National Defence Committee on Sept. 26th, 2023

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Thank you, Mr. Chair.

Mr. Fadden, I'll start with you.

You've spoken to the importance of prioritizing the delivery of equipment above any other objectives. Being a Canadian MP, I also want to make sure that the Canadian Armed Forces is ready and able to meet whatever goals it has and is able to be as effective as possible. Being the MP for a riding that is home to several of the companies that are in the industry we're speaking of today, such as L3, I also understand the importance of helping these industries to at least compete with their global competitors and be just as good as they are or better.

How can government determine when it's more beneficial to pursue industrial benefits versus when it's best to prioritize getting the right equipment on time?

[Richard Fadden]

Again, I'm not sure it's possible to elaborate rules that would apply in all circumstances. Essential to all of this is effective planning in the defence department. In a lot of cases, these things can be predicted. To the extent that things can be predicted, you can deal with surprises.

One of the criteria should be a surprise. Perhaps something happens on the cyber front, or we have a significant increase in Russian activity in th Arctic. Whatever the surprise, something that really takes the military and the government by surprise should be one criterion.

Also, I don't think we should ever send our military personnel into a war or a warlike zone unprepared and unequipped. I don't know to what extent it's true, but the example was given about our troops in Latvia not being equipped appropriately with helmets. I just don't get this. You cannot.... You should not send soldiers into a warlike zone without personal protective equipment. That would be one example, so it's when there's an immediate risk to the military as well.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

That makes sense.

You also spoke about how politicians have and set certain objectives in general that cover many different categories and, of course, sometimes they conflict. Is there a way to work on these two objectives at the same time?

What is one of the ways in which we can help to support industry in the long term even though we are immediately meeting our goals when there are surprises or when there's an emergency situation?

[Richard Fadden]

I tried to say in my remarks that I thought all of the objectives were reasonable, so I start from that premise.

Regional development in and of itself has absolutely nothing wrong with it and we should pursue it whenever we can, but one of the things that I believe Canada—or the defence department in particular—is not very good at is prioritizing. We try to do a little bit everywhere and sometimes we pay the price for that.

The main thing that needs to be done is to have an open discussion of these issues, because we don't do that. We simply decide that we're going to proceed with the rules as they exist now, and then a whole raft of people get very upset, the government feels compelled to defend and nothing changes.

We have a system of ministerial accountability, so I'm not suggesting that the chief of the defence staff should be allowed to go off on a tangent on his own, but surely there's some way—through a cabinet subcommittee or a subcommittee of the House or something—where these cases can be made publicly. I really do believe that in most cases it's specific to the individual acquisition.

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Do you think Canada could be doing more to engage industry and to make sure they're part of the solution in the long term, for example, regularly meeting with the defence department—meetings between the two—in order to build capacity?

[Richard Fadden]

Absolutely. I think one thing we should do more of—we're already doing some now—is not giving a particular company a set of requirements of 1,500 pages, but rather giving them 100 pages that require a result, a result-based acquisition. Many of our allies use this, but we still tend to the view that every detailed requirement should be set out for the company to meet. I think that, if you give the companies more flexibility but make it very clear what you want in the end, you incent them to find efficiencies and economies while still reaching the end product.

I also think that more of an open dialogue between the public service in particular and the private sector would be useful, and it's one thing that over the course of the last two or three governments we've somewhat discouraged a bit. It's sort of risky if you're a public servant to go out for lunch with somebody who works for a company, as if somebody is going to shift a multi-million dollar contract because somebody buys you a cup of coffee.

I'm making a joke of it, but there's some truth in the fact that more dialogue would be useful—much more dialogue—and the fact that the dialogue shouldn't determine the final outcome. That's for the government to decide, but sometimes we bring industry in too late to realize that they cannot deliver what we're asking for, and it causes all sorts of delays.

I absolutely think you're right. Much more of this would be helpful.

[The Chair, Liberal, John McKay]

Thank you, Madam Lambropoulos.

Welcome to the committee, Mr. Thériault.

You have two and a half minutes.

[Luc Thériault, Bloc, Montcalm, QC]

Two and a half minutes…. Okay. I'll try to ask a quick question.

Mr. Fadden, you spoke earlier about governance that should be more centralized. You talked about a lack of decision-making efficiency, because too many departments were involved.

Why are you advocating for a new department rather than a new agency? What would the benefits be?

[Richard Fadden]

This is an issue that people have been divided on for some 20 years. I don't think we need to change the number of departments. What's really important is to establish the essence of each department in advance. We would need a central department. During the Second World War, there was the Department of Defence Production that centralized everything related to military procurement.

Today, the same priorities would exist. There would be regional priorities, innovation, technology. They would simply be concentrated in one department. The same pressures, the same conflicts, would exist.

I don't think there is an ideal solution. A number of our allies have created an agency, rather than a department. Sometimes it's more efficient, and sometimes it's not. The advantage of an agency is that it's a little bit further removed from ministerial interference or intrusion. Sometimes it's useful for ministers not to interfere in the details, but not always.

So an agency can be created rather than a department. That's one way.

[Luc Thériault, Bloc, Montcalm, QC]

Do you think that centralization would make accountability more effective?

[Richard Fadden]

I'm having a hard time answering your question, because it could be more effective. That said, the minister responsible for defence procurement is very experienced, and all his colleagues will try to convince him of what is or is not going on.

In addition, in Canada, a lot of things are decided at cabinet meetings. So even if a minister had a very centralized power, it would be difficult to separate it from the power of cabinet committees.

[The Chair, Liberal, John McKay]

Thank you, Mr. Thériault.

Madam Mathyssen, you have two and a half minutes.

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

Thank you.

