National Defence Committee on Oct. 19th, 2010

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

Point of order, Mr. Chairman. Since Mr. Ross graciously offered to give me the details of what a level 3 partnership means, would it be possible for him to table this with the clerk so that members of the committee can consult this document?

[The Chair, Conservative, Maxime Bernier]

Thank you, we will take note of that.

[Dan Ross]

It will be my pleasure.

[The Chair, Conservative, Maxime Bernier]

Fine, thank you.

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

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

Thank you, Chair.

I'd like to clarify something, Mr. Ross, because there's a lot of talk about withdrawing from the MOU. The MOU seems to have done us very well so far. Going back to 1997, we've so far spent $168 million; we've committed to spending $551 million over the MOU life, which I think is up in 45 years, from my reading of it. So far, for our $168 million, we have achieved $850 million in benefits.

That seems to be very consistent with what Mr. Williams told us of the intention of Canada's involvement in the joint strike fighter development program, even as a stand-alone operation. It was good for Canadian industry, we learned things, we got involved in the high-tech development--all of that. Mr. Williams also tells us that we don't have to withdraw from the MOU, even if we don't buy these planes. Is that not true?

[Dan Ross]

Sir, technically we don't have to make a decision to physically withdraw. But what we experienced over the past year...as the consortium of companies and the U.S. government were consolidating and bringing together their global supply chain to produce aircraft, Canada had not committed and the industrial opportunities for our Canadian companies virtually dried up. We had not made a commitment and we were not in the game. There were no contracts that I was aware of from late last year until the summer, where Canadian companies had new opportunities. The message clearly was that they needed to put their global supply chain together and they were going to do it with the countries that had made commitments to purchase aircraft.

Clearly, you could stay in the MOU--

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

But isn't that contrary to the MOU, which says that all the participants are entitled to have access to the contract?

[Dan Ross]

The Canadian companies had done very well already--very well.

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

Now you're saying there was an add-on to the MOU that says we won't include you in the supply chain if you don't commit to buying.

[Dan Ross]

There was a difference between the development portion and the long-term production portion. In the development portion, Canadian companies have done very well, but that's a different story, and clearly we got more than our share.

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

We got five times as much as we put into it.

[Dan Ross]

Absolutely. We didn't get the last $500 million until after we signed. It was $350 million prior to making a commitment. The $500 million--and it's increasing and will continue to accelerate upwards--occurred after making a commitment to buy, because the real opportunities are in production for the 3,000 to 5,000 aircraft.

We could have stayed in the MOU and continued to contribute small amounts of money, and it would have eventually been $500 million over 45 years. But if you had not made the commitment to ever participate in production and acquire aircraft, the real economic opportunities for Canadian companies would have diminished and just tailed out. That's not unreasonable for our partners. They have actually bought aircraft.

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

I'd also like to clarify this issue of the IRB versus the program that the MOU implies. You can't impose an IRB if you're going to buy the joint strike fighters. If you turn around and say, “We're going to stay in the MOU, have a competition, and give the contract to Lockheed Martin”, you can't have IRBs.

[Dan Ross]

That's right.

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

That's what section 7 is about.

[Dan Ross]

Exactly.

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

But that doesn't mean you can't have a competition and say, “We have this MOU, where if we choose to participate and buy the JSF, we can do it under the MOU.”

[Dan Ross]

Which is where we are now--

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

Yes.

[Dan Ross]

--and with the opportunities for up to $12 billion over the lives of 5,000 planes.

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

I understand that side of it and I understand that argument. That's speculation and hope on behalf of the industry, and I'm very glad they're optimistic. But that doesn't mean you can't see what else is out there in a competitive bidding process so you can then compare.

[Dan Ross]

You can see what's out there, but the U.S. government would not participate in your competitive bidding process.

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

That's fine. You don't necessarily need them to participate if you are so certain, as you seem to be today, about what your costs are, what you're getting, and what it's about.

[Dan Ross]

I'll go back to the first point of my opening address. When you have a competition and you only have one player, one supplier, it's not a competition. It's about the available fifth-generation fighters, and there's only one that you could actually buy. It's not a competition, and the one you have to buy already has the best price and industrial opportunities within the permitted MOU.

[The Chair, Conservative, Maxime Bernier]

Thank you very much, Mr. Ross.

I will give the floor to Mr. Hawn.