Yes.
Evidence of meeting #15 for Industry and Technology in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was f-35.
A recording is available from Parliament.
Evidence of meeting #15 for Industry and Technology in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was f-35.
A recording is available from Parliament.
Senior Research Fellow, Centre for Defence and Security Studies, University of Manitoba, As an Individual
Yes.
Conservative
Ted Falk Conservative Provencher, MB
Thank you for that. I think it's very important for this committee and for the government to hear that.
You have been very critical of the DIA.
Senior Research Fellow, Centre for Defence and Security Studies, University of Manitoba, As an Individual
That's the Defence Investment Agency, yes.
Senior Research Fellow, Centre for Defence and Security Studies, University of Manitoba, As an Individual
I do intuitively, but I'll be honest, I don't know. I haven't seen any details of this. I don't know if the czar, as I call them, has testified to the national defence committee or to this committee about how this is going to go. If we think that with the Defence Investment Agency we are somehow going to throw out, as my colleague said here...as much as I agree with his point.
Are we going to throw out all the procurement competitive rules? Are we going to throw out all the ISED issues involved here? Are we just going to streamline this and go ahead? I don't think so. It's going to remain in place. I've argued this for a long time over the years about defence procurement in this country. People say we need to reform this and we need to reform that. To be honest, forget it; you're not going to reform nothing. You're going to play in the margins. You might be able to tweak things and get a little faster and a little quicker, but unless there's a sea change, I just don't see that happening in the case of the Canadian system.
Conservative
Ted Falk Conservative Provencher, MB
I believe I'm out of time.
I had questions for the others as well, but I'll leave it to my colleagues.
Thank you.
Liberal
Parm Bains Liberal Richmond East—Steveston, BC
Thank you, Mr. Chair.
Thank you to our witnesses for joining us here today.
I'll go to you first, Mr. Hodgett. Thank you for your service.
I want to talk a little bit about our defence ecosystem in Canada. We know that we have over 600 manufacturers in our defence ecosystem. How can we ensure that Canadian SMEs or new start-ups in the defence and national security sector remain a focus of the national procurement strategy and are not being sidelined by larger multinational firms?
Chief Executive Officer, H2 Analytics Inc.
Thank you very much for the question. I very much look forward to my parliamentary doctorate in the mail.
Chief Executive Officer, H2 Analytics Inc.
There are many ways in which small and medium-sized enterprises can be incentivized to, first, join the space and then, second, stay in the space. A fantastic start is a review of the ITB system that encourages a more effective collaboration among academia, prime contractors and small and medium-sized enterprises. Additionally, nationally mandated procurement requirements for small and medium-sized businesses is an opportunity that has been talked about recently.
Most importantly, the key to this is the provision of revenue to these companies in a way that actually gets them over what we in the technology industry refer to as the valley of death. It is very easy to get R and D money. It is very easy to get initial contracts that can get you to a point of productization. If the Crown is not willing to engage with small and medium-sized enterprises in a way that allows them to sign contracts that exist for a known duration at a known value, then the opportunity space reduces significantly for companies to join.
The last part of that would be the review of SR and ED. The applicability of SR and ED, especially in the capital expenditure space, is a huge benefit to companies in the area. As soon as small companies start playing in defence hardware, defence software and larger-scale capabilities, they are immediately priced out of the market, purely due to the cost of those items. Being able to roll that into SR and ED spending is an extremely powerful tool.
Liberal
Parm Bains Liberal Richmond East—Steveston, BC
Staying on the capital side of things, we've heard in this committee before from people in the banking and financial sector who've talked about the stigma around capital lending. The term “debanked” has come to the forefront. Can you maybe talk a little bit about that? Have you experienced any of that in what you're doing?
What are things that we as a government can do to ensure that there's the financial capital side of things to remove some of that stigma and assist with some of these new start-ups?
Chief Executive Officer, H2 Analytics Inc.
Absolutely.
Private institutions, of course, have their own risk processes that they need to undergo, and that's fair enough. On the capital provider side, last year we were engaging initially with venture capitalists, some of which said that defence was currently in the bucket of gambling and crypto trading. Obviously, we disagree with that.
In terms of banking itself, the reality is that it's not necessarily because of the stigma around defence. It is because, in many cases, the way the contracts are structured—i.e. usually one year plus option years—does not actually provide a capital provider the certainty so that they can say, “I know that you're going to be on contract for the next three years, so I'm willing to provide you with the loan that will carry you through this time and allow you to do that kind of investment.”
