Government Operations Committee on April 8th, 2022

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

Welcome to meeting number 14 of the House of Commons Standing Committee on Government Operations and Estimates.

Today we will continue our study on the national shipbuilding strategy. We will also discuss committee business during the last 60 minutes of the meeting.

The committee has the expectation that all witnesses will be open about any potential conflict of interest they may have. This is to ensure that the committee can fully understand the context of the testimony it is about to receive. If they feel their testimony may be coloured by a previous or current interest, I invite the witnesses to disclose this during their opening statements.

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 and remotely using the Zoom application. Regarding a speaking list, the committee clerk and I will do the best we can to maintain a consolidated order of speaking for all members, whether participating virtually or in person.

I'd like to take this opportunity to remind all participants to this meeting that screenshots or taking photos of your screen is not permitted.

Given the ongoing pandemic situation and in light of recommendations from 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 for all those attending the meeting in person. Anyone with symptoms should participate by Zoom and not attend the meeting in person. Everyone must maintain two metres of physical distancing, whether seated or standing. Everyone must wear a non-medical mask while 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 surfaces, such as their desk, their chair or their microphone, with the provided disinfectant wipes when vacating or taking a seat.

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

With that said, I would like to welcome our witnesses. We'll hear from Mr. Choi and from Vice-Admiral Norman.

I invite Mr. Choi to make his opening statement.

[Timothy Hiu-Tung Choi, Consultant, Research Fellow, Doctoral Candidate, University of Calgary, As an Individual]

Thank you, Mr. Chair.

Dear Mr. Chair and honourable members, thank you for inviting me to provide my insights to this august committee.

Many other witnesses have already spoken to you about the complexities and challenges of the processes behind the NSS, so I will focus my remarks on three major issues.

The first is Canadian naval ambitions as a driver of CSC design. The RCN essentially operates as two smaller navies, with one on each coast. In standard practice, the so-called rule of three means that for every ship deployed overseas, you need at least two more to maintain fleet maintenance and training requirements. For Canada this means essentially every combat vessel that it aims to deploy overseas must have the ability to defend itself against modern air, surface and underwater threats because it will often be operating on its own. This has driven the decision to ensure that all 15 ships are built to the same standard that incorporates modern air defence systems into the anti-submarine Type 26 hull. Even so, modern submarines are equipped with anti-ship missiles, so even an ASW-centric vessel needs a very robust anti-air capability.

Are CSCs able to perform air defence in addition to their ASW focus? My assessment is yes. The bottom line up front is that the ships can carry air defence missiles that are an order of magnitude greater than current frigates, if they are using the same types of missiles, so even if the exact number of missiles gets reduced during the remaining design work on ships, they will still be much more capable than in our existing Halifax class. The new decision to acquire F-35s also further enhances the CSC's combat ranges.

Second is the geostrategic need to develop Canadian shipbuilding. Other speakers have noted the Chinese navy's rise as the world's largest in the number of ships. What I haven't seen discussed is the limited capacity in western naval shipyards to help maintain our collective lead. By mid-decade, the U.S. will have only three shipyards dedicated to building complex warships like the CSC, all of which will be at their maximum capacity. In this context, Canada's Halifax yard, thus, has the potential to provide North America with basically 25% of its advanced warship construction capacity. This is on its own a very important thing, but also it can be leveraged in our discussions with the Americans when the topic concerns Canada's willingness to pull our weight in defence spending.

More importantly, the alternative of buying ships from abroad would bind our foreign policy to the country building our ships. The decades-long period required to build all 15 CSCs means that the country building our ships would have a multi-billion dollar hostage that it could leverage in any negotiation or crisis. Warships should serve as a tool of Canadian foreign policy, not hold it hostage.

Third is the limitations of current cost estimation methods. “Steel is cheap and air is free” is the common rule of thumb for naval architects. This means that the cost of a ship does not scale linearly with its size. Unfortunately, size is precisely the metric being employed by the PBO to arrive at their cost estimates for the CSC. In fact, combat engineering systems contribute approximately 60% to 70% of a ship's overall cost, whereas the hull contributes the relatively small remainder. Thus, the size of a CSC should not be the metric for determining its cost increases. Rather the combat systems should be the point of focus.

However, unlike the growing size of the ship's hull, the scope of the CSC's combat engineering systems are unlikely to increase between now and construction. In short, if the CSC's actual costs do increase, inflation will likely play the dominant role as the ships await their turn to be built over the next two decades, rather than the design.

