National Defence Committee on Nov. 2nd, 2023

[The Chair, Liberal, John McKay]

I call this meeting to order.

Colleagues, it's 3:30 p.m. I see a quorum, and everybody's time is precious.

We'll commence with Mr. Clark.

I thank you, sir, for your attendance here today. We're hoping to hear some interesting testimony with respect to how we deal with procurement. Again, thank you for driving all the way in from Cobourg. We appreciate that.

With that, you have five minutes for your opening statement. Then we'll go to questions.

[Michael Clark, Manager, Business Development, FELLFAB Limited]

Good afternoon, Mr. Chair and committee members. Thank you for the opportunity to appear here today.

My name is Michael Clark. I am an executive representing FELLFAB Limited for the defence and government sector.

FELLFAB is a 72-year-old privately owned Canadian business. We're based in Hamilton and we specialize in providing innovative textile solutions. We pride ourselves on transforming purchased fabrics into engineered solutions to meet specific industry applications.

We operate within a variety of industries. We are a multi-year award-winning vendor in the commercial aerospace world. We operate in the rail, nuclear, industrial and defence markets. We're also a vendor in the space market. When you look at the Canadarm and see its white textile wraps with the Canadian flag, those were made by FELLFAB Limited in Hamilton in our class 100,000 clean room. It's a very interesting story.

At FELLFAB, we employ 125 individuals and fall under the designation of a small and medium-sized enterprise, as laid out according to ISED. We leverage this distinction using the ITB policy for large government procurements, ITB being “industrial and technological benefits”. We work primarily with large defence contractors in this field. I'm going to save you from hearing about a whole list of programs we've worked on.

A 2022 report released by ISED indicated that firms with fewer than 250 employees represent nearly 90% of the companies in the Canadian defence sector. Like FELLFAB, these companies do not operate solely in the defence sector; they play a role in a number of different industries as well. Navigating the complexities in large-scale defence programs is a continuous endeavour for us. While we acknowledge the complexity and nature of the defence procurement system, we also recognize and know first-hand the impact that small and medium-sized companies have in this sector.

I watched some of the recordings from previous sessions. A lot of the discussions have been about large-scale defence programs—planes, ships and those big things—but we must not overlook the smaller-scale initiatives and projects that impact the day-to-day operations of the CAF. Outfitting CAF personnel with necessary kit or products to maintain equipment is crucially important. Our experience in these projects has taught us that speed and efficiency are equally crucial. While the programs we work on may not boast billion-dollar budgets, their cumulative impact is far from trivial.

Today I would like to emphasize the critical importance of supporting Canadian companies for our defence needs. Choosing Canadian companies means investing in our people and highly-skilled jobs and fostering innovation within our borders. Furthermore, supporting Canadian companies like FELLFAB enables us to contribute to important initiatives, such as resettling refugees, integrating them into our communities and providing them with meaningful employment. In summary, every dollar we spend outside of Canada takes from Canada. The world is always changing, and our changes in the procurement world must keep step.

COVID taught us a very valuable lesson: Reliance on a non-Canadian-centric supply chain or procurement policy can be risky. Navigating defence procurement policy is not an easy endeavour, especially for small companies. Simply stated, if there is a requirement for the CAF with a suitable Canadian solution, you should buy it. It's the best thing to do. It's the right thing to do.

How do we make it easier and quicker for small and medium-sized businesses to work within the defence procurement policy? As somebody once said to me, the questions are easy; the answers are difficult.

Thank you for your time.

[The Chair, Liberal, John McKay]

Thank you, Mr. Clark.

Mr. Kelly, you have six minutes, please.

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

Okay.

Thank you very much for being here today. Indeed, we're hoping that perhaps through your testimony we can get some answers about how procurement can be improved.

For a small or medium-sized enterprise, what are the challenges in dealing with PSPC?

[Michael Clark]

It's not always just dealing with PSPC. When contracts are let and they're tendered, that goes through PSPC. A lot of times, programs or products required by DND don't necessarily go through that same tendering process. In those cases, when we talk about speed, that's probably one of the issues we run into—the ability to work with individual bases on individual applications. How are they able to get products?

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

Is it your suggestion, then, that it's easier to deal straight with DND than it is to go through PSPC?

