Evidence of meeting #64 for National Defence in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was billion.
A recording is available from Parliament.
9:35 a.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
Okay. Is there sufficient competition for military contracts?
9:35 a.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
For the big ones, like the ones for which we did reports—surface combatants, notably—there is not a lot of competition domestically. That is one of the issues when the government wants to procure these major acquisitions and major pieces of equipment and insists on procuring them domestically.
It has to help financially with the building of the capacity, which is not the case, for example, in the U.S., where there is already a much bigger base for building these warships.
9:35 a.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
It's up to the government to explain having only $6 billion out of the $10 billion in the estimates, but do you have any way to attribute that shortfall? Is it delays in the process?
Does it appear to be a conscious decision to not fund “Strong, Secure, Engaged”, or is it a matter of delays?
What do you make of that?
9:35 a.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I wouldn't attribute that to a conscious decision. What we've been told is it's a combination of delays in procuring major projects and the pandemic, which has slowed down many things. These are the main elements that we've been told.
9:35 a.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
Specifically, what are the central procedural issues in the system that are causing the delays? What can you pinpoint?
9:35 a.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It's the fact that there are multiple players and multiple organizations—so multiple departments—and the policy decision-making process, or in other words, the political decisions that have to be made. These can be very delicate decisions that involve multiple factors.
The combination of all these elements tends to slow down military procurement, in addition to a relatively small industrial base in Canada, which reduces the number of bidders and competitors. These are all factors contributing to delays.
9:35 a.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
There are bureaucratic factors and there are also political factors.
9:35 a.m.
Conservative
Pat Kelly Conservative Calgary Rocky Ridge, AB
We have maybe 20 seconds left.
How do we ensure that these lapsed funds and the non-inclusion in the estimates of what's necessary to implement “Strong, Secure, Engaged”...? What's one thing you could say in those 10 seconds you have here to get it done?
9:35 a.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I'd say focus the minds and reduce the number of players involved.
It's less than 10 seconds.
9:35 a.m.
Liberal
The Chair Liberal John McKay
Thank you, Mr. Kelly.
That's good advice. Focus the minds and reduce the number of players.
Madam Lambropoulos, you have five minutes, please.
9:35 a.m.
Liberal
Emmanuella Lambropoulos Liberal Saint-Laurent, QC
Thank you, Mr. Chair.
I'd like to thank our witnesses for being here to answer some more questions today.
I've met with Canadian industry in my riding. I have a pretty big aerospace industry. There's CAE, Bombardier, several companies that have worked with the government and received contracts in the past. A major complaint they have is that we often go toward the outside and toward other countries instead of domestically procuring some of the equipment that we use in our Canadian Armed Forces.
They actually met with the minister recently. One of the reasons the minister gave was the fact that different countries that are all part of NATO have to have similar equipment when they're training and when they're working together.
First of all, can you confirm that this is a factor that's taken into account when looking at where to procure from and which equipment will be required for our Canadian Armed Forces?
9:40 a.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
It's clear that interoperability with our major allies is an important factor in design specifications. We obviously want our military equipment to be able to operate alongside our allies, so it may or may not be a factor in some or all of our military procurement projects.
Beyond that, I think the minister and her officials would be best placed to answer in more detail the extent to which this is a limiting factor.
9:40 a.m.
Liberal
Emmanuella Lambropoulos Liberal Saint-Laurent, QC
Thank you.
How does Canada compare to other countries in terms of domestic procurement versus external procurement? Do you know how other NATO countries or, for example, G7 countries, compare to Canada in terms of reinvesting in their own industry?
9:40 a.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Based on my knowledge, it seems to be broadly similar. Of course, there are exceptions for big countries like the U.S., which has a strong, wide military industrial base, but for other smaller countries, it is broadly similar to Canada.
9:40 a.m.