Finally, some witnesses have used a theory-based rule of thumb to determine that the CSC's operational costs will be three times that of its acquisition costs, and that this will be unaffordable. However, recent empirical evidence suggests that reducing acquisition costs do not guarantee a linear reduction in operational costs. Much of this is attributed to the fact that a ship's crew comprises approximately 50% of its operational costs, so we cannot expect the CSC to have significantly reduced operational costs unless we were to also purchase a design that has a significantly smaller crew, which comes with its own significant downsides.

I will conclude there.

[The Chair, Conservative, Robert Gordon Kitchen]

We will now go into questions.

We will start with Mr. Bezan for six minutes.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

Thank you, Mr. Chair.

I want to thank Professor Choi for his comments and his skill and understanding of what we need to do with our surface combatants.

You talked about the PBO report. Everything is done on a wait basis. Based upon that report, there have been some people who have described our CSC as just a fat frigate.

Can you talk more about what weapon systems we need on there. You mentioned the F-35s, and how the reach and capabilities of our surface combatants and the air systems that we will have in place with F-35s are going to be enhanced. More importantly, a lot of people are getting very concerned about the overall costing and where we're at as everything continues to escalate. We still haven't cut steel for even the first surface combatant.

How do we get ships in the water quicker and maintain that Canadian capability for shipbuilding, while we're dealing at the same time with a changed world with the Russian invasion of Ukraine? Everybody always forgets that Canada is an Arctic neighbour of Russia.

[Timothy Hiu-Tung Choi]

Thank you, Mr. Bezan.

For the air defence section, around seven years ago—probably eight now—we decommissioned our Iroquois class air defence destroyers and they provided that long range air defence capability that can attack aircraft well out to the horizon and beyond it.

Right now our Halifax-class frigates have been upgraded and do a very good job of defending themselves, but not so much the larger area around them. With the new CSCs, we are planning to equip them with a new phased-array radar, which essentially means that you can take them down for maintenance without actually turning them off. So in case they received any damage, you can repair them without becoming blind, unlike certain other ships like the French and Italian vessels that were offered to us earlier.

With this new radar technology, you can see further and more precisely what we're looking at, and then aim and direct the necessary missiles out through that long range distance. In co-operation with the F-35, with the plan to equip our ships with the so-called cooperative engagement capability, CEC, an F-35 can essentially become a forward sensor for the ship. So an F-35 can fly well out to the horizon and beyond and then relay what it sees back to the ship, telling the ship where to send its missiles. Even if a ship can't see over the horizon, it can shoot where the F-35 tells it to shoot.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

Does the FREMM have that capability to work with an F-35?

[Timothy Hiu-Tung Choi]

As far as I know, no. Neither of those FREMMS, that I'm aware of, have that capability, though I imagine it could be installed with a lot of additional hardware, software and firmware additions.

With regard to your second question on bringing these ships into water quicker, one of the things I like to say is that the best time to maintain a constant, ready shipbuilding capability was 20 or 30 years ago, and the second best time is now. We are in a state where we have a process set up, albeit it's not ideal and could be better. The other witnesses have gone into way more detail about this than I will, but essentially one of the quicker or more obvious solutions to me is to split the build between two yards.

There are drawbacks and benefits to that. The benefit is that you would get the ships in the water more quickly—at least all of them more quickly—and then the cost incurred from inflation due to the quicker build will be reduced. The downside is that you're repeating the learning curve across two shipyards, so each shipyard ends up actually charging more per ship on average, and this may or may not cancel the benefits of reduced inflation costs.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

Thank you.

I'll turn to Admiral Norman now.

Thank you for being here, Admiral. I know you weren't making any opening comments. I just want to thank you in particular for all of the work you've done on advancing Canada's shipbuilding strategy and making sure that we're getting ships ordered.

Can you talk a little bit about the Asterix and how we need to have more AOR capabilities in the ocean and how that serves to extend our reach as the Royal Canadian Navy.

[VAdm, Ret'd) Mark Norman (Vice-Admiral (Retired), As an Individual]

I won't speak to the Asterix specifically, but I will more broadly address the issue of resupply and how important it is for a navy with any aspiration for going beyond your own coastline.

In the simplest terms possible, the joint support ships that are under construction in Vancouver at the moment are a variation of what is called, generically, “underway replenishment” capability. In essence, it allows a group of ships to operate farther afield because they carry with them, in that group, their own logistic support, which includes fuel, ammunition, potentially food, and other supplies.

As it relates to the numbers and how significant this is, in essence it's a force multiplier. If you have a group of ships of whatever size—two, three, four—and you can keep them at sea longer or you can extend their reach in terms of being able to go farther afield, that's where this joint support ship capability comes into play.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

Admiral Norman, if we have two joint supply ships that will get delivered some time in the near future, as well as the Asterix, does that provide us with enough capabilities to support the fleet that we're going to have in the future, or do we actually need one more on top of that?

