National Defence Committee on Feb. 1st, 2018

[Patrick Finn]

For capability acquisition, sir, yes, it is. It's very regimented. Not only is it establishing the capability, but there is never an infinite amount of money, so there are cost-capability trade-offs. I would say capability comes even a step before that, in the context of the capability development process. We have a very detailed process that starts with determining the future security environment. In other words, the capabilities, the needs of the Canadian Armed Forces, are looked at in terms of what we anticipate the threats and the situation will be in three, five, 10 years from now, which could cause us to even change direction in a previous procurement we're working on and change some requirements.

It then flows into, as you indicate, the definition of high-level mandatory requirements. We have internal governance that looks at cost and capability. For us now that is all enshrined in our new defence policy of “Strong, Secure, Engaged”. Then it would flow into the follow-on steps of actual procurement.

Where it would not necessarily be capability-based is that there's a degree of procurement or contracting for equipment that is in service. These are in-service support contracts. Clearly, if the decision has been made to acquire a new ship or aircraft, in so doing we've also made a decision to support it. We don't go back and re-establish the requirements to establish in-service support for a ship or an aircraft or an armoured vehicle.

[David Yurdiga, Conservative, Fort McMurray—Cold Lake, AB]

Thank you.

How much time do I have left?

[The Chair, Liberal, Stephen Fuhr]

You have a little less than two minutes.

[David Yurdiga, Conservative, Fort McMurray—Cold Lake, AB]

Excellent.

Can you explain some of the benefits that foreign comparative testing has for Canada and our national defence?

[Patrick Finn]

In the context of procurement and value for money, we're trying to do a lot more work on how we test, and test early. We've had some really good outcomes from this approach. What we can't do is establish all of the test facilities and test ranges, duplicating what all of our allies are doing, so we have reached out and established some relationships.

A couple come to mind immediately. One is the U.S., and testing around vehicles. We use U.S. ranges for missiles and torpedoes and things of that nature. We have some ranges of our own that we also share. This enables us to share not only facilities, but also data and outcomes. It could be early on in research and development around better armour. We've used it to great effect. For example, when our tactical armoured patrol vehicle came to production, early on we put it through very detailed and rigorous testing and had some pretty significant failures. We refused to accept any vehicles. After two years of redesign work, we had a much better outcome, and now we've taken possession of 80% of those vehicles.

It is sharing of facilities, but it's also sharing data and information without each of us having to duplicate it.

[David Yurdiga, Conservative, Fort McMurray—Cold Lake, AB]

Thank you.

According to the National Post, the RCAF will now be keeping the CF-18s operating until 2032. Has your department drafted any reports calculating how many of our current fleet are expected to be combat capable by that date?

[The Chair, Liberal, Stephen Fuhr]

I'm going to have to hold you there, because we're right at time.

Before I move to Mr. Garrison, just in regard to the order of reference, it's Canada's involvement with NATO. There will be some procurement questions, and that's all fair ball, but this isn't about how Canada procures, although that's certainly something this committee can talk about. As it's loosely related, that's fine, but this is about how we deliver capability to NATO, so I'd like the committee to focus on that as we move forward.

Go ahead, Mr. Garrison.

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

I have a point of order.

[The Chair, Liberal, Stephen Fuhr]

Go ahead, Mr. Bezan.

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

Mr. Chair, Mr. Finn—I always like to refer to him as Admiral Finn—had talked about “Strong, Secure, Engaged”, and as that policy includes procurement within Canada, I think that is open for discussion.

[The Chair, Liberal, Stephen Fuhr]

I said that it is loosely related. The reason Mr. Yurdiga was stopped was because of the time issue—

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

I understand.

[The Chair, Liberal, Stephen Fuhr]

Fair enough. Your point is taken. It's loosely related.

Mr. Garrison, you have the floor.

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

Thank you very much, Mr. Chair. I'm not going to waste my time on this argument.

I'm glad to have these witnesses back here today. In previous sessions I have asked you about Canadian procurement and my concerns about both national security and intellectual property. I still have those same concerns, and those are going to be my focus today in our relations with NATO.

I want to start by trying to understand a little more about the NATO Support and Procurement Agency. Who is eligible to bid for contacts under that agency? Is it only NATO members, NATO partners? Whose trade rules apply in those procurement contracts?

[Patrick Finn]

Thank you very much, sir, for the question.

I will ask my colleague, who has a much deeper understanding of this area than I do, to speak to it in a second, but fundamentally they have a rule set whereby it's largely inside of NATO, and then it can turn into subsets. I often consider it to be an agency that is like the PSPC here, where the PSPC does broad procurement for the government in the context of the contracting it does and takes requirements from its customer departments. The agency, NSPA, is somewhat similar in how they do it and how it breaks down and who does what.

