National Defence Committee on Nov. 2nd, 2023

[Michael Clark]

You see it even today with a lot of programs. DND and the tech authority are involving industry right from the get-go.

The first thing they do is look at whether there is something they need. First they identify their need. The next thing they do is go to industry and say, “We're looking for something like this. What have you got?” Industry is being engaged almost right from the beginning.

We've seen, over the last 10 to 15 years, that during CANSEC—of course, you're probably aware of the large show every year here in Ottawa—DND really tells its people to get out there, to go to these events, to engage with industry and to see who's out there and who does what. The people within DND are being educated as to where these companies are and what they do. They are engaging industry pretty much right from the beginning. They're engaging industry with industry days, for example, if there's a certain program.

Really, ever since COVID, these have become more and more common, because we can do hybrid meetings now. People are more used to the virtual concept, so they can get a lot of people involved and can ask them the questions: “What does industry have? What do you have to offer us?”

I think it is working now.

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

The Parliamentary Budget Officer appeared before committee and talked about some of the inefficiencies that come with having multiple ministers and ministries involved in the procurement process. Too many hands on the wheel can make things a little bit difficult for those vendors going through that process.

What are your thoughts in terms of dealing with one or more ministries? Should it be one? Does the current system work now when you're dealing with multiple ministries?

[Michael Clark]

When you're getting into programs of that magnitude, those are the ones that are playing at that tier 1, tier 2, tier 3 level, so we'll be supporting those prime contractors. They're probably dealing with that a lot more than we are at the level where we play.

I would probably say I'm not the best one to answer that question.

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

Fair enough.

I know you do a lot of business in the United States and outside of Canada.

Can I ask, in terms of their procurement process, when you're bidding on government projects in other countries, is there anything to learn from what they're doing right?

[Michael Clark]

In Canada, we have FELLFAB Limited, which is a privately owned, family-owned business. In the United States, we have FELLFAB Corporation. The CEO is common between both, but that is a totally separate entity. FELLFAB Corporation in the U.S. does very little defence business. We're trying to change that, but it's very different. I would say that we have nowhere near the same level of exposure in the defence market in the U.S.

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

Okay. It's not surprising, I think, to many of us who've been in government for a while that one of the biggest complaints that comes through the procurement process from vendors who decide to formally complain is the whole issue of bias. Have you experienced that with some of the contracts that you've been on before? Have you filed any formal complaints? If you have, how have they been dealt with?

[Michael Clark]

No, we've never run into that, or at least not to my knowledge. I've been with the organization for seven years. I've never run into it first-hand. I don't have any recollection of us encountering such a thing or reacting to it.

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

Okay.

We had a recommendation from another witness who talked about maybe structuring the procurement process a bit differently from the way we do it today, especially for our larger contracts. We talked about removing some of the barriers and hurdles that vendors need to go through when they're going through that process.

His suggestion was that while that might prove to have some benefit to us in terms of speed—and I think that's of the utmost importance, both for the government and for the vendors who are participating—it may have some impact on transparency in terms of almost bending the rules rather than breaking them, which could create a messy situation, certainly from a political perspective. Our constituents want everything to be open and transparent. We don't want to run into instances of vendors complaining at the end of the day that there has been some bias.

Can I get your reaction as we look at the procurement policies that have been developed over decades, probably for the entire life of your operation at FELLFAB there in Hamilton? What's your opinion in terms of removing some of the requirements that are embedded into the procurement process if the outcome is that we may have less transparency with what we put out from a procurement perspective?

[Michael Clark]

That's—

[The Chair, Liberal, John McKay]

That's a very important question. Unfortunately, Mr. Collins has left you no time to answer it, so if you could—

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

Pat will let him answer it.

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

Thank you. He'll return the favour.

[The Chair, Liberal, John McKay]

I'm sure there will be some reciprocity here.

Madame Normandin is next. She will speak to you in French. I'll give you a second to get yourself wired up there.

We have Madame Normandin for six minutes, please.

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

Thank you for being with us, Mr. Clark.

I'm going to give you the opportunity to answer my colleague's question, because I also wanted to ask you the same question.

To make things easier for small businesses, could some of the rather excessive restrictions be removed on more modest procurement projects?

Are there any unnecessary barriers imposed on you?

[Michael Clark]

Thank you. That's a good question.

I talked about speed. Speed is critical sometimes. Part of what gets delayed is that if there's a part of DND that wants to do a small local purchase order, they have restrictions on how much they're allowed to spend without having to go through a more formal process. Sometimes they're not aware of what those levels are, but the fact of the matter is that those levels haven't changed in probably close to a decade, and we have seen, as you know, that inflation has gone rampant. The price of product is through the roof. In the province of Ontario, we've had labour increases since 2016.

