Government Operations Committee on Sept. 29th, 2022

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

Welcome, everybody. I will call the meeting to order and welcome everyone to meeting number 30 of the House of Commons Standing Committee on Government Operations and Estimates. The committee is convening today to continue its study on air defence procurement projects.

Today's meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022. Members are attending in person in the room and remotely using the Zoom application. 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 in this meeting that taking screenshots or photos of your screen is not permitted.

With that, I would like to welcome our witnesses here today. For your opening statements, we will start with Mr. Carroll followed by Mr. Norante.

You have five minutes, Mr. Carroll. Go ahead, please.

[Simon Carroll, President, Saab]

Good afternoon, Mr. Chair and members of the committee. Thank you for the opportunity to speak to you today.

With me is my colleague, Patrick Palmer, from the “Gripen for Canada” team.

Saab has a proud history in the defence and security industry. It dates back over 400 years and includes everything from submarines to fighter jets.

At present, we proudly serve the Canadian military with leading products such as the Carl-Gustaf weapon system that was provided by Canada to Ukrainian forces, along with several naval systems on board the navy's Halifax-class warships.

As you are likely aware, Saab remains eligible for selection in the future fighter capability project, having submitted a compliant bid for 88 Gripen fighters to Canada. Not only does Saab meet all mandatary requirements for capability, interoperability including NORAD and Five Eyes, and the delivery schedule, we also remain the only eligible bidder offering guaranteed pricing and economic benefits equal to the full value of the contract.

Saab is the only competitor that committed to build, upgrade and maintain the future fighter in Canada, the first made-in-Canada fighter jet. This would create 6,000 high-value jobs across the country, maintained over 40 years to keep and grow critical aerospace skills within Canada's domestic industry. We partnered with Canada's leading aerospace companies, including CAE and GE in Quebec, IMP Aerospace & Defence in Atlantic Canada, Arcfield in Alberta, Leonardo Canada in Ontario and many more.

Our offer also included the creation of three centres of excellence: a cybercentre in Toronto, a sensor centre in Vancouver and an aerospace R and D centre in Montreal.

We further committed to the creation of a Gripen centre, the Canadian home of the Gripen fleet. The Gripen centre would employ Canadians to maintain and upgrade Gripen in-country, providing Canada with the sovereignty and independence to control the aircraft forever.

Recent statements by the government indicated that Canada is negotiating cost, a delivery schedule and economic benefits with our competitor. There should be no negotiation on these critical elements. These elements of the bidder's response were to be committed to and then evaluated as part of the competitive process. The fact that there are ongoing negotiations should be concerning to members of the committee and all Canadians. Saab is ready to provide Gripen fighters to Canada, as stated in our offer.

In addition to the fighter program, I would like to speak to another opportunity relevant to air defence procurement: ground-based air defence. Current world events have highlighted the importance of protecting critical infrastructure and populated areas from air threats, be they aircraft, drones or incoming fire.

Saab's mobile short-range air defence solution, MSHORAD, has been designed to meet such threats and can be rapidly deployed for use wherever and whenever it is needed. Canada has identified ground-based air defence as a critical and urgent requirement, given that it has no GBAD systems to defend against aerial threats, including the emerging threat from drones.

Unlike traditional ground-based air defence systems, Saab's MSHORAD solution can detect, classify and eliminate small, low-flying targets with high accuracy. This capability is also important beyond the traditional conflict scenario. For example, our system, because of its unique mobility and flexibility, can be deployed at any location where security is of the utmost importance, such as a major sporting event or a meeting of heads of state.

Canada has recently released two urgent operational requirements closely associated with the broader ground-based air defence procurement, and we are confident that Saab's MSHORAD solution meets the needs of the armed forces for all three programs.

Saab is supportive of these urgent operational requirements and encourages the swift acquisition of this capability. As with the future fighter program, Saab is confident that it can meet the desired capability and delivery schedule requirements for Canada and, in the case of ground-based air defence, could deliver an interim capability within 12 to 18 months and a fully operational capability within two years of contract award.

