Industry and Technology Committee on Oct. 22nd, 2025

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

Building on that, how can we ensure Canadian SMEs and start-ups in the defence and national security sector remain a focus of a national procurement strategy and don't get sidelined by a larger multinational firm?

[Christyn Cianfarani]

One of the ways you can do that is by being far more interventionist than we are currently. The tools we use are passive. They require other companies to choose where they invest.

Using a defence industrial strategy, you would call out specific areas of interest where you wanted foreign primes. For example, you would say that this particular sensor or this particular capability will be Canadian, and our expectation while we're doing the contract is that this Canadian technology will be embedded in our variant.

If you start to be heavily interventionist—which in general we are not because we have such low volumes and it's always in any given moment in time—and if we change our thinking around, I truly do think there will be more opportunities for small businesses to enter these supply chains.

I'll stop there.

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

Thank you.

[The Chair, Liberal, Ben Carr]

Thank you, Mr. Bains.

Mr. Ste‑Marie, you have the floor for two and a half minutes.

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

Thank you.

My question is for both of you. It concerns the topics just discussed by my colleague, Mr. Bains.

How do procurement timelines and predictability of demand issues affect your ability to invest in workforce innovation and development?

You have one minute each.

[Christyn Cianfarani]

One of the challenges is that innovation can come from any kind of company, but there is a lot of innovation that comes out of small to medium-sized enterprises.

One of the single biggest problems we see with the procurement cycles we currently have and the inability to procure, immediately, Canadian sovereign capability is that the procurement cycle being anywhere from five, 10 to 15 years will basically run small businesses out of cash flow, so they cannot retain the skills or sometimes even the service provider—the individual who has the knowledge—for such a long period of time. Basically, we get what's typically called a valley of death, where the innovation is funded, there is no procurement vehicle or the procurement vehicle happens five years later, and effectively the firm runs out of cash or has to look for other ways to keep itself and its people alive.

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

Thank you.

Mr. Mueller, you can respond now.

[Mike Mueller]

To build on that, predictability and having the government come forward with its expectations earlier provides that certainty, especially for small businesses.

Government needs to take a look at those payment schedules: How do you pay in a timely manner and maybe pay ahead of schedule? A huge area of opportunity is on the innovation side. We have this BOREALIS and these commitments, so how do we make sure that small and medium-sized businesses can take advantage of some of these pieces? How do you take a look at some of the policies that keep these small businesses from scaling up and growing while building out that ecosystem?

Some small businesses are fine to stay small and some have ambitions. We need to have policy that enables them to grow, create more jobs and build more of that ecosystem.

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

Thank you.

[The Chair, Liberal, Ben Carr]

Thank you.

Mr. Guglielmin, you have five minutes.

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

Thank you both for being here.

Ms. Cianfarani, in your opening remarks you stressed the importance of very meaningful industry participation in the defence industrial strategy. You also alluded to this having gotten under way about 12 months ago.

In your opinion, since the government's announcement of the defence industrial strategy, how much engagement from the industry has been solicited?

[Christyn Cianfarani]

It's fair to say there has been a lot of disparate engagement. The challenge is that, to use my cake analogy, there are thousands of interventions to companies across the country. I would ask you, “What do you want in your cake?” You would say, “I think it needs eggs, flour, sugar and some sprinkles.” Then I would say, “I think it needs to be chocolate, eggs, flour and maybe, I don't know, something else.” In the end, I don't know whether we were baking a pancake, an actual cake or a multi-layered cake. In the end, we know that different facets of industry will have different opinions, but it all has to come together holistically to make sense.

What we are trying to express is that the component pieces have been conveyed, but we cannot now see what that makes in terms of a holistic, joined-up strategy. It is effectively industry that has to deliver to get us from where we are today to being able to absorb, within our companies—and I'm not assuming that we're going to be eating all the money that's coming from the government—roughly 150 billion dollars' worth of investment as compared to the amounts that we've seen in the last 10 years.

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

When we think traditionally about how this has worked, has the unwillingness to collaborate in this manner you're explaining with the defence industry hindered our procurement efficiency or innovation in the defence industry specifically?

[Christyn Cianfarani]

I don't know if it has hindered innovation necessarily, but we have a big distinction, which I call the separation between church and state, where we are very afraid and tepid in this country about unabashedly procuring, in the shortest frame possible, resident Canadian capability. We think in some way it is something cruel and unusual, or it's inside baseball or not fair if we're not giving other countries an opportunity to bid on our procurements.

The reality is that this is a managed market. This market is heavily protected and managed around the world. In some countries, you are specifically told who you are going to work with and what you are going to build. I'm not saying that we necessarily have to go that far, but we need to understand that this is a moment when our failure to be a lot more directive about what we want, what our expectations are and what we intend to buy for ourselves from our own country could effectively squander this high volume of investment money that we will have.

