Industry Committee on Oct. 26th, 2016

[Randy Hoback, Conservative, Prince Albert, SK]

Okay.

[Desmond Gray]

We're not far enough down the road to know that. We know we need more investment in terms of the analytics. You're absolutely correct there. We need more investment in reaching out to industry and reaching out to small businesses and better communication. I think a comment was made about rural, and we need better engagement with the rural areas.

We tend to locate in the larger urban centres, and I know innovation hubs are there and industry is there. In a digital world, innovation is everywhere, and Canada is a huge country. This is part of why we're looking at how we deliver our program and how we have to expand and change that to make it more available.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay.

Coming back to military procurement, is there a simple answer to why we need to reinvent the wheel on everything we purchase? When the military is looking for a warship right now that they're tendering, weren't there some warships available out of France? I'm not a defence specialist, so I'm speaking in generalities for sure, but why could we not have just bought those? Why did we insist on reinventing the wheel? Could we not have saved millions and millions of dollars for taxpayers in that scenario?

[Paul Halucha]

In terms of that question, it was a policy decision to rebuild shipbuilding capability on both coasts of Canada, so that explains that single incident.

[Randy Hoback, Conservative, Prince Albert, SK]

Yes, that's fair.

[Paul Halucha]

I think in general the statement of requirements that's developed by the military is typically what underpins the construction of the market. The companies either can or can't participate. It's rare that it drives you to just one selection, and ideally, from the perspective of the work that Jeff and I and ISED do around maximizing industrial benefits, competition is typically very helpful in enabling us to get the best in terms of the value proposition, and it encourages firms to bring forward the strongest commitments to Canada.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Mr. Garrison, you have five minutes.

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

Thanks very much.

Mr. Hoback's question, of course, leads me to the submarines. People say you get a good bargain by purchasing something that exists. We bought the submarines, and they were off the shelf, and they had been off the shelf for quite a while. That being said, it created a lot of manufacturing work in my riding.

[Randy Hoback, Conservative, Prince Albert, SK]

A lot of service work....

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

It was a lot of rebuilding, really, from the ground up.

I'm trying to stay within the confines of the study you're doing, but I have shipbuilding procurement people in front of me and I have to raise some concerns.

The shipbuilding strategy started off as a floor in terms of what our needs were, and now it has suddenly become a ceiling. Nobody can imagine we would get more than the number of ships that were the absolute minimum that were in the strategy. It's become about the dollars instead of about the ships. That floor was what we absolutely needed, and suddenly the shipbuilding strategy is the money and how many ships we can get for that, so we've had a kind of slippage there in our understanding of that strategy.

The timelines were originally set out to try to maintain our capacities, and now that's slipped to—I'll be as charitable as I can—filling immediate gaps. We saw that with the tender ships, where we're now having one refit, and we're contracting with the Spanish armada and doing all kinds of stopgap things that end up costing us quite a lot of money outside the money that was allocated.

All of those really don't fit so well into this study, but I think one does. One of the purposes for shipbuilding was to create stability and predictability in the shipyards around the country so we would have that viable industry that would support our military, but also support good jobs in Canada. I have to say the problem we're having now with the strategy is that predictability for a lot of the potential employment is lost.

When the frigate refit was finished in my riding, 250 people were laid off. The idea was we would be at a certain place in the shipbuilding strategy and we wouldn't lose.... It's not just the worry or concern about families, which I do have, but it's also the capacity you lose. You have skilled teams built up to do that work, and if you don't have that stability and predictability in the industry, they will disperse. Then you have people scrambling trying to restore that capability.

I guess I was really asking for a procurement view, but anybody who wants can respond to that. How are we doing on that goal of the shipbuilding strategy of creating that stable and secure industry that doesn't go through boom and bust?

[Desmond Gray]

Your point is very well taken. Unfortunately, I'm not the marine expert. I didn't realize that would be a focus of this committee, but we would be happy to note it and to respond to it. You're absolutely right.

As we mentioned earlier, predictability allows for better definition. Better definition leads to alignment with industry, capacity, cost, and of course in terms of the capacity to ensure people have jobs and they will be there. If you lose that capacity and you have to wait a year, you face the odds they will have to go someplace else. Then you have a whole other cost to bring your workforce back up.