Liberal
Emmanuella Lambropoulos Liberal Saint-Laurent, QC
Okay
Industry does feel that if we don't at least prioritize them in terms of contracts, then other countries are also going to have difficulty going towards them because they won't feel they have credibility because their own country isn't preferring them. By doing this, then, we are only making it worse because the small base that exists in Canada is only going to be getting smaller and smaller. Is there no way that you could see a potential way to help change that? Is there no way there could be better communication, perhaps, between the government and industry in order to really show, “This is what we need. These are what our needs are going to be. This is the vision we have going forward, and we would like to prioritize you”?
Also, they feel that because there's this interoperability that you're mentioning, if we were to choose and see that Canada produced something great, then we could also promote it abroad. Then we could have some of our Canadian technology, which is pretty good technology, helped in that way. We're pretty good at this especially in the aerospace area. What are your thoughts on this?
9:40 a.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
I think you raise a very good point. If Canada does not rely on its domestic producers, it becomes difficult for them to be credible when they try to sell their products abroad if their own national government is not even depending or relying on them to equip its armed forces. That leads to difficult decisions at the political level as to when and what to procure and who to ask to supply the Canadian Forces. Do we go with the lowest bidder or do we go with the lowest bidder or a Canadian producer to ensure this becomes a national champion or a nationally recognized supplier, which can then become also recognized by other armed forces abroad and export its product? It's a delicate balancing act.
9:40 a.m.
Liberal
The Chair Liberal John McKay
Colleagues, we've been very efficient. Thank you to our witnesses. For the first time I can remember, I actually got in two full rounds in the time allotted.
As you know, we are intending to go in camera after this, so I just want to canvass the room as to whether you want to go for a third round. If we shrank the round to, say, three minutes and one minute, would that be of interest? These are valuable witnesses here. Would that work? Are we ready for that?
Okay.
If that's all right with you and you're not going to charge us overtime.... One coffee, that's the price. Okay.
Mr. Clerk, could you attend to the coffee needs.
With that, we'll start the third round.
Mr. Bezan, you have three minutes.
9:45 a.m.
Conservative
James Bezan Conservative Selkirk—Interlake—Eastman, MB
Thank you, Mr. Chair.
I want to thank the PBO for being with us today.
You mentioned a couple of times now reducing the number of players and having one point of ministerial accountability, one senior civil servant to also be in that accountability chain.
Who would you eliminate from the team to streamline it and what role can PCO play in helping oversee and coordinate defence procurement and speed up that process?
9:45 a.m.
Parliamentary Budget Officer, Office of the Parliamentary Budget Officer
Personally, I am agnostic as to who should be in the driver's seat, so to speak, as long as it's somebody with the right expertise and the right knowledge and who is well supported by a sufficient number of officials and the right skill set.
When it comes to a coordination role, in my experience whenever there is a group or a task force, or whatever you want to name it, that's housed at PCO, the Prime Minister's department, it tends to focus the minds in the public service and it tends to signal the issue is very important to the Prime Minister and to the clerk. Having a coordination group or a responsible secretariat within the Privy Council Office, which is the Prime Minister's department, usually tends to signal to the entire bureaucracy that the issue is very important. It tends to make things happen, and make them happen as quickly and efficiently as possible.
9:45 a.m.
Conservative
James Bezan Conservative Selkirk—Interlake—Eastman, MB
Thank you very much.
The other issue we've been talking about is ITBs. Industry Canada is responsible for ensuring that ITBs are actually taking place. Are they policing it to ensure that there is dollar-for-dollar value? Are they making sure that it's actually creating high-skilled jobs and expanding our industrial base, or has it become more of just a shell game, moving money between different companies that could end up buying a potato farm in Manitoba, for example?
9:45 a.m.
Advisor-Analyst, Office of the Parliamentary Budget Officer
I can certainly say that ISED has personnel who verify every transaction under defence contracts to make sure there is no double counting and that these funds are actually spent.
With regard to the creation of employment and the economic activity aspects, they use a modelling approach to estimate that. It's not a situation where they're counting x number of jobs created in such-and-such a locality. It's estimated via models.
9:45 a.m.
Conservative