National Defence Committee on Nov. 17th, 2016

[The Chair, Liberal, Stephen Fuhr]

Ms. Romanado, you have the floor.

[Sherry Romanado, Liberal, Longueuil—Charles-LeMoyne, QC]

Thank you, Mr. Chair.

Thank you very much, Rear Admiral Finn and Ms. Campbell. It's always a pleasure to hear from you.

I want to talk a little about the time frame required for capital expenditures.

The time it would take to go from statement of requirement to RFP to selection to acquisition to being combat ready could, obviously depending on the object we're looking to buy, be quite a long time.

Given the importance of being able to protect our Arctic sovereignty, and given the—I don't want to say mistakes—lessons of the past with respect to our Victoria-class submarines, are there any thoughts already in play for replacing those submarines with nuclear? If so, are you able to share how long that would take?

Obviously, they are going to need to be replaced. I'm not sure whether they'll be replaced with nuclear submarines, but given that requirement, how long in advance would we need to start preparing in order to make sure that we don't have a capability gap in that regard?

[RAdm Patrick Finn]

I'm really not the right person, in the context of capability and future capabilities. That would be our vice chief, chief of force development, and others.

What I will say from experience, having a couple of times been involved in looking at nuclear submarines in Canada, is that it's a very complex, massive undertaking. I was involved with this a few decades ago and went to sea in British, French, and American nuclear submarines. It's a very expensive and very massive undertaking.

As a country, of course, we have a nuclear industry that actually puts us ahead of others who may look at this, but it is a massive undertaking. At this point I'm not aware of any discussions in that vein, but to be fair, it's really a question best addressed to our vice-chief and the commander of the navy.

[Lisa Campbell]

Let me add that you raise an excellent point about the time at which you buy. One thing we try to do in all of our procurements is capture the span of existing technology that is proven and tried and also what's coming on the horizon but isn't at such a stage of research and development that there's lots of risk attached to it, so that when the actual contract is issued, Canada benefits from what is the latest in the market for which there's an established supply chain, so that we can get best value. That is the balance we try to strike, keeping in mind that it can take years to get to that stage.

[RAdm Patrick Finn]

I apologize, but I would like to add something to Ms. Campbell's comments about technology.

When you look around the world at submarine technology and the advances in air-independent propulsion in fuel cells, there is a lot happening in this area which in the future could be used, if not under ice, certainly at ice edge and in other things like that.

These are the sorts of things we try to stay abreast of. What the intentions are, I'm not sure, but it's having quite a dramatic impact on non-nuclear-powered submarines.

[Sherry Romanado, Liberal, Longueuil—Charles-LeMoyne, QC]

Madam Campbell, you mentioned visiting BCIT. In a previous life I worked in the higher education sector.

What would be the importance of working with, say, research-intensive universities to forecast the next generation of technology we might need and foster the research we might need in the future?

I know that capability is being identified by someone outside of your portfolio, but I'm thinking in terms of supporting and leveraging the great brain power we have here in Canada with our research-intensive universities to come up with that next best thing we might need, so that we can keep that made in Canada right here.

[Lisa Campbell]

It's an excellent question.

There are three aspects that I'd like to point out. One is that Innovation, Science, and Economic Development Canada is right now looking at key industrial capabilities in Canada. They've hired a company, Avascent, to help them with that in looking at where Canada's existing areas of strength are, so that when we are letting these huge contracts we can support things that are already there.

We also have at our department the build in canada innovation program. Although it's not a big program, it's quite powerful. What it does is it pairs innovative pre-market technologies with government departments. It's hugely successful. The Department of National Defence and the National Research Council are some of our biggest clients, as well as Environment Canada. What we're finding is that they want to buy it more.... They think it's fabulous.

I would say as well that we receive a lot of unsolicited proposals. Historically, our department has said that it isn't interested in unsolicited proposals. We actually take a more nuanced view of that now. It's business creativity, after all, as well as advertising, but also layered in there are business solutions to things we didn't even know were problems yet, or business solutions to existing things we're doing that may not be done in the most efficient way. We are very open to that. We do industry engagement not just on specific procurements but actually across the board.

