National Defence Committee on April 15th, 2024

[Peter Hammerschmidt]

I'll jump in.

Yes, that's exactly right. I think we took a really hard look at the SSE experience and the implementation experience as we did the policy development work for the policy update. There was a lot in SSE that was right, and then there was a lot in SSE we thought we could do better at.

When you look at the new policy, there are some specific investments in things like infrastructure, sustainment and people that we knew we needed to get right to be able to be in a position to implement the projects that are identified in the new policy quicker and more efficiently.

In total, there are about 24 projects in the new policy that have been funded, that the government is moving out on and that the government has committed to doing immediately. Then, as referenced, there are about 11 other projects that the government has committed to pursue in terms of establishing the capability, but the government is committed to exploring options as to how best to actually pursue that. We'll be working on those in tandem with the implementation of the existing initiatives to bring proposals forward to government as soon as possible.

[The Chair, Liberal, John McKay]

Thank you, Mrs. Lalonde.

Madame Normandin, you have two and a half minutes.

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

Thank you very much, Mr. Chair.

Mr. Matthews, I'd like a few more details on the production of ammunition, mainly 155 mm. It was announced that $4.8 million had been made available to increase the number of munitions produced from 3,000 to 5,000. We know that Ukraine uses between 1,000 and 8,000 rounds a day, whereas our monthly production is 5,000 rounds. Could you tell me how we are going to manage to increase production, given that in order to switch from producing M107 variant shells—which are less in demand—to producing M795 variant shells—which seem to be required on the ground—we would have to invest $400 million to update the factories, even before producing a single shell?

What are the forecasts in this respect, given that $15 million has been announced for the current financial year and $137 million for the next? Are there any long-term contracts about to be signed or already signed with companies? What investments will we make to meet Ukraine's artillery requirements, which are very justified?

[Bill Matthews]

Thank you for your question.

I'm going to start answering, but I'm going to ask General Eyre to add his comments about the different kinds of ammunition.

Number one is that there's only so much you can do to increase production on an existing line. That production has increased from 3,000 to 5,000 per month. What we really want is a new production line in Canada to produce, ideally, a different type of round that is of better quality. The chief can talk about that.

The real goal here is to have a new production line in Canada, not just for Ukraine but also to replenish our own stocks so that we can develop our own inventories in case they are needed. That will benefit all allies, and all allies are doing the same thing.

General Eyre, I don't know if you want to add comments on the different types of rounds.

[Gen Wayne D. Eyre]

Mr. Chair, I don't have much to add other than we need the new 155 mm ammunition.

The range is farther, it's more accurate and it has a larger kill radius than the M107 round. That's why we urgently need to get this into production.

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

So I understand that $400 million is needed to produce this new ammunition. Is that amount earmarked somewhere? I see only $15 million and $137 million for the next two fiscal years.

[Bill Matthews]

To do that, we have to work with private companies, and it will take a long time to build the new facilities. We can start spending that money in the next few years.

The major investments will start once the building of a new line starts. That involves a lot of design and engineering work, so that work will start.

[The Chair, Liberal, John McKay]

Thank you, Ms. Normandin.

You have two and a half minutes, Ms. Mathyssen.

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

Thank you, Mr. Chair.

The defence policy update signals some changes, but I didn't see any commitments to reforming outsourcing and the contracting practices.

Recently, we had testimony from UNDE and PIPSC leadership. They're very frustrated, as are we, about this idea of a value-for-money analysis, which they can't get any answers out of.

In fact, Mr. Matthews, when you were here before the committee, you talked about that analysis, yet nobody seems to be able to get that analysis out or see through it. Those auditing practices aren't as transparent, or they're not transparent at all.

Can you provide some commentary on that? I'm sure you saw the testimony from the union leadership on all of that. Can you provide some comments on that for us here today?

[Bill Matthews]

I certainly can.

It comes up in a number of areas, not only from our union colleagues but also when we talk to military members who are on base managing budgets. We often hear that they have money in a pocket for contractors, but they'd rather have employees. In some cases it's vice versa: They can't find employees, but they can get contractors. Therefore, we are reinforcing with those who manage budgets on bases that there are ways to move money into the most efficient place.

One of the commitments we have made around value for money is that any time a new idea for outsourcing or taking public service work and using contractors is being put on the table, we demand a business case. There are no active discussions around any of that right now, so I have no business cases to share, but that is a requirement we have shared with our management team.

Equally, where there are more efficient ways to do business by moving away from contractors and using public servants, we are also encouraging people to look at that. We've had an interesting experience with one of those recently, as you would be aware. There are active discussions where the labour force exists, where we can turn contractors into public servants when we know it's long-term work. Typically, it's actually more efficient for us to use public servants in that scenario.

We have other scenarios where the skill set doesn't exist in the public service, so contractors will continue to play a role, but there's nothing explicit here. On the reallocation exercise that we were talking about a few moments ago, that is actually driving a lot of conversations around what the right model is to deliver a service. If it's cheaper or more efficient to use public servants, we are certainly open to those discussions. In some cases, the labour force does not exist.

[The Chair, Liberal, John McKay]

Thank you, Ms. Mathyssen.

We'll go to Mr. Bezan for five minutes.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

Thank you, Mr. Chair.

I want to follow up on Ms. Mathyssen's question.

