National Defence Committee on Feb. 14th, 2017

[Peter Jennings]

We tend not to see it that way. We have a border, which we guard very assiduously.

They are now operating eight vessels, modestly armed, that can undertake civil policing tasks.

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

They're included in your budget.

[Peter Jennings]

No, they're quite separate.

Our defence budget is pretty much what you see. It does not include veterans entitlements or pensions paid to retirees. It is dedicated to the acquisition and payment of the current force and the sustainment of its operations. That is what the defence budget amounts to.

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

You stated that the current intent in Australia is to build the ships in Australia. Is there a premium involved in that? Does it cost significantly more? If so, can you give me a rough estimate, percentage-wise?

[Peter Jennings]

It's a hotly argued issue. There are claims that say the premium we've paid on the air warfare destroyer has been perhaps 20% on what might have been achieved out of an American—

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

The economic benefit, though, would more than make up 20%.

[Peter Jennings]

There would be economists who would say that's not right, but I wouldn't agree. I'm a person who is happy with the idea of the local build. In past construction, for example, with what we call the Anzac frigates—because the New Zealanders were also involved—we were able to take down a notional 20% premium to zero by the time the final ship was constructed.

The key point there is it's now clear that as you build a number of vessels, you will get a learning curve and a saving against each of those new ships as they come forward. The aim should be to bring the premium down to zero, or as low as you can make it competitively.

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

About procurement delays, I don't want to paraphrase and say you're well known for it. Would that be cultural? Would it be mostly political?

[Peter Jennings]

No. Each unhappy procurement program is unhappy in its own unique way.

In the case of the air warfare destroyer, for example, which has suffered some significant delays, it came down to a perennial problem. We're always producing the first of class, and then we're never building enough to actually give us the learning effect as we go along. The first air warfare destroyer was a pretty rough experience in terms of learning how to construct the vessel. The third one, which is under construction now, is going along brilliantly.

The challenge for countries like ours is that we're always dealing with small builds. We've been through a history of penny-packet decisions. We'll build two; then we'll wait for a while and lose the workforce, and then we'll come back and build more. Hopefully this idea of a continuous build is the solution to start to get us into a routine of being on time and on budget.

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

You spoke about, up until currently, building ships in a modular design. Do you have any examples of a ship or a vessel built with different modules in different shipyards in Australia?

[Peter Jennings]

Yes. The air warfare destroyer, based on the Spanish F100 design, was built in modules in South Australia and in Williamstown, which is in Victoria near Melbourne. I think we might even have had some modules constructed in a small yard in Queensland.

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

That's been a success, for the most part?

[Peter Jennings]

It was more successful as the build went on.

They were finally assembled in Adelaide. It's quite technically possible to do that with a significant amount of work. The more work you put into a module before it gets into a ship, the faster and cheaper it is. Modular construction is sensible. Even if we're building all of them in Adelaide in the future, it'll still be done by modules that are then fitted together.

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

Thank you.

[The Chair, Liberal, Stephen Fuhr]

I'm going to have to cut it off there.

Ms. Gallant, you have the floor.

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

I'll be sharing my time with Mr. Bezan.

When you were asked, Mr. Jennings, whether or not there were any procurement projects we could do jointly, you suggested we could do the submarines. Well, that really wouldn't be jointly, because we don't build them at all.

In your submission you state that you have a strategic urgency and that your 12th submarine is expected to be built around 2050. How would you fit a Canadian order into that, or is it another type of submarine and another submarine shipyard?

[Peter Jennings]

I think this is one of the greatest problems we face. It's in the mismatch between what we know we need because of strategic circumstances evolving now, as compared with the idea of an 18-month or two-year steady drumbeat in the production of ships into the future. I cannot think of a way that we can reconcile those competing challenges right now. Whether that changes in the future I think will be driven entirely by the shape of the world in the Asia-Pacific region in the coming years. If we find ourselves in greater urgency, then we may have to rethink the plan.

In terms of combined work we might do with Canada, I don't imagine we would ever get to a stage where we would actually be building hulls for your navy in Australian yards. Where I think we have good opportunities would be in the construction of subsystems, particularly at the high-tech end of of sensors and weapons, and looking for ways we could share in each other's value chains so that our industry and your industry could have a more interchangeable involvement in both the Canadian and Australian procurement systems. I think there are great opportunities for us to do that.

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

Are your systems interoperable with the NATO fleet?

[Peter Jennings]

Yes.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

Thank you.

You've been talking about the influence of China and their proliferation in nuclear submarines and how Vietnam is now buying submarines from Russia, and you also mentioned that you're co-operating with Singapore, yet Singapore is also doing more business with Russia all the time.

How do you view the Russian influence in the Asia-Pacific region, and could you tell me whether Australia is at all concerned about it?

[Peter Jennings]

I think we're certainly concerned about Russian behaviour generally, the somewhat destabilizing way Russia chooses to act internationally, and we're very worried about the prospects for Asian security if Russia becomes more involved.

Last October the Russians and the Chinese held a maritime exercise in the South China Sea, which was the first time that the Russians had returned to the South China Sea since they quit Cam Rahn Bay in Vietnam in 2001. The last ship left Cam Rahn Bay in 2001, and they kept an intelligence-gathering facility there for a couple more years.

I think the Russia-Vietnam relationship is something to watch, because it's still incredibly close. As we've seen, once again Russia is now positioning itself as a supplier of choice to the Vietnamese military, which I don't think is productive for the security of the Asia-Pacific region in a longer-term strategic sense.

[The Chair, Liberal, Stephen Fuhr]

You have another minute for a question or a response, if you want.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

Part of the study that we've been doing here often involves the Coast Guard and the integration of the Coast Guard with our navy. What's the relationship between the coast guard and the Royal Australian Navy?

[Peter Jennings]

We don't have a coast guard in Australia.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

You have none at all?