INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, June 1, 1999

• 0904

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): To order, pursuant to Standing Order 108(2), a study on a document entitled “Sustaining Canada as an Innovative Society: An action agenda”.

We're very pleased to welcome the Canada Foundation for Innovation. With us we have Dr. David Strangway, the president and chief executive officer, Carmen Charette, the vice-president of programs, and Manon Harvey, the vice-president of finance.

We're very pleased to have you back with us again and we look forward to your presentation. Then, I'm sure, we'll have a number of questions for you.

• 0905

Dr. David W. Strangway (President and Chief Executive Officer, Canada Foundation for Innovation): On behalf of the Canada Foundation for Innovation, I want to thank you, Madam Chair, and the members of the Standing Committee on Industry, for the invitation to appear.

As you mentioned, I have with me today Madam Carmen Charette, who is our senior vice-president of programs and operations, and Manon Harvey, who is the vice-president of finance. Also with us is Denis Gagnon, who is a senior adviser to the Canada Foundation.

We're very pleased to be here, for at least three reasons. First, it's an opportunity to tell you something about our organization and where it is in its five-year mandate. Second, I'm sure that we will be able to exchange interesting ideas on the importance of sustaining Canada as an innovative society. Third, the comments and suggestions resulting from today's discussions should prove most helpful to us in our own strategic thinking as we look ahead in the CFI.

The mandate entrusted to us by the Parliament of Canada in 1997 prescribes that we invest in capital infrastructure projects to strengthen the research capacity in Canadian universities, colleges, hospitals, and not-for-profit research institutions. These investments are directed to the areas of health, engineering, science, and environment.

Our governance model is somewhat unique. We operate as an independent corporation and we make our investments in partnership with governments at all levels as well as with the private and the voluntary sectors. According to the funding formula stipulated in the act that created us, the CFI injects up to 40% of the capital costs of infrastructure projects, with the other partners I mentioned providing the remaining 60%.

There is no question that we are responding to an urgent and considerable need. We had earmarked $400 million for the initial competition in 1999, but when we put out our first call for proposals, which went out in 1998, the demand far exceeded our projections. Indeed, Madam Chair, we received some 800 applications totalling close to $3 billion, of which CFI's share would have been $1.2 billion in the first year alone.

The good news was that this showed that the applicants felt confident they could raise the 60% in matching funds from the other partners. The other good news was the very high level of commitment from all of the provinces, which on average have so far contributed 40% in addition to the costs of approved research infrastructure projects.

We are also observing an interesting trend at the provincial level, in that a number of provinces are now establishing special agencies or ministries focusing on innovation. This is the case, for instance, in Quebec, in Ontario, and in Alberta.

You will all know, of course, that last February, in the federal budget, the Government of Canada reaffirmed its own commitment to innovation by allocating to the CFI an additional $200 million, bringing our available total to $1 billion. This sum being invested, it will rise to some $1.3 billion and therefore will have the potential to trigger other partner contributions in the order of a further $2 billion. Altogether we are looking at an investment of over $3.25 billion in the research infrastructure in this country. This research infrastructure will help build a top-quality research environment in Canadian institutions and will help us to keep our best and brightest at home.

The report entitled “Sustaining Canada as an Innovative Society: An action agenda”, which was tabled in September 1997, recognized that research and innovation have become twin pillars of the knowledge-based economy, and I quote:

University research is the wellspring of innovation. Clearly, it is the foundation for the entire process that turns knowledge and ideas into new products, patents, and processes.

The CFI supports this vision, and we do so in a concrete fashion: by establishing funding mechanisms in consultation with research institutions and their partners; by putting major amounts of money into leading-edge research; by complementing the actions of the existing granting councils; by being responsive to the many suggestions that we receive; by encouraging innovation in the very way that we manage ourselves as an organization; and by keeping our operating costs to a minimum.

• 0910

Our team is small but very dynamic and totally committed. We operate with a clear sense of purpose and within a finite timeframe. We rely on an impressive number of volunteer experts to assist us in the assessment—around 600 so far—to help our board of directors make its final decisions.

Over the last year, we have turned an important corner from planning what we'll do to actually doing it. By the summer of 1999, within another month, the CFI will have invested $480 million in research infrastructure. When coupled with funds from other partners, this will result in a much needed infusion of $1.2 billion for capital research infrastructure in Canadian universities and research institutions.

These strategic investments in infrastructure, however, are really about investments in people, which recognize the immense potential of our research community and celebrate its creative excellence. In supporting world-class expertise in universities and research institutions, we are putting in place the right conditions to attract and retain top-quality researchers in Canada and to train young Canadians for the knowledge-based economy.

We are also reinforcing, Madam Chair, the critical role that universities play in the sustainable development, both social and economic, of many smaller communities across Canada.

