Government Operations Committee on Oct. 24th, 2022

[The Chair, Conservative, Kelly McCauley]

I call the meeting to order. Good morning, everyone.

We'll get started. We do have quorum.

Welcome, everyone, to meeting number 35 of the House of Commons Standing Committee on Government Operations and Estimates, also known as the mighty OGGO.

Today we're continuing our air defence procurement projects study.

We have witnesses from 11 to 12. From Thales Canada, we have Chris Pogue, chief executive officer; and from the Conference of Defence Associations, we have Youri Cormier, executive director.

We'll start with five-minute briefs from both of them.

Mr. Pogue, perhaps you would like to go first, please, for five minutes.

[Chris Pogue, Chief Executive Officer, Thales Canada Inc.]

Thank you very much.

Good morning, Mr. Chair, and members of the committee.

As noted, I am Chris Pogue, the CEO for Thales Canada, part of the Thales group of companies, a global technology leader with 80,000 employees operating in 68 countries.

I want to extend my sincere appreciation for this opportunity to discuss defence procurement, with a specific emphasis on Canada's air defence needs.

I also want to come before you, recognizing that I have served 20 years in the Canadian military and now almost 20 years in the Canadian defence sector. Throughout this time in the industry, my north star has always been to serve those who serve. I can say that the same spirit exists within our team. With over 2,000 employees of Thales in Canada and considerable investment in Canada, one example being $40 million annually in R and D executed right here, we are building a safer, greener and more inclusive future that we can all trust—developing Canadian capabilities in augmented intelligence, cloud computing and collaborative defence and security.

The point of today's gathering is that change is the status quo, and never has there been more need for change than what is urgent today. With war raging in Ukraine, Canada's chief of the defence staff is pushing for industry to move to wartime footing. Western leaders are looking to shore up friends to reduce trade barriers and supply chain risks, underscoring the need to acquire the interoperable solutions best suited to supporting allied missions.

To act, however, industry needs more than a demand signal. It needs orders framed with predictability and timeliness. Those orders can enable faster delivery of outcomes, and in better ways. When it comes to procuring wartime capabilities, slow and steady cannot win this race, nor will going it alone. Canada must move in step with its allies. Winning modern wars is made possible only when allies co-operate seamlessly.

Our closest allies are willing to help Canada meet its most urgent air defence needs, with capabilities that would ensure allied interoperability while protecting our own forces in Baltic deployments. Companies, including Thales, have answered Canada's call for the capability to protect our people and to defend our interests. We remain concerned, however, that Canada's procurement system inhibits the ability to act on some of these offers, not for lack motivation but for lack of flexibility.

Today Thales equips the United Kingdom, among our closest allies, with short-range air defence capability to defend against threatening planes, helicopters and drones. This capability is currently deployed in support of NATO missions. Along with training, this capability has been provided to Ukrainian armed forces, where it has proved to be an effective system against Russian aggression.

It is in Canada's best interest to protect our soldiers well. It is also in Canada's best interest to ensure NATO interoperability within this current context. Canadian air defence capability is critical to industry, and industry is ready and equipped to serve those who serve with a field-proven capability.

Today's conflicts won't wait. They move fast and develop almost instantly. Industry and government share a responsibility to use every creative means they can to move Canadian capability from the world of delays and deliberations into the hands of our armed forces and NATO allies.

Deploying Canadian forces to the Baltics creates an urgent air defence and force protection need, and there is an immediate and interoperable solution available. Canada needs to take action. Acting today will also provide a transformative opportunity for the development of Canada's ground-based air defence capability of tomorrow.

Canada must continue to tap into the promise of new ways of working with industry. There are guideposts of this promise, for example relational and trust-based contracting, which is already being used today by the Royal Canadian Navy. It offers the potential to maintain continuous capability, incremental field innovation by design, and to incentivize collaboration. In my 20 years of service and 20 years in the industry, this may be the most significant procurement shift I've ever seen, with a great potential to deliver faster and more capable solutions. Perhaps we will turn to it later in the dialogue this morning.

In closing, I urge all of us to address Canada's immediate need to acquire air defence capabilities to defend our interests and protect those who serve.

Thank you.

[The Chair, Conservative, Kelly McCauley]

That's great. You finished early—wonderful.

Mr. Cormier, you have five minutes, please.

[Dr. Youri Cormier, Executive Director, Conference of Defence Associations]

Thank you very much, Mr. Chair.

Good morning, everyone.

Let me start by thanking the committee today for calling the CDA as a witness for your study of Canadian air defence procurement.

The Conference of Defence Associations was founded in 1932 and today serves as an umbrella group for 40 member associations who represent over 400,000 active and retired members of the Canadian Armed Forces. Our goal is to foster a facts-based rational approach to Canada's defence and security policy.

Now, for full disclosure with the committee, I want to mention that the CDA Institute, our sister organization, counts Boeing, Lockheed Martin, Airbus and Pratt & Whitney as past and current clients. However, the bulk of our income is obtained through competitive grants, private donations and ticket sales to our events, and the above four represent a minute fraction of overall revenues.

