Government Operations Committee on Oct. 17th, 2023

[Nancy Tremblay]

Thank you for...

[The Chair, Conservative, Kelly McCauley]

I'm afraid that is our time. Perhaps we'll get back to you.

Mr. Johns, go ahead, please.

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

Thank you all for being here.

I'm going to start with you, Ms. Gregory, just to systematically go through my questions.

We know Canada is a world leader in airborne surveillance, anti-submarine warfare and aerospace, but in May of this year, 16 Canadian aerospace and defence executives sent a letter to the Prime Minister and also to the relevant ministers at the time—Minister Champagne, Minister Anand and Minister Jaczek—asking them to allow an open CMMA competition instead of the sole-sourced procurement for the American-made P-8.

I hope you agree that Canadian aerospace and defence industries are world-renowned, and if so, do you accept the assertion from these industry leaders that the Canadian government's failure to allow our domestic sectors to even compete on this contract will do significant reputational damage on the world stage? How do you expect allied governments to invest in Canadian aerospace and defence if the Government of Canada won't even let them compete?

[Mary Gregory]

I think it's well known in Canada's aerospace and defence sector that it is difficult to sell internationally. That's what companies often tell my department and me. It is difficult to sell internationally if they're not selling within Canada.

Canada has a very strong and capable aerospace industry. It's mostly in the top three in civil elements of aerospace—civil simulators, civil engines and civil aircraft. From the perspective of a defence procurement, I think the strength of Canada's aerospace industry on the defence side has been more as a supplier as opposed to an OEM.

On your point, I think it is very important, and we hear it constantly from industry, that supplying to the Government of Canada is an important element for the defence sector and for the aerospace sector.

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

I'll dive into the supply side.

We know that the Boeing product does not provide sovereign control of the intellectual property to Canada and approvals for any future modifications. They must be granted by the U.S. military. Meanwhile both Unifor, representing over 11,000 Canadian aerospace workers, and the International Association of Machinists and Aerospace Workers, have issued letters to the federal government saying that awarding a sole-source contract for the American-made P-8 threatens Canadian aerospace jobs.

Can you confirm that no Canadian workers will build Canada's P-8 Poseidons?

[Mary Gregory]

Thank you for the question.

The Poseidon aircraft, from what I understand, is based on a Boeing platform for which there are certain subcomponents built in Canada, but overall the platform is produced in the United States. It's unlikely there will be a lot of direct Canadian content on that aircraft.

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

I'll go back to what you initially talked about in terms of supplying those jobs.

Given Canada's recent inability to negotiate any guaranteed supply chain work on the F-35 fleet that we're currently procuring, how confident are you that you'll be able to negotiate guaranteed industrial and technological benefits for Canadian industry and workers, equal to the full value of the P-8 contract of at least $7 billion?

Would you agree that a sole-source contract whereby industrial offsets will be negotiated after the approval of the purchase cannot in any way guarantee maximum economic benefits for Canada, a defence procurement policy outlined in Canada's own defence policy, “Strong, Secure, Engaged”?

[Mary Gregory]

Thank you for the question.

Our policy for industrial and technological benefits can apply to foreign military sales, and it can apply to directed procurement. What would happen in that case is we would negotiate an agreement with the provider. If it were Boeing, we would negotiate with Boeing to conduct industrial benefits of the value of the contract in Canada. As you say, they wouldn't necessarily be directly on the platform that's purchased, but they could very well be, and often are, in commercial procurement, commercial activities that occur across Canada. Boeing has obligations already on previously purchased aircraft.

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

But there's no certainty here. There's no certainty now.

I'm sorry to cut you off there. Time is so short.

The premier of my province, whom I'm obviously a big fan of—Premier Eby, from British Columbia—also said to the media in July of this year, in response to a question about CMMA, that he supports the Canadian government aggressively investing in domestic aerospace and defence industries through open competition, just as France and other allied nations do. More recently, the Quebec National Assembly unanimously passed a motion calling on the provincial government to lobby the federal government to open the CMMA procurement to Canadian firms.

