Evidence of meeting #7 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 procurement.
A recording is available from Parliament.
Senior Advisor, Office of the Parliamentary Budget Officer
We are coming out with reports on a yearly basis on NATO defence spending, yes.
Conservative
Ted Falk Conservative Provencher, MB
Are you aware of any other areas where the government is reclassifying expenditures into defence to meet that 2% target?
Senior Advisor, Office of the Parliamentary Budget Officer
My understanding is that, every year, National Defence sends some of their civilian members to other government departments to figure out how much spending would fit under the NATO definition of military expenditures. At the end of the year, they have line items showing that for this department, for example, the RCMP, there's x billion dollars, for the Coast Guard, there's y billion dollars, and so on and so forth.
Liberal
Liberal
Parm Bains Liberal Richmond East—Steveston, BC
Thank you, Mr. Chair.
Based on publicly available data, can your office estimate regional and sectoral benefits from defence procurement? For example, in my home province of British Columbia, the national shipbuilding strategy is under way.
Would you be able to talk about jobs or how much output per dollar in impacts it has compared to conventional infrastructure or industrial spending?
Senior Advisor, Office of the Parliamentary Budget Officer
That's a perfectly fair question.
I would say that ISED would be the department you'd want to speak to in terms of evaluating regional benefits or economic activity that occurs in certain areas. It's not something that we've looked at. Of course, our mandate is to look at things of particular importance to the nation's finances, so arguably, it's not inside our mandate.
Liberal
Parm Bains Liberal Richmond East—Steveston, BC
In addition to Canada's security and sovereignty, the defence industrial strategy is expected to bring domestic industrial benefits such as careers and innovation. For example, according to a study by Desjardins, one dollar of defence spending leads to $1.2 in nominal GDP once direct, indirect and induced effects are accounted for.
Can you tell us what assumptions are needed to model productivity?
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
To clarify the question in terms of modelling productivity—
Liberal
Interim Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
As Mr. Penney indicated, within our existing modelling, we do take into account increasing both the public sector and private sector investment, of which National Defence would be included as part of it.
We already have the data available, and it's something we're following and tracking.
Liberal
The Chair Liberal Ben Carr
Thank you, colleagues. That was a productive meeting.
Thank you, witnesses, for making yourselves available today and providing insight on this study in relation to the defence industrial strategy, which is a big component of what we are setting time aside for over the course of the next few months. Thank you again.
Colleagues, we are going to briefly suspend in order to turn to the second half of our meeting today.
Liberal
The Chair Liberal Ben Carr
Colleagues, I call this meeting back to order.
We're going to get into the second hour.
We have three witnesses with us today, two here and one online. All witnesses have completed the required connection tests in advance of this meeting.
For our witnesses, there will be up to, and I stress “up to”, five minutes for introductory remarks, at which point we will get into a line of questioning with predetermined allocated time for members of each affiliated party around the table.
We have with us, from Triple Helix, Alexander Salt, post-doctoral fellow; from Acme Testing and Consulting, Richard Borger; and from U15 Canada, Robert Asselin, the chief executive officer.
Mr. Asselin, since you're participating in our meeting virtually, you'll be the first to speak.
If you're ready, the floor is yours for five minutes.
Robert Asselin Chief Executive Officer, U15 Canada
Thank you, Mr. Chair.
Thank you for the opportunity to appear before you today. My name is Robert Asselin. I serve as the chief executive officer of U15 Canada. We represent the 15 leading research universities in the country. Our institutions conduct more than 75% of all university research in Canada. They enrol 70% of the full‑time doctoral students. They generate much of the nation's innovation, from patents to private sector research contracts or major scientific discoveries. Collectively, our universities are a national strategic asset. They're the anchors of talent, research and innovation in Canada.
We're living through a profound transformation in the global economy. The era of unfettered trade—the idea that open markets would always deliver stability and prosperity—is over. Around the world, we see the return of economic coercion. Supply chains are weaponized, access to technologies is restricted and the nations are redefining prosperity through the lens of security.
In this new era, economic and national security are inseparable. The long‑term contest among nations is now about who can compete and win in advanced industries.
As former Google CEO Eric Schmidt's special competitive studies project puts it, “innovation power”, the ability to invent, adopt and integrate technologies at scale, is now the foundation of both prosperity and security.
As former U.S. ambassador Rahm Emanuel recently wrote, industrial policy can only succeed if it rests on a deep and sustained base of advanced research.
History offers powerful lessons on how existential threats can drive transformation. In 1957, the launch of Sputnik was a shock to the United States. The response was not incremental; it was transformational. President Eisenhower created DARPA, the Defense Advanced Research Projects Agency. DARPA's innovations—GPS, the Internet and more—became the backbone of U.S. economic and technological dominance.