The last thing I would mention is that in addition to the shipyards having to grow, our procurement workforce has had to grow and specialize in this area, so we are doubling and probably tripling our marine procurement workforce over the next couple of years. We have just let a poster to hire new recruits, and I'm happy to say that we've had 1,700 applications across the country, with a special reach out to 14 universities and colleges. There's a lot of excitement about joining the procurement workforce.

[RAdm Patrick Finn]

If I may add to that, on the innovation, of course, our minister, Minister Sajjan, is extremely interested in this area, which is a key part of the defence policy review. He's challenged us to see how we can further use innovation in working, as indicated, with Innovation, Science, and Economic Development, but also in all the round tables, and to look at different models around the world, such as DARPA in the U.S., and other areas that we could bring home and do more work on, not just to innovate in the sense of what are the future threats and what's going on, but on things that we've seen in the past in the ships that could also then be leveraged for export.

[Sherry Romanado, Liberal, Longueuil—Charles-LeMoyne, QC]

In terms of risk mitigation, is there a percentage of maximum contracts that one supplier could have in the event that the supplier were to go under? In terms of risk mitigation, is there a percentage?

[Lisa Campbell]

In the two programs of work, combat and non-combat, those are actually not contracts. They're umbrella agreements. How they've been structured is that it is essentially a promise by the Government of Canada that this work will be undertaken in those yards. There are off-ramps, however, and they're performance based. In other words, if Canada doesn't receive what it wants on time and within the budgets we've agreed to, there are off-ramps for Canada.

How the work progresses is that contracts are put in place as needed with specific tasks. Canada does still retain the purse strings. A large element of the national shipbuilding strategy, as Mr. Finn and I were saying earlier, is that those two prime yards have enough work to keep them in continuous production for a long time, but a lot of the rest of the work is deliberately spread out across the country and, in some cases, around the world, again, to regrow the entire marine industry.

With respect to risk apportionment, though, and risk sharing in contracts, that's something we're also looking at closely with industry, to make sure that we don't pay for contingencies that we know will never materialize; it makes our contracts expensive. We are increasingly looking at risk apportionment with industry in a way that makes sense. Where it's less expensive for us to cover because of our insurance or because of long-term sustainability, we will cover it. In other instances, industry will share the cost.

[Sherry Romanado, Liberal, Longueuil—Charles-LeMoyne, QC]

Thank you.

[The Chair, Liberal, Stephen Fuhr]

Given the time we have available, we're going to a second round of questions. We have enough time for everyone to get through before the end of this meeting, if we're all disciplined.

Mr. Fisher, you have the floor for five minutes.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

Thanks, folks, for being here. I appreciate your expertise and all the information shared with us today.

I'll try to be quick. I want to talk for a moment about the Halifax-class frigates. It seems that this is a very successful refitting, this modernization.

I'd like to understand this better. My understanding is that the frigate has been refitted to be able to also serve as a destroyer. I'm probably oversimplifying things, but I guess the command and control function allows this frigate to act as a destroyer.

I'm wondering if this is unique. Is this considered a hybrid situation in the industry? I'm wondering if we've had a frigate deployed to be perhaps a destroyer. Again, I don't know the ins and outs of the history of this, but this seems to me to be something new and perhaps unique to this refit.

[RAdm Patrick Finn]

A generation ago, the distinction in size and firepower between a frigate and a destroyer would have been quite different. Nowadays, they've probably morphed in size of ship.

I think what has happened is, as we've retired our Tribal-class destroyers, the two capabilities that were unique to them in the navy were command and control of a task group and what we would call area air defence, which is an umbrella of missile capability that could protect all of the ships.