What is your response to the governments of Ontario, Quebec, and my home province of British Columbia, which clearly believe a sole source for the American-made P-8 is not in the best interest of their provincial aerospace and defence industries and economies overall?

[Mary Gregory]

Thank you for the question.

The industrial benefits policy that we apply can apply to a procurement with a provider from outside Canada. It does provide benefits to industry in Canada and business activities in Canada, but they may not be directly related to the procurement itself. The industrial benefits do come from other types of activities that a company like Boeing would undertake. Often they choose suppliers on the commercial aerospace side, for example, or other suppliers.

[The Chair, Conservative, Kelly McCauley]

That's your time. Thanks very much.

We'll start our second round.

We have Mr. Genuis for five minutes.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Thank you, Chair.

Before I proceed to questions with the witnesses, I want to provide a verbal notice of motion on another topic.

Chair, after eight years it's clear that this Prime Minister is not worth the cost. We've seen many examples of out-of-control and wasteful spending. I'd like to put the following motion on notice with respect to the ArriveScam app. The motion is as follows: “That the committee report to the House its deep dissatisfaction with the value for money in spending $54 million on the ArriveCAN app. It also acknowledges that the Harper government successfully developed multiple apps at a fraction of the cost, including the Travel Smart app, developed for $416,030, launched on December 19, 2015; the CanBorder border wait times app, developed for $89,981.77, launched on May 18, 2016; the CBSA eDeclaration app, developed for $122,712, launched in 2017; the Canadian Armed Forces app, developed for $107,992, launched on July 1, 2016; CRA's Business Tax Reminder app, developed for $138,800, launched in August 2014; the Veterans Matter app, developed for $132,464, launched in 2010; and the MyCRA app, developed for $2.8 million, launched in February 2015.

Madam Clerk, if you didn't manage to write all of that down while I was talking, I'm happy to provide this notice in writing.

Again, this motion underlines the deep dissatisfaction many Canadians have with what happened with ArriveCAN and the broader pattern of waste and mismanagement that we've seen from the government.

In the remaining time I have, I thank the witnesses for being here.

I will say that you're before us in the wake of a decision from the Canadian International Trade Tribunal regarding a propulsion upgrade for the Coast Guard icebreaker. Although that's not the principle topic, I would like to maybe ask you to reflect on that decision, the findings and the possible lessons learned from that experience.

[Simon Page]

Thank you for the question.

Maybe I'll give a couple of high-level reflections on the matter.

In PSPC, we run a very rigorous solicitation process based on the requirements of our client departments, as per my introductory notes. These requirements are very technical. Some of them are very focused on management.

In this case here, we're talking about a work period for a shipyard for a vessel's life extension, which was quite involved. There is a huge amount of technical requirements. When some of these requirements are assessed, each one comes in with criteria. The implementation of these criteria sometimes can be different from one body of people to another. For me, it's a reflection on the entirety of the case.

Because the case was quite complex, it involved a couple of rounds of submissions to the tribunal. I think if I have a more personal reflection, it would be to make sure that all parties involved fully understand the matter at stake at the outset. I think it triggered, unfortunately, a second round of complaints, more analysis and more deliberations—

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

Sir, I'm going to jump in because of time limitations.

The finding was.... You describe it as a technical matter. I accept that these matters are going to be highly technical for the average person, but these are things in which the department is supposed to have expertise. From my understanding, the finding is going to be costly to the government in terms of illegal granting of the upgrade for the project.

I want to press you to say a bit more about lessons learned, because it sounds like a pretty significant failure to have the ruling in this case made the way it was. Maybe the lesson should be more than just that it was really complicated.

[The Chair, Conservative, Kelly McCauley]

I'm afraid we'll have to leave it at that. Perhaps, like so many other things, we'll come back to it another time.

Mr. Bains, go ahead for five minutes, please.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Thank you, Mr. Chair.