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

The PBO noted $12 billion in lapsed defence spending between 2017-18 and 2022-23. Which factors would you say most contributed to those lapses in defence spending, and what risk would that pose as our defence budget necessarily increases?

[Christyn Cianfarani]

In some cases, procurements do move to the right; you're negotiating. However, I would argue that for the most part we see procurements get stuck in a couple of phases. One is the actual procurement-to-contract phase. It can take years, and the first happens a lot more up front. We call it requirements definition and options analysis, and it can take five years before it gets out of options analysis. One of the contributing factors for that, which you would have to validate with the Canadian Armed Forces as they are the owners of the requirements and options analysis part of the process, is I believe the changeover in posting cycles with individuals who come in and out of the procurement process.

Perhaps if we civilianized that a bit more, got it stable and actually set some targets and mapped out the process, we might be able to reduce bottlenecks and other inefficiencies in the process, as well as perhaps have stable individuals who are there year over year. That would allow a more efficient process.

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

Thank you.

[The Chair, Liberal, Ben Carr]

Thanks very much, Mr. Guglielmin.

Ms. Acan, you have five minutes.

[Sima Acan, Liberal, Oakville West, ON]

Thank you, Mr. Chair.

Mr. Mueller, you mentioned the long lead time in product development. How prepared are our Canadian SMEs to engage in partnerships with countries that have field-proven or mission-proven systems in order to attract investments and strengthen Canada's defence industrial base? How can private capital be better utilized in this sector with the largest part of the defence industry being in the public sector? How can private sector funding and investments be made to strengthen the industry as a whole?

[Mike Mueller]

I'll take that in reverse, because it's a great question.

Private sector investment will follow government leadership, and that's incredibly important. We've long talked about the need for political leadership, and if we want to talk about delays, we needed that political leadership. I feel we do have that political leadership now, so we need to move forward on that and the consensus amongst all parties with respect to this.

It's interesting. I was at a meeting of an international group of industry leaders. They're paying attention to Canada and they are now seeing the commitment and the profile that is being given to defence, and international companies are looking at how they can invest in Canada because of what's happening. They don't know where to go or how to do it, but it's on their radar. They are looking for that defence industrial strategy, so it's absolutely critical.

When you take a look at the small and medium-sized businesses in aerospace specifically, it is truly a global supply chain. Our small and medium-sized business are no strangers to that international supply chain, so, again, the predictability that's going to come with a defence industrial strategy will spur on that private sector investment and spur on those opportunities for the supply chain. If we take a look at some of the impacts and benefits to the supply chains from some of these major procurements, 60% to 70% go through the supply chains, so it's absolutely critical for those small and medium-sized businesses right across the country.

[Sima Acan, Liberal, Oakville West, ON]

Thank you so much.

Mr. Mueller, you also mentioned the shortage of skilled labour. We all know that the defence industry is very skill-oriented labour. Our government has pledged to invest in training programs, skilled trades apprenticeships and retraining support for workers in key industries.

Do you see these investments as valuable for strengthening Canada's sovereign industrial capability?

[Mike Mueller]

In a short answer, yes. Any investment going into the labour market is much needed, but we need to be strategic about it and work with the provinces to make sure that the funding is going to the best places. Responding to industry needs as opposed to trying to fill seats is absolutely critical.

That cultural shift we need to see, that we're starting to see on the defence side, we need to also see that on the educational side. It is coming; it is a work-in-progress.

[Sima Acan, Liberal, Oakville West, ON]

Are there any particular areas where Canada is closer to achieving industrial self-sufficiency, especially when it comes to the defence industry?

[Mike Mueller]

I would say that it's on a case-by-case basis, but we're one of the few countries that can design, certify and build an aircraft from nose to tail.

[Christyn Cianfarani]

We're going to be receiving a lot of assets that have a significant amount of data. In terms of managing that data, having data sovereignty and having some of the things that we have in Waterloo or in the technology corridors here in Ottawa, like artificial intelligence that will parse through that data, Canada has those capabilities. We do have the capability to do our own cryptography, and we have the quantum computing capability that will allow for the next generation of encryption.

We've spent about 10 years rebuilding the shipbuilding sector, so I think we should be thinking about the next 10 or 20 years, because that is a sector that is now operational.

Last, our intelligence services rely on satellite information, and our population could soon be relying on low-earth orbiting satellites, which are made here in Canada. I think we should be declaring space cyber-deterrence and intelligence-gathering capabilities as sovereign capabilities. That's just a fraction of the many wonderful things we have here in Canada.