Evidence of meeting #70 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 industry.
A recording is available from Parliament.
Liberal
The Chair Liberal John McKay
I call this meeting to order. I see quorum. I apologize to our witnesses, but these were extraordinary events today.
I need to get some guidance here. We have the room only until six o'clock, so that would give us an hour and 40 minutes. Do you want me to divide it equally between the first panel and the second panel? An hour and 40 minutes is 50 minutes each.
We'll do 50 minutes, and then do a quick turnaround.
We'll go to Mr. Fadden for 50 minutes—
Conservative
James Bezan Conservative Selkirk—Interlake—Eastman, MB
Also, we should keep all questions to five minutes.
NDP
Lindsay Mathyssen NDP London—Fanshawe, ON
We have one witness in this hour and three in the second hour.
Liberal
The Chair Liberal John McKay
Yes, I know, but time is time.
Let's just start with 50 minutes. I'll cut a minute off the first round.
Go ahead, James.
Conservative
James Bezan Conservative Selkirk—Interlake—Eastman, MB
There is another option, seeing that we have a couple of other witnesses in the room. Why don't we bring up all the witnesses at once and just go for the full hour?
Liberal
The Chair Liberal John McKay
We're making this up on the fly, folks. Do you want to go until six o'clock with all four witnesses?
Conservative
James Bezan Conservative Selkirk—Interlake—Eastman, MB
Can we start hearing from the current witness at the table and—
Conservative
James Bezan Conservative Selkirk—Interlake—Eastman, MB
Let's just go. Let's do the 50 and 50, because that's going to take too much time if they're not online. Are they online?
Conservative
Liberal
The Chair Liberal John McKay
I call the meeting back to order. We have a panel of the Richards.
I'm going to call on Mr. Fadden first for his five-minute statement, and then go to each of the other witnesses we have on the panel, ending with Mr. Jaramillo.
With that, Mr. Fadden, you have five minutes, please.
Richard Fadden As an Individual
On behalf of the Richards of the world, thank you very much for the opportunity to speak about an issue that I have worked on for a large number of years, but, I must admit, never with a great deal of success. To some degree our inability to effect improvements in defence procurement prompted me to reflect on these challenges. With limited improvements in mind, these are the reflections I hope to pass on to you today. I hope they're useful.
Before I come to my substantive remarks I have two meta points. First, I served both Conservative and Liberal governments, and I am convinced my remarks apply to both periods. Second, there is no silver bullet to this multi-faceted problem. Over the years, I have discussed and studied the DP experience of our allies, and everywhere there are levels of complexity that show elements of similarity with ours.
I believe there are three groupings or institutions principally responsible for defence procurement: politicians, public servants and the defence industry. I'll concentrate on the first two. Let me take them in turn.
Politicians, entirely appropriately, set a number of pan-governmental objectives to be pursued. Each objective on its own may be entirely appropriate and reasonable to pursue; however, the problem with DP arises when they conflict with one another. In the area of defence procurement, military acquisitions potentially conflict with any number of other objectives, including industrial objectives, and regional developments and innovation. These objectives are then bureaucratized by the public service and add considerable complexity for everyone involved, including the private sector. Over time all of this develops a culture, which itself becomes highly problematic. I'll say more on this in a second.
I'm not suggesting these objectives should be ignored in the context of defence procurement. Rather, their impact should be detailed and made public so that a judgment can be made on the appropriate balance among the various objectives. Also, in specific circumstances, not routinely but not rarely, the public service should be able to recommend and the government accept that the application of some specific objectives should be suspended. These suspensions in support of urgent defence acquisitions should be susceptible to acceptance by Parliament and the media, which is potentially another area where cultural change would be necessary.
As for the public service, concern about the reactions of ministers, the House and the media have made public servants very rule- and process-oriented and very risk-averse. I suggest this has become the dominant culture with respect to any public servant who has anything to do with defence procurement. The way the Federal Accountability Act has been implemented also does not help.
I'm not advocating irresponsible action but rather an acceptance of some measure of risk and the possibility of error in favour of more effective acquisitions. In practice this might mean an environment where acceptance of exceptions to rules in favour of special arrangements can be sought, without being career-limiting. One easy example is that the public service has become extraordinarily reticent to take any action that raises the possibility of litigation, even though over the years the government wins most of the litigation. There's a real resistance, and this just gridlocks things because of the fear of litigation.
