National Defence Committee on Nov. 28th, 2013

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Thank you very much, Mr. Chair, and through you to the minister and witnesses, thank you for appearing today.

Minister, while we're on the subject of procurement, I wonder if we could talk a little bit about our arctic/offshore patrol ships project. There were about three different questions I was going to ask, but I'll try to encapsulate them into one.

We're purchasing these made-in-Canada ships for specific reasons, for jobs and economic prosperity. I wonder if you could talk about our strategy surrounding the sovereignty and security of Canada and once again the economic importance of made-in-Canada patrol ships vis-à-vis our arctic sovereignty.

[Rob Nicholson, Conservative, Niagara Falls, ON]

Thank you very much, Mr. Norlock.

As I indicated to you, I was in meetings in Halifax. I wasn't at the shipyards, but just within a couple of thousand feet of where the meetings were taking place, the infrastructure is actively being put into place to produce these Arctic offshore patrol ships. As you will see in the estimates, there's a request for $168 million that is related to the infrastructure to support this. You have to have considerable infrastructure.

You raised a very important point. These are being made in Canada, and, again, one of the things I would emphasize is that it's not just the jobs that are created right there at the shipyard; it's all the jobs that are associated with that—with the suppliers and indeed the other Canadian companies. This has an effect beyond just the contracts that are let to these companies.

That being said, these are important for what we need to do to maintain our ability for search and rescue, for emergency operations, and I think you even used the word “sovereignty”. We've got to have a strong presence in Canada's north; this is part of our northern strategy, as you know. The Prime Minister is there every year to support the people of Canada's north and to underline its importance to this country. Again, joining him for a short time this summer, I was very impressed to see the Canadian Rangers and others who are involved with this.

But they have to have the right equipment. Again, it was impressive for me to see a Canadian Coast Guard ship off the coast of King William Island. I think this is the kind of thing we have to do. This is an important part of Canada; we're very fortunate that this is part of this great land of ours. Again, not just for today but for the future as well, we have to invest in our capability, so that when questions arise, when there is an environmental issue, if there are sovereignty questions, where there are search and rescue requirements, or where there's an emergency anywhere in the north, we have to have the ability to respond and to respond very quickly. We have an outstanding record throughout the world of responding and helping people who find themselves in a crisis or an emergency situation, but we have to have that capability and we have to make sure that is available right here in Canada.

Yes, when you talk to me about the arctic/offshore patrol ships, I am very, very supportive of that. We have to have that capability; that's a part of what we have to have. We have to have icebreakers, and, as you are aware, those are part of the contracts on the west coast of this country. That being said, it's all part of a strategy to increase the capability and increase our ability to respond to the challenges we have today, and indeed the challenges we anticipate for the future.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Thank you very much, Minister.

You touched on the fact that we have the world's fourth largest aerospace industry, but we lost, after the Second World War, some of our shipbuilding capacity. I wonder if you could talk about how these made-in-Canada ships will permit the companies that will be tasked with building these ships.... What will their capabilities be afterwards with regard to civilian ability to build ships for Canada, and will this increase our ability to build ships in our country, which we probably have lost along with the jobs surrounding that, not only on our east and west coasts, but right across this country, from the technology—

[The Chair, Conservative, Peter Kent]

I'm afraid we've come to the end of your segment.

Ms. Michaud, go ahead.

[Élaine Michaud, NDP, Portneuf—Jacques-Cartier, QC]

Thank you very much, Mr. Chair.

I'd like to pick up on the matter of close combat vehicles. At the risk of disappointing you, minister, I would say you weren't all that clear about what's going to happen with the program. We've seen major cost overruns in numerous military equipment procurement processes, the F-35s and naval ships, just to name a few.

The Auditor General's last report highlighted a gap between the government's ambitious agenda, set out in the Canada First Defence Strategy, and available resources. And that gap is only growing. In light of that reality, we need greater transparency. The government must give us a clear answer.

For many months now, we've been hearing that the close combat vehicle program has been called into question. I want details and I want to know whether or not the program is going forward. Someone asked the question earlier, but your answer wasn't very clear. So I'm asking you again. If you still aren't sure what's going to happen, could you at least give us an idea as to when the government will be able to clearly tell us the fate of the close combat vehicle program?

[Rob Nicholson, Conservative, Niagara Falls, ON]

Perhaps I'll be a little clearer in this sense. I and the department work very closely with Public Works on these procurement issues, and it's not confined to closed combat vehicles. We're working very closely on the subject of helicopters as well, which received quite a bit of attention earlier this year.

That being said, I want you to know that all of these certainly have my attention and the attention of the department, and again, we are working on these with Public Works, and will continue to, to make sure we get the appropriate equipment for our men and women in uniform and that we get equipment that works for the needs of the Canadian Armed Forces at the best value for Canadian taxpayers.

So while I'm not making any announcements today, we'll make sure we contact your office whenever announcements are made on anything in the area of procurement, and, Mr. Chairman, we will certainly keep you informed on these. But we have to make sure on all of these that we basically make the right decision, and again, we're working very closely with Public Works on these.

[Élaine Michaud, NDP, Portneuf—Jacques-Cartier, QC]

Hopefully, the attention you say you plan to give the file will translate into a quick response. There are many of us wondering what's going on.

Furthermore, you said one of the government's priorities was Canada's presence in the Arctic and its capability to secure that presence. You said we needed to have the capability to deliver on that priority for the sake of our northern sovereignty. Since the program to acquire and build Arctic/offshore patrol ships is already five years behind schedule, you'll forgive me for questioning that priority.

Does the Department of National Defence anticipate further delays? Do you know how much that five-year delay has cost? We really need those ships.