We have had evolution in both areas that has enabled us to do some work with our Halifax-class frigates and we've fitted the first four ships, which is the part that you're talking about. We literally moved bulkheads. We moved walls and did everything and actually designed, quite frankly, a better command and control capability than the destroyers had. We've completely modernized all the command and control, so there's the ship command and control, but there's also the task group commander's command and control that we've fitted in the ship.

We have retained the ability to command a Canadian task group, but we can also command an international task group by retrofitting and also deploying those ships. Interestingly, there was a bigger challenge. You have to embark a lot more people, because the commodore comes with a lot of staff, and we had to do a lot of work around habitability or what we would call heads and wash places, and bunks. That was an interesting challenge. The navy has basically maintained, and in fact from the early feedback we're getting from ships in the Black Sea or otherwise, improved, and not so much made it a destroyer, but provided it with the task group command and control capability that was otherwise being retired with the destroyers.

[Lisa Campbell]

If I may also add that it's actually an excellent example of contract flexibility. I think there is a perception that we've put in place a contract that stays there and operates, when it's actually quite the contrary. We adapt them and change as circumstances arise or as what we're trying to incentivize changes.

In this instance, there were a lot of unexpected things that arose through the work and we had to adjust the contracts. It took some goodwill on both sides, if you will, to make sure that we still stayed on schedule and on budget.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

Has this helped bridge the capability gap by having these ships with the capabilities of both ship types? We have about 10 to 12 years before we get the surface combatants.

[RAdm Patrick Finn]

We have about a decade, so you're exactly correct. We've structured all 12 ships, as far as the layout of compartments and spaces and cabling go, but we've only fitted four with the command and control capability, since you only need one on each coast. We can actually move the equipment to any of the ships and they can perform that role. By retiring the destroyers, it was to make sure that the navy, which works as a task group as their primary mode of operation, as Admiral Lloyd would explain far better than I, would actually maintain that capability until the arrival of the first Canadian surface combatant.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

You responded to Mr. Spengemann about Australia's interest in this modernization, and I think maybe you said New Zealand. Is that perhaps because of the success of this hybrid? That's my term that I'm using, not yours. Is that why they're looking at our ability to do that?

[RAdm Patrick Finn]

Yes, it's specifically New Zealand, not Australia.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

Okay.

[RAdm Patrick Finn]

I was just saying that Australia had the same ships. It is part of it, yes. I would say in the overall context of the work that we did and the capabilities that showed up. For the New Zealand navy, when they were looking at all the capabilities and they looked around the world competitively, everything that we had done regarding design and with non-recurring engineering was of interest to them.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

Thank you very much.

Mr. Chair, we're probably right on time.

[The Chair, Liberal, Stephen Fuhr]

You're right on time.

Mr. Godin, you have the floor.

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

Thank you, Mr. Chair.

Ms. Campbell, Mr. Finn, thank you for participating. I also want to thank you for your collaboration and understanding, considering the crazy schedule. This is the life of parliamentarians. I think that you understand.

I am a member from a region. We know that procurement contracts in Canada are often awarded in urban centres. I will explain what I am getting at. I would like to talk to you about the procurement process in regional markets. Do you plan to include, in your procurement process, the awarding of contracts in small and medium-sized markets?

[Lisa Campbell]

Thank you.

Actually, SMEs are awarded 40% of government contracts. The Office of Small and Medium Enterprises of Public Works and Government Services Canada covers 3,000 contracts with small and medium enterprises across the country.

When I was in Vancouver a week ago, I talked to one of our employees who spends half of her time in small communities, specifically to facilitate the awarding of contracts to small and medium-sized companies. That's very important to us. We recognize the Canadian industrial base. We have been focusing our efforts on that for 10 years, and we are starting to see the positive impacts of those efforts. Company representatives are telling us that the process has become easier, and that they know how to navigate.

Moreover, one aspect of our modernization is about making the process even simpler. I think that the idea that those people have to spend entire days completing a form is unacceptable. We would like selling to be very simple for them and purchasing to be just as simple for us. That is part of our procurement modernization.

Thank you for the question.