National Defence Committee on Nov. 17th, 2016

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Thank you, Ms. Campbell.

You said that SMEs were awarded 40% of federal government contracts, but I think that percentage does not really apply in the regions. Do you understand that those are two different categories?

An effort is being made to support SMEs in Canada, and that's great, but what measures are being taken to ensure more balanced distribution and avoid our rural ridings being left behind?

The rural aspect is not pejorative. I am proud to represent the riding of Portneuf–Jacques-Cartier.

Are mechanisms being established to ensure the fair distribution of contracts and, if so, what are those mechanisms?

It is completely normal for urban centres, given the number of companies and the size of their population, to have a share of the cake, if I may put it to that way. However, I think that the regions are very important in Canada. They must be provided with support, so that they would have an opportunity to become major centres one day.

[Lisa Campbell]

Thank you.

The Office of Small and Medium Enterprises is really emphasizing rural communities. It is aware that, in urban areas, the most sophisticated small and medium-sized companies are doing business with all levels of government. Those who work for the office deliberately spend most of their time in rural regions so as to reach individuals who don't necessarily have access to the Internet, among others.

In addition, Innovation, Science and Economic Development Canada, which I mentioned earlier, is keeping an eye on how contracts are awarded in the entire country and in the communities, especially in rural areas, but also in urban areas.

Thank you very much.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Thank you, Ms. Campbell.

As you know, our current submarine fleet is reaching the end of its life.

Is there a plan to extend the use of those submarines or to acquire new ones over the next few years?

[RAdm Patrick Finn]

Thank you for the question.

You said that the submarines are at the end of their life, but that's not quite true. This may be a positive effect of an unfortunate situation, but at the very beginning of their life in Canada, the submarines went to sea less often than was suggested. So their hulls were not exposed to the pressures submarines experience in deep seas.

We now have much more data and knowledge on those submarines. In the plan, we are talking about 10 to 12 additional years for the time being. We are currently conducting studies to determine, based on the maintenance we are providing, to what extent we could prolong those submarines' lifespans.

For the time being, we are mainly trying to determine how much we could extend the lifespans of those submarines and increase their current capacity, considering the use we have made of them so far and the current circumstances. At the same time, given the changing military threat, we want to specify what other changes should be made to the submarines.

That is currently what our main effort is focused on. It could even help extend those submarines' lifespan to 2030, even beyond. It will then be up to the Royal Canadian Navy, the department and the government to come up with replacement plans.

[Joël Godin, Conservative, Portneuf—Jacques-Cartier, QC]

Thank you.

Thank you, Mr. Chair.

[The Chair, Liberal, Stephen Fuhr]

Mr. Gerretsen, you have the floor.

[Mark Gerretsen, Liberal, Kingston and the Islands, ON]

Mr. Chair, I'm going to turn my time over to Mr. Spengemann, who's going to ask a question.

[Sven Spengemann, Liberal, Mississauga—Lakeshore, ON]

Thank you very much.

I'm going to ask a question that's a bit out of the box on the intersection of our defence sector, civilian shipbuilding, and civilian merchant and commercial marine enterprises and cargo.

Are there synergies? Are there overlaps? Does the revitalization of the Canadian navy and the framework we're considering this afternoon produce benefits on the civilian side or vice versa? If so, what are they with respect to technologies, navigation, communications, and interdiction of hostile behaviour potentially against civilian ships? More broadly, are there amplifications we could achieve?

[RAdm Patrick Finn]

I would say that in the evolution of specifications by which we build ships, if you went back a generation ago, the military specification would have been the highest standard. That's still true, I would say, for our front-line combatants. The way we will design and build the Canadian surface combatants, or were we to do submarines, will be around structures and capability that make them highly survivable. If they take damage, they will continue to operate.

The civilian standards around ships have continued to evolve and move forward. In this day and age, most ships are built to international classification societies. In fact, most of the ships we are building under the strategy for the Coast Guard, as well as for the navy—so parts of the Arctic offshore patrol ship, parts of the joint support ship—are actually built to civilian standards. They are sufficient and of very high quality.

As a result, the shipyards, ship designers, and equipment suppliers across Canada are all building skill sets across the marine industry that would also enable them to perform well in the commercial sector. It's highly competitive, and there's a lot of protectionism internationally, but there are certainly Canadian companies that are watching very closely, even Canadian fleet operators.

In the case of Seaspan, they are not only shipyards, but they also have a very large international fleet, and they have a very large fleet of auxiliary vessels that actually provide services to Vancouver harbour. There is an opportunity there. In fact, when we established the umbrella agreements, the expectation was that we are going to provide them this work, but we expect them to go out and to complete their order book by finding other work.

Both yards continue to do that in a number of areas. Of course, for Seaspan, it's across multiple yards, whether it's other parts of Seaspan they're working for or other suppliers. For example, they continue to do a significant amount of work, interestingly, for foreign-flagged cruise ships. They do massive refits in Victoria. It's really impressive to see. The idea is to continue to build on that.

