National Defence Committee on Nov. 28th, 2024

[Simon Page]

Maybe I'll start and I'll give the floor to my colleague ADM Harty.

I want to speak again as the ADM who chairs the defence procurement strategy and sees many of these procurements going through. The risk-based approach we implemented through a pilot a few years ago, which we now have an intent to keep going with on a steady basis, is allowing us to not have to go to the Treasury Board with a full submission to execute projects under the authority of my minister, Minister Duclos. This has enabled us not only to put more files through the mill, but to accelerate the execution of some of these files.

[Siobhan Harty]

Simon mentioned three different points we could look to optimize. I'm just going to focus on one that belongs to our department. We're developing different pathways for acquisition, recognizing that acquiring a ship is different than acquiring a drone, yet we have a one-size-fits-all approach. We are developing different pathways, recognizing that equipment varies, so the different gates and processes for decision-making should vary as well.

[Marcus Powlowski, Liberal, Thunder Bay—Rainy River, ON]

Our government has given Ukraine 4.5 billion dollars' worth of assistance in its effort to fight its war against Russia. Given the lengthy time it takes for procurement, have we done anything to accelerate that process? Obviously, the Ukrainians want something sooner than the five-year process it takes to procure something.

[Simon Page]

The help, the donations and the assistance to Ukraine are a bit of a different pipeline for us. Many of the procurements where equipment is sent to Ukraine are actually conducted under the CCC, which is the Canadian Commercial Corporation. If it impacts our procurement, we will be involved.

There's also a PSPC team that does cost and price assurance. Sometimes they support the CCC in executing these contracts, but they're a bit out of the defence and marine portfolio.

[The Chair, Liberal, John McKay]

Thank you, Mr. Powlowski.

I'm shocked that you would wish to cut lawyers out of a procurement process.

Ms. Normandin, you have the floor for six minutes.

[Christine Normandin, Bloc, Saint-Jean, QC]

Thank you very much, Mr. Chair.

Mr. Page, since it's your pet peeve, I want to continue along the same lines as Mr. Allison in terms of life cycle analysis, the maintenance cycle and so on.

I understand that a systematic analysis is done for major acquisitions.

I'd like to hear your comments on what constitutes a weak point in the cost analysis. Why is it that we can't necessarily find the real amount?

For example, is it because we're not involving industry enough in the analysis?

Is it because we're not looking at best practices in other countries at that point?

Is it because we're not giving enough consideration to the actual life expectancy of the equipment, insofar as we know that the supply is slow and that life expectancy often has to be stretched further?

What's the weak point in the analysis that is done?

[Simon Page]

I thank the member for her question.

By the way, this is quite a question you're asking me. There are several elements to it.

As for the weak point in the cost analysis, there should be one. I think there are several points that need to be examined and improved. A bit like my colleague Siobhan Harty said, there's a difference between setting a price for building a ship and buying a drone that already exists.

A lot of our acquisitions are the big pieces, for example, the Canadian surface combatant vessel, the big warship we're going to build in Halifax. I think we have to take into account the fact that our practices have to change. We give cost estimates far too early for large-scale projects.

I'd say the same thing, not only for costs, but also for schedules. We set parameters far too early for projects where the evaluation is not quite complete. We actually had a price and a schedule for the shipbuilding project, even before we knew what boat we were going to build.

This may not necessarily be a weak point, as you mentioned in your question, but there is one point on which I would like to see more movement, and that is the planning of overall cost estimates. This has to be planned.

The industry sometimes contributes to this planning. Could it contribute more? Perhaps, yes.

As we execute the solicitation to ensure we remain accountable, give us the responsibility and mandate to find the best value, best return on investment. That's our job as public servants. Give us a higher level of responsibility when the contract is signed.

Let's take price differences, for example, after the contract is signed and we know where we're going. There will still be discrepancies, but it will be more acceptable.

On the other hand, if we start looking at what we said seven years ago, when the first ship was still six, seven years away, there will definitely be discrepancies. Of course, there will be factors we've given less thought to, such as the pandemic, which is an unpredictable event, and inflation, which is difficult to predict.

That said, some projects, such as the purchase of a drone, the purchase of guns, are going quite well. However, we could look at this another way too, by involving the industry even more.

[The Vice-Chair, Bloc, Christine Normandin]

Thank you very much.

You gave a very detailed answer, and I thank you for it.

I'm going to address a completely different topic.

Could you tell me how comprehensively we should review certain aspects of industrial and technological spin-offs?

I'm thinking in particular of the possibility of doing business with indigenous companies. One of the complaints we've heard is that few indigenous companies offer finished products, which makes them hard to find.

Should we revisit some policies that may look good on paper, but on the ground aren't actually working?

[Simon Page]

Once again, this is a question that could be the subject of a complete thesis. I thank you for asking it.

I think this was mentioned a little earlier, but our current governance system is that we look primarily at three aspects: the technical aspect, which is the performance of the equipment that's being purchased; the costs and return on investment; and the economic benefits to Canada. Each of these aspects is given a certain number of points. With the system we use for acquisition, the technical aspect wins, in terms of points, by between 50% and 60%. The other two aspects share the remaining 40% or 50%. We're buying equipment for the Canadian Armed Forces, which is important and has imperative value in operational terms.

As I've already said, I'll hand over to my colleague. I would like to mention, however, that I think we could use some flexibility in the way we apply the policy, depending on the acquisition strategy we use. If we're doing an acquisition that we know doesn't represent a problem, for example something that Canada does well, we can add points. If it's something in which we have very little involvement, which is already very sophisticated and for which the supply chain is established, we can look to make savings, to generate economic spin-offs, in a different way by using a little flexibility.

