National Defence Committee on Oct. 3rd, 2023

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

Thank you, Chair.

Thank you to both of our witnesses.

Mr. Mueller, you spoke a bit about how we need to refine the procurement process. I'm wondering if you can specify a bit more the ways in which we can do that. Can you also let us know what is most time-consuming and what is most burdensome in our procurement process?

[Mike Mueller]

Thank you for the question.

One of the main things I spoke about at the beginning of my remarks was the need for an industrial strategy for defence and aerospace. It goes to many of the things that were spoken about here before. Industry thrives on predictability. Industry thrives on transparency. Industry thrives on having an understanding of what and where the government wants to invest and where the government sees the key capacities and capabilities that are there. That, to me, is fundamental, right from the beginning; we need that long-term industrial strategy. If we can get those ingredients right, industry will respond and be up for the challenge on these things.

Some of the very specific pieces that I keep hearing from industry include greater collaboration between the government and industry when you're defining the capabilities that are required and when you're putting together requests for information. I listened in attention to some of the other testimony you had here also. That, to me, is a key theme. The more you can have discussions with industry earlier on in the process, the more industry can respond. But it's not only that; industry can propose new solutions and new ideas. We have disruptive technologies happening right across the board, and we seem to be always late to the game here.

The other piece that I see as a huge challenge is that there's a risk aversion with government on moving forward on some of these key procurements. We need to remove some of that risk. The old adage “fail fast, fail quickly” needs to be ingrained into the procurement system. There are lots of questions back and forth. You keep hearing, from industry in particular, that when you're in other countries, the procurement process, including the request for information, is quick, and then in Canada it's out the door. Some specific pieces need to be happening there.

In my mind, fundamentally, it's the need for that overall industrial strategy. Having the government come out with a clear policy, a clear industrial strategy, will address a lot of the issues that we're seeing right across the board .

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

Thank you very much.

Do you mind commenting on whether or not you think there are situations in which it's appropriate to use non-competitive contracting instead of competitive contracting? What do you think are the pros and cons of doing so?

[Mike Mueller]

I think that's on a case-by-case basis. Again, you need that industrial strategy and the policy from the government to make clear definitions. What are the key capabilities that we want to have here in the country? What's the capacity that we need to have? What makes the most sense?

In the absence of that, again, we're going on a transactional basis when we're recapitalizing the armed forces. That's a huge challenge. We need to do that heavy lifting and that hard work beforehand to have that industrial strategy, to sit down, both government and industry, and have those discussions on where we can be best suited to support the government. Once you have that industrial strategy, the decisions on where that procurement fits in and how we can best do it would be informed by the strategy.

Have these discussions earlier and have them with industry. That will inform the plan moving forward.

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

Thank you very much.

Ms. Cianfarani, would you like to comment on that last question as well, on forgoing competition in certain circumstances? What circumstances do you think that would be appropriate in?

[Christyn Cianfarani]

Sure thing.

Mike is very right to say that it starts off with identifying and prioritizing what we want in this country from a security and capability perspective. Then you drive that into the outcomes you want in your procurement model. We want an outcome of maintaining a certain capability with a Canadian vendor. We want a domestic supply of x. Then you would structure your procurement. In that case, it might be acceptable to have a sole source. You might use a national security exception for that, or you may use a clause we have that's called “not in the public interest”. It's the same thing. You may choose to sole-source that because it is not in the public interest, in your national interest, to procure that in a competitive way.

You need to understand the outcome that you want first. Then you use the tools to get the desired outcome that you want.

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

I have less than a minute left, so I'll just say that I appreciate the fact that you guys have come to talk to us about the need for industry and government to work together in order to come up with these plans and to better fit the needs we have and to keep going. I've heard a lot of people testify to the same thing. I think we're going to see it in our report and in our recommendations.

Thank you very much.

[The Chair, Liberal, John McKay]

Ms. Vignola, welcome to the committee.

You have the floor for six minutes.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much, Mr. Chair.

Mr. Mueller, I must confess that the situation in the aerospace industry worries me: the CP‑140 Auroras are being replaced without a call for tenders; the Arctic is exposed and the radar system needs to be upgraded; the Kingfisher planes aren't flying; the contract for the F‑35 fighter jets seems to particularly favour Americans over Quebec and Canadian companies.