Another issue shared by ministers and public servants is the principle that defence procurement rules apply across the board, notwithstanding the size or complexity of specific acquisitions. I know that I'm generalizing here, but I believe that this approach should be further developed. As an example, increase delegations and have fewer rules when the acquisitions arrive and they're not particularly complex, or when not a great deal of money is involved.
Another matter is illustrated by the debate about the appropriate organization and mandates of departments and agencies involved in defence procurement. In looking at our allies, it's clear there is no perfect model. Whatever model is chosen, it seems to me that it must take into account the political, legal and cultural environment. To me it would seem very problematic to change our current machinery, which involves a great many departments and agencies, without resolving the various issues and challenges surrounding DP.
In conclusion, to the extent that the points I have made are valid, I would suggest they need to be addressed together if a material improvement in DP is to be brought about. As these issues involve multiple departments and legal and regulatory machinery issues, they can succeed only if reforms have the support of the Prime Minister. A single minister, a single department, isn't going to make material changes in this area. It has to be a pan-government operation. In the end, cultural issues may be as important as substantive ones.
Richard Foster Vice President, L3Harris Technologies Canada, As an Individual
Thank you, Mr. Chair.
Ladies and gentleman, I have been engaged in industry for seven years. While I'm a firm believer in competition, I'm also very much a proponent for getting the right equipment for our Canadian Armed Forces in terms of delivery schedule, period of performance, capability tied to interoperability, cost and of course long-term and sovereign sustainability. We are not different from government in this respect. Our company's success is very much dependent on the same desired outcomes.
My CEO detests “red” programs probably more than government does. Canada has one of the most complex procurement processes, which is costly in terms of time and money. The geopolitical situation will require faster and more effective procurement to ensure that the Canadian Armed Forces remains operationally relevant.
Faced with a personnel deficit, the armed forces should work more closely with industry and adjust some of the default constructs with the procurement and in-service support processes.
We have the following recommendations.
Avoid high-risk firm fixed-price developmental programs. By their very nature, developmental programs will face some unknowns in terms of the full cost required to develop a capability. There are many deliberate developmental U.S. programs that take years and significant costs to develop. Non-recurring engineering paid by a launch customer OEM is not always cheap and does not always bode well for schedule, cost or risk. Canada needs to understand better what level of developmental program risk they are entering into and plan accordingly in terms of both cost and schedule.
Programs should be competed when they need to be competed and not for the sake of competition. Competition is healthy and should be a matter of course when two products or capabilities have comparative offers. If there is only one product or capability that meets the CAF's requirements and Canada is not prepared to appropriately fund a developmental program for another offering to create competition, then it should not be competed. Similarly, Canada's true requirement should not be watered down to force a competition. This ultimately undermines the CAF's capability. These principles should apply to both product acquisitions and in-service support.
For proven off-the-shelf solutions, the launch customer has invested, developed and, in many cases, competed the solution. Canada should take advantage of this to avoid delays in schedule and cost.
Canadian industries should be even more integrated than ever in the U.S.-led North American supply chain. For example, the over-the-horizon radar project should be an aligned U.S. and Canadian solution for NORAD with a cross-border and integrated industry. The U.S. is developing spiral programs to invest and develop future capabilities in radio software, night vision equipment and command and control systems. An example is Project Convergence, which is focused on regular software and command and control. Canada should deliberately partner and invest in these concepts and better integrate our supply chain into the developed solution. Canada should incentivize companies to invest in Canada to better integrate the supply chain.
R and D investment within Canada should be more focused and longer term, and should support those capabilities that have the best chance to succeed in a competitive global market.
Today's export success of the WESCAM MX-series cameras started from government-industry R and D over 50 years ago. A longer-term commitment within both industry and government is required if Canada is to remain and be competitive.
Canada is a relatively small contributor in terms of military equipment development. Working together with industry to identify those areas in which Canada is really competitive and investing appropriately would better position our country in the global market.
Canada should better develop and sustain its in-country, in-service support capabilities, including engineering support, to ensure sovereign operational readiness. Over the years, for political and operational reasons, in-service support centres of excellence have been developed in Canada. This past investment should continue to be leveraged. Canada should consider longer-term investment to maintain these centres of excellence to ensure operational sovereignty and enhanced engineering capability. Recompeting these capabilities by default rather than by necessity is costly. It causes disruption and degrades support to readiness for several years during this process.
The Canadian Armed Forces have a personnel capacity issue with no short-term solution. Therefore, Canada should integrate industry support services more into its readiness plans to ensure that Canada can meet its defence obligations at home and abroad.
