National Defence Committee on Nov. 16th, 2010

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

Great.

We heard Mr. Matthews, and I think we've heard you today, Mr. Page, indicate that Canadian aerospace companies have done well through the F-35 process. In fact, Mr. Matthews suggested that many companies feel they've done better through this process than they would through the traditional IRB process.

Do you think this is a model for future defence procurement?

[Timothy I. Page]

Well, as we've tried to say in our opening remarks, it is a model, and we believe that model can be successful as long as the characteristics that I identified in my remarks are followed and executed upon.

It's not the only model, but it is a model that can work effectively for Canada with the right environment.

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

Thank you, sir.

My final question, just before I pass the floor to Ms. Gallant, is whether you could please elaborate on the opportunities high technology companies in this country will have to increase innovation, create knowledge-based jobs, and commercialize technology as a result of these contracts and the opportunities from the F-35 program.

[Timothy I. Page]

Mr. Chairman, perhaps I might answer that in a slightly different way, because the lead time required, from R and D through to commercialization, and then the ability to compete on programs, is not an overnight phenomenon. My answer to you would be that through the opportunities Canadian industry is able to win on F-35, they will be developing expertise and access, as supply chain members, to other programs and to commercial opportunities, perhaps, that they may be able to spin off from the innovation and/or success they've had through their support of the F-35 program.

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

Thank you.

We'll go to Ms. Gallant.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Thank you.

Through you, Mr. Chairman, to Mr. Page, you mentioned that you felt that it was the role of Industry Canada to keep track of how many jobs arise to see how we're doing in terms of employment as one of the secondary benefits of having claimed that it will do the best job for our military.

Among your membership I noticed a number of companies that have plants in my riding, such as Arnprior Aerospace, Magellan, Pacific Safety Products, E.T.M. Industries, and Allen Vanguard, through Med-Eng. That's just a few out of your 860 members.

Because we have our primary contractors subbing, it's very difficult for government to know what the chain of contracting is all the way down the line. There may be companies that we would never anticipate would benefit. My question to you is whether you would survey your membership to find out how many person-hours are estimated to be gained as a consequence of this particular procurement.

[Timothy I. Page]

That's a--what's the right political word for that?--sneaky, good question.

[Some hon. members]

Oh, oh!

[Timothy I. Page]

It's a challenge to understand how much of one person's job is allocated to or supported by a particular procurement or another. It's a challenge to do. Our thought, in our opening remarks, was that there needs to be some metric against which government, opposition parties, and the public can judge the effectiveness of this model, and jobs is but one of those possible metrics.

I appreciate your identifying companies from within our membership that are part of your constituency. You are one of I think 177 federal ridings that have at least one CADSI member in the riding.

[The Chair, Conservative, Maxime Bernier]

Thank you.

Thank you, Mr. Page.

I will give the floor to Monsieur Lévesque.

Welcome to our committee.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

Thank you, Mr. Chair.

Mr. Page, I heard that Canada had contributed to the F-35's development, in that it had participated in joint research and development with the United States, and that, as a result, the government was justified in choosing this aircraft. Is that correct?

[Timothy I. Page]

We're not here to comment on the procurement strategy the government has adopted. What we're here to observe is that the record of Canadian industrial involvement in the F-35 program has been good to date, and that, in part, it's been good to date because of the early involvement of industry, collaboratively, with government.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

Mr. Page, I want to know whether Canada did in fact contribute to the development of this aircraft even before the procurement agreement was reached.

[Timothy I. Page]

Yes, we have been participating in the development of this program. Very clearly, we've been participating in its development, and that's part of the economic return Canada has enjoyed from the program to date.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

A decision was made regarding our participation in developing a certain type of aircraft with our future needs in mind. I want to know whether we checked on how the work had progressed and whether we could have asked aircraft manufacturers to be mindful of that criteria in their bids. By requesting bids, would it not have been possible to set out specifications that covered not only maintenance but also construction of the aircraft?