Going back to my point, a significant boost to small and medium-sized companies in the space would be to sign the multi-year contracts up front, as that allows for the certainty that they need. The second is when working with organizations like EDC and BDC, if there are opportunities to do things like enable.... For example, if you've signed a $1-million contract with the Government of Canada to provide a capability, you are also entitled to, through BDC, a $200,000 capital loan that allows you to basically have the credit against that procurement vehicle.
Those are some small efficiencies that could be found that would significantly increase the pace at which capital moves into the space.
Liberal
Parm Bains Liberal Richmond East—Steveston, BC
Thank you.
I'll stay with you for this one as well.
How can industry and government collaborate to periodically reassess and update the capability priorities? What you're mentioning here is that service contracts need to be long term. How do we determine how long we need this? There will be continued evolving needs around the capability. Could you expand on that?
Chief Executive Officer, H2 Analytics Inc.
My experience is that procurement requirements generally result from two levels. Either it's a strategic procurement of major capital capabilities, i.e. tanks, aircraft, ships, infrastructure, etc., or it's from the lowest levels possible, where the actual end-users are signalling requirements.
I have very little exposure to the process by which major capital procurements are put in place or how those are prioritized, so I'm going to decline to comment on that component. What I can tell you is that any soldier is absolutely screaming every day of their life about what they want to stop using and what they do want to use. Giving end-users the ability to have a direct say and giving delegating authorities, especially financial and procurement authorities, to the lowest levels possible will actually allow the trialling and, eventually, onboarding of capabilities much more quickly. That is much more suited to an innovation space as well.
I would also say that the way the government and the military can support that is by using that as an opportunity to see what works quickly and then to scale it across the institution rather than looking at multi-year projects of how we bring this on at the broadest scale possible and then push the requirements down.
November 19th, 2025 / 6:05 p.m.
Liberal
Bloc
Gabriel Ste-Marie Bloc Joliette—Manawan, QC
Thank you, Mr. Chair.
I would like to extend my greetings to all the witnesses and to thank them for coming and for their remarks.
Professor Fergusson, you criticized the government's decision to put the purchase of the 88 F‑35s on hold and to see whether it could be combined with the Gripen aircraft. You said that this was a bad decision.
Yesterday, the Minister of Industry said on CBC radio that Saab promised to create 10,000 jobs. What do you have to say about that?
Senior Research Fellow, Centre for Defence and Security Studies, University of Manitoba, As an Individual
The first response I would have is to compare what she said to what I think it was that the vice-president of Lockheed Martin said about the thousands of jobs that have already been provided. You can provide 10,000...and the number, as far as I'm concerned, is like a rabbit pulled out of your hat. No one really knows until this moves forward.
The question is not how many you can provide now or a year from now. It's how many you can provide that are going to be sustained over 10, 20 or 30 years. If you look simply, as I said, in terms of the numbers of access we have in a global marketplace, I don't know what the arrangements with Saab would be. I know what they are with the F-35 consortium, and that's a huge market.
Remember, these platforms are going to be in place, if we take the CF-18 example, the frigate example or the Sea King example, for 40 or 50 years. Over that time, there will be upgrades, modernization programs that are brought in and, of course, the overall maintenance contracts that'll have to go. With our companies that are involved with the F-35, what that means is not just dealing with 88 Canadian. That means we are engaged as long as we're competitive. I don't worry about that with our companies, because they have always been competitive. The problem has always been getting access to the global market. You now have a global market for the next 40 years to maintain that job base, depending, of course, on technology and labour versus technology resolutions, but that's the long term.
In my view, the F-35, already the bird in the hand, provides us with a long-term, sustainable capability for the Canadian defence industry with global access to a global marketplace that is going to expand, I would suggest, over time, and that is really doing what we want to do with a defence industrial strategy. The Gripen side of the equation is, in my view, a big question mark, but it's never going to be as big, it's not going to be last and it's not going to be sustained, in my view.
Bloc
Gabriel Ste-Marie Bloc Joliette—Manawan, QC
Thank you. Your comments were quite clear and eloquent.
You spoke about commitments, maintenance and upgrades, for example. These things could span a number of decades, say 40 or 50 years. There are also the strategic military issues. For example, what should be done with the current equipment? You said that there were more industrial benefits in a partnership involving F‑35s, particularly in terms of access to the global market.
During the first hour of the meeting, we met with Mr. Foster from L3Harris Canada, the company responsible for maintaining CF‑18s. Today, the Quebec newspaper, La Presse, reported that the government's potential decision to order Gripen aircraft instead could jeopardize the company's future. The paper also reported that half the jobs could be lost in the short term. Do you have any comments on job preservation at L3Harris in Mirabel?
