National Defence Committee on Nov. 16th, 2010

[Timothy I. Page]

Thank you for your question.

Where I come from there are very few real guarantees in life. What we've been trying to suggest to you, sir....

First, if I may respond to your first comment, CADSI has not taken a position on the F-35 because it is a specific program, and we as an organization don't take a position on specific programs, in part because we have 860 members, and to side with one platform relative to another would obviously put us in a tight spot with our membership. It's akin, if you like, to asking us to profess which of our children we love more. It's not a business we feel comfortable being in.

I agree with you, sir, that it is very important for Canada to have a very clear sense of what its sustainment objectives are for the F-35 and to have that sustainment plan aligned to an industrial participation plan. To date, that has not been developed or completed, and in our presentation to you this afternoon we've identified this as an item of outstanding business. We have confidence that between now and the time an order is ultimately made, the government will have arrived at a decision around sustainment and around an industrial plan in that respect.

As it relates to work to be performed in the province of Quebec or in any other province of this great country, our organization is of the view that Canadian industry is capable of competing for work, and that work should go to wherever Canadian companies have won that business. We are confident that the Montreal aerospace cluster is strong, is competitive, and will do an effective job of selling itself to the F-35 program.

[The Chair, Conservative, Maxime Bernier]

Thank you very much.

Your time is up, Mr. Bouchard. You can speak during the next round.

Thank you, Mr. Page.

It is now over to Mr. Harris.

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

Thank you, Chair.

And thank you, sir and lady, for coming today.

I want to ask you about the strategy that was described to us by the former ADM Materiel, Alan Williams, to participate in the joint strike fighter development program. As he described it to us, the purpose of Canada's participation was to increase the knowledge base of Canadian companies so that we would have experience in that field and would be able to get contracts to move to the next level of Canadian capability.

Even on a stand-alone basis, he deemed the joint strike fighter development program a success. He also indicated that initially there was no commitment, of course, to buy the particular results of that fighter jet, but that the program on a stand-alone basis was valuable and useful.

From an industrial, defence industry strategy point of view, would your organization agree that this was the result?

[Timothy I. Page]

Thank you.

First, I would, with respect, suggest that there is more than one motivation behind the government's interest in a next-generation fighter. Industrial opportunities would be one, and I'm confident that operational military requirements would clearly be another one, and probably more important, as it well should be.

So yes, the program through its inception at the concept and development stage has offered opportunities for Canadian industry to participate, and those industries, you would have to think, are now extremely well positioned to participate in the program through production and perhaps through sustainment.

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

Well, that doesn't quite answer my question. My question is, do you agree that this, as an industrial strategy, would fit with your concepts of what at least one option is for the kind of industrial strategy that might happen? It seems to me, at least, from the numbers you gave out of a cost of $168 million to the Canadian government that produced $355 million in contract work.... Whether the actual return to the government was $168 million is another matter, but I'm sure there are people who could work out the numbers for industrial spinoffs and taxes and other benefits.

But in terms of an industrial strategy, if it were for that purpose only, would it be a success? And is that a model, as an industrial strategy, that meets your needs, or do you want something more specific, whereby it's not simply a matter of companies competing for work? For example, the government keeps talking about the possibility, at least, of $12 billion worth of work being available for competition by Canada and—though they don't say this—every other industrial country that's participating in this particular project. Is that particular model one you would advance as a model for the defence industry?

[Timothy I. Page]

Sir, if I've understood your question correctly, I answered it in my introductory remarks, in which I said that the model we see the F-35 following is akin to a defence industrial strategy because it contains a number of characteristics that we would naturally believe to be in an industrial strategy, starting with there being, from the earliest possible stages of a procurement process, engagement between industry and government; second, the opportunity for Canadian industry along with the Government of Canada to participate through R and D collaborative efforts, in order to build domestic capability and capacity to support future requirements; the inclusion of articulating individual capabilities that the Canadian economy can then effectively compete for, when an early stage project goes into production; and the inclusion of Canadian companies in the supply chain of a major global OEM.

That's not to speak, as you suggested, of any spinoff benefits that might ultimately derive for those participating Canadian companies outside the F-35 program.

So if I've heard your question correctly, I think the characteristics that we believe are present in the F-35 model are consistent with those of an industrial strategy.

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

But the elements that you spoke of, outside of Canada's participating and opening the competition thereby to Canadian business, didn't seem to be part of that program specifically.