Having said that, the key thing here is that we do not have a favoured aircraft in this fight, nor would it be appropriate for a think tank like ours—a charity organization, a non-partisan organization—to take sides. We trust that through the analysis of capability requirements and industrial benefits, the government apparatus is very well equipped to make a reasoned decision.

It has been a long-held CDA view that Canada's North American air defences need to be fully modernized, and a future fighter is a key part of that process.

In March 2022, Canada picked the Lockheed Martin F-35 as the preferred bidder to supply 88 new fighter aircraft. This decision comes late, in our view. Indeed, a lot of what we know today about the F-35 we knew already in 2012. The last thing Canada should want to do now is to delay any longer. The RCAF and our national industrial base have waited long enough.

We need a robust defence industrial base in order to deliver much-needed materiel to the Canadian Armed Forces in a way that is economically sustainable for our country and that delivers high-value jobs to Canadians. Having said that, let's be careful not to forget the “B” in ITBs. Economic benefits are a key outcome of military procurement and the means to sustain it, but they are merely a benefit, not the end goal itself.

Delivering the right capabilities for the right price at the right time is the fundamental role of military procurement. If government focuses too strongly on ITBs and loses sight of what the CAF needs, we wind up paying far too much for the wrong capabilities that arrive too late.

Bureaucratic risk-averse procedures are key contributors to rust-out. Recognizing the need for parliamentary oversight, we think it should be extended to grant political cover to procurement issues where bureaucrats dare not tread, in order to speed up the process. Now that we have selected the F-35, we should go quickly to contract and make sure that we get the full range of integrated sensors for it to operate at it best.

Canada also needs to put in place full logistics and support, maintenance, infrastructure and information technology upgrades and training programs in support of the decision.

The F-35 will boost our ability to confront new generations of airborne threats. These threats include cruise missiles, hypersonic weapons systems, ballistic missiles, UAVs and fractional orbital bombardment systems. The F-35 cannot come soon enough, as the war in Ukraine has demonstrated the dangers of hypersonic weapons and suicide drones.

We also have witnessed the powerful effects of ultra-modern air defences on the battlefield. In addition to the F-35, Canada will need a robust ground-based air defence system that includes shoulder-held anti-aircraft missiles and a counter-drone capability.

In a future conflict in which Canada is called on to enforce a no-fly zone or police the skies over NATO countries, the F-35 would be our most effective platform for such a mission.

Since SSE was written, the geopolitical environment has rapidly declined. Russia has engaged in a full-scale war in Ukraine, and we have seen distressing levels of escalation in the Indo-Pacific.

Vladimir Putin's Russia has become extremely dangerous and unpredictable. It is also our next-door neighbour in the north.

Air assets are therefore crucial to protecting our sovereignty. Just last week, American F-16s were scrambled after two Russian Tu-95 Bear-H bombers entered the Alaskan air defence identification zone.

Being able to support our allies in NORAD and NATO is not only key to our national sovereignty and security. It's also important as a means whereby a middle power like Canada can help uphold the rules-based order, which is so central to our strategic interest.

Our economy and values depend on the rules-based system, and we also depend on our allies to sustain it. In exchange, both need to be able to depend on us, so we must be equipped and ready to do our fair share.

I will stop there.

I will be pleased to answer your questions, whether it be in English or in French.

Thank you.

[The Chair, Conservative, Kelly McCauley]

Thanks, Mr. Cormier.

We'll start with Mrs. Block for six minutes, please.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much, Mr. Chair.

Good morning, everyone. Witnesses, thank you so much for joining us today.

I will start my questioning with Mr. Cormier.

The first question I have is, do we have a disconnect between what we think our reputation is in the world and what it actually is? Can you comment on this and maybe provide us with some examples?

[Dr. Youri Cormier]

Yes, I think there is a disconnect, in the sense that for much of our national story, we refer to ourselves as the peacekeepers of the world. Canada used to provide 60% of the world's peacekeepers, and the last time I checked, there were 40 Canadian peacekeepers out of 120,000 peacekeepers on the planet. We're definitely not where we like to think we are.

Recently the French ambassador came out in the National Post and called us on it. He said we weren't present in peacekeeping the way that one of our closest allies was expecting us to be. He also went so far as to say that we were trying to hitch a first-class ride using a third-class ticket.

I think there's something there to be said. The French ambassador is saying this out loud. In my job, I meet with a lot of military attachés—our allies—and some of our ambassadors, and this is the kind of stuff that you hear all the time in camera.

What we heard from the French ambassador last week is just saying out loud what a lot of other people are thinking.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much.

I'm going to follow up on some of the remarks you made in your statement. You stated, “Bureaucratic risk-averse procedures are key contributors to rust-out.”

Can you comment further on that?

[Dr. Youri Cormier]

If you look at what we're using right now in the Canadian Armed Forces, it kind of speaks for itself. There are the Netherlands' old tanks, old British submarines. We're looking at old Australian jets. We have this way of shopping at the thrift shop and getting what we pay for here in Canada.

