National Defence Committee on Oct. 19th, 2010

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

Are you talking about between now and the end of the contract? Right now, approximately how much money has already been paid? Is it about $150 million?

[Dan Ross]

Right now, we have paid out $168 million.

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

How much did that bring in up until now? It is about $400 million? In fact, 144 contracts have been awarded.

[Dan Ross]

It's not a question of contracts.

It's just the contribution we have agreed to pay annually. It's the sum of the initial $10 million, the $150 million, and then a portion of the latest MOU.

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

Right now as we speak, has the money that we paid out been beneficial for Canadian companies?

[Dan Ross]

Absolutely.

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

The amount has tripled, hasn't it?

[Dan Ross]

Yes, we paid $168 million and we already have contracts for a total of $850 million.

[The Chair, Conservative, Maxime Bernier]

Thank you, Mr. Bachand.

Mr. Braid, you have the floor.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you very much, Mr. Chair.

Thank you, Mr. Ross, for being here this afternoon.

Just to begin with this, Mr. Ross, to recap, could you please explain what the consequences would be if Canada withdrew from the MOU?

[Dan Ross]

As I said, perhaps there would be two scenarios. One scenario would be that we'd still want to buy F-35s, which we could do at an increased cost but at a significantly lower IRB piece, not to exceed the actual contract value, which would be about $5 billion versus $12 billion under the MOU.

Most importantly, the future industrial opportunities for Canadian firms would stop dead. Current contracts would continue. They would not be cancelled. They would deliver the items that were under contract to be delivered, but they would not be renewed and new competitive opportunities for the aerospace industry members would not materialize.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Is it possible to continue in the MOU and at the same time hold a competitive process?

[Dan Ross]

As I explained before, I don't think that's possible.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

If we withdraw from the MOU and hold a competitive process, what do you think would be the outcome of that competitive process?

[Dan Ross]

My sense would be that if you evaluate the contenders for the essential characteristics we need for protection, survivability, affordability, etc., in the future for 30, 40 years, you're going to come back to probably one solution, which is the F-35, and you're faced with a situation whereby the U.S. government won't participate in a competition. It doesn't participate in competitive--it doesn't write RFP bids. It will simply quote you a price. If you want to buy it, there's your price.

You would have to now negotiate with the companies that are building it for some kind of an RRB package, which would be much smaller, obviously, than what you'd get with the direct participation for 3,000-plus aircraft because it would only be on 65 for the period of that initial contract.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

The outcome would essentially be the same jet fighter at a much higher cost.

[Dan Ross]

Yes, sir.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

I want to read you an excerpt from the testimony or the presentation from our last witness, Mr. Williams, when he was here for our last meeting. He said that ministers claim that this is the best aircraft available. When asked how he knows that, Minister MacKay responded that it was on the basis of briefing notes provided to him from within the Department of National Defence. Unfortunately, in-house analysis will reflect in-house bias.

One, how do you react to that, and two, where else would a minister get his or her advice if not from their own department and their own officials?

[Dan Ross]

The information on the available aircraft is a job for professionals who know what they're talking about, but it also entails access to highly classified information, which we have access to through our allies. In terms of the joint strike fighter, we have full access to our membership in the memorandum of understanding with the partners, without which we wouldn't have that access at all.

I'd also say that within the department a pretty rigorous and often bloody challenge function goes on. The vice-chief, his staff, force development staff, challenge the Chief of the Air Staff on their views on capability. I, frankly, am known to be pretty difficult in challenging requirements, not because I disagree with the environmental chief of staff, but they have to be defendable in the town. They have to be defendable to Treasury Board and Privy Council Office and the Department of Finance and the Department of Public Works and Government Services. So although many observers don't get an insight into the interior workings of the program management board, the joint force development board, those are difficult bodies, and when that advice goes forward through the Chief of the Defence Staff to the minister, it is pretty rigorous.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Perhaps I have time to sneak in a final question here.

With respect to the statements of requirement for a major military purchase like the F-35, or even the CF-18, is it unusual for some elements of the statement of requirements to be classified and others to be unclassified, and was that the case with the CF-18?

[Dan Ross]

Sir, it's absolutely normal. In fact, the classified portions are not of our choosing; that is, U.S. government technology and participation entails that classification. Bidders and many of our contracts have to come with the appropriate security clearances before they're given the classified portions of RFPs. It's normal business.

[The Chair, Conservative, Maxime Bernier]

Thank you.

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

[Ray Boughen, Conservative, Palliser, SK]

Thank you, Chair. And thank you, Mr. Ross, for sharing part of your day with us.

When I look at the information we have before us on the F-35...and I think of what happened a number of years ago when NFTC started at 15 Wing Moose Jaw, and there was a lot of kerfuffle about that in Parliament. At the end of the day, it was found that Bombardier, who ended up with the contract, was the only contractor big enough, sophisticated enough, to put the program on. Is that what we're looking at here? Are we looking at single source because we require a sophistication and only a few companies have the capability to really put such a program together? Could you share with us some of those thoughts?

[Dan Ross]

I'm not current, sir, with the situation today with Bombardier.

I would agree that the complexity and difficulty of this program is at a level that no one has ever seen in the world, and to produce three different variants.... Is it only Lockheed Martin that could do it? I'm not sure I could say that. Boeing, obviously, competed. McDonnell Douglas did, and withdrew. But there are very, very few multinationals in the world that could embark upon this, and only the U.S. government has deep enough pockets to drive this level of technology development.

As I said in my opening remarks, or close to it, they spend over $60 billion a year in the development of technology.

[Ray Boughen, Conservative, Palliser, SK]

Thank you.

One other question. How comfortable would any of us feel if we were putting our sons, daughters or granddaughters, as you said in your opening statement, in a position that is probably going to be less than favourable for them because the other people who also have aircraft have a more sophisticated aircraft than we have? Can you share with us your thoughts on that?