That said, I'm going to focus on the CP‑140 Aurora replacement. I'd like your opinion on the awarding of the contract to Boeing, without a call for tenders, as well as on the repercussions of this choice on Quebec and Canadian companies.

[Mike Mueller]

I don't want to comment on a specific active procurement, just because we do have members on both sides of these issues.

Again—and I'm going to sound a little bit like a broken record here—it goes back to the need for an aerospace strategy in Canada, to have had these types of conversations five years ago and to have the government clearly come out with a defined set of priorities, capability and capacity that they want to build here in Canada. That strategy would then inform the path forward. There are pros and cons on both sides of the issue here that we find ourselves in. That need for a long-term strategy is absolutely critical. The government needs to come to the table and start to have these types of conversations so we don't end up in situations where it's uncertain as to what's going on.

If you had that long-term strategy, if you had the key capabilities defined by the government, by the Canadian Armed Forces, you could have these discussions earlier. That, to me, is the core of all the procurement problems and potential different paths forward on some of these things.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

When it comes to strategic planning and cyclical planning, we should already be thinking about replacing the fleet when the last aircraft is put into service. Am I wrong?

[Mike Mueller]

I would say we are recapitalizing the air force on a case-by-case basis, through a transactional approach right now. Without a long-term strategy in place, we'll keep going through this process of having a transactional approach. That's one of the recommendations we've made in advance of the defence policy update coming forward: to have the government provide funding and to have the government provide that long-term plan.

Industry right across the country and supply chains on all sides depend on predictability, transparency and knowing where we're going to go next. That long-term industrial strategy is absolutely key. We see other countries doing it. For example, the defence policy update of the Australians is substantive. It identifies where they're going as a country and identifies the investments. Then also, straight from the top, from the Prime Minister down, there's a commitment for a long-term industrial strategy.

How do you utilize the industrial base? We have much to be proud of here in Canada with respect to aerospace. We're one of the very few countries that can design a plane from start to finish. That's something we should be incredibly proud of.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you.

Ms. Cianfarani, in your opening remarks, you mentioned the need for ammunition and Canada's lag in this regard. As far as I know, there are ammunition manufacturers in Canada and weapons have been sent to Ukraine. As I understand it, the ammunition has not followed the weapons. Now, these are not weapons you can throw in someone's face.

Is it possible to make up for this oversight? If so, how could it be done? If an allied country were to experience a situation similar to Ukraine's, what would you advise when the time comes to promise to send weapons, so as not to repeat current mistakes indefinitely, if there are any.

[Christyn Cianfarani]

I think you heard from the chief of the defence staff that they haven't increased munitions through the munitions supply program since, I think, 2022, or they haven't purchased additional munitions through that program. We were basically using stocks in order to send our contributions to Ukraine.

Right now, around the world, countries are getting together and looking at how to pool their munitions in order to get rapid production of munitions. In fact, NATO announced last week that it is providing framework contracts and firm orders for about 1.5 billion dollars' worth of ammunition, and it will continue to do that.

Countries around the world are bringing their defence industry arm—anywhere from 30 to 40 companies have been showing up at a run rate—in order to be able to look at how they can ramp up their ammunition to answer the call from Ukraine. To my knowledge, at this time, Canada is absent from those conversations. If we want to be present in those conversations, we would need to start talking with our ammunition providers—which the United States is doing, by the way. The United States has actually given Canadian firms contracts to increase ammunition for its own purposes and for its donations to Ukraine.

We would need to start having those conversations, and it would probably take some time—approximately two years is my guess—before we are in a state to even be producing additional operational rounds. However—

[The Chair, Liberal, John McKay]

We're going to have to leave that answer there. Thank you.

We'll go Ms. Mathyssen for six minutes, please.

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

Thank you.

Mr. Mueller, your organization produced a report entitled “Vision 2025”, which called specifically for a “buy in Canada” procurement policy. It's something I've been pushing. I have a private member's bill on that, Bill C-300, which looks to establish that made-in-Canada procurement policy. Of course, we want to ensure that we're using those federal dollars to create good, community-building, family-sustaining jobs in Canada.