I'll ask Jennifer to explain that in a little more detail, please.

[Jennifer Hubbard, Director General, International and Industry Programs, Department of National Defence]

Thank you, Mr. Chair.

The NSPA is governed by the 29 nations of NATO, so the industrial benefits for those associated programs that go to the NSPA are allocated to the 29 countries. Industry from the 29 countries can bid on those contracts.

However, the NSPA also has overarching support partnerships. There are 90 weapons platforms that they manage, which are managed by support partnerships that are made up of different nations. If like-minded nations want to buy a particular platform, they get together under the umbrella of the NSPA, and those nations that govern that support partnership get to determine which countries' industries can bid on those particular contracts. The NSPA actually has up to 30 support partnerships for their different programs. The support partnership nations get to determine who may bid.

Generally, from an overarching NSPA perspective, the NATO nations' industries can bid, but if that capability is not available in those nations, then the NSPA will look outside the NATO nations to allow those other industries to bid.

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

I want to just probe that a bit more in two senses.

When you say that you can go outside NATO, do they have restrictions on who can then bid on those contracts? I have expressed my concerns before about state-owned companies from China that have different priorities—not in the narrow conspiracy sense, although sometimes I will go there—but in the sense that they simply have different priorities, and about Russian-owned companies that have been sanctioned for their activities. What kinds of restrictions are there if you go outside the NATO partners on bidding? Is that something the group is paying attention to?

[Jennifer Hubbard]

Thank you for the question, Mr. Chair.

The governance of the NSPA is done by the 29 nations. When we see that one of the capabilities that is being sought is not available in one of those 29 nations, the 29 nations must approve going outside those nations for industry participation. Certainly in certain areas, yes, there is raised awareness for some of the countries in terms of which ones can participate on certain contracts.

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

When you say companies from a country can bid on these things, we have the issue in the public right now about the potential acquisition of Aecon, a major construction company often involved in building critical infrastructure, by a Chinese state-owned company. If a company like Aecon were to bid on infrastructure contracts, I would have some concerns. Would they, under these rules, qualify as a Canadian company, and therefore be eligible to bid on NATO contracts?

[Patrick Finn]

If I rightly understand the question you're asking, it gets into almost a case-by-case basis. If they are acquired, what are the terms of the acquisition? What can they have access to? As an example, a Canadian company, MDA, now Maxar Technologies, acquired U.S. companies, but there are firewalls and restrictions on what they can access. Again, it would be on a case-by-case basis. Once the acquisition occurs, are there firewalls, are there separations, are there things that preclude it?

It could come down to security requirements, as happens in Canada. We have a security requirements checklist that we apply to all of our procurements that determines what level it needs to be. Fundamentally, this could be an acquisition that turns into an issue around their ability to bid on classified projects and things of that nature. It could preclude them in some cases, even in the national context.

It's really on a case-by-case basis. I don't have enough expertise in the legalities of mergers and acquisitions to understand the kinds of separations that occur in those sorts of things. Generally, that would be part of the discussion in limiting what it can go to.

Again, it's very often less about a discrete rule set and more about what the 29 nations at the table determine will be done: what are they prepared to do, what is the security aspect of it?

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

I would understand if those security protocols for determining who could bid aren't public. That would be reasonable. I guess I would ask if those protocols exist for the NSPA. Do they have various levels of security to determine who can bid on contracts?

[Jennifer Hubbard]

There are some protocols. I don't know what they are offhand, but we can certainly get you that information. Some of it has to do with the capability that's being considered for acquisition, and then agreement of the 29 nations, understanding that at NATO everything is done by consensus and that the 29 must agree to the provisions.

[Randall Garrison, NDP, Esquimalt—Saanich—Sooke, BC]

The example that Mr. Finn gave of providing on-the-ground support in terms of maintenance and supply in Afghanistan is the reason I'm asking these questions. It seems to me, from the little I know, that quite often the contracts are not for high-tech equipment or for what we call weapons, but they are still critical to those operations. As I said in the beginning, as I've said in other questions to you, I'm not always concerned that someone's embedding spy technology, although I think that is a concern; I'm more concerned that when you're at war, if private companies have other priorities and their directors have relationships with others who may have other agendas, it can create problems in the supply chain that would restrict our ability, and restrict NATO's ability, to respond in those crises.

[The Chair, Liberal, Stephen Fuhr]

We're a bit over time. I'm going to have to give the floor to Mr. Robillard.

[Yves Robillard, Liberal, Marc-Aurèle-Fortin, QC]

I welcome you both to the Standing Committee on National Defence.

Are the human, financial and materiel resources currently allocated to defence procurement in Canada sufficient? If not, what further resources are needed?