National Defence Committee on Feb. 13th, 2007

[The Chair, Conservative, Rick Casson]

Thank you.

I apologize, but because of the shortness of time, Mr. Dupont or any of you, if there's a response you'd like to give and you don't feel you have adequate time, please submit it to the clerk in writing and we'll make sure it gets included.

Ms. Black.

[Dawn Black, NDP, New Westminster—Coquitlam, BC]

Thank you very much, and thank you for your presentations today.

On the C-17s, the government invoked a national security exemption that results in a large portion of their maintenance being allowed to happen only in the U.S. I'm interested in your opinions on that and why you think there would be a national security exemption.

I'm also wondering who you primarily deal with in government. Is it DND, Public Works, Industry Canada--who are the go-to people for you?

What has your experience been with government? We had a change of government last year. I'm wondering how much that has changed the process you go through.

Finally, I agree that ITAR is a very big problem for Canada and Canadians. I think it's a big problem not only for industrial capability, as you said, Mr. Page; it's also a big problem in terms of Canadian jobs. After all, it's people working in Canada who pay the taxes and make it possible for us to fund not only defence procurement but everything else in Canada. If we don't have an industrial base and jobs here in Canada, that affects everything that happens in terms of government priorities and what we can do.

I'd be interested in having you respond to those issues.

[Ron Kane]

It's my understanding that the national security exemption is generally invoked to ensure that there are jobs created in Canada. It takes the procurement outside both international and domestic trade agreements, particularly the AIT in Canada, which gives the government the capacity to restrict sources of supply or set requirements to ensure that the Canadian Forces aircraft are serviced in Canada.

[Dawn Black, NDP, New Westminster—Coquitlam, BC]

Isn't it the opposite in the case of the C-17s?

[Ron Kane]

I'm not too sure how the NSE was invoked for C-17s, but certainly some of the work on the C-17s will be done in the global Boeing supply centres. We see a role for Canadian industry in supporting aircraft in Canada. We're also trying to get Boeing to bring Canadian companies into their global supply centres—companies in Canada that potentially supply landing gear parts. We can use IRBs to get Canadian sources of supplies in those global supply centres.

On the C-17s, there will be some maintenance done outside of Canada. On the tactical and helicopter fleets, it's our strong position that all ISS has to be done in Canada. We're procuring a large number of aircraft, and the capabilities we have in our industry are first class. They're demanded by other countries around the world. That's why we've asked the government to clearly state that 100% of the ISS, excepting the spare parts, will be done by Canadian industry and Canadian workers.

We also don't want the government to use a threshold of 75% of the value; we want them to declare in a clear form that it includes complete fleet management of the aircraft, repair and overhaul, and major upgrades and modification. So we certainly see a need to strengthen the approach of ISS related to helicopters and the tactical aircraft portions of that procurement.

[Gilles Dupont]

As far as the relationship between the associations and the government is concerned, in our case, of course, we are only looking after the communications and electronics, which is a very specific sector. In the armed forces communications and electronics, our main interaction, of course, is with the Department of National Defence, but we have to interface with Industry and PWGSC. In fact, on my board of directors, for instance, I have members from all three departments.

[Timothy Page]

We have a number of doors that we typically will knock on, including Finance, Foreign Affairs, Trade, Public Works, DND, and Industry. In part—and I say this somewhat facetiously—as we look for a champion within the government to speak for and advocate on behalf of the defence and security industrial community as it relates to your question on jobs, the defence and security industry's community is a pervasive group. They're embedded in a great many different sectors of the Canadian economy. Our members, 500 of them, are present in some 177 federal ridings.

Our interest, given that a great many of our members are small, working in an industry that is highly technologically driven, is to find those opportunities where Canada can play an effective role in the supply chain of major defence contractors and around niche markets internationally, where, because of Canada's unique geography or military requirements, we've been able to develop competitive technology, products, and services.

[The Chair, Conservative, Rick Casson]

Thank you very much.

Mr. Hiebert.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Thank you, Mr. Chair.

Thank you all for being here today.

I want to start by commenting briefly on Mr. Kane's presentation before asking some questions. I was a little surprised that you referred to the C-17 procurement as sole sourced when in fact it was a competitive process, despite what you may have heard in the media, and that was clarified by Dan Ross, the ADM for procurement, last week.

Also, you talked about the benefits of using a capabilities-based approach as opposed to a technical specification approach, which is exactly what we've been doing. So I think we're obviously moving in the same direction on that.

Finally, you talked about focusing on quality versus quantity in terms of the IRB investments in order to achieve forward-looking, long-term, and high-value business relationships. I'm wondering if you're all familiar with the fact that the federal government, in cooperation with aerospace and defence industries, recently developed a key technologies list of nine key technologies that will focus the investments of those companies that are not Canadian-based, such as Boeing, to invest in Canada so that they can support the long-term future of our aerospace and defence industries.

Both Mr. Page and Mr. Kane talked about the benefit to doing something like that. I'm wondering if you're aware of the fact that we're actually doing that for the first time in our country's history. We've identified nine key technologies, including advanced materials, avionics, communications, propulsion, sensors, space, unmanned vehicles, all kinds of things that will require Boeing to direct its contracts to key technologies from this list.

