Evidence of meeting #30 for Industry, Science and Technology in the 42nd 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.
3:50 p.m.
Conservative
Earl Dreeshen Conservative Red Deer—Mountain View, AB
My point was not simply the ones we invited who didn't come, but those suggested by each of the parties at the beginning. If that's what we're saying, then I agree.
3:50 p.m.
Conservative
Ben Lobb Conservative Huron—Bruce, ON
Just to be clear, you're saying that invitations were sent out to all the witnesses on the entire list to appear or to provide written submissions?
3:50 p.m.
Liberal
The Chair Liberal Dan Ruimy
No. Remember that with respect to the clerk's office, we've gone through four or five clerks, and at every step of the way invitations were sent out. I can't ask the clerk right now to tell us exactly who accepted and who did not accept. I couldn't tell you that.
3:50 p.m.
Conservative
Ben Lobb Conservative Huron—Bruce, ON
Okay, but I thought when you made your comment, you said that invitations were sent out to every witness.
3:50 p.m.
Liberal
The Chair Liberal Dan Ruimy
No. What we will do is send out notices to those witnesses who did not show up and encourage them to submit their submissions.
3:50 p.m.
Conservative
3:50 p.m.
Liberal
The Chair Liberal Dan Ruimy
All of our witnesses who were on the list.... We gave in more witnesses than we had time for the study. Remember about...I can't even remember which day it was, but we actually sat down and we reviewed again. I said, “This is where we are at with our witnesses. We're halfway through our study. Let's go through it again and verify that we have the right people for what was missing from the study.” I gave that opportunity again.
That said, we still want to be able to get as many submissions as possible. Fair enough? Okay.
Monsieur Fortin, why don't we start with you? Unfortunately, we're going to have to keep it short.
3:50 p.m.
Assistant Deputy Minister, Science and Technology, Department of National Defence
I shall keep it short, Mr. Chair.
Thank you for the invitation to appear. I hope that the information I bring will be useful to your deliberations.
I'm assistant deputy minister for science and technology at the Department of National Defence. My role is to provide the Canadian Armed Forces and the Department of National Defence with the science and technology, the knowledge and innovation they need for mission success.
As adviser to Public Safety Canada, I also am responsible for providing public safety and public security partners across the country with knowledge to address the threats and the challenges that they have in their operations. I submit to you that the context of defence and security is evolving rapidly, that the military platforms are more complex than ever before, that the nature of conflict itself is more complex than ever before.
The changing nature of that conflict and the evolution of the technology will require that we engage with innovators across the country to address those challenges. I lead an organization of 1,300 people across the country, mostly scientists and engineers—some 800 scientists and engineers—who perform research and development in many disciplines from social science to engineering, medical science, and cyber areas. We collaborate with industry and academia. We have partnerships with granting councils, with universities. We give hundreds of contracts every year to industry. We work with allies, the science and technology organizations in our allied countries, to leverage their capacities and capabilities.
The scientists in the organization focus mostly on classified, sensitive, strategic research, and we leverage the knowledge of others in areas that are less sensitive. Our mandate is focused on science and technology to support defence and public safety.
We look forward to working with officials at ISED—Innovation, Science and Economic Development Canada—on the innovation agenda. We do need to build a resilient, robust innovation system to support defence and security objectives in this country. We need to simplify our R and D programs. We need to increase the engagement of non-governmental organizations in delivering innovation and to create a more diversified and resilient innovation ecosystem to support defence and security objectives.
Mr. Chair, I'll stop here and be happy to answer questions.
Thank you.
October 26th, 2016 / 3:55 p.m.
Paul Halucha Assistant Deputy Minister, Strategic Policy Sector, Department of Industry
Thank you very much, Mr. Chair.
I'll be equally brief. I'll abridge a few of the comments.
It is a great pleasure to be here before the committee on your final meeting of the discussion on Canada's manufacturing sector.
As Assistant Deputy Minister of the industry sector, I lead a team that is responsible for supporting innovation and competitiveness for Canada's manufacturing sectors. This includes aerospace, defence, space, automotive, life sciences, steel, chemicals and consumer products.
We also administer the industrial technological benefits policy related to military procurement as well as covering the investment review division.
Our work is done in collaboration with other sectors of Innovation, Science and Economic Development Canada, as well as other government departments.
