National Defence Committee on Nov. 7th, 2023

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

If they're stating at committee, on a procurement study, that they're frustrated and you have what sounds like some pretty sound assistance for some of these smaller businesses, why are they coming to us and saying they are frustrated? What should we do? What can we do? What are we doing?

Is it a communications issue, maybe? Is it us reaching out to them, or are we providing liaisons? I'm trying to think outside the box of how we can.... Again, if you have programs now and they don't feel like they have the ability to participate, what is it that we can do outside of what we're already doing?

I guess I'm leaning toward this being a communication issue.

[Mary Gregory]

Thank you for the question.

I could offer that some of the feedback we hear from small businesses is that the certification requirements, particularly in the defence industry—probably aerospace as well—are highly certified, relatively managed markets. That can be a barrier for a small firm, because achieving a certain level of certification to participate in an industrial supply chain can be quite challenging. It may require upfront investment for the company, which may be a lot for a small company to undertake by itself.

I believe my colleague Mr. Page mentioned the national security requirements. In the U.S., we have been working through his department to try to ensure that Canadian companies have access there as well, so that's another element. When the U.S. makes changes, we have to catch up to those changes. Otherwise, our companies are disadvantaged.

We try to keep up to date on what is challenging for small businesses. We try to ensure that they have the tools and access to resources in order to keep up to date and have access to those kinds of procurements. They're very important.

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

Thank you. That was helpful.

[The Chair, Liberal, John McKay]

That brings to an end our first panel and the first hour.

I want to thank you again for your patience and for the informative way in which you responded to members' questions.

With that, we'll suspend and repanel.

[The Chair, Liberal, John McKay]

Such as it is, we'll start. Hopefully, we'll be able to bring Mr. Lincourt in.

I notice that Ms. Lukasheh is here on behalf of SAP Canada; and from Bombardier, we have Mr. Martel, Mr. Pyun, and Ms. Thibaudeau.

I see Ms. Winger is here. She has a hard stop at 5:40, so I'm going to ask her to make her opening statement first. We can possibly work out some accommodation at some other point, so that she can respond to members' concerns.

Because we're having troubles with the SAP representatives, we'll then go directly to Bombardier, and then hopefully, by that time the SAP issues will be resolved.

Ms. Winger, you have five minutes, please.

[June Winger, National President, Union of National Defence Employees]

Thank you very much for the opportunity to appear today, Mr. Chair.

The Union of National Defence Employees represents 20,000 civilian defence workers. Our members ensure that military operations are mission-ready at all times and that military members have safe and secure places to work and live.

Our members are experts who work on bases, in offices, warehouses, airports, labs and garages. They provide consistent and knowledgeable services so that the military can be agile and combat-ready.

The contracting out of civilian defence work undermines our members' work and greatly erodes the quality of services that Canadian taxpayers are paying for. Our union has observed, time and again, including in our 2022 “Uncover the Costs” report, that contracting out civilian defence services is less efficient and effective than having the work done by public servants.

Today we need to put a stop to the long-standing pattern of management decisions being made at National Defence, which is leading to a system-wide failure and is costing Canadians more. These decisions include intentional understaffing of needed public servant jobs, paired with an over-inflated budget for contracted-out services and an inappropriate amount of reliance on private contractors to do work that should be done by public servants.

For years, National Defence has been allotting meagre staffing budgets to bases while diverting funds towards contracted-out services. This makes it impossible to adequately staff the bases and it pressures management to use private contractors to do the work that public servants should be doing. As a result, we are faced with problematic and costly overreliance on private companies to support the functioning of our military bases. The scale and scope of contracting out is increasing wildly, without adequate justification, planning or oversight. Transparency and accountability are just missing.

Contractors are not being held accountable for the accuracy, quality and timeliness of their work. Rather than fill the vacant public service positions we have, National Defence continues to pay contractors a premium, and we are left with costly, dangerous errors and oversights, broken equipment left languishing with no one to repair it and dysfunctional workplaces.

We are concerned to see National Defence paying private firms, such as Deloitte, to provide recommendations on how the department should be delivering its services. Certainly, since one of Deloitte's publicly stated aims, which is published on its own website, includes identifying opportunities to partner with industry, one would expect that its recommendations would be biased. In fact, following a recommendation from Deloitte's November 2022 report to National Defence that more data collection and analysis needs to be conducted, the department is now in the process of procuring yet another contract with Deloitte in order to pay them to conduct this data collection.

I have examples that could go on and on.

At CFB Esquimalt, the purchase and installation of turnstile gates at a dockyard entryway and exit was contracted out through Defence Construction Canada. The private contractor was paid to complete the work, yet today the dockyard doesn't have an entryway turnstile and its exit turnstile is cordoned off and not operational. The contractor installed one that was far too narrow to allow military members carrying rucksacks and parcels to get through. As well, it prevented our military veterans, who have mobility challenges, from entering and exiting the base every day. The gate was completely unuseable and had to be removed.

