National Defence Committee on Sept. 26th, 2023

[The Chair, Liberal, John McKay]

Thank you.

Our final witness is Mr. Jaramillo. You have five minutes, please.

[Cesar Jaramillo, Executive Director, Project Ploughshares]

Good afternoon, Chair. Thank you for the opportunity to address this committee. I am speaking on behalf of Project Ploughshares, a Canadian organization that has been dedicated to matters of arms control, disarmament, Canadian foreign policy and international security for nearly five decades.

While Project Ploughshares does not delve into the intricacies of procurement processes, I wish to bring your attention to several overarching dimensions that warrant consideration when discussing the implications of procurement for the future of the Canadian Armed Forces.

Before I delve into these dimensions, I want to be clear that nothing I say here is meant to be interpreted as questioning the undeniable need for the effective preparedness of the Canadian Armed Forces. The primary roles of our military must be to protect Canadians and to advance constructive and robust foreign policy objectives that enhance collective security. This duty has the full support of Project Ploughshares.

Let's explore some of the key factors that directly or indirectly impact discussions and decisions on procurement.

The first is the changing nature of the security landscape and the need for clear and relevant policy direction. The world is in a constant state of transformation. Emerging technologies, environmental challenges and evolving threats are reshaping the very concept of security. As we discuss defence procurement, it becomes imperative that we establish clear and timely policy direction for the future priorities of the Canadian Armed Forces. While Canada's defence policy in the document “Strong, Secure, Engaged” was released six years ago already, in 2017, the rapidity of the evolving security environment requires continual adaptation.

Our military must recognize and align its procurement decisions with its evolving role in addressing these emerging challenges. Without a clear vision for the role of the Canadian Armed Forces in responding to existing and new challenges, procurement processes are at risk of being driven more by industry lobbying than by the actual needs of the military, resulting in higher costs yet less effectiveness.

The second is increased military spending and global implications. The trajectory of increased military spending and the rapid and continued growth of the arms industry present complex challenges. While security spending is essential, rapid growth in military procurement spending can inadvertently foster a broader military and industrial complex, which may have an outsized influence on key Canadian foreign policy and procurement decisions. We must, therefore, critically examine the consequences of this trend, not only for national security but also for global stability. Swift increases in military spending, both domestically and internationally, can contribute to a global arms race, heightening tensions and potentially elevating the risk of conflict.

The third is misconceptions regarding NATO's GDP-based targets for military spending. Beyond specific procurement decisions, and without denying the need to correct any structural deficiencies in the procurement processes, it bears noting that perceptions of Canada as a country with inadequate defence spending can be misleading and merit closer examination, as they are often based on the arbitrary metric of military spending as a percentage of GDP. This applies both to Canada's defence spending in isolation and relative to its NATO allies.

Even before the conflict in Ukraine, Canada's defence expenditures totalled more than $26 billion U.S. in 2021, ranking it as the sixth-largest contributor among NATO members. Put another way, Canada was actually part of the top 20% of NATO's military spenders. On a global scale, according to SIPRI, the Stockholm International Peace Research Institute, Canada ranked as the 14th-largest military spender in the world last year, well within the top 10% of worldwide military spenders.

The fourth is balancing a healthy defence industrial base with responsible arms exports. While sustaining a reliable defence industrial base is undeniably essential, Canada must exercise caution in relying on questionable arms exports to support this goal, whether this happens as a matter of strategy, poorly implemented export control regulations, inertia or a combination of these factors. Our commitment to a responsible arms trade and effective export controls considerations must remain unwavering. Striking a balance between supporting domestic industries and upholding legal and ethical obligations is imperative. We must ensure that our exports do not inadvertently contribute to global instability or human rights abuses.

The fifth and last is establishing normative safeguards for new technologies. In an era marked by rapid technological advancements, including innovations with military applications, Canada must proactively establish normative safeguards to prevent potential human rights violations and misuse. Embracing technological innovation will be an increasingly crucial element of procurement for the Canadian Armed Forces. However, it is equally imperative to establish a regulatory framework that upholds the rights of Canadians, respects international norms and ensures accountability.

Thank you for your attention.

[The Chair, Liberal, John McKay]

Thank you, Mr. Jaramillo.

We're going to do a five-minute round, not a six-minute round, so Mr. Bezan, you have five minutes.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

Thank you, Mr. Chair.

I want to thank all of our witnesses.

I'm going to start with Mr. Fadden. You have a unique perspective, having been both the former deputy minister and a national security adviser to the PM.

