Thank you very much indeed.
Look, I've been a bit thrown, in a way, by what I've just heard. I prepared some remarks that I thought were addressed to parliamentarians. Janet asked me to speak about NIAG, and I think we're confusing NIAG and NATO business slightly for the parliamentarians. What I'd like to do is touch very briefly on NIAG. I sent a presentation a couple of days ago, and I think if you read it, you'll understand NIAG better. Janet and Daniel can amplify that.
My key remarks about NIAG are these. NIAG is an advisory body that gives advice to NATO and to the nations. The nations can ask NIAG for advice if they wish, though advice is pre-competitive. The minute you say there is a contract or a competition, then forget NIAG. It's gone. We advise on potential requirements, potential standards, and it is an interesting body for all of industry. We have about 5,000 members, through the national trade associations, who can participate in NIAG activities. The initial entry cost is low. You have your head of delegation. That person will give you all of the advice that comes through the NIAG meetings. If you decide there is a topic you want to follow in more detail, then, of course, the costs will start mounting, because you actually have to think about travel, how you participate, and all the rest of it. Even then, in NIAG, it will only be a study that lasts somewhere between six months and a year, so that NIAG gives an answer to whoever's asked the question.
What I want the parliamentarians to be clear about is that there are no contractual implications in this work. It is inclusive, it is non-competitive, and it is open to everybody, even those who didn't participate in the work itself. If a Canadian company wishes to know what happened in a NIAG study, but it didn't participate, it asks Janet. Janet gives the company the report. There is one box, which is NIAG.
I wasn't going to touch on the next topic at all, but I think I will. I'm going to put on a different hat than that of the NIAG chairman. I'm going to say that I work for Thales. It does an enormous amount of business with NATO, one way or another.
I want parliamentarians to understand the NATO budget. NATO's budget, in total, is about two billion euros per year. The vast majority is spent on salaries and paying for the headquarters, and some on operations. It isn't available for procurement.
Every year, NATO actually spends, as common funding, about five or six hundred million euros on actual procurement. You have to be clear about that. NATO's is not a big budget. The reason we get to the five billion number is that, under the NATO umbrella, there are a number of coalition co-operative programs. For instance, the NH90 helicopter comes into that five billion. The Eurofighter is a NATO aircraft. So in the five billion are the co-operation programs. They're not specifically NATO funded. They're funded typically under program rules, each program having its own rules agreed to by the participating nations.
It's important to understand the difference between what I'm going to call a NATO common-funded project and a NATO program that is a coalition of the willing. The one, common-funded, Canada can participate in. Consensus is required, and it's a NATO program. With regard to the coalition of the willing, Canada participates where Canada participates. If Canada decides not to participate, of course Canada's not in the program.
Parliamentarians need to understand the difference between those two. Of course, the biggest of the coalitions of the willing coming up at the moment is the allied future surveillance capability, which is going to be the replacement of the AWACS program. I think Canada is probably in that at the moment, because it's still at its very early stages.
I'm going leave that for the business, and I'm going to turn to some remarks, if I may, that I thought I would address to parliamentarians and the role of parliamentarians. My feeling is that they should be involved.
The first thing I'd like to address is that over the last 20-odd years, government has, in its defence procurement, done more and more outsourcing. This means that more and more of the procurement process is actually being run by industry, because once you outsource supports, once you outsource the running of your base, it's industry that will start taking on that role. It means that what has changed over the last 20 years is the division between the parliamentarians, who basically have the overall say, yes or no, as to whether we will do this; the civil service, which does the administration and runs the actual contracts and actually writes the cheques; the military, who set the requirements and actually have to do the operations; and industry, which actually has to deliver something. The relationship has changed over the last 20 years. I think Parliament is probably not as aware as it should be of how big a change has occurred there. I think it's not just a NATO issue but also a national issue. I think something parliamentarians need to do is to put themselves more in the loop in that defence procurement process.
I think this leads on to a thought on acquisition reform. When I spoke to the CNAD in October last year, I put this to the national armament directors. The speed of technology change has increased in some areas. In electronics, of course, we're now talking about every six months, but when we're cutting steel, we cut a ship steel or a tank steel only once every 40 to 50 years. So for procurement of a system—a tank, for instance—whereas you used to buy a tank and that was it, today that isn't it. You have to upgrade that tank. You have to change the engines every 15 years. You have to change the electronics every two or three years.
The procurement process for buying these defence systems needs to be rethought. I don't have an answer, but I do think that Parliament should be pushing for how we redo the procurement process for big military systems, and I think industry is absolutely fundamental in helping to provide the answer. It's not just a NATO issue; it's a national issue as well, and I think if NATO and nations get their act together, a look at acquisition reform would be a useful way to go to try to make sure that we procure the systems we need and that we can make sure that they can be upgraded as and when needed.
That leads on to the issue of co-operative projects. I said Parliament needs to be involved more in big defence programs. Janet referred to a work share, and juste retour, or whatever you want to call it. I think when we're looking at these big programs—the big one going through NATO at the moment is the allied future surveillance—Parliament must follow them closely. Otherwise, we're going to get 10 years downstream in a very big procurement, tens of billions, and suddenly we're going to come up to a holdup because Parliament will go, “Oh, I didn't really like that.” I think we're missing the link, the input, of parliamentarians early enough into these big defence programs, which typically are bought as NATO programs even if they're not common-funded.
The last point I want to make touches on the same area. All these programs are bought with significant industrial partnerships. When you do an industrial partnership, give industry guidelines—as parliamentarians you can do that—but let industry decide on the actual partnerships and who will do what. If you don't do that, the first thing is that you're going to cause delay while industry reconsiders: “Oh, I didn't take that into account. I'm going to have to rethink.” The minute there's delay, there is of course extra cost.
I think those areas of thought are interesting for Parliament. I thought I'd put them on the table and allow you to ask questions. I have three topics. They are NIAG itself; what I'm going to call a procurement activity in NATO and under a NATO generic coalition and co-operation hat; and where I think parliamentarians can be more active, and even should be more active, in the procurement of NATO and of course national programs.
I'd like to stop there. Thank you very much indeed for your time.