National Defence Committee on March 22nd, 2018

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

Do you agree with the comment that Mr. Bezan made related to Canada getting only 1% of the contracts? Does that jibe with your information?

[Janet Thorsteinson]

I think it's very hard to tell what the statistics really are in our environment. I absolutely know of contracts that were awarded to Canadian companies through a European subsidiary. Martin Hill said earlier that there is no access to subcontracting data, so I am reluctant to say that this percentage or that one is a good percentage.

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

Okay.

Daniel, you're with GE. Can you comment on the amount in terms of dollars or percentage of contracts that GE would get from that Canadian portion? Do you know that?

[Daniel Verreault]

The answer is zero.

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

How do you mean?

[Daniel Verreault]

General Electric Canada does not currently have any contracts with NATO.

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

Would you like to get some contracts with NATO?

[Daniel Verreault]

Of course.

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

I'm really trying to tease out recommendations today. What the committee needs to do at the end of the day is to provide a report with recommendations to the government. How would you suggest that Canada engage in its relationship with NATO in order to be able to provide more contracts to Canadian-owned companies? Do we take the hardline approach that Mr. Hill indicated, which other countries are doing, or is there another technique? I'm curious to get your input on this.

[Daniel Verreault]

We need to be more visible at NATO, everywhere at NATO. We need to be more active. We need to be more engaged. We need our experts engaged in standard setting. We need to be visiting them more often and investing in a smart way. It takes a couple of years for anyone to understand the vernacular at NATO, so this is a long game, but in the end, because of the challenges the world is facing, we need more friends, and we need to be more engaged with more friends.

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

Great.

I think I only have about 10 or 15 seconds left, but I guess what I would like to leave you with is this. It applies to Mr. Hill too. We've talked about what Canada needs to do, but we really need some concrete recommendations as to what the government should do, as opposed to what the objectives should be for what they should do. If you come up with anything at a later date, I'd ask you to submit that to us, because it would be extremely useful in terms of what we recommend to the government.

Thank you, Mr. Chair.

[The Chair, Liberal, Stephen Fuhr]

MP Blaney, please, for three minutes.

[Rachel Blaney, NDP, North Island—Powell River, BC]

Thank you.

I guess my question goes to you again, Mr. Hill. You talked about how procurement over the last 20 years has fundamentally changed and how there's now this intersection between the military, parliamentarians, civil service, and industry. Do you have any examples of a better practice or suggestions about what parliamentarians on both sides of the floor can do?

[Martin Hill]

I think my remarks here are more about, as you say, these huge cost overruns and delays in these large defence programs. There's no doubt in my mind that we are not procuring them correctly. That means civil servants, military, and industry have somehow got it wrong. Having looked at it for some time, it seems to me that those three bodies are not capable of looking at themselves and saying, “What shall we change?” I think it's up to parliamentarians to say, “This is not acceptable. You three must change.” I think there is my recommendation or my thought, that parliaments and parliamentarians in all of our nations—not just NATO, but it will feed down to NATO later—should be saying, “It is not acceptable to have these cost overruns and you have to relook at procurement.”

You mentioned modular ship construction or procurement. I think that is the way to go.

There's another word I've heard used in terms of an “architectural” approach to procurement. When I look at what's going to happen in the future AWACS or the allied future surveillance capability, it is almost certainly going to be an architectural approach to the procurement. I think it would be worth any nation's looking very carefully at defence procurement as to how we marry the cutting steel that lasts 50 years to the PCs they're going to buy and use that only last two years. How do we match those disparate procurement cycles and technology cycles and make a smart procurement? The acquisition cycle really needs looking at again. That would be my answer there, I think.

[Rachel Blaney, NDP, North Island—Powell River, BC]

Does anybody have anything to add? No?

Okay. I only have 30 seconds, so I'll let it go.

[The Chair, Liberal, Stephen Fuhr]

Okay.

We do have time available. I saw there was will from the committee to continue, so we'll go to a couple of five-minute questions. We'll start with the Liberals, Conservatives, and NDP.

I yield the floor to Mr. Fisher. I understand that he will share his time with Mr. May.

You have five minutes, MP Fisher.

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

Thank you, Mr. Chair. I will try to tie up only two and a half minutes so I can give some time to Mr. May.

At the risk of repetition, as this has been discussed a lot today, what can the Canadian government do better to support and facilitate Canadian companies?

Daniel, you had a great suggestion: the Canadian capabilities guide. Also, Mr. Hill gave a very good recommendation, but then he ran out of time. I agree with Mark that it's important to get these suggestions on the record.

Mr. Hill, you ran out of time when you were giving a really good recommendation, so I want to know if you want to take another minute and a half or so to make a recommendation on how we can help Canadian companies better bid and win on contracts.

[Martin Hill]

My number one point is that these are difficult. Government and defence industry must be closer. With regard to the relationship between your defence companies, civil service, military, if you want to win in NATO, that has to be really, really close, which means a change in culture as much as anything else. That's one thing to look at.

I think acquisition reform is fundamental. I think you should look at supporting your industry to participate in NIAG studies. The reason is that NIAG studies set future requirements, future standards, or they set inputs to those two things. It is extremely interesting for your industry to know what is going on in that area. It helps them to find a product policy strategy for themselves. It also helps them enormously to network with other industries in the domain, and set up the partnerships they will need if they're to be part of the bidding team in the future.

I have one last thing on that. I think government needs to think very carefully about what industries participate in trade associations. It isn't just the SMEs who government wants to participate; it's quite often big companies who don't participate in defence but you would like to see them...in particular, the big electronic cyber-type companies. They're not interested in defence, but you, the defence establishment, want them to participate. There is quite a bit of government push to industries that aren't members of defence trade associations. You need to consider what you're going to do to get them to participate.

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

Perfect. Thank you, Mr. Hill.

If I have any time left, Mr. Chair, I'm happy to pass it on to Mr. May.

[The Chair, Liberal, Stephen Fuhr]

You're at about 2:20.

[Bryan May, Liberal, Cambridge, ON]

Thank you, Mr. Chair.

One of the disadvantages of going second is that you run the risk of having your question poached, so thank you for that, Mr. Fisher.

[Voices]

Oh, oh!

[Bryan May, Liberal, Cambridge, ON]

I'll perhaps stick with you for a moment, Mr. Hill. I want to talk a bit about Canada being the first buyer. You talked about this a little earlier today. I have the honour of representing Cambridge, Ontario. We've transitioned over the last 20 or 30 years from heavy manufacturing to more high-tech manufacturing. A lot of companies are trying to break into that defence contract market. Do you have any suggestions, things that I can take back to my constituents and my industry in my riding, on how I can help direct them with regard to moving toward that domain? It's something that a lot of them have never really attempted before.

[Martin Hill]

Do you mean you want them to join the supply chain of the major primes in the defence environment?

[Bryan May, Liberal, Cambridge, ON]

Yes. A lot of them are smaller high-tech manufacturing companies. They're trying to get a sense of what their first steps should be.