[Timothy I. Page]

If I understood your question correctly, sir, I am confident that Canadian industry and a number of leading aerospace companies are playing a meaningful role in the development and soon-to-be production of the F-35 next-generation fighter. Our encouragement of the government is to continue to look for opportunities where Canadian industry can participate as part of the supply chain in the production phase of this fleet and to maximize the opportunities available for Canadian industry to contribute at the sustainment phase of this fighter jet.

[Yvon Lévesque, Bloc, Abitibi—Baie-James—Nunavik—Eeyou, QC]

No competitive bidding process was conducted, given that one party handed the contract right to the other, without even identifying the contractual requirements. We could have imposed certain obligations on potential suppliers in terms of the economic spinoffs they would have to guarantee our manufacturers. Under those conditions, those who did the research or who manufactured parts could continue their work. For example, when we manufacture something, very often we try to manufacture the part in the other country, so we can do business there.

[Timothy I. Page]

Sir, if I've understood your question, though I don't know because it's not my place to know, I suspect if Lockheed Martin, in the development of a supply chain for the concept and then development and soon-to-be production, has identified Canadian companies to be within that supply chain and those Canadian companies are performing successfully within that supply chain, then it would be unusual for the program office to willy-nilly change its suppliers. I think part of the value of this program is in having been in on it from the ground floor.

[The Chair, Conservative, Maxime Bernier]

Thank you.

Thank you very much.

I will give the floor to Mr. Payne. I know you will share your time with Mr. Boughen, so you have five minutes.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you, Mr. Chairman. My question is through you to Mr. Page.

Mr. Page, you did say that you had 872 organizations in your group. I'm wondering if one of those is Meggitt Defense Systems, which is in my riding. My colleague, Ms. Gallant, talked about subcontractors. I can tell you that Meggitt, a small organization in our riding, has 122 suppliers. So if you think about that in terms of other organizations, I can just see that this thing is huge.

In the CADSI report, it states on page 7 the importance of R and D as “a key driver of industrial base competitiveness”. While in some instances the IRB can be applied to cover this requirement on many of the off-the-shelf defence procurements, the uniqueness of this MOU in the JSF program offers exactly what CADSI requests, and I quote:

[CADSI] understands that Canada's industrial base adds significant value to Canadian defence systems acquired from foreign suppliers, a market that cannot be effectively sustained unless such acquisitions include intellectual property (IP) rights to permit Canada's defence industry to function effectively.

Could you explain to the committee why the intellectual property right transfers in the MOU are a significant breakthrough?

[Timothy I. Page]

Well, intellectual property is power. Those who have it are able to use it, and that is power market share.

The acquisition by the Canadian government of intellectual property related to the F-35 program and the right to use and disclose that information will enable Canadian companies to participate at both the production phase and the sustainment phase of this program once the government has identified its sustainment plan. We hope it will also enable those companies to spin off the knowledge they've acquired in the development of new and different innovative products, technologies, and services that can be useful not just for future military requirements in Canada but also to position them for international success and contribute to commercial market opportunities that may be available to them.

[LaVar Payne, Conservative, Medicine Hat, AB]

Thank you.

Mr. Boughen.

[Ray Boughen, Conservative, Palliser, SK]

Thank you.

Welcome, Mr. Page. It's good to have you with us.

We have had multiple Canadian aerospace industry representatives come before this committee and express in no uncertain terms that the JSF program would be good for business. Some people seem to be stuck on this model, and say that because it's not the old IRB there must be something wrong with it.

Progress evolves and industry evolves. Certainly the world evolves. What is your opinion on the Canadian aerospace industry's ability to adapt to the real-world changes that have come along in the past several years with respect to industrial participation?

I also noticed in your presentation that you had seven points. It seems to me that the program we're looking at fits well into those seven points. Perhaps you could comment on one or two of those observations.

[Timothy I. Page]

We observed in our presentation that the JSF model was one model. We believe it is a model that can work if it's effectively pursued. We identified some of the characteristics that we believe would support Canadian industry doing well, whether it's within the F-35 model or a different model that is available to the government.

The key for us is to ensure that when the government commits to spending a dollar on defence, it does so with one eye keenly on the operational mission it's asking of men and women in uniform and one eye keenly on the economic opportunities available to Canadian workers to support that mission.

[Ray Boughen, Conservative, Palliser, SK]

Thank you.