National Defence Committee on Nov. 7th, 2023

[Emmanuella Lambropoulos, Liberal, Saint-Laurent, QC]

Thank you.

I guess with that 30 seconds, I'm not going to get much of a response.

I'll just highlight the importance of continuing to have meetings with industry to make sure they're aware of what the future holds, so that they're prepared and able to contribute in the way they can given their expertise.

Thank you very much.

[The Chair, Liberal, John McKay]

Thank you.

Ms. Normandin, you have six minutes.

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

Thank you very much, Chair.

I’d like to thank the witnesses for being here.

My questions will focus mainly on replacing the CP-140 Aurora, and are addressed to Mr. Page. In particular, they relate to the testimony provided three weeks ago, on October 17th, before the Standing Committee on Government Operations and Estimates.

My first question has to do with the mandate given to Avascent, which was to provide information on replacement products for CP-140s.

When was Avascent given the mandate to review the options?

[Simon Page]

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

I don’t have the specific date, but it was in 2021.

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

Was Avascent’s mandate based strictly on an analysis of products available on the market? Was that part of Avascent’s analysis mandate?

[Simon Page]

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

The mandate was divided into three phases. The overall mandate for the Avascent study was actually a detailed market analysis with an options analysis in phases two and three. It wasn’t really focused on the military products already available on the market.

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

When did you receive the report confirming that no existing military products were available for the years 2030 to 2040, as was revealed three weeks ago and as concluded by Avascent?

When did you receive the report and its recommendations?

[Simon Page]

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

As I said, the report involved three phases. We received the last one in 2022. I don’t have the exact date on hand, but I could provide it to the Committee later.

As I said, the mandate was a market analysis. Many figures, many facts and a great deal of data were gathered to culminate in a fairly detailed analysis.

I wouldn’t say there were specific conclusions, but there were some very detailed facts. This was in addition to the request for information made to Public Services and Procurement Canada. All of this combined gave us a good sense of what was available on the market.

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

If I understand correctly, a report was submitted in 2022. In this report, Avascent confirmed that there were no military products readily available, apart from Boeing’s. Yet, in 2022, a request for information was still sent to various industry members. That request did not specify that the products submitted had to be readily available.

I’d like to know why this clarification was not included in the request for information, since Avascent specifically recommended an existing product as a solution.

[Simon Page]

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

I wouldn’t say that Avascent recommended an existing product. We really conduected a detailed market analysis, which included analyzing the options. That analysis looked at aircraft suppliers and systems suppliers. A combination of analyses was done in that regard.

The report provided us with a good understanding of military products available on the market, products that were not completed yet, and products from companies that manufacture mission systems rather than aircraft.

There were also options on how things might work if these companies’ products were combined. However, we didn’t really have a specific recommendation for any existing product. We had the required information on available products and on products under development.

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

Three weeks ago, at the Standing Committee on Government Operations and Estimates, you were asked whether, following the 23 responses to the request for information, you had approached industry. You replied that, no, you had not formally approached industry for more information.

During that same committee meeting, you also mentioned that the request for information led you to conclude that the only existing aircraft that provided a solution to all “high-level mandatory requirements” was Boeing’s P-8. You then stated the following: As for the process, we went from gathering information to analyzing and then delving deeper into this potential solution, Boeing’s P-8 Poseidon. […] […] the only way to get additional information from Boeing regarding the [request for information] was through a government-to-government military sales agreement.

As I understand it, following Avascent’s recommendation or analysis of the request for information, the only possible choice was offered by Boeing. Instead of consulting the whole industry, a way was found to go straight to Boeing’s information by signing a contract with the government.

Why wasn’t the rest of industry consulted in this context?

[Simon Page]

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

Our process led us to the conclusion that currently appears on our website, namely that the only available military aircraft that met all the high-level needs of the Canadian Armed Forces was the Boeing P-8 Poseidon.

