National Defence Committee on Oct. 5th, 2023

[Demetrios Xenos]

That is outside of our department's ambit. That's the reason for the pause.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

I've been asking this question of officials for three weeks now. Can somebody please help us here?

Go ahead, Mr. Crosby.

[Troy Crosby]

To this point, we continue to participate in conversations at NATO and bilaterally with the U.S. on the need to improve readiness from a munitions availability point of view. Those have led to conversations with some of our munition supply contractors here in Canada, notably IMT Defence and General Dynamics Ordnance and Tactical Systems, which are involved in making 155-millimetre ammunition for Canada.

As the deputy minister mentioned to you at an earlier appearance, we're currently capable of manufacturing what's referred to as the M107 variant of the ammunition and not the current M795. At the beginning of this calendar year, National Defence provided $4.6 million—if my memory serves, or it may be $4.3 million—to IMT Defence to ramp up their ability to produce the shell, from 3,000 rounds a month to 5,000. It's not the complete round but it's the shell. They are going to achieve that by the end of this calendar year.

Meanwhile, both GDOTS and IMT Defence provided us estimates in about the fall of last year to start the production of M795 ammunition. The estimate was $200 million total to set that up. We made a recommendation through the deputy minister and chief of the defence staff to the Minister of National Defence to proceed with that investment, and that was approved. Since that time, industry estimates have doubled to $400 million. We are now looking at that investment again to establish the production capacity for M795 in Canada for the Canadian Armed Forces. It does not include the money to actually buy the ammunition off that production line once it's commissioned.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

There's presently no timeline or expectation of when this might happen—or if it will happen.

[Troy Crosby]

We've formulated updated advice based on the new information we've received from industry, and that will go through the decision-making process.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

We had testimony from General Eyre last Thursday about the urgency of this. I hope we can make this happen.

[Troy Crosby]

If I could add....

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

I have some other questions, but go ahead.

[Troy Crosby]

Once the money is approved, industry forecasts three years for the production line to be operational.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

That's important information. Thank you.

Ms. Tattersall, media reports have stated that there was a $450-million addition to the renovation and improvement of the Irving dock. This type of subsidy is prohibited under the shipbuilding strategy. How was that funded?

[Samantha Tattersall]

Thank you for the question.

I may defer to my PSPC colleague, as the project sponsor.

[Simon Page]

There's nothing prohibited here. It's an investment in a project.

The big picture is that the shipyards were asked to fund infrastructure investment to reach what we call a “target state” within the national shipbuilding strategy. A target state means that they have to reach a level of maturity from a wide variety of parameters, including infrastructure processes, software enterprise systems and things like that—the things that you need to build ships.

They are very close to their target state. They're going to build eight ships with that target state. They've already built four.

We needed an investment in the Canadian surface combatant project, because the Canadian surface combatant is no longer the same notional Canadian surface combatant that was thought through in the early outset of the NSS. It's a denser, more complex ship, and therefore we needed to equip Irving to be ready to deliver the project.

It's an investment in the project. It's a lot more than the dock. It touches on various pieces of the shipyard, but it's an investment in the project to deliver an asset that is more complex and denser than initially anticipated.

[The Chair, Liberal, John McKay]

Thank you, Mr. Page.

It was $200 to $400 million in months, and three years to deliver.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

The shipbuilding strategy wasn't supposed to have customized subsidies like that.

[The Chair, Liberal, John McKay]

That's interesting.

Mr. Collins, you have five minutes.

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

Thanks, Mr. Chair.

Welcome to our witnesses today.

I'm going to start with a theme that's been raised at almost every meeting—at least that I've been at. It's about culture change. That's a very subjective term. I think everyone would have a different interpretation and answer for that.

To a witness or an organization...there's been the reference to culture. There's a reference that maybe bureaucracy needs to take on more risk, that there needs to be less micromanagement of some of the larger files or there needs to be fewer bureaucratic fingerprints on some of these more complex files.

Mr. Crosby, I'll start with you. What does culture change mean to you, and how can we adopt some recommendations here at the committee that speak to the whole issue of driving change from a culture perspective?

[Troy Crosby]

The notion of risk, that perspective on risk and what is a tolerable level of risk come up regularly in our discussions and in how we formulate our processes. Sometimes we find ourselves having conversations about how we can roll projects out incrementally so that we can retire risk later in the process once more is known and see progress made sooner in the projects.

