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Evidence of meeting #26 for National Defence in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was aircraft.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Bill Matthews  Vice-President Marketing, Magellan Aerospace Corporation
Nathalie Bourque  Vice-President, Public Affairs and Global Communications, CAE
Major-General  Retired) Richard Bastien (Vice-President, Business Development, L-3 Communications MAS Inc.
Daniel Verreault  Country Director for Canada , GE Aviation, Military Systems Operation, General Electric Canada Inc.
Bruce Lennie  Vice-President, Business Development and Government Affairs, Rolls-Royce

4:05 p.m.

Conservative

The Chair Conservative Maxime Bernier

Thank you, Mr. Matthews.

Right now I will give the floor to Monsieur Harris.

Mr. Harris.

4:05 p.m.

NDP

Jack Harris NDP St. John's East, NL

Thank you, monsieur le président.

Madame Bourque, first of all, I want to agree with Monsieur Bachand that your company is a renowned, worldwide leader in the work that you do. In fact, as I understand it from a little bit of research, even in the last week you've announced contracts with Korean Air, with Air China, with the United Kingdom, the Royal Air Force, with the German army air school, and even with your colleague next door in L-3 Communications MAS Inc. So it's reflecting on your comment that you're open to competition, and obviously you're very successful.

First of all, do you at this point have any contracts with respect to the F-35?

4:05 p.m.

Vice-President, Public Affairs and Global Communications, CAE

Nathalie Bourque

No, we don't, because that's the second part and it's not negotiated yet.

4:05 p.m.

NDP

Jack Harris NDP St. John's East, NL

I don't know whether you're familiar with all of this—I mean, I realize you're VP of public affairs, but are you thinking that CAE would not have the right to bid on any of this work if Canada wasn't buying 65 of the 4,000 jets they make?

4:05 p.m.

Vice-President, Public Affairs and Global Communications, CAE

Nathalie Bourque

Lockheed Martin can choose who they want and countries around the world can choose who they want in order to train their troops. As an example, in the United Kingdom, we train all the British troops and the NATO troops that go to Afghanistan. This is a contract we have. We are in a partnership with the MOD on this. For me it's kind of obvious that when your country buys, it puts you in a much better position, because this way you prove to the rest of the world that you do it for your country; you train the pilots here and you train the technicians, and then from there on you can win other contracts, which is what happened exactly on the C-130J. We were chosen by Canada under this famous SOIQ and then what is called OTSP—operational training systems provider—and after we got those major contracts, we won six other simulators around the world and one for the U.S. Special Forces.

There's a French expression that says,

“No man is a prophet in his own country.”

It's actually completely false concerning anything on the military side. If you don't win in your own country, you don't get anything outside.

We had a letter from the Swiss a few years ago, because we lost a contract here, saying “Don't bother bidding, because if your own country doesn't buy from you, we won't.”

4:10 p.m.

NDP

Jack Harris NDP St. John's East, NL

How does that work? So we should spend...well, what we're thinking is to commit up to $16 billion to purchase a particular aircraft because you have a better chance then of getting the contract? That seems to be an awfully big roll of the dice for a country to make. If you're such a great competitor, which I believe, then they would want you, just as Air China does or the German army air school or Korean Air or the RCAF wants you. If what you're suggesting is we need to sign this contract now, even though we're not planning to sign it until 2013, if we go ahead, we should then somehow contract you to look after the simulators for our 65 jets and then hope that this will get you work with.... That seems to be an awful stretch to me, as a strategy, to get work for Canadians.

4:10 p.m.

Vice-President, Public Affairs and Global Communications, CAE

Nathalie Bourque

I see it quite differently. I'm not there to choose the aircraft. I think we have specialists at DND and the people who've done the work. I'm no fighter pilot; I've never sat in one in my whole life, so I'm not there to say which aircraft should be bought. I have no idea about that. What I know is that if we are put in a position where we can bid, I'm pretty positive that we are in a good position to win the position, the contract.

4:10 p.m.

NDP

Jack Harris NDP St. John's East, NL

And you think you have no chance without that. Thank you.

I'd like to ask questions to the other two. I know everybody is here looking for work and they think this is the right choice. But I'm a little disturbed when I hear what sounds to me like Conservative talking points.

Mr. Matthews, you told us this airplane was affordable. That's what the government is telling us. What do you mean by that? If someone is trying to sell me a house, I suppose they're trying to tell me, oh, you can afford to buy this house, but what do you mean when you say that? Is that part of some economic analysis of affordability, or the capability of the government to buy this plane, or comparative advantages? Why would you use that term in talking about this particular purchase?

4:10 p.m.

Vice-President Marketing, Magellan Aerospace Corporation

Bill Matthews

That's a fair question. When the requirements for the Joint Strike Fighter were first created--this would have been 10 to 12 years ago, when they firmed up what the various requirements were--one of the them, independent of the aircraft, was price. In the past, occasionally, it was, “We don't care how much it costs, make the airplane beautiful.” This time it was, “We do care how much it costs. It has to cost in this area, and you make the airplane as good as you can make it for that price.”

