National Defence Committee on Oct. 19th, 2010

[Dan Ross]

I would have to leave it to the Chief of the Air Staff, if he appears, to talk to the requirements that perhaps Brazil would feel sufficient versus the requirements Canada would feel sufficient. For the requirements the Chief of the Air Staff has identified, which range from close air support to operations in a high-threat, air-to-air environment, they have made it very clear that the characteristics of the fifth-generation fighter are critical. And that was articulated in the Canada First defence strategy.

My mission as ADM Mat is to deliver the capability required by the Canada First defence strategy.

[The Chair, Conservative, Maxime Bernier]

Thank you very much.

I will now give the floor to Mr. Bachand of the Bloc Québécois for seven minutes.

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

Thank you, Mr. Chairman.

I'd like to welcome Mr. Ross.

Mr. Ross, memorandum of understanding is translated into French by "protocole d'entente", are you familiar with this?

[Dan Ross]

I am not aware of all the details of it.

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

You are not familiar with all the details. However, earlier, you said that the MOU specified clearly that with regard to the economic spin-off policy, this old practice should come to an end. Minister Clement himself came to tell us that indeed, Canada could not put forward a policy of specific economic spin-offs as it does for all other contracts.

And yet, in section 7 of the memorandum of understanding on industrial participation, which I read, I did not find any provisions stating that we cannot put forth our policy on industrial spin-offs. So I then asked the Library of Parliament to conduct a study of section 7 which specifically refers to industrial participation.

I'd simply like to know if you're fully aware of the section that refers to that. Are you familiar with it?

[Dan Ross]

Yes, absolutely.

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

Which one is it?

[Dan Ross]

Thank you.

The MOU stipulates in section 7.6 that “No requirement will be imposed by any Participant for work sharing or other industrial or commercial compensation”--IRBs or offsets--“in connection with this MOU”. That precludes MOU participants from demanding industrial offsets.

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

I will continue in English.

They say you start there, but they go on to say that it is not in accordance with this MOU. However, this will not prevent the participant industries from establishing arrangements with JSF contractors regarding work outside the scope of work of this MOU. You still pretend that it is mandatory that we leave out their policy on IRB(s).

[Dan Ross]

But, sir, the second portion of that refers to the ability of Canadian companies to continue to partner with and have business relationships with U.S. firms. I give you the example of Héroux-Devtek. It has bought several American firms that build the big machined bulkheads for joint strike fighters. Héroux-Devtek has acquired those American firms in Texas and produced that material.

The first part refers to the obligatory IRB offset requirements we impose on a major supplier like Lockheed Martin for Hercs that we say under the MOU you can't do. But we say to Canadian firms--or American, British, or Italian firms--you can carry out your normal business arrangements industrially. I think there's a clear difference between normal business and a government imposing an IRB and an offset requirement contractually.

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

The only thing I can say is that I will await the study by the Library of Parliament.

Do you have any other details to provide?

[Dan Ross]

Yes, sir.

Industrial participation plans have been signed between Canada and three industrial groups for the second engine--Lockheed Martin, Pratt & Whitney, and GE Rolls-Royce. The plans are quite detailed and talk about three levels of new opportunities for contracts for Canadian firms, all predicated on placing an order for fighters. They clearly say they are applied once the country has committed to buy fighters.

The second phrase is also related to the ability to put those industrial plans in place, and that clause is specifically there. Mr. Slack reminded me, because he helped to negotiate that.

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

Earlier, you talked about Israel. Indeed, Israel is not part of the nine countries who signed the MOU. I was surprised to find out that Israel proceeded with the purchase of 20 F-35 aircraft. The Israeli Defence Minister, Mr. Ehud Barak, said that he'd been assured that there would be $4 billion in economic spin-offs. The cost of these 20 aircraft is $3 billion.

Doesn't that clearly demonstrate that we would have been better off not being part of the MOU, and negotiate ourselves in order to get the economic spin-offs? Israel seems to have obtained some advantage here.