We appreciate the opportunity to appear before this committee and welcome any questions.

Thank you.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you, Mr. Carroll.

Now we have Mr. Norante for five minutes, please.

[Francesco Norante, President, Leonardo Canada]

Good morning, Mr. Chair and committee members. It's a pleasure to be here today. My name is Francesco Norante. I'm the president of Leonardo Canada.

I also want to acknowledge that tomorrow is going to be the National Day for Truth and Reconciliation, so all Canadians are in our thoughts and we're very proud of that.

Leonardo Canada is part of the larger Leonardo group. Leonardo group is one of the top defence companies in the world. Last year we closed our revenues at 14.1 billion euros, more than $30 billion Canadian.

We are presently in 150 countries around the world, in 26 of which we have production, and the majority of our revenues come from the international market. We have also invested in our supply chain extensively. We have more than 8,000 suppliers and a significant presence here in Canada as well.

Leonardo is active and present in all the spectrums of defence and aerospace. We have five key areas—air, land, maritime, space and cyber. In terms of aircraft and helicopters, we manufacture helicopters for all purposes. We proudly support search and rescue operations in Canada with Cormorant, and this is also the largest business we have in Canada.

We are also present in electronic defence. We cover basically the whole spectrum of defence electronics from U.S. command and control systems to radars and cybersecurity. We also manufacture aircraft. We are one of the few defence companies, if not the only one, that has heavily invested in jet trainers. We have a basic trainer and an advanced trainer, which are the two that we are going to offer in Canada for the next campaign.

We are very involved in the space business. We are in all the major space programs, and in particular, in Canada, we support Telesat for the low-earth orbit constellation program. We have a JV with Telus, so we manufacture the satellites for the next generation of satellites in Canada. We are also focused on customer support and training, so we do the entire spectrum from manufacturing to support, which is the activity we are going to implement here in Canada so we will be able to support all our fleets.

Leonardo Canada was established in 2018 here in Ottawa. Our office is here, with the purpose of expanding the business but also consolidating what we have. We've been present in Canada for 50 years in different configurations. Now Leonardo Canada is responsible for all the activities in the defence and security market.

In Canada, we have five service centres for helicopters across the country. We have more than 50 helicopters flying across the country. We cover search and rescue, air ambulance and also private purposes. We also have more than 40 ATRs, which are the medium aircraft for transportation. We are around 400 people. We own three subsidiaries: Leonardo DRS Canada based in Kanata, which is specialized in electro-optics and naval communication; Leonardo DRS Pivotal Power, which is focused on power units; and then Leonardo Canada - Electronics, which is specialized in simulation and training for electronic warfare.

We also are almost at the completion of the deployment of over 30 weather radars for Environment Canada, and we will also deploy more than 20 radars across all the main airports in Canada.

We have an extended supply chain. We purchased more than 3,000 engines from Pratt & Whitney. We are in partnership with CAE and all the key players. In terms of investment, we invested almost $400 million last year in the supply chain.

Finally, I would like to thank all of you for this opportunity to be here today.

[The Chair, Conservative, Robert Gordon Kitchen]

Thank you for your opening statements.

With that, we'll go into questions, and we will start with Mr. McCauley for six minutes.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thanks, Mr. Chair.

Gentlemen, thanks for joining us today.

I'm going to split my time and try to keep it half and half between the two.

Mr. Norante, I'll start with you, please. Leonardo was the main other bidder in the fixed-wing search and rescue procurement debacle. There's really no other word for what's gone on.

Are you familiar with what has gone wrong with the winning bidder, and would you care to comment on that? I realize you're a competitor, but we've heard stories about how it won't be certified, and how search and rescue personnel jumping out the back of the plane will be killed.

[Francesco Norante]

What I would say is that Leonardo presented a very compelling and very effective proposal for Canada. We would have obviously invested significantly in the country. As I said before, we invest a lot in research and development, but we were not selected so I'm not able to comment.

[Kelly McCauley, Conservative, Edmonton West, AB]

With regard to the plane that you were offering, how many of those are currently operating around the world?