Now what they've done is made a very excellent aircraft, and they are tracking down the line to the price within a few...I don't want to say this out loud, but within a few million--because times have changed, materials have changed, and prices and things like that--per unit of the price that was set out as the goal for the program, That's why I think it's affordable, because it's very much in line with what everyone thought it would be when they started out on this great collaboration.

Secondly, I know the prices of other aircraft in the world. We hear them frequently. We see the Europeans buying a tranche here, a tranche there, and you see the number at the end of it. You can calculate what the approximate price is of those aircraft, with the wherewithal to actually make them fly, because the aircraft itself is not flyable without some additional support, in most cases.

We keep an eye on what's comparative across the western world, and from those day-to-day activities we're sure that it's an affordable aircraft and that it'll sell in the area of 3,000-plus aircraft. If it's not affordable, it won't, and we're confident it will. That's because we do pay attention. We see the costs coming down. We know that every time we bid, we bid less, and every supplier that's kept is bidding less because we're getting better at what we're doing. There's great price pressure on the aircraft from five years ago.

4:15 p.m.

Conservative

The Chair Conservative Maxime Bernier

Thank you, Mr. Matthews.

Now we'll give the floor to Mr. Hawn.

4:15 p.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

Thank you, Mr. Chair, and thank you all for being here.

Mr. Chair, could you advise me when I have two minutes left? I'm going to share some time with Ms. Gallant.

First of all, I'm not sure how much of this thing with the Congress came up today, and I want to clarify something that was said. The Congress's concern is the cost tracking and reporting, not the cost escalations but how Lockheed Martin is reporting those. That's the pressure from Congress.

Would that, in your view, General Bastien, be of net benefit to Canada if there's somebody else as big as the U.S. Congress making sure there's pressure on those kinds of reporting practices? Is that going to help us in the long run?

4:15 p.m.

MGen Richard Bastien

In any such acquisition, when close control is kept, people deliver when they're measured. That's a basic management skill. Therefore, if there are areas where it was not tight enough, hopefully this is being done or this is being attacked right now and will be solved.

4:15 p.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

And that would be a net benefit to us.

I'm not sure how familiar you are with the MOU itself, but are you aware that there's not actually a contract for the aircraft themselves? It's actually a purchasing provision under the MOU that will or will not be exercised. Are you familiar with that?

I'll ask Mr. Matthews.

4:15 p.m.

Vice-President Marketing, Magellan Aerospace Corporation

Bill Matthews

I read the MOU. It's not ours to read, but that's my understanding, yes.

4:15 p.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

But that's a public document and people should have actually read that before they question things like that.

Back to the MOU, in terms of access to contracting work and so on, are you familiar with the fact that the MOU specifically excludes people, companies, from competing for work under the MOU if they're not signatories to the MOU? Are you aware of that, Ms. Bourque?

4:15 p.m.

Vice-President, Public Affairs and Global Communications, CAE

4:15 p.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

Okay. So effectively to get the business for more than 65 airplanes, we do have to be part of that MOU. Is that your understanding?

4:15 p.m.

Vice-President, Public Affairs and Global Communications, CAE

Nathalie Bourque

Yes. I read that famous MOU from beginning to end.

4:15 p.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

Good. I'm glad you did. I wish others had as well, which goes to Mr. Harris' comments.

People are throwing around various numbers; they're throwing around $16 billion.

I'll ask you, General Bastien, do you know what the purchase of the aircraft—part of the MOU—is? Do you know what the value of that is?

4:15 p.m.

MGen Richard Bastien

I do not know. I've only seen the numbers as expressed in the media.

4:15 p.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

It's $9 billion, not $16 billion. It's $9 billion to buy the aircraft. That is the cost of the aircraft. That's not just aircraft; that is simulators, training, infrastructure, and so on.

The $7 billion—and this is where it gets back to you, General Bastien—is the estimate for the first 20 years of supporting the F-35.

You've been supporting the F-18 for a long time. Do we know what the final cost of supporting the F-18 will be in 2020 after we've been flying it for 38 years? Do we know what the exact number is going to be?

4:15 p.m.

MGen Richard Bastien

Of course we do not because we have not completed the contract. We have a fair idea.

4:15 p.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

Yes, based on experience, which is what drives our estimate of $7 billion for 20 years of the F-35. Do you know how long it took after we started flying the CF-18 before we actually signed an in-service support contract for that airplane?

4:15 p.m.

MGen Richard Bastien

It was somewhere around three years.

4:15 p.m.

Conservative

Laurie Hawn Conservative Edmonton Centre, AB

It was four years, but yes, you're close. We first started flying the airplanes in 1982. We didn't sign the support contract until 1986, so on the process we're following now with the F-35, in your estimation, is that pretty much standard procedure for the way we have been following contracts in the past?