Bizarrely, once the problem was raised, it seemed that DCC chose to rehire the very same contractor and paid them to do more work on the entryway. Furthermore, additional funds have been earmarked for the next two fiscal years to pay the same contractor for more work on the entryway. As well, I've just learned there is another problem with the turnstile installed on the exit. Now it's cordoned off with yellow tape and can't be used.

Often we hear individuals who are speaking in favour of contracting out complain about too much bureaucracy and cutting the red tape. This is a case where there is no red tape. What we have is an expensive bill and whole lot of yellow caution tape.

From its procurement practices, it appears that National Defence operates as though contracting out work to private companies can release the department from the burden of risk of something going wrong. Our message to you is that you cannot contract out risk when it comes to public services. When a contractor makes a costly error or fails to meet its commitments, the responsibility still falls on the department and the government responsible for providing those services.

Canadians trust our government to use our tax dollars wisely and ethically. When we needlessly contract out the public service work, this amounts to nothing other than money-making machines for private firms, and the weight of their added expense falls on the shoulders of the taxpayers, who deserve better.

Thank you. I look forward to answering your questions.

[The Chair, Liberal, John McKay]

Thank you, Ms. Winger.

I'm going to go to Bombardier now. I'm assuming it's Mr. Martel.

You have five minutes, please.

[Éric Martel]

Mr. Chair and members of the Committee, thank you for the opportunity to share our comments as part of your important study.

Many of you know that Bombardier is a leader in the aerospace industry. In fact, Bombardier designs, manufactures and services the world’s finest business jets. We currently contribute $5.7 billion to Canada’s GDP and support 33,000 Canadian jobs.

Perhaps you don't know that Bombardier has a track record of delivering versatile defence solutions that are recognized globally for proven reliability, endurance, performance and capability in all areas of intelligence, surveillance and reconnaissance.

Bombardier has more than 550 special mission and defence jets in service worldwide, including with the United States air force and army. Therefore, we have a unique perspective on defence procurement processes around the world.

Before beginning any procurement process, the Government of Canada should proactively engage in a thorough consultation with Canadian industry to understand where homegrown innovation opportunities exist. When this is not done, government consistently defaults to off-the-shelf products—often imported and utilizing older technologies.

This is a crucial point in the context of answering military readiness. Too often, our current procurement approach starts too late, is not strategic and results in the acquisition of equipment that is just good enough, rather than the best most cutting-edge solution, and in an approach that is way too complicated.

One example of this is Canada's multi-mission aircraft procurement: CMMA. In February 2022, PSPC released a CMMA request for information outlining 13 high-level mandatory requirements and asking industry to deliver full operational capacity by 2040. Bombardier and our partner, General Dynamics Mission Systems-Canada, responded to this RFI in good faith. We put forward a made-in-Canada solution that exceeds all high-level requirements and the published delivery timeline.

Unfortunately, it turns out that this RFI was entirely misleading. The government went silent following our RFI responses, and in late 2022 news broke that they may be pursuing sole-source contracting for Boeing's American-made P-8.

The CMMA procurement process we've observed to date is deeply flawed and lacking transparency. Flaws were disclosed recently by government testimony to the standing committee on operations and governance. First, the RFI clearly states that it is not a pre-selection process and there would be no short-listing of potential suppliers based on responses, yet officials made clear that this was the RFI's very objective from day one.

Second, we learned that government has made critical changes to the CMMA procurement without formally advising Canadian industry, including expediting the final delivery timeline from 2040 to the early 2030s. Making military off-the-shelf products a mandatory criteria also was not initially mentioned. Both changes are clearly driving a biased predetermined outcome in favour of Boeing. By the way, Bombardier and GDMS can meet this expedited timeline, a fact that seems to fall on deaf ears at PSPC and DND.

Finally, we learned that officials concluded that Canadian industry cannot meet CMMA requirements before ever releasing the RFI, based on a third party study market assessment by Avascent, which has never been made public. We are completely rejecting this conclusion, as not one qualified aerospace engineer evaluated our solution—not to inform the Avascent report nor at any point afterward.

On behalf of the Canadian industry, we simply recommend what is required by Canadian law: an open, unbiased call for tender with objective and realistic selection criteria. Bombardier and GDMS want to compete, because we will win and deliver the next-generation global gold standard for decades to come to the Canadian Armed Forces.

Improving Canadian defence procurement to support military readiness must start with an open CMMA tender.

Thank you.

[The Chair, Liberal, John McKay]

Thank you, Mr. Martel.

Ms. Lukasheh, you have five minutes, please.

[Yana Lukasheh, Vice-President, Government Affairs and Business Development, SAP Canada Inc.]

Thanks, Mr. Chair, and good evening.

My name is Yana Lukasheh, and I'm vice-president of government affairs and business development at SAP Canada. I'm joined virtually by my colleague David Lincourt, who is the chief solution expert, global defence and security.

SAP is an enterprise application software company committed to enabling organizations in over 20 industries to become a network of intelligent, sustainable enterprises, bringing together the technology solutions and best practices needed to run integrated, AI-powered business processes in the cloud. Our applications are not just an enterprise resource management suite but also a readiness platform, covering planning, strategic management, force generation and deployment, capability planning, weapon platform life-cycle management, logistics, finance and total workforce management.