When you look at the threat environment we're in and the challenges we have in procurement, what do we need to be doing to address the current threat environment we're facing to get the kit that we need both today and in the future?

[Richard Fadden]

I think you've put your finger on a significant issue. Defence procurement is not going to significantly increase until the Canadian population, and all of you in Parliament, recognize that the changed international environment is bringing back substantive threats that we haven't had in the past. We can talk about defence procurement until we're all blue in the face. If the country doesn't recognize that we need to do something about our foreign and defence policy writ large in facing the greater threat, I think we're not going to really reform defence procurement.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

If we're looking at what's happening right now with the war in Ukraine and Russia's invasion and the PRC's destabilizing geopolitical games that they're playing in the South China Sea, the Taiwan Strait, the Sea of Japan and our Arctic, we see that we need to buy a lot of equipment fairly fast.

Would you suggest that we either modify or suspend current rules that are in Treasury Board under, as you said, the Federal Accountability Act and the industrial benefits program, the ITBs? Should those things be set aside so we can buy kit faster?

[Richard Fadden]

I don't think they should all be set aside in all circumstances, but it seems to me that the military should be able to advise the government on those acquisitions that are critical now, and they should waive procurement rules. They should accelerate the processes whenever necessary. I would imagine that you would never go more than 20% or 25% under these special circumstances.

Right now, I can only think of one instance when that's been done in the last 20 years, and it actually turned out to be a success story.

In dealing with IT projects in general, technology changes so quickly that by the time we get around to offering a contract to somebody, usually the technology's changed entirely, so particularly in those areas relating to technology, we should suspend some rules.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

You talked about political leadership and political control. In taking away that risk aversion that we have within the public service, having a special cabinet committee and a special secretariat within PCO to show leadership to the departments on how important procurement is, is that the right model to go forward?

That's without having to change all of the departments in setting up special agencies or anything like that.

[Richard Fadden]

I think what you're suggesting would help, but I think the biggest change required is going to be a cultural change. The culture in dealing with DP, defence procurement, is so entrenched in the public service—and, if I may say so, also within the government—that I don't think any machinery changes, including the special committee that you're recommending, are going to go very far. That's why I'm arguing that if Parliament decides that it really wants DP to be treated seriously, you have to be convinced that the international environment requires it to be done.

To put it bluntly, I've hung around politicians for all of my career, and there are not a lot of votes in defence procurement. People need to be convinced that there's a threat if they are to respond.

When there are real emergencies, this country responds in a spectacular fashion. What comes to mind is 9/11 and what we did in Afghanistan. The run of the mill operations on defence procurement.... I believe that we're not convinced collectively that we have a real problem.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

Mr. Shimooka, you talked about the non-defence objectives in procurement. Are you suggesting that we buy off the shelf as a way to get around that, and do that as much as possible?

How are we even sure that we have a domestic defence industry? In times of war, we're going to need our domestic industry to step up and build stuff for our army, rather than being put at the end of a list of other countries, which are going to be building for themselves first.

[Richard Shimooka]

Certainly every program that has bought above a certain threshold has the ITB value proposition element and requires a 100% offset. In any case, that is going to occur for all of these programs.

I think we need to have a very clear understanding of what's required for the future of war-fighting, whether operating in the Indo-Pacific or in Europe, and an understanding of our capabilities. Certain segments of the Canadian industrial base have that level of technological capability and industrial capacity for support, and we should really rely on those, while looking at other areas when we cannot buy domestically and purchase from there as well.

[The Chair, Liberal, John McKay]

Thank you, Mr. Bezan.

We will go to Mr. Collins for five minutes, please.

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

Thanks, Mr. Chair.

Welcome to our guests.

Mr. Fadden, I was so shocked to read the comments that you made in the piece from 2022, in which you talked about procurement and you talked about abandoning or pausing the rules. I've been an elected representative for almost 30 years now, and if I were to go back to my community and talk about waiving procurement rules....

You mentioned the word “media” in your opening statement. I just can't imagine how that resonates with media. I get internally why that needs to happen here and I think it should happen, but how do we deal with the cultural issue in terms of the public's desire for transparency when it comes to government purchases? You can imagine, having worked here for quite some time, what the opposition would maybe do in playing with a waiving of the rules, so to speak.

How do we deal with the public and how do we deal with, by extension, the media when that's not the norm at any level of government here in Canada?

[Richard Fadden]

That's a fair question.

It will seem like a contradiction in terms, but I think you start off by developing a package of rules that sets out the rules for suspending the rules. You have to be absolutely transparent about when a piece of defence acquisition is so critical to the national interest and national security that it will allow the government of the day, or either side, to say, “We're going to suspend those rules.” I think it has to be utterly and completely transparent.