The basic cost of product is higher, so when they come to us and say they would like to buy this many widgets, they can't buy that many widgets anymore. They either have to buy fewer of them, so they're not getting what they want, or they're not going to get the right product that they want, or it has to go back for reapproval. This all takes time. As you know, when you're talking about that small procurement, that's a piece of critical kit that they might need. It might be something that they're going to the Arctic with and they need it in two months, but the process is going to take two months.

I think some of the changes are to maybe update some of the procurement levels that these companies have access to or the money that can be spent for a single purchase order.

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

Thank you very much.

In response to a question a little earlier, you talked about the possibility of companies presenting their products to the Department of National Defence, particularly at the CANSEC exhibition or on other days.

However, it's sometimes said on the ground that small businesses have trouble finding out what the departments are asking for. For example, companies find out too late that a procurement project existed and that they could have participated because they have the same product, or even a better product, to offer.

Is it more difficult for a small business to know what the needs of the Department of National Defence are and to be able to meet them?

[Michael Clark]

That's a good question.

When I started getting involved in the defence sector, it was very much that sort of question: Where do I start? What do I do? How do I know about these things?

If you hear something on the radio that says there's this company in London that was just awarded this huge vehicle contract from the military and you think you should go visit them, you're probably about five years too late.

The thing with the defence sector is that the sales cycle is extremely long. You need to get involved earlier on. You can just Google how you do business with the Government of Canada and you'll find some information there.

I was actually giving this some consideration last night. If you want to get involved in the defence sector, pick up the phone, call your MP and say who you are and what you want to do. In some cases, they can put you in contact with your RDA, your regional development agency. They will help you tremendously in navigating the defence circle: what you do, where you go, who you can talk to, what associations you can join, what events you can take part in. It comes down to doing your homework on the industry and on where you play and who you talk to. Then it's just a matter of time.

I remember a number of years ago getting a call from a company out west and the gentleman saying, “I was told to give you a call because I want to get involved in the defence sector. I attended this meeting and sent off some information. When am I going to hear about the program?” I said, “Well, maybe in about three years.” His answer was, “Three years?” I was talking to somebody who was used to oil and gas. He said, “I'm not waiting for three years. I'm going to go back to doing what I want to do.”

There's a level of patience that's needed in the defence sector. Things do not happen quickly. You need to get involved in navigating it, going to the association meetings and the events, meeting the people within the defence sector who get involved with the design work, and understanding, from the standpoint of your company, where you fit into this whole world. When you look at different types of systems, putting a piece of textile on a ship is going to be different from putting that same piece of textile in a kit going to the Arctic.

There are different types of requirements, so you really need to understand, as with any industry, what that industry looks for, what the demands on your product are and whether your product meets them. There might be certain areas where you just don't play.

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

Should Defence be a little more transparent, or more easily accessible, in terms of its needs so that they are better known to small businesses?

[Michael Clark]

I'm trying to think of the best way to word an answer to that.

Should defence procurement be more transparent? Yes. If you follow things and you keep up to speed with things, for the most part I think it is transparent.

If a procurement process is not transparent.... Chad mentioned speeding things up for the sake of speed and maybe having less transparency. That's probably going to come back and bite you in the end, because it's guaranteed that somebody is going to cry foul on the play, and all of a sudden they are going to contest something and it's going to get tied up with committees and investigations and everything else, so are you really saving the time at the end of the day?

That's a comment from me. That's not necessarily from industry, but that's the way I would look at it.

[The Chair, Liberal, John McKay]

Thank you, Ms. Normandin.

Ms. Mathyssen, you have six minutes.

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

Thank you for appearing today.

Further to questions that have already been asked, and I think you touched on it but didn't quite drill into it, a lot of times we've heard that during those processes of discovering what is needed—what DND wants, the idea versus the reality, and so on—industry is very perplexed by DND changing their mind halfway.

Have you seen that? Have you had experience with that?

[Michael Clark]

I can't say that I've experienced DND changing their mind—

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

What about altering plans, asking for a bit more or things like that? Does that impact your company in particular or not?

[Michael Clark]

It depends on what the impact is or what the change is. If they change the fundamental....

Let's take a textile as a good example. If they change the requirement for that textile to say all of a sudden, “We want so many hours of UV resistance and we want it to be flexible at -50°C,” or something like that, it changes the type of material you use. It's going to change the way you build it, and then it could have an impact on your solution or what you're offering.

I don't think I've ever seen a situation when they've drastically changed it to the point that we said, “Oh, no. We can't even build this anymore.” I've not experienced that myself.

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

I've been working on and have introduced a private member's bill, Bill C-300, which is trying to change the procurement system to give greater weight within that bidding process to companies that manufacture within Canada and give them that one-up.

You spoke in your testimony about making that space for those Canadian companies and ensuring that this plays a role. Can you reflect on the relationship between that federal procurement and those dollars being spent within Canadian manufacturing, and how important that is? Can you speak more about that?