National Defence Committee on Oct. 3rd, 2023

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

Do I have time?

[The Chair, Liberal, John McKay]

You have 20 seconds.

[Darren Fisher, Liberal, Dartmouth—Cole Harbour, NS]

Okay, I'll hand it back to Ms. Mathyssen; she likes the extra seconds.

[The Chair, Liberal, John McKay]

Yes, it's very good of you to do that, and thank you for that plug from the Halifax Chamber of Commerce.

Ms. Vignola, you have the floor for two and a half minutes.

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

Thank you very much.

Mr. Mueller, you mentioned the astronomical amount of documentation companies have to provide in order to have a contract. I'd especially like you to tell me, in 30 or 45 seconds, about the technology used for procurement, for filing a contract or for obtaining information. Is this technology easy to use for companies, no matter how big or how small?

[Mike Mueller]

I'm not the subject matter expert on that because I don't live the procurements every day. However, from what I hear from industry across the board, the complexity is high, and the back-and-forth that is required to put forward an application is very high and time-consuming, the back-and-forth of questions between government and industry.

That's why one of the recommendations we made is for greater transparency between industry and government. Why can't we have industry spend time in government and government spend time in industry, for example, in order to foster understanding of the requirements? Often, government will come to industry and ask for something, perhaps not realizing the amount of work and time that would go into that particular question. Therefore, I think greater understanding and greater collaboration are absolutely required.

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

Thank you very much.

Ms. Cianfarani, I'm going to come back to the subject of ammunition. Some of our soldiers have never fired 84‑millimetre ammunition for the Carl-Gustav gun. They're having a hard time getting ammunition for their own field exercises here.

How can we ensure that both our soldiers and those we want to help will now have enough ammunition to make their training as effective as possible?

[The Chair, Liberal, John McKay]

Unfortunately, the time has expired. You'll have to work it in some other way.

Ms. Mathyssen, you have two and a half minutes.

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

Plus the 20 seconds from Mr. Fisher, right?

[The Chair, Liberal, John McKay]

I didn't notarize the donation.

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

In terms of these streamlining ideas, paperwork requirements and long-term industrial strategies, can both of you talk about the fact that there's a 30% vacancy rate within procurement in defence and how it's impacting that?

Maybe, with the additional time, we can hear from both of you as well about what you've heard from your members. I know there has been a delay in the updated defence policy. We spoke about it with the minister last week. I know that many of us thought it would happen before the summer break. Can you talk about what you've heard from your members on that as well?

[Christyn Cianfarani]

I can speak to the last one for sure.

I think members are obviously worried that it hasn't been released. It is what we might call a “rallying document” for us, where we get a little more visibility on the direction that the armed forces are going in. We also understand that there are some improvements expected, or structural improvements within procurement, some concepts or ideas that we've been working on with the Department of National Defence and PSPC. We're eager for it to come out. I think we are also disappointed that it has not come out already.

It also sometimes gives us a good view of the assets that the Canadian Forces is looking to procure. For example, if they are going to be interested in submarines or drones or whatever, we get a good view of that. If it comes on the heels of some budget reductions, I think we would wonder how those two interplay as well.

[Mike Mueller]

I think there's an opportunity for Canada to show leadership. We're looking to that DPU release to show the leadership that's there. I think it's an opportunity to step up, an opportunity to do more rather than less.

That would have an impact on the procurement side also. We're very concerned about the talk of cuts in the context of the situation in the world right now. I think we're waiting to see how that may impact the procurement side of things and where we're going as a country.

[The Chair, Liberal, John McKay]

Thank you, Ms. Mathyssen.

You have five minutes, Mr. Bezan.

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

I want to thank both our witnesses for being here.

I want to keep on this track of the DPU. How disappointing is it that the government hasn't come forward with it? They're at least six months behind on the release of the DPU. How much do you think it has been influenced by the decision to cut a billion dollars in spending from the defence budget? Of course, that's on top of $2.5 billion in lapsed spending last year, for a total of $10 billion that's been lapsed under the defence policy that the Liberals came up with seven years ago.

That's for both of you.

[Mike Mueller]

Thank you for the question.

As I said before, we are very concerned about the defence policy update not coming out. It's a real opportunity for the government to signify defence as a priority for the country. Not only that, there's a huge opportunity for the defence policy update to also signify the need for an industrial strategy. Again, I think Canada can play a role internationally. We need to step up. I think the real question is, are we going to take that leadership role or not? Currently, I don't see defence as a priority.

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

Ms. Cianfarani, when you take the lack of a DPU and the absence of a ministerial mandate letter for our new defence minister, Bill Blair, what does that say about the priorities of this government when it comes to defence procurement?

[Christyn Cianfarani]

I think what it says is that Canadians don't prioritize national security in the way other countries do. That is the single biggest conclusion I can draw from the state of defence—both procurement and the Canadian Armed Forces.

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

You mentioned earlier the use of national security exemptions. I know for a fact that the procurement ombudsman in his report on security exemptions wrote, “In Canada, the NSE does not provide for an exception to full and open competition; procuring bodies would require another reason to limit competition or to sole source a procurement.”

Do you think the current national security exemptions that we have in place are adequate, or do they need to be updated as well while we're going through this DPU process, or as the committee is doing this study right now on procurement?

[Christyn Cianfarani]

I suspect there may be some modifications that need to take place. I know that in Canada, sometimes, in lieu of a national security exception, we use the clause that's called “not in the public interest”. This has been used before, but in a very limited capacity. That would probably need to be looked at as well, the use of that and under what conditions.

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

Thank you.

Let's switch gears a bit here and look at the ITBs, the industrial and technological benefits. Do ITBs penalize Canadian industry bidding on contracts? Do they increase the cost of procurement for the Government of Canada and, ultimately, for taxpayers?

Both of you can answer, because aerospace and the overall defence industry are impacted.

[Christyn Cianfarani]

I think there's a lot of confusion around the ITB regime. The ITB regime is a passive way of getting.... It's a blunt instrument that is used to get Canadian content or Canadian involvement within procurement. By its nature, it shouldn't penalize Canadian firms; it should be a way to incentivize and build domestic capacity.

By the way, every country does this with its defence market. It is a managed market. We just choose to do it through a very passive tool instead of a more aggressive tool that is absolutely preferencing your defence contractor prior to an acquisition even occurring. So I think that—

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

Mr. Mueller, would you agree with that, or would you say that Canadian companies have to create the product here and then they have to build the ITB as well?

It's meant to.... If you're buying out of the country, it ensures that there are some industrial benefits secured back in Canada, but a Canadian-based company.... Aren't they being penalized?

[Mike Mueller]

We see some circumstances where some companies are saying that.

One of the things about the ITB process is that often folks will say, “That's a strategy.” We keep saying it's not a strategy; it's a tool, and it's an after-the-fact tool. We need to take a look at how to become a bit more proactive on some of these things and how to drive outcomes that make sense for the industry based in Canada across the board.

[The Chair, Liberal, John McKay]

Thank you, Mr. Bezan. You got your extra seven seconds.

We'll go Mr. Fillmore for five minutes.