Industry Committee on May 19th, 2016

[Jean-François Champagne]

I guess, in short, there are clusters, obviously, around the original manufacturer. When we see original manufacturers building factories, that creates an ecosystem, and the aftermarket, as an extension, also benefits from that. So the first answer is, yes, we do that.

From an innovation perspective, though, also to echo, it happens pretty much anywhere our members are based out of. We have asked our members about the evolution of innovation hubs, as an example, and it doesn't appear that the core of our members, at this point in time anyway, understand those innovation hubs very well and or have really engaged in leveraging them for innovation.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

Okay.

[Christyn Cianfarani]

If you read my notes, we absolutely have clusters. I call them ecosystems, but it's the same principle. There's a cluster in southern Ontario around combat vehicles, aerospace and airframe components in Montreal, and simulation and training in Montreal, as well as shipbuilding on the east and west coasts. In fact I would say that a cluster model is absolutely essential in defence. You will often find either collaborative models for research and development or incubators and accelerators used in those cluster models. You'll find in the Montreal community—

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

Quebec has that—

[Christyn Cianfarani]

— CRIAQ, which is effectively a program that puts universities together with the aerospace community.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

Now in that instance—

[The Chair, Liberal, Dan Ruimy]

Thank you very much for playing today.

[Voices]

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[The Chair, Liberal, Dan Ruimy]

Mr. Lobb, you have three minutes.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Just to go back to Christyn again, I wonder if we can take a look at one procurement project. The Aurora has had quite an interesting time. Again, it's been extended out for many years, with many of its parts being replaced. The Boeing P-8, I think, is what you'd looked at replacing it with, and it was deemed to be too expensive. These things come up and they do perhaps go over budget, or more than what DND had budgeted, and that gets into the media and is politicized, and then it's shelved. In the future, when we're wanting a surveillance aircraft, whether it's a P-8 or some other innovation, how do we go about it? It seems to me that the way it's going is probably not working out so great.

[Christyn Cianfarani]

I guess I'd ask you to clarify the question. Are you referring to the establishment or requirements to come up with the capability or...?

[Ben Lobb, Conservative, Huron—Bruce, ON]

After we've determined what is required and we go out, how do we form a relationship, whether it's with Boeing or Lockheed or whatever, to establish a craft, whether it's manned or unmanned, to be the craft for the next 30 years? What is currently happening doesn't seem to work, and it's over budget. How do we make sure, if we're going to have a new craft to, say, replace the Aurora, that we do so, that Canada's involved, that we get the industrial benefits out of it, and that we somehow deliver it on budget?

[Christyn Cianfarani]

I'd hesitate to comment on any particular platform whatsoever.

[Ben Lobb, Conservative, Huron—Bruce, ON]

I'll just boil it down to a pretty basic thing. If you want to do business with the government, and we want to buy military aircraft, but every single craft you go to procure is double what the estimated costs are going to be, we can never purchase any new craft. That's the situation we're in. Yes, we want to update Canada's military aircraft, but we can't do so when every single one we go to buy either can't be built or it's twice the price. That's what it boils down to, in my estimation, and that's what's happening.

[Christyn Cianfarani]

Can I ask what your question might be?

[Ben Lobb, Conservative, Huron—Bruce, ON]

My question is, how do we work with industry so it isn't always double the price?

[Christyn Cianfarani]

You need to incentivize industry. First of all, I think we would say that the procurement situation is challenged in terms of making cost estimates. I won't get into that, but I do believe that David Perry has done some significant work on cost estimating. You have some cost estimators in the defence realm who talk about parabolic estimation, etc., and I do believe that some of the PBO reports have probably covered the issues with cost estimating. If you park the idea that perhaps sometimes we don't have a good feel for what our estimate is and, secondly, that we may not understand how our requirements are driving certain Canadian customizations of that aircraft and, therefore, that there's the potential inability for industry to be able to even deliver what we are asking for, that is a second perturbance in this whole chain of issues before you even get to negotiating with the contractor.

Then I would say that when you negotiate with the contractor, clearly we have to be setting up the contracts so that we are, first, incentivizing them and, hence, the new kind of point system to get what we want, and second, that we want to make sure, to be honest, that if there are liquidated damages in these contracts for non-delivery on performance, non-delivery on industrial benefits, or non-delivery on schedule and time, we would enforce these. I do believe one of our challenges is that because we buy aircraft in so few iterations, for such a long period of time, and it takes us such a long time to get to that situation, we often have a generalized concern about backtracking on a particular procurement.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

[Christyn Cianfarani]

You're welcome.

[The Chair, Liberal, Dan Ruimy]

That's going to be it.

I'd like to thank all of our guests for coming today. You provided us with very good information.

We are going to break for two minutes. I do have one housekeeping matter to take care of. We'll take two minutes, we'll break, and then we'll get back in and take care of our housekeeping.

Thank you very much, guys. That was great.

[Proceedings continue in camera]