In 1962, President Kennedy went to Rice University to deliver his famous moon speech and called for a national mission to lead in science and technology. Crucially, they placed their leading research universities at the centre of that effort. NASA's partnership with Caltech became a vibrant model for what alignment between government, academia and industry can achieve. It turned scientific excellence into national capability, and it produced spillovers in robotics, materials, communications and defence that still shape the world today.
Canada now stands at a similar inflection point. Our leading research universities—the U15—are among the best in the world. They produce extraordinary talent and cutting-edge discoveries. Yet, too often our breakthroughs are scaled elsewhere because we lack a coordinated strategy linking discovery to deployment and research strength to industrial advantage. That gap, the failure to connect our research power to national purpose, has been the Achilles heel of Canada's industrial policy.
The creation of BOREALIS, Canada's new defence innovation platform, offers a way to change that. It can be our version of DARPA, a vehicle to translate advanced research into deployable technologies for the Canadian Armed Forces and for our advanced industries.
However, we must act boldly and decisively. We need to better connect talent and intellectual capital, foundational research, commercialization and public procurement.
Advanced industries aren't only drivers of productivity. They're also the building blocks of national security. Canada can't afford to remain a passive adopter of foreign technologies.
Yes, Canada is not the United States; our scale is different, but scale is not the lesson. The lesson is alignment. When research excellence, receptive industrial capacity, and predictable procurement work together, sovereign capabilities follow. If we get that alignment right, we will strengthen our security, drive innovation and build the technological foundations of Canada’s prosperity for decades to come.
Thank you, Mr. Chair.
Liberal
The Chair Liberal Ben Carr
Perfect, Mr. Asselin.
You used exactly five minutes.
Dr. Salt, I'll turn the floor over to you for five minutes.
Alexander Salt Triple Helix Post-doctoral Fellow, As an Individual
I would like to thank the chair and members for inviting me to speak today on what is an incredibly important issue.
In my opening remarks, I will make a couple of observations about the evolving state of Canada’s defence industrial ecosystem and make a few recommendations that you may want to examine for further study.
The evolving international security environment, marked by rising geopolitical tensions and Russia’s war of aggression in Ukraine, has underscored the urgent need for Canada to develop a coherent national defence industrial strategy. Such a strategy must go beyond rhetoric to modernize Canada’s approach, align our defence and dual-use innovation ecosystems and ensure that they can be mobilized for real strategic effect. Canada’s security and economic resilience increasingly depends on our ability to harness this integrated ecosystem with purpose, speed and focus. Advanced technologies such as AI, robotics, cloud networks, biotech and quantum computing, among others, are holding increasing relevancy to modern military operations as well as Canadian defence.
What sets the current generation of emerging tech apart from traditional 20th century defence technologies, like tanks and fighter jets, is their origin, in that, historically, conventional military hardware has typically been designed and manufactured by major defence contractors, while today it is civilian technological start-ups, often at the small and medium enterprise level, that are driving tech innovation. Many of these start-ups are creating technology with dual-use application, meaning they hold utility to both militaries as well as the civilian economy. These dual-use technologies are also developed at a much more rapid pace than what traditional government procurement processes can handle. Simply put, the status quo of how Canada identifies and acquires new military technology is likely ill-suited to ensure that the military maintains access to strategically vital emerging technologies. Unless this is fixed, the military will be outpaced by allies and adversaries alike. Accepting risk and prioritizing speed must become a much larger component of how Canadian defence operates.
In terms of a few recommendations, first, the government needs better data. To sustain an effective defence industrial strategy it will require a much better understanding of the small and medium enterprise ecosystem within Canada, including what firms are out there and where they are located. The government needs to better define how it characterizes dual-use firms. Further, there likely needs to be a better understanding of what constitutes a sovereign Canadian company, especially when it comes to multinational corporate structures.
Second, to meet the needs of small and medium enterprises, Canada should consider establishing alternative funding mechanisms to help streamline investment in dual-use start-ups. This could include the establishment of a not-for-profit venture capital fund. Canadian allies such as the U.S, U.K. and Australia, are starting to demonstrate that this approach can be effective at driving technological innovation. There is an attractiveness to forming a publicly funded venture capital fund that could help streamline defence tech investments but also can allow the government and military to shape the research and development cycles of the start-ups involved.
Third, existing innovation mechanisms such as the IDEaS program are in need of aggressive reform or replacement. Transforming IDEaS into a formal defence accelerator institution similar to those currently in operation in the U.K. and Australia would likely enhance the program's effectiveness by lessening the focus on competition over grants and allowing more opportunities for direct contracting to occur.