[Lisa Campbell]

Let me just add that as Mr. Finn pointed out, a significant portion of Seaspan's work is commercial, and we expect that to continue. When I talked about us ensuring continuous work in the yard, that's partly Canada, but there are also expectations that the yard will look after that as well.

To the point about dual-use civilian and military applications, we actually think that's good for industry. We encourage it, and we try to permit it as much as possible. It's healthier for Canadian industry. We know that sustained funding over time allows the kind of R and D that has a direct impact on innovation and also increases the number of dual-use civilian and military applications.

[Sven Spengemann, Liberal, Mississauga—Lakeshore, ON]

That's very helpful.

Thank you, Mr. Chair. That was my question.

[The Chair, Liberal, Stephen Fuhr]

Ms. Watts, it's over to you.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

Thank you very much. I appreciate being at my first meeting here.

I come from the west coast, and am particularly interested in the status of the joint support ships project. I'm wondering if you could give us an update on that.

[RAdm Patrick Finn]

Regarding the joint support ships, the ships themselves are based on a mature German design, the Berlin-class ship. We have acquired that design and brought it into the yard where we have a combined workforce. I have some people in the yard, engineers and others, working with a significant workforce in the yard and beyond, who are now looking at the design. The thing about a design, if you will, is that the blueprints and the build design have to be produced to the yard that is actually building, because their processes will be slightly different and their flow will be slightly different. That work is under way.

We're about to let the next fairly significant design and production engineering contract, as we call it, of over $200 million. Not only will it bring the design to a production-ready state, but we'll actually acquire all of the material and long lead items, as we call them, such that when we sign the build contract, there's no delay.

We're probably about 12 to 14 months away from the actual build contract, with the idea that in 2019 we start cutting steel. The idea is that the steel, the slow-speed diesel engines, and the systems are all there ready to be assembled. There's a fairly aggressive schedule to deliver the ships. The first ships would be delivered within about 36 months. We continue to be on track to deliver as planned.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

The expectation to begin, I think, was around 2020-21.

[RAdm Patrick Finn]

I think we see both ships right now at about 2021, beginning of the year and end of the year. That will continue to refine as we do all the design work I talked about, but that would still be the view.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

Within that whole program, have you looked at the job creation numbers in terms of what that looks like?

[RAdm Patrick Finn]

We have, collectively. Again, our colleagues at Innovation, Science and Economic Development Canada feed us those numbers, and they have. I just don't have them with me. I apologize.

[Lisa Campbell]

I would say that the yards have seen tremendous growth. That includes Seaspan shipyards, as I mentioned earlier. I was just out there, as was Mr. Finn. The recruitment that's going on in the Vancouver area is very impressive. They have a relationship with an aboriginal trade school and have been hiring at a rapid rate.

[RAdm Patrick Finn]

They were telling us last week that just in the yard, their shipbuilding workforce is now over 500, and engineers and procurement specialists beyond that. Of course, in that whole supply chain of systems and pipework and cable, it would be in the thousands. Again, I just don't have the numbers. I apologize.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

No, that's fair enough.

In terms of using the German design, you're saying that you're working with the engineers. Are these local engineers or are they from Germany coming in to work collectively together?

[RAdm Patrick Finn]

These are local engineers. We do have a reach-back to the company, ThyssenKrupp Marine Systems. They have a Canadian division as well, and have actually hired in Canada. That's really to make sure that if we have any questions about interpretation of the design package or things that they have given us...but this is a Canadian workforce. Again, some maybe have come to Canada. I would say to you that this is the nature of shipbuilding internationally. When we built the frigates, we used to joke about everybody having a Scottish accent.

People with expertise who move around the world are coming to Canada, moving their families here, planting roots, because they actually see, as a result of the shipbuilding strategy, almost uniquely in the world, except perhaps for a couple of places, a long-term vision of shipbuilding. In fact the Australians and other allies have approached us to get us to come and explain the approach we've taken, the road we've taken, because they see opportunities for themselves as well.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

Okay.

Quickly, when was the shipbuilding strategy was developed?

[RAdm Patrick Finn]

We started in 2008. We received Government of Canada approval in 2010 and issued the requests for proposal. In late 2012 we signed the umbrella agreements with the two yards. They then spent about 36 months each completely recapitalizing their facilities, impressively so. As Ms. Campbell said, if you have a chance to visit either yard, I would recommend that you do it.

It's really since 2015 that we've been building. Having been involved with it since the outset, I would say that a shortcoming, I often think, for myself, is in 2012 the effort we put into communicating that we weren't going to be starting to cut steel in a month. But the road we've been on at the shipyards, what they've achieved in three years of recapitalization, is very impressive. Irving Shipbuilding has the largest single building for shipbuilding in North America. It's highly impressive.

[Dianne Lynn Watts, Conservative, South Surrey—White Rock, BC]

Thank you very much.