To conclude, I'm going to talk about indigenous procurement. Coming from a defence background, I remember a time when this was not part of the defence and navy business. There was virtually no overlap between these fields and indigenous companies. Now there's a lot. In my opinion, we need to proceed on a case-by-case basis, where there are opportunities. If there's one area where we need to pay attention to what people in the indigenous industry are telling us, it's this one. We need to understand what they can bring to our portfolio.

[The Chair, Liberal, John McKay]

We'll have to leave it there. Thank you.

Madam Mathyssen, you have six minutes.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

After the last Conservative government, there was a huge loss of public servants. The current government tried to fill those positions, but they were filled by contracting them out to third parties. We've all seen what's happened with that, unfortunately.

I wanted to ask about the filling of those public servant positions. We specifically heard in an internal memo that roughly 4,200 military procurement positions were unfilled at the end of May 2022. As we were told in the last study, the loss of procurement specialists was a huge gap that needed to be filled.

Can you give the committee an update on whether those positions have been filled? What plan is in place to fill them?

[Simon Page]

I think most of that statistic is probably with the client department of National Defence—the colleagues we deal with on a regular basis—and other client departments such as the Coast Guard and Transport Canada.

The way it works for PSPC is that, every time a project needs to come our way so we can execute a solicitation, the Government of Canada, through the client department, gives us the resources to hire the procurement specialist we need to effect a procurement. The key advantage of doing this is that you capture all the costs associated with the project in one spot.

My team right now is well staffed to execute everything that's being asked in finishing “Strong, Secure, Engaged” and in tackling on-staff requirements. In terms of those requirements, some projects are still being explored. For instance, I'm not fully staffed to execute the submarine project, but I do have a very tiny team as the project grows and eventually gets executed.

I personally and my team are executing the defence and marine procurement. We're lean, but we're good to go.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

I'm glad to hear that. That's a perfect segue, because I was going to ask you about submarines next.

Can you share the scope of spending on the new fleet of submarines compared to the rest of our navy procurement projects? How much of that budget would be taken by this purchase, as you understand it, going forward?

[Simon Page]

Right now, all the numbers are with the client department. I'm not going to speak about any numbers or where this project could take us. The project has entered our bubble, if I may express myself that way.

We've been asked, so far, to start gathering some information. A few weeks ago, a request for information was published for this procurement. We've received 20-plus responses. The analysis has started, and there will be some back-and-forth with some of these folks and companies that have answered.

At some point, the project will go through the approval cycle at National Defence. That's when some of the budgets and some of the funding pieces are going to start taking shape.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

I appreciate that.

Unlike the national shipbuilding strategy, there's no clear domestic option for the purchase of submarines in Canada. However, the government is supposed to be committed to ensuring as much domestic procurement as possible so that Canadian workers are still benefiting from these very large-scale—although you didn't give me numbers—procurement projects.

Can you talk about the commitment in this specific project to domestic workers—to Canadian unionized jobs and workers?

[Simon Page]

It's still very early with this project. We have received, as I mentioned, 20-plus responses to the request for information. Some of them are from Canadian shipyards and Canadian companies.

We're just starting the analysis. The request for information just closed a few days ago. After the analysis, likely the shaping of your question will start being more tangible and concrete. At this time, I would say it's too early to speak about specific contributions.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

I know I have less than a minute left, Chair.

I'm trying not go over time because he'll get cranky with me.

You were not allowed to finish after the last question I asked you on the national security exception and you had two more points. Can you give them now?

[Simon Page]

I had two more points on the national security exception. Once a national security exception is invoked, that doesn't mean we stop adhering to government contracting regulations. GCRs still apply even after the NSE has been invoked. An NSE does not equal sole-source procurement. Sometimes it may lead to a sole-source procurement, but it is not a mandated piece or a linked piece.

Water bombers are under the procurement system of the provinces. That's why they're not linked. I wanted to confirm that before I tabled an answer to one of your previous questions.

[The Chair, Liberal, John McKay]

Thank you, Ms. Mathyssen, for not contributing to my crankiness.

[Lindsay Mathyssen, NDP, London—Fanshawe, ON]

It's a rare occasion.

[The Chair, Liberal, John McKay]

Yes, it's a rare occasion. You have a talent.

We have a full 25 minutes if we run this tightly.

Mr. Stewart, go ahead for a tight five minutes, please.

[Don Stewart, Conservative, Toronto—St. Paul's, ON]

Thank you. I'll also try to not contribute to your crankiness.

Thank you to the witnesses for being here today.

My first is question about general defence procurement. Is it lumped in with the same processes as procurement for other departments? Are there some special considerations that DND needs because of the national security element of it?

[Siobhan Harty]

If you're referring to our general rule set, the answer is no. It's all lumped in. The government contracts regulations, which were referred to, cover all procurements.

[Don Stewart, Conservative, Toronto—St. Paul's, ON]

How do you prioritize which contracts or projects receive...? How do you prioritize them, whether it's looking at a new contract for, say, munitions or one for the subs?

[Simon Page]

That's a great question.

I explained the defence procurement strategy governance earlier. Three departments meet and review various projects and various solicitations. These are already prioritized according to the needs and requirements of the client department.

That prioritization happens in their world. They have a program management board they run within National Defence that will dictate the pace and the priorities. We try to obey that cycle.