[Francesco Norante]

I don't have the total number, but it's a significant number, yes.

[Kelly McCauley, Conservative, Edmonton West, AB]

It's a mature design. If the government had chosen Leonardo on that day several years back, would they be functioning, built, in the air and operating right now?

[Francesco Norante]

I'm not able to comment on the status of the program, because we were not selected. What I can repeat is that my company was definitely prepared to offer this solution for Canada.

I would say that now we've moved on. It was six years ago. We're focused on other propositions.

[Kelly McCauley, Conservative, Edmonton West, AB]

Were the various requirements in the RFP easily adaptable for the plane you were offering? Were they reasonable, unreasonable...?

[Francesco Norante]

It's complicated to say right now. Obviously, we were not selected, so I don't know the status of the program. To be honest, we have not looked at the opportunity any longer.

[Kelly McCauley, Conservative, Edmonton West, AB]

Is the plane you offered currently still being manufactured?

[Francesco Norante]

Yes. That's correct.

[Kelly McCauley, Conservative, Edmonton West, AB]

Okay. Thanks.

I'm going to switch over to Saab.

Thanks for the information on the ground protection, especially against the drones, etc., because it's not something we've addressed yet in this committee. It's very interesting.

With Saab it's been a very long procurement process—not quite as long as it is for us to buy pistols, but it's certainly getting up there. How do you feel that Saab has been treated? Has the process been fair and transparent, do you believe, all along the way? Are there parts that you think certainly should have been improved upon?

[Simon Carroll]

Thank you for the question.

I believe the process was positive. We had a lot of interaction with the Canadian government throughout the process.

My colleague here has been part of it for longer than I have. I will defer to him to answer the rest of the question.

[Patrick Palmer, Executive Vice-President, Head of Saab Technologies Canada, Inc., Saab]

To echo Simon's position, we certainly felt that the process was very well defined. There was a lot of engagement and a lot of interface with the customer.

Up until the latter part of last year, where the customer moved to identify that we would offer a fully compliant bid, including interoperability and security...so we were able to demonstrate that we could meet the Two Eyes and Five Eyes requirements—

[Kelly McCauley, Conservative, Edmonton West, AB]

I'm sorry. Did the Gripen meet the requirements for full interoperability and all of the other requirements?

[Patrick Palmer]

Yes. We passed all of those requirements. I think it was the end of last year when the Government of Canada announced that both us and our competitor met those requirements.

That said, one of the things I'll draw attention to is that, post that period of time, they entered into more of a quiet period, I would say, where there wasn't a lot of back-and-forth. One of the confusions we have right now is one of the minister's announcements that they're negotiating costs, economic benefits and deliveries for that program. From our perspective, those elements were to be clearly defined and committed to as part of the RFP. Ours was, and we're committed to that. We're committed to the deliveries.

[Kelly McCauley, Conservative, Edmonton West, AB]

They asked you to pre-commit as part of the RFP, and now they're stating, “That's nice, but now we're going to negotiate further on these items,” which were laid out in the RFP. Actually, that sounds very similar to the fixed-wing search and rescue RFP, where they had a 30,000-page RFP but they changed the rules afterwards.

What would they be negotiating with on the F-35, when there are no ITBs allowed as part of the F-35 program, in terms of economic benefits? Do you know?

[Patrick Palmer]

Thank you for that question, but we're not really privy to that level of what they're negotiating and what the final result will be. The only thing we can talk about is what we've committed to Canada. What we've committed to Canada is a fully compliant offer for 88 aircraft, including all of the training and all of the support structures.

[Kelly McCauley, Conservative, Edmonton West, AB]

What IP sharing would there be with the government or was that—

[The Chair, Conservative, Robert Gordon Kitchen]

Excuse me for a second, Mr. McCauley. I hate to interrupt, but we're having a translation issue. I apologize.

I'm sorry about that. I think we've corrected it now.

[Kelly McCauley, Conservative, Edmonton West, AB]

How much time do I have?