[Dan Ross]

I really don't have any idea what the details are in the agreement between the United States government and the Israeli government. The price works out to about $135 million per aircraft, which isn't surprising because the cost of production now is much higher than it will be four or five years from now when it's a very efficient production line. So the earlier you buy, the more expensive your aircraft will be.

I understand the Israelis are buying 19 or 20 now.

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

Yes, it's 20.

[Dan Ross]

They will buy perhaps 80 over time, and the price will go down.

The foreign military sales program with the U.S. government effectively results in a country being told that's the government-to-government price. But they can also work with a company like Lockheed Martin, or another company, to negotiate offsets separately from the government-to-government agreement.

A very important point is that the joint strike fighter is not a commercial sale. The United States government spends about $68 billion annually to develop technology--government money. It developed the C-17s and the C-35s, etc., of the world, and it controls who buys those things. It will often restrict commercial sales entirely, saying that if you want an F-35 or a C-17, you must come to the Pentagon and it will give you a price for military sales.

The United States government does not participate in open competitions. It will tell you a price, but it's a take it or leave it price. As I started out saying, it does allow the American company that built it to actually talk about offsets with a foreign government. But that's not a competitive discussion at all. It's a take it or leave it question from the U.S. government.

[The Chair, Conservative, Maxime Bernier]

Thank you very much.

Monsieur Harris, you now have the floor.

[Jack Harris, NDP, St. John's East, NL]

Thank you, Mr. Chair, and thank you for joining us, Mr. Ross.

Mr. Williams, your predecessor, told us the other day that the MOU was not incompatible with the competition for the replacement for the F-18. It's our understanding that within your department there was work being done to provide for just such a competition, to begin this year. In fact, it seems that your minister was of the same view, because he assured the House of Commons on May 27—I don't know if you were there, behind the scenes—at the estimates committee that indeed there would be a competition. Lest there be any doubt, he said it later on the same evening, assuring us that participation in the joint strike fighter program was not to be construed as a statement that this couldn't happen.

If what you're saying today is so self-evident, how does that all fit together? How did we come from the minister's commitment on May 27 to the House to an announcement in July that all of this is now self-evident, that this is the only plane we want, that it is the only plane that meets the need, that there is no competition, and so on? We've seen, even today...you're the assistant deputy minister in charge of procurement, but you sound as if you're giving a PR defence at the beginning of your statement about the need for this plane. How did we get to that from an assurance that there was a competitive process that was going to be in place and that work was being done on a competitive process?

[Dan Ross]

There are two things.

First of all, in the department, we were engaged in a very detailed review of the options and the cost of those options from a performance point of view, a cost point of view, and an industrial point of view, working with our colleagues at Public Works and Industry Canada. That was not centred around, in the case of the F-35, being able to do a normal, competitive RFP process, which we knew we couldn't do within the MOU without having to leave.

We did have to consider Eurofighters. We did consider Super Hornets and several other aircraft. We worked with our international allies and so on to identify the cost of ownership. I can't speak authoritatively to what the minister intended at the time. I knew he was well aware of the previous fair, open, and transparent competitive process that occurred to select the F-35 or the F-36. I know that many individuals disagreed that it was a Canadian competitive process, having spoken to Mr. Lagueux, who was the ADM at the time, and Mr. Slack, who was involved at the time.

When we joined the permanent MOU in 1997, we had full-time representation in the joint project office. We had full involvement in the scope of the requirements being stated, on our behalf and on behalf of the other partners, by the United States Air Force and the United States Navy. It was clear at that point, to people directly involved, that this would be the competition for the western world's next-generation fighter. That's why European countries participated back in 1997. They knew that other countries in the world would never be able to afford to move to a next-generation fighter by themselves. It was not affordable.

We joined early because it was important to have access to what was going on and to have a say and input into the scope of those requirements. In the long term, if it paid off and was successful, you could acquire it. If you didn't, at least you had a detailed understanding of what was happening and what was not happening.

I think that would be my response to those two points.