In conclusion, ensuring that Canada's military remains operationally relevant will require a disruption to our current procurement processes and thinking. Industry is ready to engage and help.
Thank you.
Liberal
The Chair Liberal John McKay
Thank you, Mr. Foster.
Go ahead, Mr. Shimooka, for five minutes, please.
Richard Shimooka Senior Fellow, Macdonald-Laurier Institute, As an Individual
Thank you for allowing me to speak to the committee today.
For my remarks, I would like to focus a bit on defence procurement in the past, the present and the future.
Looking back, one of the most difficult periods for the Canadian Armed Forces in recent history was the late 1970s and early 1980s. Successive governments had cut into the military budget, downsizing and reorientating the forces while delaying modernization. By 1980, the Canadian forces faced obsolescence in the face of significant advances by Warsaw Pact militaries.
While downsizing had cut the military's standing forces, it still retained a capable administrative system with enough institutional memory to execute the new programs. By 1990, the military had replaced a number of its key capabilities with the CP-140, the CF-18 and the Leopard 1, while others, such as the Halifax-class frigates and the North Warning System, were on the cusp of being deployed.
On the surface, Canada's situation today resembles that of the 1980s and may even seem to be on the same trajectory if 2017's “Strong, Secure, Engaged” had been executed as envisaged. Unfortunately, the reality is far worse now than it was back then.
Many of the same systems we acquired in the 1980s are far beyond their rust-out dates and are not anticipated to be replaced for another decade or more, due to failing program execution. While defence spending has increased over the past eight years, much of it has gone to operational accounts due to growing international commitments. This has masked the increasingly dilapidated state of the military's capital base.
In other words, our system of procurement is fundamentally broken. Deliveries of major capabilities can now be counted in decades, whereas years should be the norm. The remotely piloted aircraft system, which will deliver a medium-altitude unmanned aerial vehicle, is about to enter its 17th year of existence without delivering a platform. By comparison, many of our allies, such as the United Kingdom, Germany and France, have brought equivalent systems into service in under four years.
These failures have occurred at an inopportune moment, as the international security environment has deteriorated rapidly in the wake of the Russian invasion of Ukraine and China's destabilizing efforts in the Indo-Pacific. Our allies have increased spending and launched a broad modernization of their forces, whereas Canada's efforts seem to be stalled by comparison.
In short, the system of acquisition is fundamentally misaligned from the focus of delivering critical defence goods to our soldiers. Over the past four decades, it has become progressively slower and less able to meet our national defence needs, due to several factors.
The first has been the increase in non-defence objectives in procurement, most notably for delivering economic and social benefits to Canadian society through these purchases. Second, a number of perceived failures, such as the initial cancellation of the F-35 purchase in 2012, resulted in ill-considered reforms. They added layers of unnecessary process, diluting individual accountability and increasing costs and delays in these programs.
While our present situation is suboptimal, the real cause of concern is the Canadian Armed Forces of the future, which in reality is already here. Reflecting the rapid and fundamental evolutions in our societies that we are experiencing due to the confluence of new technologies, warfare is undergoing a similar shift. What I outlined earlier is a 20th-century approach to war-fighting and procurement. Canada must move into the 21st century.
A core consideration is the information dominance strategy. In the United States, this exists under the joint all-domain command and control approach, or JADC2. This doctrine seeks to aggregate and integrate information from all available sensors, analyze it and disseminate it to all units that can effect action. Canada's major allies, including Australia, Germany and the United Kingdom, are implementing similar approaches, and their force structures and doctrines among all of their services have already been drastically affected. On a granular level, a platform's connectivity and integration to existing networks and command and control systems are often as important as its physical attributes.
Canada has not adjusted to this new reality. While “Strong, Secure, Engaged” did contain verbiage that acknowledged the utility of joint intelligence surveillance and reconnaissance for the battlefield, the Canadian Armed Forces has lagged far behind its allies in this area. For example, if we look at the remotely piloted aircraft system, or RPAS, the procurement has largely focused on physical capabilities, but minimal consideration was given to how the platform would play in a broader networked environment. This would be akin to buying a top-of-the-line smart phone and using it only to make phone calls.
In many ways, this shift, when it comes, will be a fundamental one for the department and the government. Its implications will be profound and widespread, affecting not only the military operations but how we procure systems. For some systems, such as software naval capabilities, how we approach them will directly affect their military utility. It requires procurement approaches that are flexible and innovative, delivering capabilities rapidly to our soldiers in order to face these new threats.
I thank you for this time today. I look forward to your questions and comments.