[Michael Clark]

It's definitely quicker. The tendering process can be lengthy. Some things will drag on for a while. There are extensions and such.

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

For relatively smaller and lower-valued contracts, it would be better not to deal with PSPC. Is that what you're saying?

[Michael Clark]

In my opinion, yes.

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

Okay. Thank you.

The government operations committee studied PSPC and the challenges for small and medium-sized enterprises in dealing with PSPC. I recall the testimony. It was staggering. On the barriers to procurement across Canada, every witness talked repeatedly about how difficult it was to bid on contracts. It leads to fairly uncompetitive contracts, because most companies don't have the expertise and can't be bothered, frankly, to gather the skill to negotiate through PSPC.

This study was a little while ago. I'm not sure; would you agree with some of that characterization? Do you think it has gotten better over the last three or four years since that study was tabled?

[Michael Clark]

That's an interesting point. There are instances that I can think back to from a number of years ago—I can't remember the companies individually—of hearing that it was too difficult and onerous if you were a small company to get involved in some of these larger programs and tenders. They just didn't have the horsepower sometimes to pull it off.

Even with our organization, it sometimes takes a lot of time and a lot of manpower to work on a tender, pull things together and do what is being asked in the tender process to be able to submit a bid.

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

Does the Government of Canada, whether it's the department or PSPC, need to do a better job of concise and accurate RFPs?

[Michael Clark]

That's a tough question to answer, because each one is different. Some of them are definitely more complex than others. I don't know if I can—

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

Is that the RFP or the actual solution required?

[Michael Clark]

In some cases it's the actual RFP.

I don't know if I actually have a good answer for that. I've seen some that are fairly straightforward and simple and others that are quite complicated and have a lot of moving parts to them. I do pity some of the folks at PSPC who have to orchestrate these things, because they are complicated.

As I think somebody else stated here—I think it might have been Simon Page—when you look at some of these tenders, it's not just one department: You have DND as the tech authority and you have PSPC as the contracting authority, and then you have ISED also overseeing part of it. You have these three circles that are trying to intertwine.

When you're trying to get a balance that everybody is happy with, I don't think you're ever going to see one that goes so smoothly that everybody says, “Wow. That was perfect.” It would be very difficult to ever see that happen.

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

Okay, but surely we can do better than taking literally decades to figure out and decide what product to buy and fulfill the contract.

[Michael Clark]

Yes. It is a—

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

What do you think delay costs in the operational readiness of the Canadian Forces?

[Michael Clark]

I wouldn't even want to try to guess. I don't know. That's a question that would be beyond me.

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

Do you agree that delay is a problem and that it takes too long to replace important pieces, whether it is something big, which I know is not what your company does, or something small?

[Michael Clark]

I hear it from my peers, people with the large defence primes, who say, “Yes, it takes too long.”

They're complex systems. When you're talking about something like a ship, that is a very complex system. An aircraft can be very costly and complex.

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

What about the smaller things that your company bids on?

[Michael Clark]

The actual tendering process is fairly quick, but again, it's the identification from DND in asking, “What is it that we're looking for? What is it that we need?”

What DND has done more recently has been to ask, “What does industry have to offer?” It will actually interview industry, get industry involved to see what is available in the market today and try to select the best of the best, instead of what it did years and years ago, which was to invent something and then go to industry and ask, “Can you build it?”

[The Chair, Liberal, John McKay]

Thank you, Mr. Kelly.

Mr. Collins, you have six minutes.

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

Thanks, Mr. Chair.

Mr. Clark, welcome. It's always great to have a Hamilton perspective, but especially from, as you noted earlier, a very successful, long-standing small to medium-sized family-owned business that's done terrific things from an employment perspective in the city of Hamilton. I appreciate your providing testimony today.

To date, we've largely looked at some of the internal controls related to how the procurement process works between ministries, and the steps and layers it takes for a contract not just to be let but also to be awarded.

One of the questions I have asked some other witnesses is regarding when and where industry should be a part of that procurement process through those steps. We've talked about, in some cases, the lack of communication and the need for more transparency.

With your experience with these contracts, where do you see industry? How does industry play a role in terms of providing some advice all through that process?