[Jack Harris, NDP, St. John's East, NL]

Well, it's your response, but it certainly doesn't explain why the department was undergoing plans to have the kind of competition we are asking about now and obviously spent some considerable effort undertaking. This retroactive suggestion that the decision as to who would actually build this JSF being made in the year 2000 was in fact a competition for what Canada needed....

I mean, this is what we're talking about. We're not talking about who is going to build the JSF; we know who is going to build the JSF. We're talking about a competition for the replacement of our F-18s. We obviously have a problem here with what kind of competition we're talking about.

The JSF has been referred to as a particular type of plane, in fact a niche plane with a role as a battlefield interdictor, intended to attack and destroy hostile battlefield ground forces after the opposing air defences are stripped away by more capable, and now cheaper, F-22 Raptors. Even though it's a fifth-generation aircraft, it doesn't have the same capabilities as the F-22, nor apparently is it a capable plane when compared with the fifth-generation jets being developed by the Russian Air Force--one that's in production now, the Su-35S, and another one that's being test flown; I think it's called the PAK-FA.

I've seen criticisms of this program and the F-35 program, and you talked about the safety of men and women flying these. If we're talking about air-to-air defence within Canada, given a situation where if we only have the F-35 and these Russian planes can actually outperform the F-35, what do you say to that?

[Dan Ross]

Frankly, I'm unaware of the detailed intelligence knowledge that you have of the Su-35. I'd be actually quite surprised that it's that technologically advanced. The F-35's capability is quite amazing, but that information is highly classified. The F-22 is strictly an air superiority aircraft--air to air.

Dr. Carter, my counterpart in the Pentagon, in a letter, clearly said they had considered it as one of their options. It is not upgradable or modifiable to do the multi-role capability of an F-35 without prohibitive cost, so the United States Air Force are keeping the F-22 to the number they've bought in an air superiority role. But clearly the F-35 is a new level of technology, and it has capabilities that are highly classified.

I don't know what the Russian aircraft can do, but I'd be very surprised if it was comparable. Will it have stealth? Of course, it will. Will it have significant improvements over fourth-generation...? Yes, it will. Will it be equal or better than F-35? I couldn't say.

[The Chair, Conservative, Maxime Bernier]

Thank you. Merci bien.

Thank you, Mr. Ross.

I will give the floor to Mr. Hawn.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Thank you, Mr. Chair. Thank you, Mr. Ross.

I would suggest, Mr. Ross, that's precisely why we need an airplane like the F-35, which is the best available, to counter adversaries that...we don't necessarily know what they're going to look like in 10 or 20 years.

I will comment on a couple of things the opposition has brought up. That Su-35 comparison was done by a retired wing commander from the Royal Australian Air Force, who was a Mirage-III pilot. That was the last aircraft he flew. His comparison.... In fact it's not his fault; he doesn't have access to the information on the F-35. He's making a comparison with a fourth-generation look at a fifth-generation comparison, without understanding fifth-generation technology.

We talked about Canada's requirements. We have nine countries within the MOU, and Israel and others are looking at it. Most of the countries within the MOU have similar operational requirements to Canada: we operate in similar missions, in similar areas. Obviously we're going to be operating side by side with them on a lot of missions.

Is it fair to say there's some comfort that all of those countries that operate similarly to Canada have reached the same conclusion? Is that a fair statement?

[Dan Ross]

Yes, sir, it's a fair statement. In fact, I think the British government made a statement today to the effect that they are only retaining a small portion of their Tornado fleet, which they have to upgrade, and F-35s, and they will now buy the carrier variant for the joint strike fighter instead of the vertical take off and landing variant, and they'll put flat decks on their two carriers.

They say it's a state-of-the-art aircraft with an exceptionally broad range of capabilities and they expect its service life to be a number of decades. It is specifically designed to operate independently in very challenging environments. The joint strike fighter is designed to be more affordable across its operating life, benefiting from the expected production run of more than 3,000 aircraft. That's what the British said today.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Thank you. And the point about the Canadian Forces' or DND's plans on a competition...I'm not sure if you're aware, but that was one line--one line on a briefing slide that covered contingency for future planning. It was not being actively planned within the department to have a competition. Is that a fair comment?