Fourth and finally, Canada should diversify its international defence industrial partnerships and explore forming new research and development agreements with other countries on matters related to emerging technologies. These initiatives would help diversify and strengthen the Canadian defence industrial base, help accelerate the integration of emerging technologies within the military, and potentially, expand the export market opportunities for certain sovereign defence products.
Thank you.
Liberal
The Chair Liberal Ben Carr
You're setting quite the standard here, witnesses.
Mr. Borger, I think the pressure is on you now, sir.
You have upwards of five minutes. Take your time as needed.
Richard Borger ACME Testing and Consulting
Thank you, Mr. Chair, and the rest of the members of this committee.
I would like to begin by expressing my gratitude for the opportunity to present to you tonight.
I believe I have a unique perspective to provide suggestions on how the defence industrial strategy can be leveraged to regenerate and further develop sovereign capabilities of Canada's industrial ecosystem and procurement opportunities for Canadian businesses. In the past several years, I have provided in situ testing and objective evaluation on the functionality of several innovations that were processed through the innovation solutions Canada testing stream. Additionally, since 2023, I have been the secretary of the Innovation Centre of the North, which is one of Canada's recently established NATO DIANA testing centres. This experience, coupled with being the director of a small Canadian business, has provided me with a rather unique lens to provide suggestions to this committee.
Based on this experience, I've provided five suggestions for this committee to consider as you frame the defence industrial strategy to ensure the most benefit for Canadian businesses.
These suggestions include the following: review and reinvigorate the innovation solutions Canada testing stream with a committed intent to normalize the use of third party evaluators; increase utilization of the NATO DIANA testing centres; repeal the industrial and technological benefits, or ITB, policy; implement dynamic procurement strategies for defence procurement; and promote an innovation-forward mandate for all members of the Department of National Defence and the Canadian Armed Forces.
In the brief I provided to the committee, I've attempted to provide context to each of these items and provide evidence-based suggestions for the implementation that will provide immediate support for Canada's industrial ecosystem. I look forward to further discussion on this matter.
Thank you once again for this opportunity.
Liberal
Liberal
The Chair Liberal Ben Carr
Your introduction in and of itself could have been a great standard to set for us.
Okay, colleagues, we have some time to play with.
Madam Dancho, the floor is yours for six minutes.
Conservative
Raquel Dancho Conservative Kildonan—St. Paul, MB
Thank you, Mr. Chair.
Thank you to the witnesses for being here.
I have questions for Mr. Asselin
You mentioned in your opening remarks that universities are a strategic asset. I very much agree with you. Of course, you are the CEO of U15 Canada, which is our top Canadian academic institutions, our universities. Well done on that, and we're looking forward to your testimony.
I've done a lot of reading of things you've published in recent years, so I would like to ask you a bit about that.
You had written that “economic security and national security” are now “inseparable” and that Canada's “long-standing failure” has been “linking discovery to deployment and research strength to industrial advantage.”
I do feel this is a core issue that this committee needs to be seized with concerning the defence industrial policy that we're looking to make recommendations on.
As you know, about $3.7 billion goes from the federal government to our universities for research and development. There's also quite a bit of research and development tax credits and innovation programs. In my study of this department and of this funding, it doesn't seem to me that there's any coherent strategy behind this funding that would be focused on, say, sovereignty and our critical industries. I want to ask you a bit about that.
In particular, you said that Canada must build “the sovereign capabilities and productive capacity that...underpin [our] resilience for decades.” That's very well said.
Do you feel that taxpayer funding for research and development to universities and/or private enterprise should have a more strategic focus on ensuring that it's contributing to our critical industries and the development of them?
Chief Executive Officer, U15 Canada
It's a great question.
Obviously, the granting councils provide various sources of funding, from very fundamental to more mission-driven. I will say that in the context of the defence industrial strategy, we have not yet seen more targeted funding related to the objectives we're discussing today. We're hoping this will come, in light of the upcoming budget, with more intentionality.
BOREALIS right now is a vehicle that has been announced. It has not really been explained in detail how it would, for example, fund research and what mechanism it would use to transmit this idea generation to corporations and commercialization and then public procurement. What we're hoping to see is the full continuum from research funding through public procurement.
Conservative
Raquel Dancho Conservative Kildonan—St. Paul, MB
In some of your previous writing you've warned that “vague” industrial objectives tend to yield “underwhelming results”. Within that, you've also pointed to DARPA, the U.S. Defense Advanced Research Projects Agency, which clearly has been quite successful in contributing to their defence industrial strategy there.
If Canada were to build its own DARPA, would it be like this BOREALIS agency you've alluded to?
Chief Executive Officer, U15 Canada
I hope so, but everything will be in the execution of it.
Conservative
Raquel Dancho Conservative Kildonan—St. Paul, MB
What sort of metrics do you think we should be looking at to measure success?