Industry and Technology Committee on Oct. 1st, 2025

[Wendy Hadwen]

I think this is the simplest way to start. Whatever the Canadian Armed Forces members need to do the job that the government is going to ask of them is therefore a capacity that we would like to have access to, in Canada, preferentially. That's where we start from. It is everything from food all the way to high-tech equipment.

If you think about it, the way we've gone about the strategy is to identify where we think there are structural gaps that prevent us from thinking about the conflicts of the future and the capabilities we're going to need. In this respect, we know that deep tech, AI, quantum, robotics and unmanned systems will all be part of any military requirement that we foresee.

We also know there are some structural barriers for industry to be able to work with the Canadian Armed Forces. Some of those include small businesses struggling to access capital because they are operating in the defence sector or because they are making something that might cause harm in a military conflict.

Some of the questions we get asked a lot by industry, or some of the frustrations we hear, are about who to talk to. Some industries we've heard of come to Ottawa and meet a lot of different—respectfully—assistant deputy ministers like me and they don't feel like they understand how they can get their problem solved or translate it into a contract.

We know that we want to position Canada to articulate sovereign capabilities. These are things that we would want to be Canadian from start to finish and where we would want to have the ability to draw on this capability—also because we're very good at it and because it's essential in wartime.

We have a shipbuilding strategy that represents a sovereign capability, but there might be opportunities for other things that you can imagine.

I'll just conclude with one more area that is so important. It is research and development, and the commercialization of technologies and capabilities, from landing gear systems all the way through to data integration. We have so many great and talented firms in Canada, and we have some opportunities to improve how they orient to a defence demand signal.

[Dominique O'Rourke, Liberal, Guelph, ON]

Thank you very much.

I have a quick question on procurement and then, if I have time, I want to go to IP and ethics.

There is a company in Guelph that is woman-owned. She makes some pieces for export, machining parts for American tanks. The U.S. has a stream for small businesses. It also has a stream for women-owned businesses. For smaller contracts, there's a pool of those contracts and then it's easier for those small businesses to bid. The U.K. has a defence industrial strategy and it also has a stream dedicated to small business.

Is our defence industrial strategy planning to do that or will we be relying on the large industries—the large defence companies—to do their own subcontracting?

I think it's an interesting model and I'm curious to know whether we are planning to adopt a similar one.

[Wendy Hadwen]

As Kendal mentioned—and I might just ask her to add to this—so much of the Canadian economy is small businesses. Didn't we learn in the pandemic the way they can pivot so quickly, but also that they're very vulnerable in times of economic disruption?

We absolutely have our eyes on ways to make sure we can access the capabilities of the small businesses. ISED has some programs specifically designed to support them. They are not about defence, so our strategy could consider how to marry up programs that we already know work with small businesses and open a defence stream.

Kendal, did you want to add to that?

[Kendal Hembroff]

In the case of procurement, we are in the process now of taking a very careful look at the current procurement system. Part of that looks at what some of our allies are doing. I note the examples that have been provided by the member concerning the U.K. and the U.S. I think they're quite interesting examples.

The defence industrial strategy is still under development. That work has not yet been finalized, but we are certainly looking at other leading examples by other countries.

[Dominique O'Rourke, Liberal, Guelph, ON]

Great, thank you.

Am I out of time?

[The Chair, Liberal, Ben Carr]

You have a brief amount of time, but, unfortunately, it's not going to leave us much for a response, Madam O'Rourke. I'll try to roll it over if I can.

[Dominique O'Rourke, Liberal, Guelph, ON]

Our colleagues will ask the questions.

[The Chair, Liberal, Ben Carr]

Mr. Ste‑Marie, you have the floor for six minutes.

[Gabriel Ste-Marie, Bloc, Joliette—Manawan, QC]

Thank you, Mr. Chair.

I'm not sure I would use adjectives as strong as the ones just suggested.

I'd like to thank the chief of the defence staff and the two deputy ministers for being with us and answering our questions.

My first question is about the supply of spare parts and software and the maintenance of devices, for example, that are done in the United States. We've seen the President of the United States start blocking exports, including to Colombia. The export of American engines for the Saab Gripens was blocked and we were told that all we had to do was buy American F‑16V planes instead. The U.S. President has also blocked $400 million in weapons and munitions purchased by Taiwan because he is currently negotiating with China. If the U.S. President wanted to put pressure on Canada, he could block software updates or shipments of spare parts to make our devices ineffective.

In this context of great uncertainty, what are the risk analyses for dependence in the United States? What are the contingency plans for the Canadian Armed Forces or the department?

[Major-General Jeff Smyth, Chief, Air and Space Force Development, Royal Canadian Air Force, Department of National Defence]

Allow me to answer in English.

If I understand the question correctly, and I am paraphrasing, you are asking what analysis has been done to ensure we have access to the capabilities that we need.

We have to keep in mind very much that for things like fighter aircraft, or other really high-tech capabilities, there are very few countries in the world that actually do that type of production. Canada made a strategic choice in the fifties to no longer produce fighter aircraft. The challenge that we're up against is with countries that have invested over decades to develop those types of capabilities. We don't have a simple way to build that industry in Canada really quickly. This will take time, a lot of funding, and support from government to get us to a level where we don't have to depend on other countries for that type of technology.

The threat that we are up against on a daily basis is extremely high-tech. This isn't as simple as it might have been during World War II where we took an automotive factory and started producing bomber aircraft. When we get to the level of complexity in the weapons systems, the ecosystem that needs to support that is extremely important.