[VAdm (Ret'd) Mark Norman]

To go back to Mr. Choi's earlier comment about the rule of three—which isn't so much a rule as it is a practice and a guideline for developing force structure—the minimum you need to have one of anything available to you permanently is three. With two plus one, you're at the bare minimum, and if you want any more flexibility over the long term to accommodate things such as maintenance or any unplanned problems you might have with a ship, then any greater number than three gives you the flexibility of having at least two available to you on a nearly permanent basis.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Admiral Norman.

We now go to Mrs. Thompson for six minutes.

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

Thank you, Mr. Chair.

Thank you to both witnesses for coming today.

Mr. Choi, I'd like to zero in on a couple of your comments in your opening statement. One was on the complexities and the challenges around the national shipbuilding strategy and on that, the very real need to support Canadian shipbuilding and to move beyond this file and this season of procurement.

With that in mind, in March 2022, you presented a paper that highlighted the drawbacks of off-the-shelf procurement, where pre-designed equipment is purchased from existing suppliers.

Would you mind explaining some of the costs that are associated with adapting defence systems purchased from other countries for use in Canada? Is buying more defence systems off the shelf a viable option for the Canadian Armed Forces?

This is considering that the Coast Guard has a role here, because we're replacing the Louis S. St-Laurent, which is critical for of Arctic travel, research and support for the capacity to move within very heavy ice conditions.

[Timothy Hiu-Tung Choi]

Thank you, Ms. Thompson. It's a great question.

“Off the shelf” gets thrown around a lot as a general solution to all of Canada's procurement woes, but in reality, it covers up a lot of minute details that dictate the timetable, time frames and costs of buying “off the shelf”. Essentially, when you say buying off the shelf, you can mean, literally, a ship that's already in service or just about to enter service and it's just sitting there. That's something that the Egyptians do very well, so they end up with a fleet of very different classes of ships and they can't really train or maintain them really well.

In most cases, off the shelf means you're buying a design that's already in existence. It seems simple enough on its own, but even for a ship, there are multiple design stages. Which stage of that design are we talking about when we're saying off the shelf? Is it the very beginning, where you say, “This is what it looks like this, what can it do?”, or is it the second stage, where you know what it's supposed to look like and what it's supposed to do, but not how you are going to get there? What are the literal nuts and bolts, steel plates, equipment and the pumps that are going to make that drawing, that concept into a real, vessel?

Finally, you have to give the shipyard instructions to put it all together.

When you say “off the shelf”, which stage of those three are you really looking at? The further back you go, the longer it's going to take and the more it's going to cost.

Even for a ship like the JSS, the joint support ship that's being built in Vancouver, that was technically an off the shelf solution. It was based off of a ship that the Germans had already built and already had in service. You think, “Oh well, that's super easy and it should be super basic to convert it into something we can build here”. In actuality, there are all sorts of design considerations when you're building in a different country, versus your own, that are incorporated into the design itself that you then have to go back and readapt into our own industries and our own capabilities. That's one thing.

The second thing is, of course, the time period. It's been roughly 15 or 20 years since that original design was created. A lot of things have changed in regulations and proper survivability and habitability requirements for our navy. All these things have to be worked back into that original design.

I would argue that in some cases, working from a clean sheet design is easier than modifying an existing one, just because you have much more room to say right from the outset where you want things to be and how they should be.

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

Thank you.

I'll go back to another article that you released recently. In 2020, in an Arctic Yearbook article, you argued that the Arctic population in Canada is dependent on military and civil naval activity in that region.

How do military and civil vessels sustain civilian populations in Canada's Arctic?

[Timothy Hiu-Tung Choi]

This is mostly visible in the Coast Guard. For now, the Canadian Coast Guard is the dominant federal maritime presence in the Arctic.

They provide vital icebreaking services to ensure that northern resupply vessels and commercial shipping can actually get to those northern communities and supply them with the necessary food, fuel and matériel that's required to sustain them for the rest of the year before the next summer's shipping season. That's the first and most commonly appreciated role of the Coast Guard icebreakers.

Secondly, and this is the one that doesn't happen too often anymore, sometimes the Coast Guard itself carries supplies on its own ships and delivers these supplies to certain communities like the Eureka science and weather station where the sea ice is too heavy for commercial shipping. They take that stuff right along to the shore and ensure these communities get those very vital supplies.

Those are the two major things. Then, of course, there are fundamental basic services that you expect to see in southern Canada, like search and rescue services, aids to navigation and the maintenance of those things, so mariners can use the water safely around them.

