National Defence Committee on Oct. 3rd, 2023

[Andy Fillmore, Liberal, Halifax, NS]

Thank you very much, Mr. Chair.

I want to clarify something so that the committee understands it. Defence spending fell to less than 1% under the previous Conservative government. We've doubled that since that time. In fact, the plan is.... We've consistently increased the defence spending. From $18 billion in 2016-17, it's going to achieve $40 billion in 2026-27. We're the seventh-largest member of NATO. We have the seventh-largest spend in NATO. I just wanted to make sure that the committee and our guests understand that.

Coming back to our panellists, it's lovely to see you again. Thank you for being with us.

I want to turn my mind to ITBs and carry that on. Of course, we know the government has many obligations, and defence is one of them, but growing the economy and creating jobs is another one that we take very seriously. We try to find the confluence of defence procurement and the economy through ITBs. Several witnesses during the study so far have identified that the ITB policy doesn't really succeed in achieving what it's setting out to do, or rather complicates or makes the process less efficient.

Here comes Halifax, Mr. Chair. More than a decade ago, I was involved, with many others, in an advocacy program to win the shipbuilding procurement strategy in Halifax. Today, we have 2,000 shipbuilders working on the Halifax waterfront. We're heading north to 3,000 as we switch to CSCs. We've managed to bring in training programs for women, for indigenous shipbuilders and for Black shipbuilders. Clearly, there's an enormous domestic impact that comes through the ITBs.

You both represent large organizations. I want to get a sense of your position, I guess, on whether it's reasonable to continue in some way with the ITB program through an industrial policy, for example. First of all, let's start with this question: How do you feel about ITBs?

[Christyn Cianfarani]

Well, there is no question that the policy isn't perfect, but I think the way in which we look at the defence industry.... We don't start from first principles to say, “We want to have a defence industry in this country and therefore we will protect it and we will manage it.” Given that we start from an almost diametrically opposed premise, which is, “Hey, maybe we don't need a defence industry in this country”, ITBs are an essential way in which we bring work to Canadian businesses all along the chain.

In some cases, prime contractors are incentivized to partner with Canadian firms and provide jobs in Canada. I do believe, in the absence of the use of other tools in a far more aggressive manner, that the ITB policy is absolutely essential to ensuring that we get work in Canada where, in some circumstances, foreign prime contractors might not be incentivized to do so.

[Andy Fillmore, Liberal, Halifax, NS]

Mr. Mueller, go ahead.

[Mike Mueller]

I would agree with that analysis.

ITB is a tool. Does the tool need a bit of work? Absolutely it does. We need to become more proactive. We need to identify or maybe remove some of the restrictions with respect to investment in the country.

But again, going back, you need that overarching industrial strategy to really drive where we're going to go on some of these things. It's absolutely critical. ITB is a good tool to accomplish that, but it's not the strategy overall.

[Andy Fillmore, Liberal, Halifax, NS]

Okay.

Defence procurement is a good way as well to grow skills in the workforce to make Canada more competitive when we procure domestically. Do the ITBs play a role in spurring that innovation as well?

[Mike Mueller]

Absolutely, there is a role there. We've had lots of discussions, even with you, on the labour market side of things and how we can drive that forward. Any investment into the country, either domestic investment or international investment, is absolutely critical to driving some of those skills forward.

We have amazing companies doing some pretty innovative things on different training mechanisms. You're seeing industry really taking on a leadership role with respect to some of this, because we need to.

[Andy Fillmore, Liberal, Halifax, NS]

Okay. I have 40 seconds.

On the industrial strategy that you mentioned, if you were going to put one or two improvements to the ITB program in there, what specifically might those be?

[Mike Mueller]

Proactivity would be number one, and then the identification of the key capacity and capabilities we want to have here in Canada. Those would then drive the ITB forward.

[Andy Fillmore, Liberal, Halifax, NS]

Would that be capacity in the workforce?

[Mike Mueller]

It could be in the workforce. It could be technology, skill sets, programs—anything like this—but we need to have that clear identification and work with the government on some of these things.

[Andy Fillmore, Liberal, Halifax, NS]

Thanks very much.

[The Chair, Liberal, John McKay]

Thank you, Mr. Fillmore.

Colleagues, we have a 25-minute round coming up and we have 15 minutes or thereabouts. If we do three minutes, three minutes, one and a half, and one and a half, and then three minutes and three minutes, we will get somewhat close to just after six o'clock.

With that, Mr. Bezan, you have three minutes. Go ahead, please.

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

First, I just want to give notice of the following motion:

That, pursuant to Standing Order 108(2), the committee undertake a study of the almost-one-billion dollar cuts to the Canadian Armed Forces and the impact this will have; that the committee hold a minimum of three meetings on the topic; that the committee invite the President of the Treasury Board, the Minister of National Defence, and the Chief of the Defence Staff to appear before the committee; and that the committee report its findings and recommendations to the House.