Are you familiar with these key technologies and the benefits they will have? What are the benefits you think will result as the industry receives these investments?

[Ron Kane]

Certainly in terms of the need to go to a capabilities-based approach to procurement rather than driving procurements off detailed technical specifications, we are aware of developments within DND that certainly point in that direction. What we haven't seen is that translate down to actual procurement.

It's not just a case of shrinking the technical specifications from 100 pages down to 10 pages. If it were 10 pages, you'd still have restrictive measures in them that eliminate other potential options to come forward. So it's not just the size of the technical specifications, but we are certainly hearing positive words out of DND in terms of wanting to move in that direction. We just have to see it take hold in practice.

In terms of the quantity versus quality aspect of IRBs, we in fact did input to that technology list that is used by Industry Canada. The list is there, as stated, but the IRB approach doesn't incent the prime contractors to put efforts in those areas. There are no multipliers, no value discriminators that give a higher-value offset or credit as opposed to simple procurement.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Actually, I think it's more direct than that. Boeing is required to invest in these areas. They are not given incentives; they're simply required to invest in these nine areas.

[Ron Kane]

At the end of the day, the ability of the prime contractor to meet those without having incentives is difficult.

In terms of the technology list, we think that technology list also has to be tailored to each major contractor. Boeing can offer something different from a Lockheed Martin and then offer something different—

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Wouldn't that offset the benefit of having a policy? If we want to develop centres of excellence in Canada in these nine areas, why would we change where they can invest from one company to the next?

I would also like to hear from Mr. Page in the limited time I have.

[Timothy Page]

You are speaking words that we have not heard come out of the government.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

This is a public document on the website.

[Timothy Page]

No. I am talking about centres of excellence. I am talking about directing Boeing to specific areas. This is language we have not heard, at least in the defence and security industries. Have we heard of the technology list? You bet your bippy we have heard of the technology list. In our view, it needs to be expanded. It is light on the soldiers' systems technologies, it is light on marine and land capabilities, and we have offered our views to the Department of Industry as it relates to that.

I would be happy to share that material with you, if you are interested. As it relates to the performance versus the detailed specs issue, our view is that it is very much in the definition. What a performance-based spec is depends on whom you ask. As an association, we would be delighted—and I'm sure my colleagues would be as well—to sit down with this committee and with others to discuss our take on exactly what a performance-based spec should look like.

Finally, on the C-17, if I might just quickly, the reality is that if the Government of Canada has identified a requirement for a strategic lift capability, the size that is the C-17, there aren't that many options around the world for it. Again, the question is how competitive a process is it, and when does that competition period begin? On C-17, they have one of the only two pieces of equipment in the world that could respond to the requirement that was defined.

I appreciate your comments and would be happy to follow up with you as it relates to the technologies list we think should be expanded.

[The Chair, Conservative, Rick Casson]

Thank you very much.

Gentlemen, thank you. You did a great job in a cramped period of time. I indicated that if there is anything further, please feel free.

I understand Mr. Coderre has an issue to bring forward, and we have another committee chomping at the door.

Thank you very much.

Mr. Coderre.

[Denis Coderre, Liberal, Bourassa, QC]

Thank you, Mr. Chairman.

I gather that Mr. Steve Lucas will be present next Thursday. I do not know what his rank is. From the beginning, we in the opposition have wanted to invite Colonel Dave Burt. Obviously, in the light of all that happened with the procurement issue, I would like the committee to ask the Department of National Defence that Colonel Dave Burt, the Director of Aerospace Requirements, be also invited as a witness. In fact, we will certainly have some very specific and crucial questions for him. We need this because we are currently studying procurement.

Moreover, we will be discussing the C-17. In our opinion, there was no fair competition in this file. The colonel, from his vantage point, could tell us what happened in that case. Therefore, I expect him to come.

If we need a motion, I could move it and it could be seconded. The committee members in this room could agree to make sure that the colonel will appear before us next Thursday.

I do not know whether my colleagues from the opposition have anything to add. In my opinion, it is crucial for us to hear him. I understand the chain of command etc., but Colonel Burt is on record. E-mail messages were passed around pursuant to the Access to Information Act. This is public knowledge. He has a very specific point of view that will help us to deal with the procurement issue and I expect him to be present on Thursday.

I will let the clerk advise us. Do we need a motion? If we do, I will move it. Otherwise, can we find another alternative?

[The Chair, Conservative, Rick Casson]

We have had a request to add a person to the witness list, Colonel Burt. Any other comments on that?

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Who exactly are you asking to add to the list?

[The Chair, Conservative, Rick Casson]

Colonel Burt. He's a logistics officer who is below Lucas.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

If I'm not mistaken, I think the clerk received confirmation yesterday that he has been invited.

[The Chair, Conservative, Rick Casson]

Well, let's get this sorted out.

I guess there was no confirmation he would be here, but he was in the work plan that was put forward to DND.

[Denis Coderre, Liberal, Bourassa, QC]

So if we stick to the plan, I'm expecting him to be there on Thursday.

[The Chair, Conservative, Rick Casson]

We are.

Thank you.

The meeting is adjourned.