[Timothy I. Page]

Oh, I think very much those elements that I've articulated—I did so intentionally—as they relate—

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

Well, I know you did, but I haven't heard anybody else talk about them as part of that JSF development project.

[Timothy I. Page]

Well, I can't comment on that, sir.

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

Well, it's new to me; I'm just telling you that.

So you're saying that this was all part of the strategy.

[Timothy I. Page]

I'm surprised, given the number of witnesses who have been before your committee, that this matter or those issues haven't been brought up. But we'd be happy to provide you with additional information on any one of these items, as you deem appropriate, either as an individual member or as a committee.

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

Well, maybe the committee could hear that, because what we've been hearing about is access only as the issue. That's all I've heard, and maybe somebody could enlighten me.

I was a little concerned about your iteration of the unknowns—on the sustainment side, I believe—wherein you say you don't know the contract value, you don't know the number of jobs. I believe this only relates to the sustainment program part. Or is it the cost in general?

[Timothy I. Page]

Well, I didn't in my introductory remarks, sir—speaking through you, Chairman—comment on the cost at all. What I was trying to identify were areas where there is still acknowledged work to be done and opportunities to be exploited and capitalized on by Canadian industry. My exhortation is for the government to act aggressively and collaboratively with industry to optimize the opportunities that are on the table, both for Canadian industry at the production stage still and through the sustainment plan, once that sustainment plan has been developed and once Canada has identified its priorities. Our encouragement is for them to do that with a domestic industrial plan in mind.

[The Chair, Conservative, Maxime Bernier]

Very well.

Thank you very much.

Now I will give the floor to Mr. Hawn.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Thank you, Mr. Chair.

And thank you to our witnesses for coming.

Through you, Mr. Chair, I'd like to pick up on a couple of things that other folks have said. I don't think he meant to say this, but Mr. Harris seemed to intimate that the $12 billion was the entire amount of industrial participation up for grabs for everybody within the MOU, but in a $383 billion program.... I don't know what the number is, but I would suggest it's many, many times larger than $12 billion.

Is that a fair statement?

[Timothy I. Page]

Through you, Mr. Chairman, that was one of our cautionary notes, only because we don't know the figure. Because of commercial confidentiality reasons, it's difficult to understand where work is already being won. Clearly, on a $380-plus billion program, given the current metrics, there are clear opportunities for Canadian industry.

What we've been trying to say is that the earlier that Canadian industry is part of the planning and then execution of procurement, the greater the opportunities there will be for industry to participate, both at the production and the sustainment phases.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Now with respect to sustainment, because that is obviously an important issue, I'm sure you're aware, but I just want to make it clear, that we didn't have a sustainment contract for CF-18s until four years after we actually started flying the airplanes.

[Timothy I. Page]

I am aware of that, yes.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

So it's one of those things that does develop. Clearly, we would support developing that as early as possible.

How do you see that sustainment phase unfolding or developing?

[Timothy I. Page]

We understand that Industry Canada has established a sustainment working group and that a number of companies have been invited to participate in it. We're equally conscious that the Department of National Defence is working up its numbers and its plan. Our access to that data is, obviously, and for legitimate reasons, restricted. So from a relative outsider's position, our encouragement to the government is simply to ensure that as it develops its sustainment plan, it does so with one eye on meeting the mission requirement of the Canadian Forces and one eye on the economic opportunities available to Canadian workers.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

There was another comment across the way about how Canada might be disadvantaged because foreign governments would pick contractors. It's not foreign governments picking contractors; it's primary contractors picking subcontractors, such as Lockheed Martin, Pratt and Whitney, and so on. Is that a fair statement?

[Timothy I. Page]

Our understanding is that this is a competitive process. Our encouragement of the Canadian government is that it works effectively and aggressively with Canadian industry to optimize the opportunities that are available.

We are working, sir, in a market that is less defined by free trade and more defined by managed trade. As we've said in our procurement report, it's important for our federal government to have a clear idea of what its military objective is and what its industrial objectives are as it goes into defence procurements.

[Laurie Hawn, Conservative, Edmonton Centre, AB]

Yes. My point was that it's not the Government of Italy or the Government of Norway that's going to pick subcontractors; it's going to be the prime contractors that pick subcontractors, wherever they pick them. It's not a government decision; it's an industrial participation plan decision.

[Timothy I. Page]

In principle, the answer is yes. I would add, in support of what I've just said, that there are different countries who place higher or lower priority on individual aspects of their industrial base and who may take it upon themselves to encourage the prime contractors to look favourably at a supply base from their country. We're encouraging that of the Government of Canada as well.