If we're going to be a G7 country, I think we have to stop having this preference for a Dollarama approach and remember that we're the ninth-largest economy on the planet. If you look at what Australia is doing in the meantime, they're the fifteenth-largest economy on the planet. The Canadian economy is 30% larger than the Australian economy, and we go around telling ourselves we can't afford to get this equipment and be out there in the world.

The reality is that if the Australians can afford it, so can we. It's just a question of political will and consensus building amongst parties, and using the podium. I'm speaking to politicians here. We can't just go to the electorate as though they are focus groups and deliver whatever they want.

Full disclosure: I'm a professor of political philosophy and war theory, not an expert on costing or ITBs. However, I remember teaching courses on Plato and classical political theorists. One thing that keeps coming up is the role that politicians have in being the educators of society, being able to go to the electorate to educate them on needs and requirements, so that they get informed and together we build a national consensus on Canada's role in the world.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Perhaps a good segue to that is another comment you made in your opening remarks. You stated, “Recognizing the need for parliamentary oversight, we think it should be extended to grant political cover to procurement issues where bureaucrats dare not tread...to speed up the process.”

When you talk about political will and perhaps the role of parliamentarians, what would you recommend to give the oversight that we do not have as parliamentarians?

[Dr. Youri Cormier]

I think parliamentarians have the necessary oversight but don't always use it as much as they could. What I mean by that is that if we are worried that public servants are too risk averse or are slowing down the process to avoid risk, maybe they need political cover. All-party consensus is maybe a way to go to the people who are working in these departments and giving them support. I think that when cabinet and Parliament stick together and say they need something soon, there's a way to get it quickly.

The best example is in Afghanistan. We needed equipment. It was delivered. We were able to conduct our operations. Let's continue doing that.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Following up on that, you also declared that the March 2022 decision to pick up the Lockheed Martin F-35 as the preferred bidder to supply 88 new fighter aircraft “comes late in our view”.

Indeed, a lot of what we know now about the F-35 today, we knew already in 2012. The last thing Canada should want now is to delay any longer. The RCAF and our national industrial base have waited long enough.

Full disclosure, I was on the OGGO committee back in 2012. I recall many of these conversations, and the launch of this project.

What are the costing impacts of these delays? What are the impacts on the industry?

[Dr. Youri Cormier]

For that, I'm not going to give you a direct number, because I would have to take my calculator out, and I would probably get it wrong.

The main thing is that some companies are packing up their offices and leaving Canada, because there are more serious markets out there. They quit mid-process on bids, and when this happens, you wind up with fewer competitors in the game. It's not good for the buyer.

[The Chair, Conservative, Kelly McCauley]

Thank you, Mr. Cormier.

Ms. Thompson, you have six minutes, please.

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

Thank you, Mr. Chair.

Before I begin the questions, I would like to ask for 10 minutes at the end of this meeting to be able to discuss Thursday's meetings, specifically, bringing—

[The Chair, Conservative, Kelly McCauley]

I'm aware of that already from Mr. Housefather.

Thank you.

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

Are we good for 10 minutes at the end?

[The Chair, Conservative, Kelly McCauley]

We'll see how we're doing for time.

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

I'd like to push a little on this. It's important for us to be able to have the conversation, simply because witnesses are coming Thursday, and—

[The Chair, Conservative, Kelly McCauley]

Yes, I realize that, Ms. Thompson, but it depends on our second hour. We have a hard stop at one o'clock, and I don't wish to take away time from Mr. Johns' witnesses.

We'll see in the second hour, but we will try.

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

Thank you.

Mr. Pogue, could you please share how the current project management style at your company helps in gaining successful business contracts with the private sector and government?

[Chris Pogue]

Within the company, the project management processes we have are well defined and based on project management principles, PMP, and the professional certification of project managers.

Principally, that drives the way in which we develop a work breakdown structure, the work we're going to do, the way costing people have helped cost it. We make sure that the program can be effectively delivered to the end state, as well as managing the day-to-day interactions with all the stakeholders, frequently suppliers, as well as, obviously, the customer, whether it be the navy, the army, the air force, or whomever, and the Coast Guard in some cases.

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

Could you share with this committee the business relationships between Thales Canada and the federal government?

[Chris Pogue]

By business relationships, I'm going to assume you mean the major contracts we have under way today.

The major contracts under way today would be through the AJISS Arctic/offshore patrol ship and joint support ship in service support contract for the Royal Canadian Navy. We are an electronics system integrator as part of the NSS to the individual shipyards that are building parts of the national shipbuilding strategy. We serve the Canadian Army with some software development applications, as well as a recent contract for the tactical control radar.

Another major customer of ours is the Coast Guard, where we deliver bridge support to the electronic systems integration for the bridges they operate from when they take those vessels to sea.

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

Mr. Cormier, as executive director of the Conference of Defence Associations, can you tell us about your role in your organization's affiliation with the Canadian aerospace industry?