Of course, in the coming years as more and more of the Navy's Arctic and offshore patrol ships come online, there is going to be a much greater naval militarized presence up in the North. In some cases, as far as I know, there isn't a really solidified plan for how we plan on using them, but I imagine there will be some way to make use of these Navy vessels to help the Coast Guard with some of the missions they have up there that are not pure icebreaking. I think there will be a gradual convergence of the civilian missions that the Coast Guard carries out and the general naval sovereignty presence that is up there. The two will combine together very well.

This is something we see over in Greenland. The Danes don't have a coast guard; they have a navy. They use their patrol ships, which are smaller and a little bit less capable than ours, for a lot of the same missions to support and enable civilian uses of the seas.

This includes breaking open ports to allow fishermen to go out into the ocean and assess their resources there.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Choi.

We will now go to Mrs. Vignola for six minutes.

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

Thank you very much, Mr. Chair.

Mr. Norman, thank you for being with us. The fact that you would agree to appear before this committee today only makes you seem more noble-minded, and I readily acknowledge that. Although you have dedicated your life to defending this country, you were dragged through the mud on a mission to provide this country with a type of vessel that was sorely lacking, and made a success of the project a success despite the fact that defence procurement was a real mess. Your agreeing to be here to allow this committee to further reflect on defence procurement demonstrates indisputably that you are fundamentally upright man and true to your deepest convictions. Thank you for agreeing to answer our questions.

Vice Admiral, I read a great deal about the saga surrounding the Asterix and the horrible things this country has put you through. One thing in particular caught my eye. Just as you were given the green light to move forward with the agreements on the Asterix, the newly elected government received a letter from a shipyard with only one slipway and many contracts already in place. As a result of this letter, you experienced the events we are aware of.

It was possible that a second supply ship, the Obelix, would be made by the builder of the Asterix, that is, Chantier Davie.

Given that sailors love the Asterix and it was built on time and on budget, why did the Obelix never see the light of day when at least three such vessels are needed?

[VAdm (Ret'd) Mark Norman]

Thank you, Mr. Chair.

Thank you for your question and your comments, Madam.

Unfortunately, I can't comment on the Asterix or a possible second ship. I can only repeat what I said to Mr. Bezan earlier, that there is a demand for more ships for the Royal Canadian Navy, but it's not my place to determine how best to deliver them.

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

Thank you very much, Mr. Norman.

I'm going to approach this from another angle.

What should defence procurement be based on to avoid interference and influence from individuals with no knowledge of defence or large shipbuilding, and ensure that tax dollars are used wisely and not to line the pockets of influential lobbies?

In other words, how can we make it so that politics isn't involved in any way with defence procurement?

[VAdm (Ret'd) Mark Norman]

I will respond in English.

I think you raise one of the fundamental issues associated with procurement. It's not just a problem in Canada; it's a problem amongst all of our allies. The issue is how we separate the political processes associated with the expenditure of large amounts of taxpayers' money from the more mechanical aspects of determining the legitimate requirements for military capability and the ultimate delivery of those requirements in whatever form they take.

Canada is not any better or any worse, in my opinion, in this regard. We have our own issues. They are fundamentally Canadian. I think your committee and others who are discussing these issues need to look at where political intervention is legitimate and where it is not. My sense, from observing this over the past few years, is that we're starting to see a separation in terms of the actual mechanics of the procurement process itself once the key decisions are made and they're left to officials to manage. The bigger issues related to whether a procurement program is in the national interest, what the strategic considerations may be, what type of capability Canada should or shouldn't have, and what the rough budget should be are legitimate government decisions at the political and cabinet level.

I think the long answer to your question, if I may, is that finding that balance is really important. I think it's one of the key areas we need to continue to work on in order to ensure that the women and men of the armed forces are getting the equipment they need and that ultimately the taxpayers of Canada have confidence in the system that's delivering those capabilities.

Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you.

Ms. Vignola, you have five seconds.

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

In that case, thank you very much, Mr. Norman.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you.

We will now go to Mr. Johns for six minutes.

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

Thank you.

I'd like to thank you both for being here.

Thank you, Vice-Admiral Norman, for your service.

I do want to ask about procurement, I guess following the thread from Ms. Vignola about how to do things better. Right now we have four ministers responsible for procurement. It's hard to pinpoint who's responsible when ships are late, for example, for purposes of accountability and efficiency. We can look to Britain and Australia, where they have a single defence procurement minister.

Vice-Admiral Norman, given your experience, would you be able to comment on that and provide your thoughts?