introduce myself. I spent the bulk of my public service career at the Office of the Auditor General, leaving in 2007 as the senior principal for national security programs. During my years at the office, I directed performance audits of a dozen capital programs at the Department of National Defence. I am currently a fellow of the Queen’s University centre for international and defence policy and teach from time to time at the Royal Military College.

Turning to the objective of the committee to understand and improve the procurement process for defence projects, I would like to direct the attention of the committee to three overarching issues: the politics of defence procurement in Canada, the nature of the choice between fourth- and fifth-generation aircraft and the capacity of the defence establishment to manage both procurement and sustainment of the aircraft after purchase.

Regarding the politics of procurement, Canada has been afflicted by two basic disagreements. First, there is a lack of consensus amongst Canadians as to whether the armed forces should be war fighters or peacekeepers. Second, there is a conflict between the defence establishment’s desire to maintain a multi-purpose, combat-capable force and the public’s evident desire to have a Walmart-style budget defence policy.

The lack of consensus and the low salience of defence in electoral decisions have resulted in the weaponization of defence procurement to appeal to one side or the other rather than to pursue a coherent national strategy.

These dynamics have disrupted the F-18 replacement project. On Monday the government announced the selection of the F-35. From the standpoint of the aircraft’s mission, this makes sense. Continental air defence is the primary mission of Canada’s fighter force, and the U.S. Air Force intends to base its continental air defence on fifth-generation aircraft. While fourth-generation aircraft might still be useful to NORAD, the role a fourth-generation fighter would play would become limited.

The war in Ukraine suggests that its survivability in contested airspace is essential. Russian air defences are impressive, and their reach extends roughly 400 kilometres into NATO airspace.

NATO and other defence ministries have voted with their feet and have opted for the F-35. The main issue the F-35 presents to the armed forces is sustainment. F-35 sustainment costs are enormous and unknown. The autonomic logistics information system, or ALIS, is problematic, and it's going to be replaced. The U.S. Air Force itself is considering reducing the number of F-35s to be acquired, because of the fleet affordability problem.

The challenge of the aircraft is compounded by the general problem in the Canadian Armed Forces with sustainment. The armed forces had difficulty in estimating support costs for new aircraft and maintaining enough support personnel to support their equipment. The department is reporting that current aerospace readiness is at about 55%, and that significant personnel shortages persist. The addition of a new fighter aircraft without adequate provision for sustainment will make a bad situation worse.

Mr. Chairman, that concludes my opening statement.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Kasurak. I appreciate that.

To all of the witnesses here, your statements that were presented to us have been distributed amongst the committee members, so they did have them in advance.

Mr. Fergusson, if you have one that you want to submit at some point in time, please send that to the clerk, and we would be happy to distribute that as well.

With that said, we'll now go into questions and answers. We'll start with Mr. Paul-Hus for six minutes.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you, Mr. Chair.

Good afternoon, everyone. Welcome to the committee.

My first question is for Mr. Collins.

Mr. Collins, you said that the procurement process in Canada is cumbersome and that it takes an average of 15 years to deliver equipment to the Canadian Armed Forces.

Do you know how long it takes on average for the Americans and the British to complete the same type of project?

It takes 15 years here, but what about in other places?

[Dr. Jeffrey Collins]

Thank you, sir. That is an excellent question.

As to whether I have the United States' precise numbers, I do not.

Generally, I have a pretty good understanding of how procurement works in, say, a fellow middle power like Australia, and it's not that much better, I'm afraid.

It goes to the heart of the nature, often, of the type of procurement we acquire. As my colleague, Mr. Kasurak, noted, the more sophisticated aircraft complicate sustainment costs and intellectual property negotiations, and the list of variables at play goes on.

In terms of our having the unique situation of trying to manage a complex defence procurement, I'm afraid we're not alone in that regard.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Okay.

Some friends of mine are very interested in aviation. They told me about a technical issue related to the F‑35. It concerns the different series: the block II, block III and block IV. I was told that we must acquire the block IV series aircraft. Otherwise, we'll end up with a model that requires an upgrade, which will cost a fortune.

If Canada purchases block IV aircraft, I'm afraid that it will take a very long time to receive them. We know that Finland will receive its block IV series aircraft in 2029. We could receive them in 2030 or 2032. Is that a possibility?

First, do you know whether Canada plans to acquire block IV series aircraft? If so, what will be the schedule?

[Dr. Jeffrey Collins]

I don't know the actual schedule of block IV. That's a great question. Finland, of course, will be entering into it. My colleague Mr. Fergusson noted what's to be negotiated. I think one of the key things to negotiate with the company is where in the production cycle we fit. They have a certain production rate of x number of aircraft. The Americans get so many, and many of the other partners get so many.

I don't know if my other colleagues would like to chime in.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Mr. Fergusson, do you have anything to add?

[Dr. James Fergusson]

It will probably be the block IV. I don't disagree with my colleague about it needing to be negotiated. The government has said, assuming an early decision or a seven-month decision, that we'll acquire the first aircraft in 2025. We probably know where we're going to fit into that production schedule.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

If Finland, which has already made its decision, will receive its block IV series aircraft in 2029, is it realistic to think that Canada, which hasn't yet made its decision, will receive its aircraft in 2025?

If you don't have the answer to this question, that's fine. However, this issue should be clarified.

Mr. Fergusson, I want to follow up on your comment about the announcement last Monday and the discussion that is supposed to take place over the next seven months about whether to finalize the F‑35 purchase. The Minister of Procurement and the Minister of National Defence announced that the F‑35 procurement process was under way, but that it would take time. Again, there doesn't seem to be much progress.

Do you think that this announcement was purely political?

