Government Operations Committee on April 1st, 2022

[Kelly McCauley, Conservative, Edmonton West, AB]

I'm just going to interrupt you, because I have another question. I just want to chat about ITBs for the rest of the time.

I know there's the issue of the F-35, on which, in our agreement, we cannot have ITBs. It makes it very weird or odd that we need another seven months to come up with a decision.

The three of you could just chime in quickly. How much do you think our ITB process is delaying our procurement? What do you think it's costing taxpayers and, therefore, our military in the end? Are we spending x, 20% or 30% higher on ITBs, and should that money be plowed into defence instead?

[Dr. James Fergusson]

Well, I'll take a shot—

[Kelly McCauley, Conservative, Edmonton West, AB]

One example I'll give is of my friends, the Irvings, putting a French fry plant in Lethbridge and claiming it as ITBs toward naval technology.

[Dr. James Fergusson]

I would respond to this by saying that there is significant delay because of ITBs except in the case of the F-35 consortium, which is one of the few projects—on the good side—that recognizes the reality of the defence marketplace.

The ITB program has no sense of what is real and not real in that marketplace, particularly in the aerospace sector.

If you continue down the path with companies doing this, what happens? Investment gets made into Canada, industries sort of appear, and they have very short life spans because they don't get global market access. Then, when the project's over, a lot of them are gone unless they're fortunate enough to get integrated into the American prime supply chains.

What is good about the consortium is that, in fact, we get access to the marketplace. We get access to technology rather than build to print, because, in order for companies to be open and to be able to compete for bidding for components and for subsystems on the F-35, those companies have to get access to the technology and specifications provided by Lockheed Martin. This provides greater opportunities, which then link to long-term opportunities, because we are now linked into a global supply chain that goes beyond the F-35 and is certainly linked into a much larger export market.

This is, in my view, the way of the future.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Fergusson.

We'll now go to Ms. Thompson for five minutes.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you, Mr. Chair, and thank you to the witnesses.

Mr. Fergusson, I'll continue with you. Could you please tell us why the procurement of fighter jets with modernized technology is important for the security of Canadians?

[Dr. James Fergusson]

It's vital to deal with the new threat environment.

The simple answer to this is old versus new. Canada has no choice for a variety of strategic reasons: interoperability and responding as we do to allied, U.S.-led initiatives. It is vital to deal with the more complicated threat environment that has emerged to North America in particular, from long-range cruise missiles to hypersonic vehicles, and I'll put ballistic missiles on the sideline here.

We simply will not be able to adapt, and we will not be able to be interoperable with our NORAD ally, the United States, in coordinating and providing an effective air or aerospace deterrent and, at the end of the day, defence capability. If we don't do this, then we'll be marginalized.

[Joanne Thompson, Liberal, St. John's East, NL]

Following that thread, what would procuring modernized jets say about giving the persons serving as part of the Canadian air force and flying those jets that advantage in terms of their own safety?

[Dr. James Fergusson]

I think it's extremely important. I mean, I listen to the rhetoric coming from government and bureaucratic officials about the importance of supporting our men and women in the armed forces. Give them the best equipment we can give them, the most advanced equipment, to make a contribution to North American defence, Canadian defence and our allies' defence. It is essential. We have to do this unless we decide we wish to cede everything to our allies, and particularly cede our own defence to the United States.

This will also have repercussions down the road in terms of recruitment. No one wants to recruit into the Royal Canadian Air Force, have ambitions to be a fighter pilot, and fly something that's old and out of date. It's as simple as that.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you.

In a recent article, you mentioned that just throwing money at defence procurement won't solve any of the current issues, and that we need a plan for where those funds will go. Wouldn't you say that “Strong, Secure, Engaged”, as well as the national shipbuilding strategy, which I realize we'll be going into in more detail in the second round, are good plans in terms of where we can invest funds to support defence procurement?

[Dr. James Fergusson]

Yes and no. The fact that they detailed these things or where we're going to invest is important, yes, and it is useful, but this was done in 2017 and 2018. We're now in 2022. The world is a little different now.

The no side of the equation is that too much of it is ambiguous. I understand the reasons that governments prefer ambiguity over specificity. The world can change, and there are other political reasons. When you take, for example, the priority of NORAD modernization [Technical difficulty—Editor] at North American defence modernization, which is even bigger, what does that mean? Well, we have ideas of what it means, but usually it's about the North Warning System and [Technical difficulty—Editor] it's much bigger than that.