Thank you to all the department members joining us today.

I want to echo something my colleague said about military safety being paramount. I also believe the equipment, resources and tools made available to them are equally as important. I think Madame Gregory mentioned there are Canadian suppliers that are part of the P-8 procurement.

Mr. Matthews, do we have a number on that? How many Canadian suppliers contribute to the P-8?

[Bill Matthews]

I'll start with some generic comments and then see whether Mary or Nancy would like to chime in.

Supply chains right now are very much global. I know it's tempting to think of something completely made in Canada or completely made in the United States. The reality is that regardless of where the bulk of the manufacturing is, there are often links to other countries. Obviously, we want to make sure Canada has maximum opportunity, but we also want to make sure that none of those components are manufactured in places we would not be comfortable with. Integration of the supply chain with allies is critical.

As my colleague Ms. Gregory said, there are some Canadian components on the P-8 already, and I'll turn the mike over to her in a second. The more important point she made is this: If there is a decision to go with the P-8, the economic benefits policy requirements don't change, regardless of whether the prime is in Canada or headquartered elsewhere.

Mary, I'll now pass it over to you.

[Mary Gregory]

Thank you so much.

I apologize, but I don't know the exact number of suppliers on the P-8. It is a militarized version of the 737, I think. Boeing Winnipeg has parts, composites, elements and components that might relate to the 737. I apologize, but I don't know the specifics on which elements might come from Canada. My understanding is that it's a small amount. I wouldn't suggest it's a big number.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

I'll now go back to Mr. Matthews.

What's the life expectancy of the replacement aircraft?

[Bill Matthews]

I guess it depends on which solution is chosen.

Let's be blunt here, Mr. Chair. The most specific information we have is on the P-8 because it is an existing product. All the other products and the information we learn through the RFI run by PSPC are developmental in nature. There is a lot of good work done to estimate when the products might be ready and how long they might last.

When we heard back from the RFI—and Simon, feel free to correct me if I have this wrong—most of the developmental options—“developmental” meaning they don't have an option today that meets the requirements—are looking at somewhere between 2036 and 2038 as the most optimistic estimate of when they would have a plane ready with all the systems. Then you have a lifespan beyond that.

If you look at the CP-140, which came into service in 1980, we're 43 or 44 years from there. That's a good guess. What we know about the P-8 is that the U.S. intends to keep it in service until the mid-2060s. Again, we have about a 40-year runway on that particular asset. It is the one we have the most certainty on, because it is an existing product.

[Parm Bains, Liberal, Steveston—Richmond East, BC]

Okay.

I'll now go to Mr. Page.

Stepping away from this particular procurement, because no decisions have been made, we know the default position of PSPC is to run competitions whenever possible.

What are the factors that led to the decision to go another way?

[Simon Page]

Perhaps this is a good segue to the answer just provided by Mr. Matthews.

When we receive a requirement, we look at what it is and the details around it. We then try to have the best solicitation process for the requirement. In this case, we started our process with a request for information, as detailed a bit earlier.

We also had a third party set of eyes for our work on the request for information. Then, as Mr. Matthews mentioned, the result of that request for information was that research revealed that we only have one military off-the-shelf product that could meet the requirements of Canada at the moment.

That triggers, I think.... I'll go back to the previous—

[The Chair, Conservative, Kelly McCauley]

I'm sorry, Mr. Page. We're past our time.

Next is Ms. Vignola for two and a half minutes, and then Mr. Johns for two and a half minutes.

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

Mr. Page, if I'm not mistaken, we'd like to start getting the planes in 2032, correct?

How long does the proper procurement process take? Would it push back the deadline by that much?

[Simon Page]

Thank you for the question.

As I said, when we sent out our request for information, a third party verified the results and confirmed that no off-the-shelf military products were available for the years 2030 to 2040. So we were open to sourcing otherwise, and we still are.

We checked how long it would take, approximately, even with...