National Defence Committee on Oct. 19th, 2010

[Dan Ross]

I can only speak for myself. From a personal view, I would feel very uncomfortable. But as I also said, there's a difference today in the sort of a one to one chance of coming home alive; 15 or 20 years from now that chance of coming home alive is one in twenty. That's not an acceptable situation. For the investment of, say, $5 billion for 65 aircraft, that's not an acceptable choice.

[Ray Boughen, Conservative, Palliser, SK]

No.

Thank you. I will share my time with Mr. Hawn.

[The Chair, Conservative, Maxime Bernier]

Mr. Hawn, please, three minutes.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Perfect.

I want to go back, Mr. Ross, to talk about simulations and other companies coming with simulations that say their piece of equipment is better than—

[Dan Ross]

I'm astounded by that.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Oh, yes, I'm totally shocked.

If we want to talk about biases, I'd like to compare biases. You have a lot of experience dealing with companies who are going to come and tell you that they make the best...whatever. How would you compare the bias of a company that is trying to sell us something, regardless, to the bias we have in the Departments of National Defence, Public Works, and Industry to get the best piece of equipment, whatever it is, at the best price, for the best industrial participation, and a decision that's, as you said, dependable on the street? How would you compare those two biases?

[Dan Ross]

I can't afford to be biased; it's not defensible. Industry Canada, Public Works, Treasury Board--they play a pretty aggressive challenge function. They have their own particular mandate and responsibilities and they take those seriously. But the requirement needs to be stated by those people who have to go live and die with that. At the end of the day, that's their call. The Chief of Defence Staff gets a say in that; the minister gets a say in that, obviously.

My experience with the industry is that they work hard, most of them are very honourable, very ethical, but they also believe in what they have and they want to tell you it's the best. I can't speak to their simulations, because their simulations always show that their equipment wins. But they're all winning, so somebody has to be losing. I don't know who that is, but....

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Your bias, if I can use that word, is to do the job, to get the best equipment at the best price and the best industrial benefits.

Would you put more stock in the simulations that have been done by the people who we have paid, who have the expertise to study these over years at a highly classified level, than the ones run by a company that's trying to sell a widget?

[Dan Ross]

Only if those simulations are done, for example, by our defence and research and development community. By that, I mean professional scientists and those with Ph.D.s, who have no interest, frankly, in whether product A or product B is better or worse. But we are asking very specific questions about technology and capabilities in very scientific terms. They're not pilots, they're not industrialists. I find them to be very objective, but you have to be careful who you're asking, and you do need to get the companies and the commercial interests set aside from that question.

For example, on armoured vehicles, we insist that we have an independent third party attest to the survivability results, who is not paid by that company or in part of that country. That's what we feel is the measure of independence that's required.

[The Chair, Conservative, Maxime Bernier]

Thank you very much.

Mr. Dryden, you have the floor for five minutes. Do you want to share your time?

[Ken Dryden, Liberal, York Centre, ON]

I think Mr. Wilfert has a question.

[The Chair, Conservative, Maxime Bernier]

Okay, Mr. Wilfert, you have five minutes.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

I just have one question.

In your response, Mr. Ross, to the question I asked about the benefits, and later in response to my colleague, Mr. Regan, you cited section 7.6 as the part of the 2006 MOU that states that holding a competition would force Canada from the MOU.

I know my hearing isn't very good today, but my eyesight is excellent, so I will read it to you for you to respond. Under section VII, industrial participation, section 7.6 reads:

No requirement will be imposed by any Participant for work sharing or other industrial or commercial compensation in connection with this MOU that is not in accordance with this MOU. However, this will not prevent the Participants’ industries from establishing arrangements with JSF Contractors regarding work outside the scope of work of this MOU.

Can you respond to that in terms of this issue?

[Dan Ross]

Yes, sir, thank you.

I thought I did respond to that. The first portion—which Mr. Slack helped to negotiate, and who is here—very specifically prevents the MOU participants from imposing IRBs and industrial offsets. There are no offsets allowed under the MOU.

The second portion allows them to make industrial partnership arrangements, as they normally would—and I gave the example of Héroux-Devtek—and also the industrial participation agreements the Government of Canada has signed with Lockheed Martin, Pratt & Whitney, and GE Rolls-Royce, if we acquire aircraft, for contractual business opportunities for production of material directly onto the fighters.

They're not inconsistent at all.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

I don't read that in there at all. I don't see anything there on guarantees at all, or competition, or anything in there.

Is there somewhere in this that you can point us to? This is the section I would say refers to this, and you had referred to this section. I don't see that. My colleague doesn't see that. If you could....

[Dan Ross]

The sentence says, “...this will not prevent the Participants’ industries from establishing arrangements with JSF Contractors regarding work outside the scope of work of this MOU.”

To me, I read that—and perhaps I'd have to get legal advice—to say that we're not handcuffing companies for having the normal industrial partnerships they would have.

The first part is about government-imposed IRBs and offsets not being allowed. That's very different from the second part.

[Bryon Wilfert, Liberal, Richmond Hill, ON]

Again, where in the 2006 MOU is it stated that if we held a competition it would force Canada to withdraw from the MOU? Can you point that out?

[Geoff Regan, Liberal, Halifax West, NS]

It's not in section 7.6.

[Dan Ross]

It doesn't say it specifically in the MOU. If you wanted to do a competition, as we currently do, with Industry Canada policies—which require in a commercial contract that the contractor deliver IRBs of 100% of the contract value in Canadian content, dollar for dollar, and we're all familiar with that—you can't stay in the MOU and impose that commercially on the company.

[Geoff Regan, Liberal, Halifax West, NS]

You are saying that Treasury Board can't decide what policy it's going to have. You're also saying that for a $16 billion contract, Treasury Board couldn't tell us we aren't forced to do this by the MOU in this case and we can make our own decision about how we approach it.

[Dan Ross]

No, sir. You clearly could stay in the MOU and do another process, but you cannot impose any IRBs then on the company you bought it from.

[Geoff Regan, Liberal, Halifax West, NS]

What guarantees are there of IRBs now? There are no guarantees.

[Dan Ross]

Well, we anticipate.... We've already got $850 million worth of contracts and we anticipate up to--

[Geoff Regan, Liberal, Halifax West, NS]

But they are not guaranteed in the MOU, isn't that correct?

[Dan Ross]

Absolutely, they're not guaranteed.