As the committee has learned over its study, this is a sector that makes a significant contribution to every region of Canada's economy across exports, R and D, and jobs.
However, manufacturing has been through a challenging few years. Canada lost a large number of manufacturing jobs, firms and investment during the 2008-2009 global recession. Despite these challenges, manufacturing employment has been stable since 2009 at close to 1.7 million people, or 10% of total employment.
While its share has fallen, manufacturing accounts for 10% of Canada's gross domestic product. We have seen a strong rebound in this area, but it remains below pre-recession levels.
Canadian manufacturing exports have climbed steadily since the recession. In 2015, manufacturing exports totalled $325 billion, an increase of 9% compared to the previous year. For all the discussion of Canada as a resource nation, manufacturing represents nearly 70% of Canada's merchandise exports, consistently higher than energy, mining, and agriculture exports combined.
The committee's work on the future of manufacturing has been of keen interest to the department. We have been closely following the witnesses' testimonies, and it has been especially timely, given the department's priority on the innovation agenda and the work our minister has been undertaking over the past number of months.
I'd like to recap some of the big themes very briefly that were brought up during the hearings that are important to the future of manufacturing in Canada and the work of the department.
First, access to talent.
Second, growing companies.
The third is focusing on emerging technologies. The fourth theme is accessing new markets through trade.
There are significant challenges facing the manufacturing sector, and they touch on the mandate of multiple federal departments. From ISED's perspective, they are also an important area of focus for the minister's innovative agenda.
The department continues to work with other federal departments and industry to support our ministers in delivering on the commitments outlined in their mandate letters.
I look forward to the discussion and the questions. Thank you.
4 p.m.
Liberal
The Chair Liberal Dan Ruimy
Thank you. That was short.
Finally, do we have any opening remarks from Mr. Gray?
4 p.m.
Desmond Gray Director General, Office of Small and Medium Enterprises and Strategic Engagement, Department of Public Works and Government Services
Yes, you do.
4 p.m.
Director General, Office of Small and Medium Enterprises and Strategic Engagement, Department of Public Works and Government Services
Thank you very much, Mr. Chairman. My name is Desmond Gray, and I'm the director general of the office of small and medium enterprises and stakeholder engagement in the acquisitions branch of Public Services and Procurement Canada.
As you all probably know, the Government of Canada does expend significant resources annually for the goods and services it buys to meet the needs of Canadians. Federal procurement accounts for about 1% of Canadian GDP, so it's quite significant. On average, this translates into about $18 billion of procurement a year. This ranges in the goods and services that we buy from things like food, clothing, and office supplies all the way up to ships, tanks, and aircraft, which is a very wide range.
Of this $18 billion annually we spend, $16 billion is spent with Canadian suppliers. Last year, for example, our department issued over 23,000 contract documents. Of this amount, $6 billion was spent on DND requirements, and of that $6 billion, $4.2 billion was for goods.
Canadian federal procurement is based on the core principles of fairness and transparency. Our laws, regulations and international trade agreements generally require that government purchases be put to the open market for public bids.
Competition promotes innovation and the best value. There are some exceptions to this, provided for in the government contracting regulations, such as when only one supplier exists, or there is a robust justification to source to a single supplier. This may occur mostly in the defence context, where interoperability with allies and national security are factors at play.
Canada has for some time leveraged defence procurement for industrial benefits, and recent changes have brought broader application and more rigour to that work. A core element of the industrial and technological benefits approach is a rated and weighted value proposition.
As part of the overarching goal of getting the right equipment and services for the Canadian Armed Forces, this is a powerful lever for the government, because it requires bidders to compete on the basis of meaningful economic benefits to Canada associated with each bid. It is a weighted and rated assessment, so bidders who provide quality value propositions will stand out. We know that sustained spending over time not only strengths the industrial base, it supports research, development, and innovation, and export capabilities.
I think you all know that unlike regular goods and services we provide or procure, defence equipment is rarely standard. Even equipment described as “off the shelf” may need to be customized to meet military needs. Armoured and non-armoured military vehicles, for example, carry sophisticated equipment, and they must be able to withstand weather conditions and circumstances that are unlike those encountered in the civilian world.
