Industry and Technology Committee on Nov. 5th, 2025

[Philippe Lagassé]

Having spent a decade reviewing and advising four successive ministers of national defence on requirements, from two successive governments, I will tell you that the military requirements should be the requirement. I have serious concerns about requiring us to go down the Canadian route. We may build that in as part of the technical or industrial side of the equation, but I would urge the government to stay true to the fact that the requirements should be the requirements on the military side.

[Kathy Borrelli, Conservative, Windsor—Tecumseh—Lakeshore, ON]

We have so much skill in this country. When you lay out the requirement, I'm sure we have the skilled companies, the skilled labour, that could build what we need before we go elsewhere, no?

[Philippe Lagassé]

I think it really depends on what you're trying to build. In some cases, you're going to be building a capability that is an allied capability that's built in multiple places. For instance, again, why did the F-35 ultimately win the competition? Because it was the best aircraft at the end of the day, and this would be true of building a naval ship as well. I mean, we can build parts of it, but we also want to have the best possible technology.

There is a balance to be struck between protecting our men and women in uniform when they are operating and they need to trust that they are being equipped with the best possible equipment. Now, that doesn't say that Canadian manufacturers can't do it. They can all compete. As you say, we have great ingenuity. We have great technology. It's not to say that they can't do it. It's another thing altogether to require it.

[Richard Shimooka]

Could I make a quick comment?

I would say that one shortcoming of the existing procurement process in regard to sovereign production is that in many cases we've actually funded systems with capabilities through the lowest technology readiness level, to the point where it's almost mature and ready to go, and we've actually forced them to go into a competition against a foreign manufacturer. We've developed them through DRDC or various investment funds and the systems are ready to go. There are examples like the high-frequency surface search radar, which is several years back now. It's one example where we had a capability in Canada to do so.

The existing procurement rules, which are changing, have actually made it much more difficult for Canadian industries to actually compete within our own procurement system. I agree a hundred per cent with my colleague's points here. I think that in some ways we've actually gone too far in some of these areas.

[The Chair, Liberal, Ben Carr]

Thank you very much.

Mr. Bains, you have five minutes.

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

Thank you, Mr. Chair.

Thank you to our witnesses for joining us.

I'm going to Mr. Reed first.

First, thank you for your service.

We've had witnesses come to the committee in the past, and a specific witness talked about anecdotal evidence regarding entrepreneurs who were debanked, with no apparent reason other than the fact they ran a defence-oriented business. Could you shed some light on the potential stigma around defence and financing defence and if you've encountered similar stories?

[Kevin Reed]

That statement is absolutely true. Prior to 2025, if you were in the defence category, then you were deemed to be in other categories that had a lot of stigma too, principally because of ESG. That has changed with all global banks, including the Canadian ones, in the last six months, where they are building their defence teams. They are building their knowledge set. The “S” in ESG is now “societal”. The protection of people is a societal right.

We're seeing this rapidly changing, not just with the banks, but with pension funds, sovereign wealth funds and insurance companies. You will start to see by 2026 more credit available and more equity flow into the category, which has been starved.

That is an absolutely true statement. Companies, just because they were in the defence category, were debanked. They didn't have credit. I have multiple stories and examples of entrepreneurs I know who had big opportunities. They might have had $10 million a year. They were dual purpose. They were in drones. They had a 60-million pound order from the British \Ministry of Defence as a third-tier supply chain. They couldn't fulfill it.

We talk about building our capability. We have to be able to finance our entrepreneurs. If we don't finance our entrepreneurs, we don't build the capability.

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

Are there any measures we need to incorporate into our banking system where you think there are still some shortfalls or barriers?

[Kevin Reed]

I think our mainline banks are taking this very seriously. They see this as both a national rallying cry and a business opportunity.

The ability to put credit out is still pretty restrictive under Basel III and Basel IV. That's why having an AAA layer over credit guarantees will be a force multiplier for capital for the SMEs and private companies.

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

Thank you, sir.

I'm going to switch to Professor Lagassé.

Currently in defence manufacturing, Canada has approximately 600 suppliers. With respect to the industrial ecosystem that goes along with defence capabilities, how can we, as a government, leverage these regional strengths where they're all located?

You mentioned the Poseidon, in Richmond, British Columbia. Boeing has been there for 100 years. A lot of the IT and analytics around the Poseidon aircraft are being handled in my hometown.

Could you talk a bit about what we need to do to support our SMEs versus larger multinationals?

[Philippe Lagassé]

I'll just build on a point that my colleague Mr. Shimooka made in his answer to the earlier question as well.

