Thank you, Mr. Chair.
Good afternoon everyone. I will be giving my presentation in English, but we will be able, I hope, to answer your questions in both languages.
Thank you for the opportunity to appear before you this afternoon and for your interest in hearing CADSI's views on the F-35 program, a subject of keen interest to Canadians and to our 860 member companies.
We fully appreciate the political environment within which the program is being discussed. As you know, CADSI is not a partisan organization, and as a not-for-profit association, we do not have a commercial interest in this or any other defence program. You might well appreciate that because of the depth and breadth of our membership, we do not take a specific position on any given defence procurement, which is why you have not seen us in the media on F-35, nor are you likely to. Furthermore, we don't comment on defence requirements, as we firmly believe that is the prerogative of the federal government.
With that said, in general we believe that defining a requirement should not be used as an opportunity to define a specific platform. We believe that procurement strategies should be chosen in part so as to optimize Canadian industrial participation at the R and D, production, and sustainment phases of a project.
As you may remember from our appearance before you on April 29 this year, we have called on the government to create and implement a defence industrial strategy in the context of general reforms to defence procurement in Canada. If such a strategy existed, we believe questions surrounding the economic benefits derived from any specific procurement, including the F-35, would be easier to answer and evaluate from the perspective of a return on investment for taxpayers.
What can we say about the F-35? First, in principle, we like the project model being used for the F-35 because it includes characteristics akin to a defence industrial strategy. By that I mean cooperation between the defence industry and the Canadian government from the concept phase of a defence program; the commitment and targeting of government-supported industrial R and D from the earliest stage; articulating and promoting domestic industrial policies where Canada can win business at the production phase of a program, including defence electronics; procuring the right to use and disclose intellectual property to benefit domestic industries' involvement at both the production and sustainment phases; and enhancing Canadian access to global supply chains from development through production and sustainment. We believe those characteristics, akin to a defence industrial strategy, are present in the F-35 project.
Second, participating in the development of capital defence programs from the ground up provides Canadian industry with the time horizon to invest in plant, process, R and D, and human resources, and to find partners to enable it to compete successfully when programs ultimately come to market. We believe it also creates an important window of opportunity for government to act strategically to nurture and develop Canada's defence industrial base in areas of sovereign, security, and national economic interest through its participation in such programs.
Third, we support a similar procurement approach to other priorities outlined in the Canada First defence strategy, including but not limited to naval and coast guard requirements. We encourage the government to work expeditiously to move the national shipbuilding procurement strategy forward to the point where construction on these new vessels can begin in the shortest timeframe possible, in collaboration with Canada's marine and shipbuilding industries.
Fourth, there are other project models that can also effectively obtain needed military equipment and build and sustain industrial capability and capacity in Canada's defence industrial base. Regardless of the project model chosen--build, or COTS and MOTS, with strategic industrial and regional benefits--the message we wish to convey is that a collaborative relationship between the defence industry and government, developed from the earliest stages of defining a defence requirement for Canada and conducted in the context of a defence industrial strategy, will improve Canadian industry success in defence procurements at home and abroad and enhance its ability to spin off capability into the commercial marketplace, both domestically and internationally. We believe this is good news for the Canadian Forces and good news for Canadian workers in the defence and security sector of the economy.
Fifth, in the context of the recent Auditor General's report on defence procurements, we note how important program and management cost controls around defence spending are in general, and will be into the future, for ensuring that the Canada First defence strategy can be fully met and implemented on time and to budget, including a fully funded national shipbuilding procurement strategy. Government's recommitment to fully fund its planned investments in land vehicles and soldier systems and naval and coast guard vessels would be an important sign for those within our membership who are concerned that the next-generation fighter program might siphon funds from programs they are investing in.
Sixth, to date, the government reports on early contract returns on the F-35 project would appear to show that Canada has done as well as or better than other partner countries in winning business. If this trend continues, participating companies will do well. We would ask the government to provide regular updates on the continuing progress of Canadian industrial participation in the F-35 project.
Finally, there remain a number of issues around this project, which, when addressed in the fullness of time, will better define the scope of Canadian industrial involvement in the project and the economic benefits that can be realized for Canadian workers. Those issues include the articulation and execution of a domestic industrial plan for the lucrative sustainment phase; how effective the Canadian government can be working with domestic industry to capitalize on access to and use of the intellectual property Canada has purchased within the program; the extent to which Canadian companies and the government can capitalize on additional high-value defence electronics business from the supply chain opportunities that remain to be decided for F-35 production; and how many high-value jobs are ultimately going to be created and sustained within the Canadian economy.
Mr. Chairman, in our view, it is somewhat too early to tell if the model will ultimately work to Canada's benefit. We do not know about job growth or prospects, in part because Industry Canada doesn't keep job data. We don't know contract terms because of commercial confidentiality. And we don't know about contract value, because, in short, we don't know how many planes will ultimately be built and purchased.
That said, CADSI lends its continuing support to ensure that when the day comes and Canada is ready to formally make a procurement request of the program office in Washington to address its next-generation fighter needs, Canadians will know much more than they do today about the extent and quality of economic activity that will be generated over the long term for Canada's defence industry and workers, both at the production and sustainment phases of this program.
Mr. Chairman, CADSI's 860 members and their 90,000 knowledge-based workers remind this committee of what we said in our military procurement report of December 2009, which was that defence procurement decisions should be made in the context of a defence industrial strategy. With a strategy in place that is aligned with the Canada First defence strategy and international market opportunities, industry is better able to prepare for success, and Canadians are better able to judge the domestic economic return on investment from defence spending.
Thank you. We will now answer any questions you have.