The tools for us to be able to do this are largely present now. It's a choice to do that, recognizing the importance of getting incremental delivery of capability to the Canadian Armed Forces as quickly as we can, rather than waiting for the big bang at the end of a project that has become overly complex simply because we've tried to do everything at once.

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

Thanks for that.

Mr. Page, maybe I can ask you something along the same lines. You talked about trade-offs in your opening, and you've referenced them several times now to the committee.

Former deputy minister of defence Richard Fadden was before the committee and talked about some of those trade-offs. He said we might want to consider pushing the pause button on transparency, to some extent, in a structured way in order to speed up the process.

What are your thoughts on having to make a choice among some of the principles and policies that are embedded in the procurement process? The only way to move things forward a bit more quickly might be to take some of those policies off the books.

[Simon Page]

Again, for me there are two key components to this culture. I'll go back to my previous statement about preprocurement, procurement and post-procurement. I'm actually quite intrigued by the reaction here about the three years for the ammunition, so I will touch on that a bit.

First, as I mentioned earlier in answer to another question, our default position within the system right now is that we compete for everything. There's the policy, the client sends me a procurement and the default position is to compete. If we don't compete, it's a sole-source justification that needs to be debated with a good degree of discussion. That enablement to go sole-source when sole-sourcing makes sense should be looked at. That for me is a culture thing that we have integrated into our policy. We need to break that a bit and be empowered to make decisions when a competition does not make sense and is not really the way to go for very obvious reasons, and we have other mechanisms to deliver more effectively. Usually, meeting schedule costs is a different discussion.

I still want to touch on preprocurement activities and planning. If you don't plan, industry is industry, and we need to understand industry. We also need to empower it to deliver for us. That's one thing that I don't think we do super well. I think there is some improvement there. One of the initiatives we have will look at that, but if we don't know we're going to need a specific 155-millimetre bullet at some point, and we expect it to be on the shelf a month from now, then we don't have a good appreciation for the system and what we're trying to deliver.

If you want to deliver stuff on time, start planning on time. You'll get it on time. The speed at which ships can be built is known. The speed at which you can purchase aircraft is known. We need these items to transit through the machine at a pace that will enable no capability gap and enable timely delivery.

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

I get all that. That's all driven by policy. In a perfect world, things run very efficiently if at the start of the process we're efficient right through to the end. If the stars align, that thing gets through quickly. Obviously it's somewhere in the system within the policies we have in procurement. Some of those policies are holding things up.

I guess my direct question to any of you would be this: What policies do we take out to speed things up? What would you be comfortable with? Understanding that we need a level of transparency, what specifically do we start taking out to speed up the process?

[The Chair, Liberal, John McKay]

That's an important question. I hope some of you will reflect on it at some point, but we're out of time.

I'm sorry, Chad.

You have two and a half minutes, Madame Normandin.

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

Thank you very much, Mr. Chairman.

Mr. Page, I would like to go back with you to the fact that tendering is supposed to be used by default. With respect to multimission aircraft, we found out that the CP-140 Aurora aircraft were scheduled to be replaced starting in 2032, but that deadline was finally moved closer, which might benefit Boeing.

Also, last week, Minister Blair told us that because of the budget cuts requested by the Treasury Board Secretariat, there could be calls for tenders or extended timelines for projects, given the fiscal years.

I was wondering where we are at with the replacement of the CP-140 Aurora aircraft. Are we going to maintain a tight deadline that prevents tendering, despite the budget cuts planned by the Treasury Board Secretariat? Could we go back to a slightly longer timeline with respect to the procurement process so that tendering is possible and perhaps taxpayers can get a better value for their money? I know my question encompasses a lot, because I am putting a few things in context, but I would like to hear your comments on that.

[Simon Page]

Mr. Chair, I thank the member for her question.

Unfortunately, I cannot speak to this in detail. This is a project that is ongoing and there is very little I can say. We are in the decision-making process. What I can say is that all pillars of the Defence Procurement Strategy are considered: performance, cost, return on investment and economic benefits for Canada.

Right now, we are really in the middle of the decision-making process. I can tell you that at first glance, budget cuts do not seem to have any bearing on where this project is going or what decisions we have to make.

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

Regarding the duration of the acquisition process, the aircraft were originally due to be replaced starting in 2032, but it is now going to take place earlier.

Is that correct?

[Simon Page]

Some variables led us to look at the Aurora replacement project in a different way. We are still at the heart of these discussions.