Can you elaborate on that specific made-in-Canada approach you outlined in your policy document? I was hoping you would be willing to table that report with the committee here today as well.

[Mike Mueller]

Absolutely. We would be willing to table that report. Thanks for the question.

I believe that report came out just before the pandemic. There is a section on defence procurement. It's “Buy for the benefit of Canada”, which is an important distinction on that side of things. We have workers right across the country—just over 200,000 workers in aerospace—and as you mentioned, these are absolutely good, family-supporting jobs. They're 30% to 40% higher than the average in manufacturing across the board.

Our challenge at the time—and it still is—to the Canadian government, in the context of a defence policy update and a long-term industrial strategy, was that you need to be buying for the benefit of Canada and the workers of Canada. There are supply chains right across the country. We see some pretty significant investments both by Canadian companies and by international companies in that workforce right across the country, and that spans from Vancouver Island right out to Newfoundland and everywhere in between. One of the amazing things is that you will find aerospace companies in almost every riding in the country. They're everywhere. These are good, family-supporting jobs, as you said, so they're critically important, but again, it's the need for that industrial strategy.

We've been encouraging the government for years now to come forward with that strategy, to identify what the key capabilities are and what capacity we need to have here in the country, and then, through procurement, to buy for the benefit of Canada, for the benefit of Canadian workers and technological innovation. How do you drive forward some of the research and development domestically?

There's a whole host of pieces out there, but again, that strategy is absolutely critical. I want to thank a lot of the other House of Commons committees that have specifically called for the implementation of the strategy. It's my hope that it will be one of the recommendations that come out of the report from this committee.

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

Thank you.

I see a bit of what I hope isn't a contradiction, and maybe there can be a bit more clarity from both witnesses on this. That streamlining we're talking about and that immediate need, because things have been so delayed in terms of procurement and bids and so on.... That streamlining seems to almost work against this idea, because that long-term planning hasn't happened and the long-term strategy isn't there.

Can you both talk about how you see them fitting together better so we're not just buying off the shelf and spending a lot of money on something like an F-35, which is now ballooning in the American system? They are already showing how many more trillions of dollars they're pouring into it, the forces, and that isn't Canadian-made and isn't part of that longer vision and that strategy.

[Mike Mueller]

Maybe I could start on that. It's not really a contradiction. You need to put that work into defining exactly where you want to go as a country with respect to a defence policy, and the government thus far has been lacking in that. That's really what's required here. In some cases, buying off the shelf makes sense. In some cases, developmental programs make sense. But without that piece there to guide industry and to help government make those decisions, it's very tough.

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

If you're not investing now for that later term and you're spending all your money buying off the shelf, how can you invest now?

[Christyn Cianfarani]

I think there are some areas that I would call “quick hits” or low-hanging fruit, where we know we have resident capability within the country and, in the case of the war in Ukraine for example, we know we would need to restock. We have a lot of armoured vehicles. We're world leaders in armoured vehicles, so that would be identification of one capability that we know is resident in Canada, and if we needed to source that very quickly, we could source it. We know that's going to be a capability that we're going to need for the long haul.

Another example would be something like cyber, where you have a lot of nationalistic interest. We know that it evolves rapidly. We know there are people in this country who do it. If you wanted to procure it like a service, you would set up a long-term sourcing contract with a vendor in Canada and you would move forward on those things.

I think it's a sort of double-pronged approach, where you continue with your strategy on one side, because it's a very long-term item, and in the short term you look at where we already know we want to keep capability in this country, where it's world-leading already, and make an investment in the quick hit in that area.

[The Chair, Liberal, John McKay]

For the second round, you have five minutes, Mrs. Gallant.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Mr. Mueller, it took 20 years after the cancellation of the first Sea King replacement order to get the Cyclone helicopters in place. Given that it took that long and that the CH-146 Griffons are due to be replaced in the 2030s, should we not be placing that order now?

[Mike Mueller]

I'll give an example on this because, again, it goes to your question and also the previous question with respect to whether there is a disconnect here on some of these things. When the government puts in timelines, puts in key capacity and key capabilities, and puts in the funding, as we saw through the COVID-19 example, industry can do amazing things. It's incumbent upon the government to set forward those priorities, absolutely.

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Is there an order in place yet, yes or no, to the best of your knowledge?