In the comments you just made, Mr. Matthews, you said you want to turn more contractors into employees of the Department of National Defence. We just went through that with Dalian Enterprises with Mr. Yeo receiving over $8 million in contracts through the arrive scam situation that we're dealing with. That's quite the scandal. Then he became an employee of the department. You have suspended him. You have turned this over to the military police, in my understanding, and it's being investigated. What's the status of that investigation?

[Bill Matthews]

We have made the military police aware of the situation. Mr. Yeo's employment has been terminated. In fact, he resigned before we could move to termination. We are continuing to investigate any potential work he was doing.

To date, we have confirmed that, of the contracts he was working on before he became an employee, services were delivered in a satisfactory manner. We are still looking to make sure there were no instances where he was doing contract work while he was an employee. We have yet to find any, but that work is ongoing.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

However, at the same time, we know that, through the arrive scam scandal, they were getting contracts without providing any work and then subcontracting. As part of your investigation, are you co-operating with the RCMP on the broader investigation into the arrive scam scandal?

[Bill Matthews]

The department will co-operate with any police investigation. As it relates to Mr. Yeo's work as a consultant with National Defence, he then did the same work as an employee. This was an example of someone doing full-time contract work until somebody realized, in theory, it would be more efficient to make him an employee. That work was delivered as advertised. There were no issues there, but obviously we will co-operate with any police investigation.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

Before I move on to my next round of questions, I want to thank General Eyre.

I don't know if we'll have you back again before the end of the session and before you retire as chief of the defence staff. I want to thank you for the incredible service and leadership that you've provided during a difficult time in the Canadian Armed Forces.

We scanned through the defence policy update, and in no place do we talk about war footing. We know from the department's reports that only 58% of the Canadian Armed Forces is standing ready and can be deployed. The air force is in even worse shape, with 55% of its equipment unserviceable or unavailable. In the Royal Canadian Navy, 54% of the ships and crews are not deployable, and Vice-Admiral Topshee's video spoke to that. In the army, 46% of the equipment is unserviceable.

We talked about being 16,000 troops short, and we talked about 10,000 troops being undertrained and not deployable. Where are we at right now with the number of troops that we have in total as members of the Canadian Armed Forces? My understanding is that 15,000 people applied to be members of the Canadian Armed Forces and walked away because of the timelines for recruitment.

[Gen Wayne D. Eyre]

Mr. Chair, there is a lot in there.

Firstly, on the policy document itself, you talked about war footing. The characterization of the security environment as it applies to Canada has geopolitical, technological and climate change in there. I'm happy with that.

Likewise, the strategic framework's focus on foundational readiness and deterrence is absolutely necessary. I think something all Canadians need to realize is the relationship between our vital national interest of prosperity and deterrence. Deterring aggression and instability in the international order, as a trading nation, is absolutely required. Do you think we have financial problems now? If we can't collectively deter further imperialism and the like, it's going to be much more difficult.

Again, I'm happy to see that we were listened to in terms of building up foundational readiness. Before we get new capabilities, we need to build readiness in what we have. We look at those pillars of readiness: personnel—which I'll get to in a second—equipment and the serviceability rate, for which we're getting the national procurement funds. It's not everything we asked for, but—

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

Could I interrupt here?

[Gen Wayne D. Eyre]

Yes.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

I think we have a lot here to discuss in the defence policy update.

I want to move the following motion so we can dig into this in greater detail:

That, given the state of the Canadian Armed Forces, which is experiencing record low recruitment and retention, and sees active service members using food banks and living unhoused, pursuant to Standing Order 108(2), the committee undertake a study on the timeline and implementation of the Defence Policy Update. That the committee shall hold a minimum of seven meetings for the duration of the study; that the committee invite the Minister of Public Service and Procurement, along with relevant defence industry, academics and other stakeholders; and that the committee report its findings to the House.

That was originally circulated, but I made some minor amendments, since we had the Minister of Defence here today, along with department officials.

Can I speak to that, Mr. Chair?

[The Chair, Liberal, John McKay]

You may. It's been tabled, it's in order and it's relevant.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

I don't think this is too complicated.

I would just say, colleagues, that we have a lot to unpack in the DPU. General Eyre has started to lay out all the things that need to happen to address the challenges we have in the threat environment we're facing.

I think that for us to thoroughly know what's facing Canada as a nation, from a threat environment standpoint, and how we're going to address it with the current recruitment and retention crisis we have.... Look at housing continuing to be a challenge, the cost of living crisis that's been created by the Liberal government because of the carbon tax, and inflationary costs going up so that we had troops using food banks and relying on food donations when they were in Ottawa on training. We should take a fulsome approach to the DPU to ensure it is addressing the threat environment we're facing and the needs of the Canadian Armed Forces and to ensure we're buying the right kit for those who are going to be needed to do the tasks at hand.

We haven't even touched on the DPU on the research side and where we're going with artificial intelligence. How are we going to use more robotics? What about more drone capabilities in the air, on the ground, and in and on the sea?

We have to take a fulsome approach to this. I think seven meetings are required.

[The Chair, Liberal, John McKay]

As a point of clarification, your notice of motion says, “eight meetings”.

[James Bezan, Conservative, Selkirk—Interlake—Eastman, MB]

I did some amendments on the fly, because we've already had the Minister of National Defence. That takes away one meeting, so I'm saying, “seven meetings”. Also, I've added in, after “using food banks”, “living unhoused”.

[The Chair, Liberal, John McKay]

Okay. Thank you.

Mrs. Lalonde.