Senior Research Fellow, Centre for Defence and Security Studies, University of Manitoba, As an Individual
Exactly, and it's not there. It's Magellan Aerospace in Winnipeg. I don't have a list of the companies. I believe there are 30 Canadian companies involved in this. If anyone here thinks that if we buy the Gripen, this won't have implications for their firms.... The Americans will decide: “Who are the leads on this? You're not buying. We're going to now push you out.” They'll all go. I'm convinced of it.
Even more, which we don't talk about, are the strategic political implications. How is the U.S. Department of Defense...? I'm not telling you that we should be kowtowing to the Americans, but how are they going to respond to this? What does this mean to them? What does it mean for the companies when suddenly we're signalling to them that we still want access to their market through the DPSA? By the way, the deal we struck back in 1956 was that Canadian companies would be treated like American companies in DOD procurement and, in return, we would buy major military systems from the United States. There have been exceptions, and those have been understandable for a variety of reasons in terms of product capability at the time. Do you think they're just simply going to sit by and say, “Oh that's fine. We don't mind”. I don't think that's a proper reading and understanding of the American administration.
If you're going to go down this path, and this is the broader path—and I'll end here—in terms of diversifying to the European marketplace and the Asia-Pacific partners, despite the agreements we've signed with them...which are very nice agreements. There's no meat on them at all. We don't know what they really mean. If they cannot promise access to a global market and to their procurement systems, it's not worth going down that path at all. We'll get nowhere. Even then, if we go down and they promise access, you have to remember that, overall in past decades, when we've gone to the Europeans...and they've talked about this. The Europeans are as protectionist as everyone else is, and they're going to privilege their companies, not us, at the end of the day.
Bloc
Gabriel Ste-Marie Bloc Joliette—Manawan, QC
Once again, you were quite clear. Thank you.
Thank you, Mr. Chair.
Liberal
Conservative
Kathy Borrelli Conservative Windsor—Tecumseh—Lakeshore, ON
Thank you, Chair.
Dr. Huebert, the F-35 is used by 19 non-U.S. partners. The integration with allies is a necessity. Could you explain the importance of choosing the F-35?
Professor, Centre for Military, Security and Strategic Studies, University of Calgary, As an Individual
Absolutely. Thank you.
Again, I'll start off with the reality. As we are going through this discussion, people are wondering if we are going get the 10,000 jobs from Saab or if we are going to somehow escape, as Dr. Fergusson says, the American wrath when and if we were to do it.
What that misses is the core of your question. What is the strategic purpose of getting the F-35, or the Gripen, for that matter? We see, from a strategic perspective, why Norway, Finland and Denmark have all made the decision to go for the F-35. It is the manner in which it fights and meets the expected enemy. Let's face it. We are talking about meeting a potential conflict with Russia.
The reason that these countries say that they want to go with the F-35 and the reason it has such an international appeal is that, of course, you are talking about trying to respond to a new battlefield with a new type of weapon system, and it's referred to both in our defence update and in the Arctic foreign policy. The stealth and the speed of the new missile systems are such that the old days of tactical war fighting are gone in any major war. We're talking about a very different type of ability to respond and defend.
The reason the F-35 is put at the forefront is that it is a fifth generation that is dedicated to a system response. In other words, it's not just simply one aircraft out there and able to dogfight with a Russian or a Chinese aircraft, because those are the two enemies identified in the defence update. You're talking about being able to talk to each other, knowing where the threat is coming from and when in fact the threat is speeding at about a thousand kilometres or even faster.
In order to engage in that war environment...and this is what Canadians always have such difficulty trying to think about: We buy weapons because we may be at war. As our defence update says, that possibility has increased. Therefore, the F-35 works with our allies. It is integrated to a level that the open literature suggests the Gripen isn't.
I'll add one other factor that hasn't come into the discussion yet. If we find ourselves actually at war with the Russians, does any Canadian really think the Swedes would ever be able to resupply any damage or loss that we could suffer in that conflict? The reality is that, as soon as that conflict goes kinetic, you can forget about any resupply from the Swedes. They will be dealing with a frontline attack from the Russians. Therefore, rather than wondering whether Montreal, Winnipeg or whatever municipalities are going get the weapons, you have to think about the best way to maintain ourselves in a war. A resupply from Sweden simply is not going to happen in such an event.
Conservative
Kathy Borrelli Conservative Windsor—Tecumseh—Lakeshore, ON
Thank you.
Do you agree that procuring F-35s would help with recruitment of fighter pilots?