It would be useful if you could get all parties in the House to agree with it in principle. To the extent that the House agrees with this in principle, the media will eventually follow.

I want to be clear that I'm not suggesting the suspension of all rules, all the time—

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

You would be clear that it needs to be limited.

[Richard Fadden]

—but I think you need transparency in respect of the need for that kind of suspension in circumstances when either certain international conditions or something special in Canada occurs. You're a better judge than I am for this, but I think that if you make a clear case that we're sending our soldiers, sailors and airmen into battle or close to battle without being properly equipped, most Canadians will agree that this is not an acceptable way of proceeding. I can give you examples of when we've done that if I think about it.

If you come up with that kind of explanation, then you can proceed to waive maybe not all the rules but some of the rules, and only in those circumstances .

I'm sorry for the long answer.

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

No, it was a great answer. I was looking forward to it.

You referenced micromanaging in that same piece in terms of the aversion to risk in the bureaucracy, and that, I think, is common in all levels of government. You talked about not being afraid to possibly make a mistake with some of these very sensitive files. There are benefits, though, that come with that. Time is one of them.

Can you elaborate on that in terms of how much risk the bureaucracy should take when we're dealing with some very expensive files and some very public high-profile files?

[Richard Fadden]

That's another very good question.

I want to be clear that I'm not suggesting waving one's arm opposite a billion-dollar expenditure, but I think what I was referring to was the rigid adherence to every sub-subrule in a lot of cases and the fear that the slightest error would be picked up by the opposition of the day or by the media and that people would not be backed by their superiors in the public service. I'm not accusing politicians here exclusively. It's their superiors in the public service. Somehow, again, I think it's a cultural issue. I don't think you need to change the law.

As I mentioned in my remarks, for all of this to happen effectively, you're going to need a prime minister who takes interest and says that this needs to be done. I have not been, nor ever will be, a prime minister, but I can't imagine very many topics that would be of less interest to the average prime minister. However, somehow, if we're going to make all these cultural or substantive changes, we need a whole-of-government approach, starting at his level with ministers and senior officials.

Mostly, as I mentioned in my remarks, it's the acceptance that occasionally the fear of litigation gridlocks people now. Despite the fact that cases before the Canadian International Trade Tribunal and the Federal Court are usually won by the Crown, people just sort of freeze. If we lose a case, it shouldn't be regarded as career limiting or the end of the world as we know it, but right now it's close to being viewed that way.

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

Fair enough.

[The Chair, Liberal, John McKay]

You have about 15 seconds.

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

I'll save it for the next round.

[The Chair, Liberal, John McKay]

Okay. We'll add it to your total.

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

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

Thank you very much, Mr. Chair.

My first question is for Mr. Fadden.

One of the criticisms I've heard about procurement is that a lot of military personnel are assigned to the procurement system, even though there is a shortage of military personnel. I've been told that one of the possible solutions to counter this would be to rely on industry more to make the procurement system work.

For example, a long-term military clothing contract was awarded to Logistik Unicorp, a company in my riding. The company is responsible for finding suppliers, among other things.

I'd like to know what you think of that possibility. Do you think that could have an effect on risk aversion, given that the responsibility would be shifted to the private sector and away from public servants?

[Richard Fadden]

I think you're quite right when you say that too many military personnel are involved in procurement.

I see two possible solutions.

The first would be to increase the number of civilians working on this file. The second would be to push procurement to the private sector, as you say.

This could work up to a certain point, but we couldn't go beyond that because of the risk….

The private sector is looking to make money; that's really their main goal. There should still be an opportunity to intervene; there should be an opportunity to conduct a fairly detailed review of the purchases after the fact. I think it would be worthwhile to do so in certain sectors and in the case of certain acquisitions.

That said, every time there are cuts at the Department of National Defence, they are always applied to the procurement sector.

There aren't enough people working on this file, which is causing a lot of delays.

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

Thank you very much.

My second question is more for Mr. Foster, but if anyone else wants to answer it, feel free to jump in.

You talked about research and development. From what I understand, this sector is often left to the industry, which uses it through industrial and technological benefits as a multiplier effect.

So I'm wondering whether Canada is losing some control, in a sense, over the sectors in which it would like to develop research and development, by not deciding on its own which sectors it wants to focus on. I'm thinking of the Institut quantique at the Université de Sherbrooke.

We could be more at the forefront and use those expenditures in calculating our 2% at NATO.

Haven't we subcontracted research and development to a certain extent through industrial and technological benefits?