That's just a notice.

Ms. Cianfarani, you talked about Canada being ghosted by AUKUS. Then you went on to talk about the NATO framework contracts that are out there right now in a number of different areas and Canada, again, not being part of that discussion even though we're a member of NATO.

Why are we being ghosted at NATO?

[Christyn Cianfarani]

I think we've been, in our behaviour...and to some extent from what I've seen reported in the newspapers, the Prime Minister has been very clear with our NATO allies that we have no intention of meeting the obligations we've signed up for.

I believe that NATO allies have taken that in a very serious way. Their behaviour, accordingly, is that Canada doesn't deserve or isn't going to be a reliable partner on the world stage. They will take what we are willing to put forward, but if they need someone to rely on to meet their commitments, it isn't going to be Canada.

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

That is unfortunate. I appreciate your candour.

We talk about the U.S. giving Canadian companies military contracts. We know that they often work quite differently than the Government of Canada in how they approach it. RFPs, as was mentioned, mean volumes of documents to satisfy the risk-averse bureaucracy within the Government of Canada, whereas down in the States a hundred pages are usually more than enough, and they'll work side by side with industry to develop new military products.

I'm wondering what experiences Canadian companies are having, in working with the U.S. military, that we should be taking as lessons learned to apply to how we procure our own equipment here in Canada.

[Christyn Cianfarani]

It's tough, because we obviously have different acquisition rules, and we have, I think, a narrative in our country of “fair, open competition at almost any cost”. That is not a mantra most other countries have. As I've said, most other countries start from a position of “We will preference our domestic industry first and foremost”, and then comes the conversation of “How do we involve our partners and allies or other nations if we're going to be providing this equipment to the rest of the world?”

First and foremost, we would have to change the nature of the way in which we interact, from first principles, with our own industry.

With that being said, there are lessons you can learn from the Americans, and the Australians to some extent, where even before they conceptualize what they're going to make or build—the next airframe, for example—they are already working side by side with their industry on what is in the art of the possible. That usually becomes a research and development project, which then gets funded by firm contracts.

Those are some ideas, starting with, perhaps, our next generation of armoured vehicles.

[The Chair, Liberal, John McKay]

Thank you, Mr. Bezan.

You have three minutes, Mr. Collins.

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

Thanks, Mr. Chair.

Welcome to both witnesses.

Last week, former deputy minister of defence Richard Fadden appeared before the committee and talked about how, for some of the very large and pricey contracts that we put out, we might want to look at pushing the pause button on some of the internal controls and purchasing policies we have in place. What are your thoughts on that suggestion and recommendation?

[Christyn Cianfarani]

I don't know exactly to what he was referring. He may have just meant.... I truly don't know which part of the process he was referring to with regard to internal controls of government, whether that is extra oversight or governance models.

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

He referenced the fact that the process is very slow and cumbersome, as I think you've both highlighted here today, so in order to get around that, we might want to look at addressing that with the current regulations we have in place that make up part of the procurement process. In order to gain time in that process, it might mean forgoing some of those internal controls we have that make up the procurement process.

[Christyn Cianfarani]

Again, if it's an internal control that potentially can be either combined or omitted, it would be nice to know which ones we're looking at and then determine whether eliminating that control would have ramifications elsewhere.

[Mike Mueller]

I think it goes a little bit to the recommendation we have about risk-based procurement. Again, how do you streamline the defence procurement process? How do you reduce some of the unnecessary processes that are there—again, depending on the risk? I listened quite attentively to Mr. Fadden on that. I was sort of struck by....

Again, I don't know exactly what he was referring to, but I think it's incumbent upon the government to take a look at how we can streamline these things where the risk is perhaps lower, as opposed to that one-size-fits-all procurement solution for everything, which may be a little bit overboard in some respects. I think there's a nugget there that we should be looking at. I'd be very hesitant to say that we should get rid of that control or this control, but there is opportunity for improvement.

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

On the issue of resources, some witnesses have recommended increasing capacity at PSPC. The CADSI recommendation was very explicit, Ms. Cianfarani, that we grow, to use your word, the government's workforce. Is it absolutely necessary to do that in terms of building the bureaucracy, or are there better ways, through technological improvements, to improve the procurement process?

[Christyn Cianfarani]

I think it's a two-pronged approach. I mean, you do have to study where there is an overly complex process and eliminate additional steps, redundancies and other areas, but I think it is fair to say that one of the challenges is maintaining that workforce in order to absorb the volume of procurement that is coming down the pipe, one way or another, whether it's the current finishing of “Strong, Secure, Engaged” or a new and even greater defence policy update.

[The Chair, Liberal, John McKay]

Thank you, Mr. Collins.

Madame Vignola, you have one and a half minutes.