Canada faces a lot of significant choices in terms of dealing with or developing effective surveillance tracking and target discrimination capabilities for the aerospace defence of North America and Canada. These go beyond fighters. They include, besides air-to-air refuelling, potentially airborne warning and control aircraft. They also include the potential role that the future surface combatant will play. They also potentially require considerations of ground-based defences for a layered defence of North America, going back in some ways to the 1950s and 1960s. None of this.... This is all open. We don't know what they're planning, and you do need a plan.

The other interesting thing about this, and it reflects the strategic issue for Canada, is that those plans are being drawn up, but they're being drawn up by NORAD. NORAD is the driver behind this—not National Defence in this country and not necessarily DOD in the United States. It's a NORAD thing now, which spills into USNORTHCOM as well.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you.

Mr. Chair, do I have time for one more question?

[The Chair, Conservative, Robert Gordon Kitchen]

You have 30 seconds.

[Joanne Thompson, Liberal, St. John's East, NL]

Okay. I'll leave it for someone else to continue, rather than have the answer be interrupted.

Thank you so much.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you very much.

Ms. Vignola, go ahead for two and a half minutes.

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

Thank you, Mr. Chair.

My question is for Mr. Kasurak.

The American publication Defense News reported in a July 2021 article that the F‑35 still had seven critical deficiencies that had to be addressed. The manufacturer refuses to specify these technical deficiencies. We understand that, clearly, the current F‑35 is very different from the F‑35 of seven years ago. Nevertheless, it's troubling to know that there are still seven critical deficiencies.

Could you share your thoughts on these seven deficiencies? What risks are involved? Do you think that these risks are being properly assessed?

[Peter Kasurak]

Well, the aircraft has hovered around seven or eight critical deficiencies, but they're always changing. They correct some and new ones get added. Of course, they don't want to reveal what those are, because it's related to the combat effectiveness of the aircraft.

The problem with the F-35 is that it's still in low-rate initial production, and they've built several hundred aircraft. The U.S. has acquired almost 25% of its target fleet, and the plane is still not completely finished yet. I think the consequence is that once you are in this world, you bring money, because this is the nature of the beast. It's never really going to be fixed, but you can't afford not to go there. You can't afford to go back to fourth-generation aircraft that are more predictable, because they aren't survivable anymore. It's a dilemma, but you just bring money.

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

You said that this is a new aircraft and that other issues will arise after the current ones are addressed. Do you think that the government included this risk factor in its calculation of the budgets for aircraft maintenance and other expenses?

The aircraft will eventually reach the end of their life. In its long‑term fiscal projections, has the government considered not only these maintenance and repair issues, but also the need to set aside money?

In your opinion, is there any foreseeability in terms of the amounts released to date?

[Peter Kasurak]

We don't know. We haven't seen it. We haven't seen the contract yet, so we have really no idea about what the projections are. However, I would hazard a guess that whatever the projections are, they're going to be too low in the end.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you.

Now we'll go to Mr. Johns for two and a half minutes.

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

Thank you so much.

I'm going to back to Mr. Kasurak.

In terms of the politics, again, you raised this as a major problem. There has been a delayed procurement process under both Conservative and Liberal governments. Public Services and Procurement officials have suggested that the government's rigid procurement process provides resilience against changes of leadership. We know there's been leadership at the bureaucratic level as well.

What other benefits could Canada's highly structured procurement approach provide? In your view, do the benefits of a rigid procurement approach outweigh the disadvantages?

[Peter Kasurak]

I'm not sure that the rigidity always provides benefits. It's a matter of degree. One thing it provides, or has provided, is a level of transparency. With all the checks and balances, one has a better sense of what is going on with the procurement. This was the reaction to the Hillier era wave of sole-sourcing; we had to put something in place that gives the public a better sense that these things are being looked at carefully.

It provides some reassurance, but it is easy to go overboard. I think the case has been made by others that we've reached that point. When you look at the air projects that were done by ACANS, where the government essentially sole-sourced, it's hard to say that those procurements are worse than ones that had an extensive competitive process.

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

Can you maybe identify the other elements of department culture that contribute to positive procurement outcomes?

[Peter Kasurak]

The positive side is that the public service in Canada is professional and politically neutral, so the public service is going to attempt to provide ministers with what ministers have asked for. It's a responsive public service, and I think that is a great asset, because you can have changes of government and still have a knowledgeable bureaucracy in place.

This is a problem the Americans have, because they change their senior bureaucracy over every couple of years.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you.

Now we'll go to Mr. Lobb for five minutes.