Yes, you're absolutely correct. That's the challenge.

I'll defer to my colleague. Would you like to say anything?

[Sylvain Cyr]

I can add maybe one thing. I think there is still a conscious effort by government, in trying to align the various ships and work packages, to try to avoid this as much as possible, but I think that at times, despite some of those best efforts.... If one thing gets delayed, and through the tendering process more time is needed, we then, unfortunately, end up with the situation you describe.

I know there is still an effort. I'm not the marine expert either, but in speaking regularly with my colleagues, I do know they are trying to avoid that as much as possible.

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

Is there anybody else?

[Jeff Waring]

Briefly, again, part of our effort is to generate economic benefits within the marine sector as well as in the broader economy so we are applying our industrial offset policies to the national shipbuilding strategy procurements.

In addition to that, both of the prime contractors, Irving and Vancouver Shipyards, are required to invest a certain proportion of their contract value through what they call a value proposition. These are investments in human resources development, technology development, and industrial development in the marine sector itself in order to build that sustainable marine sector.

Yes, the sequencing of ships and shipbuilders is part of it, but it's also the leveraging opportunities we work with the shipyards on.

[The Chair, Liberal, Dan Ruimy]

You have five seconds.

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

I'll just say the word “apprenticeships”. I would like to see in procurement some attention to building future capacity through apprenticeships.

[The Chair, Liberal, Dan Ruimy]

There we go. You got it in.

The final five minutes go to Mr. Arya, I believe.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Mr. Chair.

Mr. Garrison, talking of ships and submarines, I toured the shipbuilding facilities in Halifax and I spent all night in our submarine, the HMCS Windsor, so I'm now an honorary submariner. Anyway, we will not go there.

Mr. Gray, you talked about BCIP. We have a lot of supply side programs in the government, but very little on the demand side. I'm glad that you're looking at SBIR, which has been quite successful in the U.S. We hopefully will get a program like that, but instead of adding one more program, I think the small industries minister mentioned, if I'm not wrong, there are 300 programs in our government today.

How can we rationalize that number of programs and get some good programs, something like SBIR?

I think that has more to do with Mr. Halucha's portfolio. We have so many programs here. How can we rationalize that and bring forward something like what Mr. Gray is talking about, the SBIR program in the U.S.?

[Paul Halucha]

There are two answers to the question. SBIR is clearly something that we are looking at and have been working at ourselves in depth with the United States to understand how it would work and how it could be adapted to Canada—

[Chandra Arya, Liberal, Nepean, ON]

I understand that, but is it not time to rationalize the number of programs we have?

[Paul Halucha]

This is the retooling of government. Our minister has been discussing the innovation agenda and some of the measures he's doing, but at this point nothing has been done.

[Chandra Arya, Liberal, Nepean, ON]

Going back to my colleague's question about a partnership with the provincial government, one of our previous witnesses was the Chemistry Industry Association, which said you don't have to reinvent the wheel. Already provincial governments have brought in some programs. He specifically mentioned Ontario and Alberta. Alberta has a chemistry industry-specific strategy. They have allocated $400 million.

I think the point my colleague was trying to make is that instead of coming out with a separate one ourselves that does not gel well with what the provincial governments are doing....

I have a few seconds. Maybe I'll share my time with my colleague here.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, and thank you, witnesses, for coming.

At the beginning of your presentation, you talked about small businesses and the valley of death, the challenges that small businesses go through. I'm spearheading a study trying to identify different programs that are available to small businesses during the various stages of their development. One of the areas with the least number of programs or partnerships available is the valley of death during the growth phase.

What is your department doing, whether as a partnership with an organization such as BDC or independently, to help businesses get through that phase? That's where we lost a lot of businesses and that's where a lot of jobs could be generated.

[Paul Halucha]

I'll let Gerard have an opportunity to speak shortly, since he hasn't spoken yet during the meeting.

I think BDC is a key part of this, and this allows me an opportunity just to get back to our conversation at the beginning. The BDC has spent about $4.7 billion on manufacturing in 2016, according to their numbers that they've provided.

[Majid Jowhari, Liberal, Richmond Hill, ON]

That's why I specifically thought about BDC, but what is it specifically that your department is doing?