As for my remarks before the other committee, and to answer the first part of your question, indeed, we did not request further information at that time.

We had a very good information base, a very good database. To obtain further information, following the conclusion we had drawn from the report, our request for information and other analyses carried out internally, we would have to ask the U.S. government…

[The Chair, Liberal, John McKay]

Unfortunately, we're going to have to leave it there. I'm sorry to interrupt this exchange.

Ms. Mathyssen, you have six minutes.

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

Thank you.

The last time you appeared before the committee, I asked about the F-35 fighter jet contract.

Mr. Crosby, you stated you were actively engaged in governance committees around this project to monitor the experience of our allies with this jet. Then, when I asked about the U.S. Government Accountability Office's report, which was quite damning on the price gouging and inadequacies they saw baked into the F-35 program, you stated you weren't aware of any evidence that there was price gouging or public commentary there.

I find that contradictory, at best. This is a huge acquisition Canada is making, one I expect requires a lot of study, scrutiny and taking in of all that information from our allies, instead of just the information provided by the supplier.

I did an Order Paper question on this purchase. The response I received back stated that neither the Department of National Defence or ISED commissioned or produced any studies or reports on the life-cycle costs or economic impact of the acquisition.

I would like to ask both Mr. Crosby and Ms. Gregory this: Did this acquisition solely rely on reports and studies produced by the supplier Lockheed Martin, or did your department produce a report or study on the life-cycle costs and economic impact of this purchase?

[Troy Crosby]

When the acquisition of the F-35s was announced, we disclosed the forecast of through-life costs for the capability, which of course includes the in-service support costs. The information used by the subject matter experts who do these sorts of cost estimates came from a variety of sources—most importantly, from the U.S. government, from whom we're acquiring the capability. That same information was made available to all of the allies participating in the production, sustainment and follow-on development phase memorandum of understanding.

As everybody would be aware, earlier this week—or last week—the Parliamentary Budget Officer did an independent cost estimate. It was within a fairly narrow margin of the estimate DND disclosed in January.

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

Do I pause, or does my time...?

[The Chair, Liberal, John McKay]

Keep going until we find out what it is about. It might be just a quorum call.

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

Okay.

The government—industry or defence—did not do those cost estimates itself, internally. You relied upon outside sources for that information. You made the purchase. The purchase was made by the government before the Parliamentary Budget Officer, in fact, did that study.

[Troy Crosby]

It is true that the announcement of the purchase was made earlier in the year. Of course, the information that goes into the models that develop the cost estimates need a source: cost per flying hour, fuel consumption rates and those sorts of considerations. This is in addition to the Canadian Armed Forces' own estimates of how much flying they'll do with the aircraft, the number of people who will be involved and all the other elements, including infrastructure and other considerations, to put together a Canadian-specific estimate.

[Mary Gregory, Associate Assistant Deputy Minister, Industry Sector, Department of Industry]

Thank you for the question.

Our department, ISED, would track the economic impact of the procurement as it unfolds. In this case, the suppliers agreed to an economic benefits arrangement, so we have to track the activity going forward, as Mr. Crosby said earlier. There's been $3.5 billion in Canadian activity already, because Canada has been a partner on the F-35. Our department will continue to track that activity.

Because it has to unfold in the future, we don't have an estimate at the ready right now.

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

Since your last appearance, have you had an opportunity to read that American government report in terms of accountability on the F-35s?

[Troy Crosby]

I have not read the report personally.

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

That's too bad.

In terms of that Order Paper question, a member of Parliament has to specifically understand, before they get into it, exactly how the department is going to answer that question with a fulsome response. Is that correct?

[Troy Crosby]

I'm afraid I don't follow the question.

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

Ultimately, I tried to ask a very simple question about what studies and reports were completed by the government to determine the life-cycle costs and economic impact of this purchase. I was told that neither department did any of that internal costing. You're saying that, to understand that, I would have to know that in advance in order to be able to ask the right questions to get the right answers.