National Defence Committee on Sept. 15th, 2010

[Dan Ross]

Thank you, Mr. Chair.

I will leave the industrial participation question to my colleague Mr. Parker from Industry Canada. I think he has some very positive things to talk about.

From the defence procurement point of view, things have changed dramatically. We have gone from the lowest price compliant, detailed specifications--a process that took a decade--to performance-based procurement. We've demonstrated that repeatedly over the past four or five years. And we have delivered new capabilities, for example, armoured logistics trucks to Afghanistan in 10 months. It's driven by performance and not by perhaps a 50,000-page detailed specification of engineering drawings that is onerous, difficult, and frankly incomprehensible to most human beings.

That process has driven years out of the defence program. It is combined with the Canada First defence strategy, which is a clear blueprint of funding commitments by this government, and accrual budgeting from the Department of Finance, where you can finance that initial procurement and then effectively mortgage the repayments through our normal budgeting process over the life of equipment.

Those three things--performance-based procurement, a long-term commitment of funding and a plan, and accrual budgeting--have made an enormous change in how defence procurement is taking place in this country. Without any one of those three, we would not be where we are in, for example, re-equipping the air force.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Thank you.

Could we hear quickly from Mr. Parker?

[The Vice-Chair, Liberal, Bryon Wilfert]

Mr. Parker, be very quick, about 30 seconds.

[Ron Parker, Assistant Deputy Minister, Industry Sector, Department of Industry]

Sure.

The most significant change, from an industry perspective, has been the increasing use of global supply chains and the distribution of production around the world. Every single original equipment manufacturer in the industrialized countries relies on global value chains. The opportunity that this procurement offers for Canadian firms to become embedded in the global supply chain is practically without precedent.

[The Vice-Chair, Liberal, Bryon Wilfert]

Thank you very much. That was right on time.

All right, colleagues, witnesses, we are going into the third and final round. We have five minutes for each member.

We'll start off with Mr. Simms.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

We haven't changed our mind on the fixed-wing search and rescue, have we?

[Voices]

Oh, oh!

[The Vice-Chair, Liberal, Bryon Wilfert]

I haven't changed my mind, no.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Darn.

[The Vice-Chair, Liberal, Bryon Wilfert]

But I'm sure we could have a meeting on that at some point, and I'll invite you.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

As we say in Newfoundland, God love you, then.

First of all, Mr. Hawn made the point about there being the same criticism today as there was back then. Well, I think the CF-18 was a fine aircraft and it served us well. Maybe in the absence of that criticism it would not have been as good. We hope to raise the bar in this particular situation, and I'm sure Mr. Hawn would agree.

Mr. Parker, I want to go back to that point you just made about the global supply chain. It is unprecedented, indeed. I would like to ask a few questions about that on the flip side. It seems to me that the way we're going is that future procurement of aircraft or vessels, whatever it may be in the Department of National Defence, will be subject to that global chain; therefore in some cases the ability to get needed parts in a very quick manner may not be as efficient as it was before. In other words, if we had the same airplane, the F-35, the same aircraft the Americans have, they may demand more because of the mission, whether it be Iraq, Afghanistan, or the next chapter.

How would that affect us? Certainly when it comes to less sovereignty for us...dare I use the word. At any rate, it's the only word I can come up with.

Less sovereignty would certainly put us...hopefully not in a precarious position when parts are needed, because I know that we have that situation when it comes to search and rescue.

[The Vice-Chair, Liberal, Bryon Wilfert]

Thank you very much.

I'm going to go to Mr. Parker.

[Ron Parker]

Thank you, Mr. Chair.

There's nothing unique about the F-35 in terms of its reliance on global value chains, parts coming from around the world. The management of supply chains has become an incredible art, just as you see on the commercial side as well.

In terms of this particular procurement, Mr. Slack has explained how various agreements are being put in place, arrangements are being put in place, to provide for the provision of parts. That's going to be managed through the Department of National Defence.

[The Vice-Chair, Liberal, Bryon Wilfert]

Mr. Slack.

[Michael Slack]

Thank you, Mr. Chairman.