If you really want to work with Canadian companies, you need to work with them from the beginning if you want to develop your own capacity to do something specifically tailored to your forces' requirements.

We currently have a program—I think you've heard of it before—called IDEaS. We develop the capability with Canadian companies, yet there's no contracting mechanism for the government to then actually acquire the capability.

It's these types of things. If we don't address such simple things like that, which our allies do as a matter of course, then we are falling behind.

We do have contracting regulations and we have other programs in place, but I would say that the main thing is this: What we can do to ensure the Canadian Armed Forces are able to work with Canadian industries to develop the capabilities they need and then give them the authority and ability to buy it quickly?

We don't have that right now. That is really arguably the most important thing. If you want to support Canadian industry and SMEs, they need to know that they have a buyer.

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

Is this a structural issue, maybe, with Innovative Solutions Canada, or are there recommendations you can make?

[Philippe Lagassé]

This is a national defence program, unfortunately. You would think this is something that would be relatively easy to achieve. I suspect we will get there. I don't want to be overly harsh on people. The reality is that, if anything, I would say, speaking to the larger question that we've been dealing with here, Canadian culture has always been so fair and so focused on open and transparent competition for everybody at all times that we have hurt ourselves by not saying, in some cases, that, no, we're just going to work with our companies here on this particular technology.

In trying to be more Canadian than we need to be, in trying to always ensure that we are so rules-based and so fair and transparent, we sometimes aren't willing to simply work with Canadian companies to find Canadian solutions.

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

Thank you.

[The Chair, Liberal, Ben Carr]

Colleagues, I'm going to use my prerogative as chair for just one minute to get a question in, which I had intended to do.

Mr. Lagassé, the question is for you. There was some very interesting reporting from CBC about a month ago, overseas in Finland, talking about the way that the Finns in particular, living next door to the Russians, have integrated into everyday life a mobilization of their citizenry, whether that's mailing emergency preparedness kits or whether that's building underground infrastructure that serves as a playground but in wartime could be converted very quickly into an operations system.

Do you believe, as was referenced by our colleague a couple of minutes ago from a remark made by the deputy minister, that we're in wartime? I don't think we're in wartime, but we're not in peacetime. Does the Canadian citizenry need to start thinking differently about its role? Does the government need to start talking to citizens differently about its role in terms of the challenging world order we're moving into?

[Philippe Lagassé]

Absolutely. Look, it's not just Finland. All the Nordics embrace the concept of total defence. This is what you need for not just traditional military threats but also the natural disasters that we're currently facing and have had difficulty managing.

One can imagine a scenario, Mr. Chair, where, if you want to see your sovereignty slip away, there is a situation in which Canada, on its own territory, is not able to deal with a major disaster and our major ally comes in and decides that it's not really going to go. You need to be able to deal with that. The way you deal with that is by having a citizenry and a population that is able to answer the call when something occurs. This is the total defence concept. This is training people to know that they have to be able to protect themselves, that they have to be able to take care of themselves for 48 to 72 hours and that we can mobilize our youth to deal with a major earthquake or fires or whatever it is so that we can handle the problem on our own, lest we be forced to call somebody else to do it for us.

[The Chair, Liberal, Ben Carr]

Thank you very much. I appreciate that. It's a topic I'll be curious to delve into a little bit further.

Colleagues, we have two very quick orders of business.

Typically, witnesses, you are free to go, but MPs typically do like to kind of debrief at the end. If you can stay, just so that a handshake can be provided, we need two minutes to deal with some business. If you have to go, of course, you are free to do so. We appreciate your availability.

First, colleagues, I'm looking for unanimous consent on a motion. It essentially authorizes associate members who are subbing into the committee to get access to the digital binder. I think everyone is familiar with this already. I would like to save some time by not having to read it.

I'm looking for unanimous consent.

(Motion agreed to [See Minutes of Proceedings])

Thank you very much.

Second, Madam Dancho had put forward a motion. I don't think we need to turn this into much of a discussion. There seemed to be agreement in my discussions on Doug Guzman, the CEO of the Defence Investment Agency. There's a desire and a will on the part of the committee to invite Mr. Guzman as a witness. Originally, there had been a discussion of two hours. My understanding in discussions with parties is that one hour would be sufficient—stand-alone, however.

With unanimous consent, we can simply agree that I can provide instruction to the clerk to find an hour on the defence industrial strategy to have Mr. Guzman from the DIA as a stand-alone witness on that panel.

I'm looking for unanimous consent.

(Motion agreed to [See Minutes of Proceedings])

Colleagues, thank you very much for a very interesting discussion.

The meeting is adjourned.