[Rob Nicholson, Conservative, Niagara Falls, ON]

Again, I know they are very focused and working diligently on these to make sure they are a part of that. But I want to be as helpful as possible to you, so I'd ask Admiral Finn to elaborate.

[RAdm Patrick Finn, Chief of Staff, Materiel Group, Department of National Defence]

Thank you, minister.

In the context of the arctic/offshore patrol ship and the entire shipbuilding strategy, when you talk about the project delays...in 2008, when we launched the project, it was under a competitive approach that we were trying with other projects, as was the coast guard. We were not having a lot of success because of the state of the industry. It caused us to take a pause to establish the strategy. In fact, it was one of the catalysts to create the strategy.

We are now seeing already a quite positive effect of that. We've relaunched it. We are now creating world-class facilities on both coasts. We are moving to—

[Élaine Michaud, NDP, Portneuf—Jacques-Cartier, QC]

I don't have much time left, and I'd like to know whether the delays have resulted in any costs.

[RAdm Patrick Finn]

Yes, the delays have led to costs, but there's also—

[Élaine Michaud, NDP, Portneuf—Jacques-Cartier, QC]

How much exactly?

[RAdm Patrick Finn]

We're talking about specific numbers. Once the design phase is complete, the cost per ship has to be determined. At the moment, we anticipate being able to deliver—

[Élaine Michaud, NDP, Portneuf—Jacques-Cartier, QC]

But you have no idea what the delay-related costs are?

[RAdm Patrick Finn]

Yes, we absolutely have an idea of those costs.

[Élaine Michaud, NDP, Portneuf—Jacques-Cartier, QC]

Could you tell me what they are?

[RAdm Patrick Finn]

They're acquisition-related costs. In light of the delays, we developed a strategy that allowed us to create much more efficient shipyards.

So there are also—

[Élaine Michaud, NDP, Portneuf—Jacques-Cartier, QC]

If I understand correctly, I won't be getting those numbers this morning.

Thank you very much.

[The Chair, Conservative, Peter Kent]

Mr. Allen, please.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you very much, Mr. Chair.

I would just like to continue on with the arctic/offshore patrol ships and Mr. Norlock's questioning.

Minister, you talked a little bit about the icebreakers and the types of capabilities we were going to require out of this. I'd just like to understand—maybe you and your officials can answer this—the definition phase and the importance of that, and more specifically what the deliverable is going to be out of that definition phase so that we make sure we get this construction done in a timely fashion.

[Rob Nicholson, Conservative, Niagara Falls, ON]

I'm going to ask Admiral Finn to again provide some of the details. We get reports from both coasts. I think in terms of procurement and contract letting and the ongoing commitment of the priorities, this has been a success up to this point in time. Indeed, I've been very encouraged by what's taking place on both coasts.

We didn't get into this, but we don't want to have this boom and bust cycle in the shipbuilding industry. These are long-term commitments. We were talking about the arctic/offshore patrol ships. We want to have a long-term commitment so that Halifax and other areas aren't in this boom-bust cycle. As your colleague, Mr. Norlock, pointed out, it's gearing up these things and starting them and having them come to an end.

This is a long-term project, and I think one that's going to benefit in every way.... I mentioned some of the economic spinoffs, but I'll ask for some of the details from Admiral Finn.

Thank you.

[RAdm Patrick Finn]

Thank you, Minister.

The definition phase is to prepare in all respects the build for the ships. It's not just the design; it's testing the facilities, ensuring the procedures and processes are in place. It's an international best practice: to actually control costs in shipbuilding you do not start construction until you're fully ready.

Historically, we would have run a competition, selected a supplier, and then started the process of preparing to build, and we would likely have incurred cost overruns and potentially scheduled delays. In this particular case, the shipyard itself is literally being built anew on both coasts. In the case of Halifax, it's a brand-new world class facility that's rising. In the next 18 months they will continue to finalize the design. It's a very, very detailed construction design. We will actually build test modules in the facility, so there'll be a couple of components of the first ship that will be fully assembled and tested. We will look at acquiring long lead items, so material that would cause delays.

We're literally spending a couple of years to be fully ready to build these ships, which will also basically save us money in production. That was my point previously. Although we've incurred some costs for delays, we're actually also achieving some cost savings by being more efficient, by being fully ready, by having a completely capable shipyard ready to move, by having a design that has been completely tested, right down to having a 3-D model where we can do walk-throughs and test all of the availability and all the maintenance.

This is delivering a best-practice approach, a fully capable yard, a fully capable design, such that when we actually launch the construction we'll have a very good understanding of price, we'll know exactly what we're getting, and we'll be able to build through the arctic/offshore patrol ships and acquire both a capable facility and the people to then move through that and into the next generation of combatants.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

I have two quick follow-on question to that.

First, having been involved in construction projects before, I know there's always this design, and then, dah, dah, dah, dah, dah. So we're going to have very much an iterative type of process. We're almost going to have, in some cases, working models, so we're going to build an expertise in that. Confirm that, if that's true.

Then there is a second piece to this. Because of that expertise, do we see a situation where foreign allies could end up buying ships from us in the future because of this competency?

[RAdm Patrick Finn]

To your first question, yes, that is correct. We will have complete design. We will have done model testing against ice in an ice tank. We will know exactly what we're getting. The potential is there for others to pursue that, and we're seeing some interest in some areas.

But the other big area where it helps us, as far as building in Canada, is when we talk about cost. The through-life cost is what is key. It costs us as much to maintain ships as it does to build them. Building them domestically gives us the supply chains. Traditionally, in the maritime domain, we run into problems when we acquire offshore, not because they're not capable, but because often we don't have the inherent supply chain with them. We will understand these ships from the keel up.

[The Chair, Conservative, Peter Kent]

Thank you, Admiral.

Mr. Larose, go ahead.