These solutions, at various degrees, are currently adopted by over 40% of the world's militaries, 70% of NATO allies and all Five Eyes countries. Overall, our 300-plus customers in defence and security share a trusted business network, leveraging the latest innovation, emerging technologies and data to achieve operational and mission excellence.

We would like to thank the Chair of the Standing Committee on National Defence for inviting us to participate in this review of the impact of Canada’s procurement processes on the Canadian Armed Forces.

Our testimony includes two components. The first will address the issue of introducing digital technologies in a military context. The second will focus on how SAP is helping to optimize procurement processes.

I invite my colleague, Mr. Lincourt, to talk about the first component.

[David Lincourt, Chief Expert, Global Defence & Security Industry Business Unit, SAP Canada Inc.]

Thank you, Mr. Chair.

We all recognize that DND—and the Canadian Forces—is a large and complex organization, and it operates in a volatile, uncertain, dynamic and ambiguous world.

When it comes to digital technologies—

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Mr. Chair, he sound quality was poor, so there was no interpretation.

[The Chair, Liberal, John McKay]

Can you hang on for a second? There's an issue with the quality of Mr. Lincourt's sound.

Ms. Lukasheh, are you able to complete Mr. Lincourt's presentation?

[Yana Lukasheh]

I'll complete his remarks and he could maybe stay online to answer questions.

[The Chair, Liberal, John McKay]

We have a problem with his speaking, period, so it may be that you'll have to take all of the questions, or you'll have to respond to the questions in writing—one way or another.

[Yana Lukasheh]

I'll try my best.

[The Chair, Liberal, John McKay]

I'm sorry about this, Mr. Lincourt. You're going to have to enjoy New Orleans a little bit more.

[David Lincourt]

You have my apologies.

[The Chair, Liberal, John McKay]

Thank you.

[Yana Lukasheh]

I'll proceed.

[The Chair, Liberal, John McKay]

You have about three minutes left.

[Yana Lukasheh]

No problem.

We all recognize that DND is a large and complex organization that operates in a volatile, uncertain, dynamic and ambiguous world. DND can't approach these realities in the same way as was the case in the past. Speed of innovation is paramount, and I would say that continuous innovation is paramount. There is a need to constantly revisit, first, the concept of operations, because what worked yesterday won't work today; second, the processes and procedures to more effectively and efficiently do what needs to be done; and, third, the people, principally their skills.

Programs are very inflexible in how they are phased and delivered. Changes create perceived scope creep and risk to schedule and budgets. This is extremely unsuitable to bringing digital technologies into the department. We recommend an approach where requirements and solutions can naturally adapt to the need for new operating concepts, procedures and the skills of people in order to harness new digital technologies towards continuous innovation.

Programs are discouraged from leveraging each other. Programs are mandated to deliver against their own sets of requirements, and incorporating someone else's puts their metrics at risk. It also creates an environment of “not my problem”. We recommend an approach that fosters horizontal integration of technologies where synergistic effects can lead to vast value to the department.

Introducing digital technologies is quasi exclusively restricted to large defence contractors. Innovation is stimmed and precludes small and medium-sized businesses from contributing. Similarly, defence personnel find ways around the process to innovate. While solving local problems, these innovations introduce tremendous risks, particularly security risks. We recommend standardizing on a digital technology platform that permits all the members of the ecosystem to innovate within a well-managed governance framework.

Now I'll go back to the second point around procurement, and I will bring an example. Digital technologies can streamline procurement processes, enabling National Defence and the Canadian Armed Forces to better manage portfolios for horizontal integration, including de-risking major projects, enhancing transparency and accountability, identifying cost-saving opportunities by analyzing spending patterns, optimizing inventory and, ultimately, negotiating better contracts.

More importantly, digital technologies will also allow the department to integrate with other defence systems and data sources, providing a holistic view of procurement and supply chain operations; to monitor and evaluate the effectiveness of these processes; and, lastly, to leverage training and support services to ensure that defence personnel can effectively use the technology to drive procurement reform and unlock additional value.

Today, Canada's defence industry is affected by risk, complexity and diversity, regionally and nationally, coupled with dynamic changes in overall economics and constrained budgets. Multi-faceted and complex procurement processes are adding further burdens and delays in the implementation of efficient mission-critical operations.

I'll speed up, Mr. Chair.

Over the past—

[The Chair, Liberal, John McKay]

We're pretty well over the time, and we are running a hard clock here, unfortunately. Maybe you can work it in during your response to questions.

Before I ask Mr. Bezan for his six minutes, Ms. Mathyssen, you had an idea about incorporating Ms. Winger's testimony. Do you want to present it?

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

Yes, thank you.

It's my understanding that I have to move a motion. Because Ms. Winger had to leave to do the votes, if the committee would submit a series of questions that they may have had for her so that she can answer them, they will then become part of the testimony for this report.

[The Chair, Liberal, John McKay]

That's in order. It's part of the subject matter. Is there any discussion?