The office of small and medium enterprises and stakeholder engagement, the organization I lead, was created in 2005 to specifically address the needs and perspectives of small and medium-sized enterprises selling to the Government of Canada. We assist SMEs, identify procurement opportunities, and help remove obstacles to their participation. Today approximately 35% of all of our PSPC contracts are awarded to SMEs.
Finally, I'd like to tell you a little about one other program we deliver, and it's called the Build in Canada innovation program. We believe this is a unique program that helps Canadian companies commercialize their innovations by buying and testing them in the federal government.
This program was created to bolster innovation in Canada's business sector. The BCIP helps companies, including small and medium enterprises, to bridge the pre-commercialization gap for their innovative products and services, while providing the federal government departments with opportunities to access innovation and innovative solutions. We do this by awarding contracts through an open, transparent, and competitive process with pre-commercial innovations by testing and providing feedback to these entrepreneurs about the performance of their products; by providing innovators with the opportunity to enter the marketplace with a successful application of their new product or service; and by covering the cost of the innovation and managing the procurement process on behalf of the federal government departments.
As of October this year, we have awarded 209 contracts to innovative Canadian companies for a total value of $74 million, and most recently we have been in the process of reviewing the BCIP program. We are looking to determine if it meets the goals that were originally set for it and if the program could be improved to deliver greater benefits and value to federal departments and Canadians.
Thank you for your time.
I appreciate the opportunity to appear before you, and I and my colleague will be pleased to respond to any questions.
4:05 p.m.
Liberal
The Chair Liberal Dan Ruimy
Thank you very much.
We're going to jump right into questions with Mr. Baylis.
I'm just reminding everybody that Mr. Fortin will leave at 4:30.
4:05 p.m.
Liberal
4:05 p.m.
A voice
No.
4:05 p.m.
A voice
He's staying.
4:05 p.m.
Liberal
Frank Baylis Liberal Pierrefonds—Dollard, QC
Okay. I planned to start with you anyway.
Do you have a question for Mr. Fortin? He's leaving at 4:30, so what I'll do is pass my time to Mr. Chandra and I'll take the next slot.
4:05 p.m.
Liberal
Chandra Arya Liberal Nepean, ON
Thank you.
Mr. Fortin, I know you are committed to involving the private sector in the development and commercialization of technologies. They've done that at DRDC. Three times I have asked our defence minister not anything about F-35s, the CF-18, or Syria, but about what steps he is taking to commercialize the technologies getting developed in DRDC and how he is going to engage the private sector in commercializing these technologies. I have not asked the minister this question, but I want to ask you what we can do to promote the C4ISR industry in Ottawa.
4:05 p.m.
Assistant Deputy Minister, Science and Technology, Department of National Defence
Thank you for the question.
As I said in my opening comments, my role is to support innovation in science and technology in the Department of National Defence. It is to provide the Canadian Forces with the best technologies. They need a tactical advantage, a technological advantage, when they are in operations, so my role is to give them the best technologies. It is also to work with procurement folks, whether in DND or at PSPC, to identify the best technologies on the market and to provide advice on what will work in the hands of operators in the field.
The Department of National Defence does not have an economic mandate, an economic mission. We do support companies. We have a program called the defence industrial research program, whereby we cost-share with industry the risk of doing research and development. In fact, on the web at the moment we have a program that allows this.
4:05 p.m.
Liberal
Chandra Arya Liberal Nepean, ON
Is there any program that formally brings in the private sector to commercialize the technologies being developed?
4:05 p.m.
Assistant Deputy Minister, Science and Technology, Department of National Defence
Again, we don't have an economic mission, but what we do, because of our science mission, is reduce the risk of companies doing research to develop solutions. It is our standard policy to leave the intellectual property with the companies that have invested in research and development so that they can commercialize their products.
4:05 p.m.
Liberal
Chandra Arya Liberal Nepean, ON
Thank you, Mr. Fortin.
Mr. Gray, you talked about the BICP. My understanding is that this year you are investing less than $100 million there, compared with the billions in software dollars we give in grants and other supports to the industry. It seems to me that the amount for BICP, which I consider one of the best programs, is very limited.
I support free trade agreements, bilateral and multilateral; however, a lot of the contracts you award are beyond the scope of these agreements. For the contracts you award outside the scope of these trade agreements, why don't you give preference to Canadian small businesses? You said 35% of it goes there, but why don't you formalize it and set up a mechanism so that Canadian businesses are supported?