We're working with our other partners on developing a global sustainment solution that will allow for the delivery of a part to Canada, anywhere in North America, in 24 hours, and anywhere around the world in 72 hours. There are going to be warehouses established around the world with joint strike fighter airplane parts that will be sent out, much like Walmart does right now, to points where they're required in real time.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

With all due respect, Mr. Payne mentioned that it's not like Walmart, and it's not like Canadian Tire. What bothers me is that at the 103 search and rescue base in Gander—I'm not getting into fixed-wing—there were instances where we had the aircraft unavailable at times of emergency, and one of the big reasons was because of parts, because you can't buy them at Walmart and you can't buy them at Canadian Tire.

I'm just trying to get to the nub of this, which is that I hope you're far more confident about these global supply chains, because from what I've seen thus far—you're more involved in operations than I am, and I understand that—I'm a little bit concerned about that global supply chain and its expediency to get a part on time.

[Michael Slack]

Every effort is being made, Mr. Chairman, to address some of the concerns that the member has raised. It's not only a concern to Canada, but it's a concern to all the partners. We need to make sure that we can get parts when we need them, where we need them, and that's an essential part of this.

One of the other facilitators in this process is that we're working with the United States and the other partners on developing a unique export control regime. One of the restrictions we have on getting parts quickly is sometimes the U.S. export control process, where there is a requirement to do retransfer authorization from the U.S. State Department to Canada, to the United Kingdom, to Australia. Within this program, we are working on addressing those particular issues in advance and making sure that no retransfer authorization will be required among the partners for parts required for the sustainment of the aircraft.

[The Vice-Chair, Liberal, Bryon Wilfert]

Thank you, Mr. Simms.

Mr. Bachand, you have the floor for five minutes.

[Claude Bachand, Bloc, Saint-Jean, QC]

Thank you, Mr. Chair.

Earlier we talked about the possibility of you submitting analysis options and the specific characteristics, that is, the statement of requirements. You said yes.

We would like you to provide a copy of the results of the simulation series that was conducted. We will probably introduce a motion shortly asking that it be submitted. Do you have any objections to submitting the study from your series of simulations that clearly show the superiority of the JSF?

[LGen J.P.A. Deschamps]

I understand what you are asking. The issue is that the simulations are “classified”. The documents we can supply would be virtually useless.

[Claude Bachand, Bloc, Saint-Jean, QC]

You mean they would be censored?

[LGen J.P.A. Deschamps]

It has to be censored. Since Canada does not own the information, we have to comply with the international standards we are subject to. I can, however, share documents that at least provide a more comprehensive view. That way, you would have enough information about the requirements, that is, the SOR. We can use “declassified” documents to begin the dialogue.

Today, we can leave you with an “unclassified” document that could at least serve as a reference point in discussing the airplane and its overall capabilities. If that would be of help to you, we could do it soon. We could provide you with the document on requirements as soon as possible.

[The Vice-Chair, Liberal, Bryon Wilfert]

General, the committee would certainly appreciate that. Knowing a little bit about documents over the last couple of months—no pun intended—I want to indicate that the more information this committee has, the better we're able to do our job. So we'd appreciate that.

Monsieur Bachand.

[Claude Bachand, Bloc, Saint-Jean, QC]

I would like to continue in the vein of what you said earlier, General Deschamps, regarding technological content and intellectual property. It appears that Lockheed Martin is not prepared, in a number of cases, to share the highly technological content and intellectual property it possesses on this type of airplane.

Hearing this kind of thing always scares me. I don't want the work of Canadian companies to be reduced to replacing tires or painting wing scratches. That is not what Canadian companies want. They want to be involved in the high-tech aspect, and they want there to be a certain transfer of intellectual property. I would like to hear your thoughts on that.

I would also like you to talk about ITAR. Do you feel that this policy should be changed? I have made several efforts regarding this in Washington. Do you think we should convince the Americans that, since we are unconditional friends, the ITAR approach should be done away with because it puts a burden on Canadian and Quebec companies?

[The Vice-Chair, Liberal, Bryon Wilfert]

Mr. Ross, we have about one and a half minutes.