To speak more specifically to the question, as part of our assessment—and this isn't just the Department of Defence, this is also with PSPC and ISED—when we do a competition for capability, we look at the support ability as part of how that assessment is done.

While there may be a desire to keep everything within Canada, and we have incredibly advanced industry in many areas, supporting aircraft is one of those things where we have great industrial abilities, but we still don't have all of the capabilities we need to meet our operational requirements indigenously to Canada, if I could say that.

Therefore, we are relying on other countries in many cases to build some of the equipment that we need. We are very much aware of that, and we factor that into how we build our requirements and procurements.

[Gabriel Ste-Marie, Bloc, Joliette—Manawan, QC]

Thank you very much.

My next question is more for Ms. Hembroff.

I'd like us to talk about sort of the opposite of the subject that was just raised, namely, the importance for Canadian industries of exporting military equipment to the United States, our neighbour to the south.

How important are exports to the U.S. market for Canada's military industry?

[Kendal Hembroff]

Yes, the United States certainly represents a significant market for Canadian exports of defence goods and services. It currently represents 63% of Canada's total exports from the sector. Just to give you a sense of some of our other major export markets, Europe represents 11% and the U.K. 5%.

For that reason, the diversification of export markets will need to be something that we look at very carefully in the context of the defence industrial strategy. We need to make sure that we are providing international market opportunities for Canadian companies, especially given that the Canadian market, compared to a lot of other international markets, is quite small. In order to really build a very long-term sustainable industry we need to be also looking at international opportunities.

[Gabriel Ste-Marie, Bloc, Joliette—Manawan, QC]

Thank you very much, Ms. Hembroff.

My time is up.

Thank you very much, Mr. Chair.

[The Chair, Liberal, Ben Carr]

Thank you, Mr. Ste‑Marie.

Colleagues, we now go into the second round for five minutes each.

Mr. Guglielmin, the floor is yours for five minutes.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Thank you, Chair.

General Smyth, first thank you for your service.

Thank you to the witnesses for appearing today.

General, the federal government's review of the F-35 procurement has been repeatedly delayed despite public commitments to do so by the end of summer. Would you agree that such delays risk undermining both industry trust and the timely delivery of critical military capabilities?

[Major-General Jeff Smyth]

I would say briefly that the review process is ongoing. Of course, from an RCAF perspective we're very much looking forward to the outcome as soon as that decision is made.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

The Auditor General's report also flagged a near 50% cost increase now totalling $27.7 billion. Would you agree that, without stronger cost controls and more transparent oversight, these escalating expenses could become a challenge in defence procurement?

[Major-General Jeff Smyth]

I will say very generally that the level of technology that we're looking at to be competitive and to be able to fight and win against the threats that we are facing is not something that you can buy off the shelf at a Walmart. I think we all agree that everything is more expensive given recent events within the economy. Cost growth within complex problems is something that has always been the case and will continue to be the case for the foreseeable future.

Certainly, when we look at the military threat that Canada is up against, we have to ensure that we can fill our capability gaps to defend Canadians as directed by the government, and basically in accordance with the government policies that we're given.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

General, I spent my career in the private sector in the steel industry where there are a lot of timelines and accountability. I'm just curious about whether future defence procurements should include more rigorous timelines to improve that accountability that would be required with the public use of funds.

[Major-General Jeff Smyth]

I will say, as I'm now in my 37th year of service, I don't think we have ever delivered anything quickly enough for the demands of the soldiers, sailors and aviators who are out there and their lives depend on these on a daily basis. Of course, we'd love to do everything faster, but our ability to balance requirements with industry capabilities or good stewardship of public funds obviously has to be balanced within the process that we have. Of course, we'd always like to go faster, but we want to make sure in doing so that we meet our requirements and provide maximum benefit to Canadians.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Major-General, from your perspective with delays and ongoing costs that continually escalate, what do they say about the government's ability to manage complex defence procurement? How would you say this uncertainty impacts defence industry's planning and confidence?

[Major-General Jeff Smyth]

My perspective on that is that this is within PSPC's area of expertise. In many ways I am the requirements guy; like I said, I would love to have equipment as fast as possible. That's one where I don't think I have the expertise to be able to answer your question sufficiently.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

General, from your experience and in your view, what are some of the fundamental flaws in the current system that continue to drive cost overruns and delays? Are there any specific reforms that you would recommend to truly fix some of the long-standing issues that you have seen?

[Major-General Jeff Smyth]

Certainly, our ability to equip industry with the security clearances that are required to address the threat....

I can maybe answer it in a different way. As I said, it's an extremely high-tech threat that adversaries are investing tens of billions of dollars, if not hundreds of billions of dollars or more, into. It's very agile. One of the challenges we have is that we've typically drawn up requirements and then handed them to industry to answer those requirements. What we're trying to do now.... This is what Wendy is trying to articulate with regard to the defence industrial strategy as well.

From my perspective, we would present an operational problem to industry, talk about it at the appropriate level of classification and then look for their innovation to help us solve the problem. We want to work more collaboratively with industry in full understanding of the threat when we're trying to solve that operational problem. Our ability to work more closely with industry depends on our ability to give them the security clearances that are required and to have the infrastructure, both in terms of information technology and in terms of physical infrastructure, to protect some of that intelligence information, as well as the intellectual property that goes with defining something to defeat it.

Those things are things that we have to improve on so that we can respond in an agile manner to the agility of the threat that we are facing.

[The Chair, Liberal, Ben Carr]

Thank you very much.

Ms. Acan, the floor is yours for five minutes.