Mr. Jaramillo, you talked about a different perspective on the NATO 2% spending target. Can you elaborate on that and how you determine that this benchmark is calculated, or why you've challenged it in this way?

[Cesar Jaramillo]

Absolutely, and thank you very much for that pertinent question.

I believe everyone on the committee is familiar with the NATO push for spending 2%—or beyond 2%—of GDP and devoting it to military spending. I think there are several misconceptions around this debate.

First of all, including in my conversations with colleagues and with everyday Canadians, there is this notion that Canada is somehow lagging and that Canada is catching up, or that NATO is catching up somehow in terms of its military expenditures. As I said during my opening remarks, globally Canada is within the top 10%. Within NATO, it's sixth out of more than 30 military spenders. This misconception that we're catching up really needs to be balanced with some perspective of the actual numbers.

The measure itself, this metric of percentage of GDP, is an economic measure that tells us absolutely nothing about the level of threat or threat perception. It is an arbitrary measure that is driving increased defence spending when, already, it is a highly militarized alliance.

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

It doesn't really emphasize where Canada could maximize or be best used or.... I know that certain countries place into that calculation how much is spent on veterans affairs or a coast guard, whereas we look at that differently. Is that correct?

[Cesar Jaramillo]

That is correct, and I think Canada could play a very constructive role in broadening the definition of what is considered security and what counts towards those targets that are set.

The traditional understanding of security, a narrow understanding of security, will by definition involve, in the next few months, years and decades, including consideration of the intersection between environmental degradation and security. Canada can play a role in terms of having a broader, more accurate and more current understanding of what constitutes security and what constitutes effective preparedness.

[The Chair, Liberal, John McKay]

Thank you, Ms. Mathyssen.

Ms. Kramp-Neuman, you have five minutes, please.

[Shelby Kramp-Neuman, Conservative, Hastings—Lennox and Addington, ON]

Thank you, gentlemen.

My first question is for General Foster.

In your testimony, you mentioned the “personnel deficit” that we have in our CAF. I believe you can certainly bring us a unique perspective, having been in the military and, with your military experience, now being in industry. I have a two-part question.

How do we overcome the deficit of 16,000 personnel? Where is the sweet spot or, as in Mr. Fadden's comment, the “silver bullet”, so that we can do our fiduciary duty of respecting taxpayer money and getting the equipment that our armed forces need in this dangerous world that we live in?

[Richard Foster]

Thank you.

In my experience, even in working with L3Harris, I know that we've deployed the CC-150 Polaris into Kuwait, and it has operated out of Iraq with civilians supporting that capability for four years. Having deployed in fighters around the world, I have not seen a conflict where we couldn't have technicians on the ground supporting those capabilities, like in Aviano or in Kuwait or in other places.

I think there's a role for industry to be more involved with in-service support capabilities to help with the deficit. Working with AIAC as the chair, we are looking at industry-led aircraft maintenance engineering training, and I think some of those opportunities could be cross-traded across working with the Canadian military.

[Shelby Kramp-Neuman, Conservative, Hastings—Lennox and Addington, ON]

Second, for Mr. Shimooka, do ITBs add costs to the procurement, or just slow it down and make it more expensive?

[Richard Shimooka]

It's both.

Certainly, compared to all of our allies, the ITB program is a bit of an anachronism. None has maintained such a requirement to have 100% offsets, partly because they've found, especially in Australia's case and for several European allies, that these do slow down the delivery of programs, and they do add costs.

There's no way you can ask a foreign manufacturer to reinvest the entire cost into a country and then for them to go back to their shareholders, or whoever their fiduciary duty is to, and say, “We're just going to give this money back.” There's going to be an increase in the cost. They're going to pass that back on to the country. That's the case with any of the major programs we have that have that sort of requirement. They are going to have that sort of effect on our costing and on delays as well.

[Shelby Kramp-Neuman, Conservative, Hastings—Lennox and Addington, ON]

Do you believe that ITBs benefit Canadian companies?

[Richard Shimooka]

I think it depends on the case and what program you're talking about. There is certainly an argument to be made that there's an opportunity cost when you look at these programs. It's that if we invested the same amount of money, the extra costs that we're spending on a program, and if we were going to invest that into the Canadian public in a different way, would that actually have a better economic industrial outcome than having it done through the ITB value proposition system?

Right now, I would say that the actual data for this is incomplete, but certainly, there was the PBO report last year that highlighted this sort of investment and the distribution of that. I think it gave you some signs that it may not actually be as effective as people believe it to be or argue that it is.

[Shelby Kramp-Neuman, Conservative, Hastings—Lennox and Addington, ON]

Thank you.

My next question is for Mr. Fadden.

In your testimony, you mentioned a couple of points that struck me.

On substantive threats, we need to make sure that the country recognizes the threat we're in, and there's often gridlock due to the fear of litigation. If we can learn from our allies, are there any international models that are working with regard to speeding along procurement or potentially waiving the procurement rules that we spoke of? For example, do the British or the Americans have a plan in place?

[Richard Fadden]

I think it's probably fair to say, as my colleague said in his remarks, that we have the most complex set of rules amongst our allies, by a long shot. Most of our allies move faster than we do. I think our European allies are inclined to move faster because the threat is much more immediate. We are quite isolated in North America, and I don't think we feel that pressure.

The United States, I guess, is in a special category of its own. Its military-industrial complex is so massive. If you talk to admirals and generals, they'll tell you a tale of woe much like the one I just gave you, but they have so much money involved that it does seem to produce, although they're beginning to have problems.

As I tried to say, I don't think there is any country that has found the perfect space to resolve this issue, because there are legitimate conflicting objectives.