[Dr. James Fergusson]

All of these announcements are political, one way or another. You can't remove politics from this. Given that the government is late—it was supposed to announce this in November, and now we're several months after that—it probably simply was a question of timing.

I don't think it would hurt that the timing also relates to, as Mr. Kasurak said, the events going on in the Russo-Ukrainian war and with NATO. It became a much more politically hot topic. I think for the government, in terms of the Prime Minister and the ministers meeting with NATO officials, this was a central issue for the officials—not the decision, but that Canada needed to do something—and we committed to doing something. I think that's where you get the timing of all this.

Just quickly, about Finland, I don't know if Finland's decision is about waiting for the block IV, or if the Finland decision is about its projected spending on the acquisition. It could be simply the latter: This is when we are ready to buy it.

In terms of upgrade costs, the whole system is designed in these blocks that you are able to constantly upgrade. Now, I don't know in the estimates of life cycles of the F-35—regardless of whether it's III, IV or V—how much that's been plugged in, but that should be part of those long-term estimates.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you.

I think that I have 30 or 40 seconds left to ask my last question, which will be for Mr. Kasurak.

Mr. Kasurak, you said that the United States decided to buy fewer F‑35s. The Conservatives, at the time, said that they wanted to buy 65. The Liberal government, in the defence policy review, said that they would buy 88. I never understood why the Liberals wanted to buy more than the Conservatives in their assessment at the time.

Do you think that Canada should go back to 65 F‑35s and acquire another model to perform different tasks related to NORAD, for example?

Is this a possibility, Mr. Kasurak?

[Peter Kasurak]

I think with the strain that introducing a second aircraft into the system would put on both training and maintenance, it's something you would really want to avoid. Even at 88 aircraft, we are operating a very, very small fleet of aircraft. To throw another sophisticated aircraft into the mix would not make sense from either a personnel management or a financial point of view.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Kasurak.

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

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

Thank you, Mr. Chair.

I have a question for Professor Collins. Just in March you had a paper published, which you co-wrote, entitled “If Only Warships Grew on Trees: The Complexities of Off-the-Shelf Defence Procurement”. Bonus points, by the way, for the creativity of the title of that report. In that report, you state, “As tempting as it is to believe that there is a straightforward solution to Canada's perennial defence procurement woes, caution on an OTS-based model is warranted.” Can you speak about why there is a need to be cautious about off-the-shelf procurement solutions?

[Dr. Jeffrey Collins]

I'm happy to, and I appreciate the props for my Mad Men-style rhetoric.

There are a couple of variables at play, as noted in that paper. One, off-the-shelf can refer to buying directly from someone, an existing production line, or buying an existing design and then adapting it to your needs.

The risk there is that companies and countries that manufacture goods primarily do so with their own specifications, so a German submarine is primarily built for the realities of operating in the Baltic. It tends to be smaller, for shallower waters and not for such long distances, for example. Taking that design, even though it's “off the shelf”, would require modifications on the Canadian end to meet Canadian needs. Why would you buy a submarine that is limited in capability for your own navy, especially for a country with the world's longest coastline and three different oceans?

The second thing is that design changes are inherently complex and involve more than just an intellectual property negotiation and the costs that go with that. The design for an existing piece of equipment in production is a design that's probably several years old. Look, for example, at the Berlin auxiliary oil replenishment ship, which is at the heart of the new joint support ships being built in Seaspan, out of Vancouver. That design traces back to the nineties. When we bought it, it was roughly about a decade old, and we had to modify it for our needs. Then we had to modify the design, because it's a modular build, to work within the confines of the Seaspan yard, because the yard that built that ship was a much bigger yard, in Hamburg, Germany.

All these layers of complexity go into saying simply that we should always think about off-the-shelf, but as for the idea that it will be “quick” or somehow cheaper, I would definitely advise caution on that. These are much more complex, especially if you're talking about building domestically in Canada.

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

There have been some examples in the past of how we have sort of learned that lesson the hard way. I'm thinking about the deal for 15 Chinook helicopters under the previous government. Can you maybe speak a bit about that and about what lesson was drawn from that particular example?

[Dr. Jeffrey Collins]

For sure. The Auditor General actually looked at this. My colleague may want to comment at some point.

We were looking for 15 helicopters. We wanted them to be able not simply to pick up troops and bring them to another spot, but essentially to operate in the Canadian environment, including with different weather challenges and over long distances. The design had to be modified to include larger fuel tanks to enable that.

We also wanted the Chinooks to do more than simply what one arm of the service would expect. The Special Operations Forces Command wanted to be able to use the aircraft as well.

Larger allies like America will build or buy multiple variants of this particular helicopter, but in our case, we buy technically relatively small fleets, and we try to jam as much into them as we can. Sometimes that's wish-list thinking. Sometimes, though, it's just about operational realities. You want a helicopter that can actually do multiple things. The challenge is that you are changing the design. That involves IP negotiations, incorporating the new designs into a helicopter that's been around since the sixties, and then ensuring that it comes off the production line.

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

Again, to use this phrase, it's not like walking into Walmart and being able to take a fighter jet or a warship off the shelf. There has to be some serious thought and consideration here to make sure we're matching the ships, the vessels, with what the mission is, what we're trying to accomplish here in Canada, as well as some of the parameters and the frameworks in which we operate. I really appreciate your making that clear for those who are watching at home, and for this committee as well.

Capabilities of vessels and jet fighters and whatnot change, and we recently heard from a witness to our committee that the F-35s we are in the process of procuring are vastly superior to the ones that were available seven years ago. The F-35 has evolved. Would you agree with that statement? Do you have any insight into how they may have improved and what that would mean for their capability?

[Dr. Jeffrey Collins]

Is that question for me, sir?

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

Yes. It is for you or, really, for any of the other witnesses.