I would like to end these very brief remarks with one last point, and it has to do with the importance of research collaborations in a global economy. Among the CFI criteria for eligibility, there is one that requires that institutions applying to us indicate how their project will benefit Canada. We are already finding that more attention is being paid to research priorities and strategic objectives. This, in turn, seems to favour cross-disciplinary cooperation, as institutions come together to make the most effective use of the contributions they are requesting.

I finish on that note because this is a key aspect on which we have been asked to comment. Clearly our ability to establish a strong research culture in Canada, whether it be in health, science, engineering, or the environment, will depend largely on our capacity to compete on the international scene, with exciting jobs created at home, with our research findings effectively commercialized, and by demonstrating to Canadians the real impact of research on their quality of life both now and for generations to come.

The challenge is great, but a lot of outstanding work is getting done to attract and preserve our very rich intellectual capital, indeed, one of our most precious national resources.

Thank you, Madam Chair and members of the committee. My colleagues and I will be very pleased to answer your questions.

The Chair: Thank you very much, Dr. Strangway.

I'm going to start with Madam Lalonde, s'il vous plaît.

[Translation]

Mrs. Francine Lalonde (Mercier, BQ): Thank you, Madame Chair.

My question relates to your criteria. In your closing remarks, you referred to CFI eligibility criteria and stated that institutions applying for funding must indicate how their project will benefit Canada. What other criteria do you use?

Ms. Carmen Charette (Vice-President, Programs, Canadian Foundation for Innovation): All projects are judged against three criteria, the first of which is the quality of the research and the need for the requested infrastructure. We consider the research projects that will be possible with this infrastructure, as well as the quality of the research team that will be receiving the infrastructure in question.

The second criterion is the ability to boost innovation in Canada. We look at components such as the training of researchers or young people hoping for a career in the research field. We also evaluate the extent to which investing in the proposed infrastructure will attract and retain highly skilled researchers who will give us a competitive edge internationally.

As we already mentioned, the third criterion is the potential benefits of the project to Canada.

Mrs. Francine Lalonde: Could you elaborate further on this third criterion?

Ms. Carmen Charette: We weigh the socioeconomic benefits and how the project will enhance the quality of life of Canadians, from a health as well as an environmental standpoint.

• 0915

We also look at collaborative efforts with the private, public and para-public sectors to ensure that the infrastructure projects we invest in benefit users of the research.

Mrs. Francine Lalonde: To enlighten me further, could you tell me in what way projects might prove not to be beneficial to Canada?

Ms. Carmen Charette: How these projects might not be beneficial to Canada?

Mrs. Francine Lalonde: You said your third criterion was whether the project benefited Canada? Since we're talking about research projects, how could they not benefit Canada?

Ms. Carmen Charette: You're correct in that most of the research projects submitted will benefit Canada. Institutions are quite familiar with the criteria that we use because transparency is one of the principles underlying our procedures and policies. We're not talking about groups of researchers who apply independently to the foundation. Rather, we're talking about applications that we receive from institutions. These institutions have procedures in place for selecting projects that will be beneficial to Canada. In most cases, the institutions that apply to us have considered this criterion. Obviously, we are asked to consider a number of worthwhile projects and we must select those that we feel could be of greater benefit to Canada.

Mrs. Francine Lalonde: This process intrigues me. When you say “benefit Canada”, aren't you really saying, for example, that these projects with benefit Quebec rather than Canada? For example, you're not looking at whether the research team has sovereigntist leanings, are you? I would hope that you're talking about the socioeconomic benefits of the project. Here again, however, isn't it difficult to choose, because it isn't always obvious which research projects will produce results?

Ms. Carmen Charette: Obviously, the selection process isn't easy and that's why we rely on experts and set up multi- disciplinary evaluation committees which, based on the information supplied, weigh the potential benefits of project proposals. When we talk about the benefits to Canada, in some cases, we're talking about the potential benefits a project can bring to Quebec, Ontario or British Columbia. That is how we go about choosing the projects in which to invest.

Mrs. Francine Lalonde: It seems to me that this criterion leaves you considerable latitude to choose one project rather than another or to favour one research team over another.

Ms. Carmen Charette: Each project must satisfy the three criteria I mentioned earlier. The quality of the research and of the research team are a very important consideration when the evaluation process is carried out.

Mrs. Francine Lalonde: Thank you.

The Chair: Mr. Bellemare.

Mr. Eugène Bellemare (Carleton—Gloucester, Lib.): Thank you, Madame Chair.

[English]

Capital infrastructure projects: can you give me some examples of those that have been accepted? Take two examples of good causes and two examples that were turned down.

Dr. David Strangway: It's easier to give you the good examples than it is to give you the ones that were turned down, but a number of them have been turned down, in very significant numbers.

First, to give you a couple of the ones that were approved, one is the very large project at the University of Saskatchewan, the Canadian Light Source project, which was perhaps one of the biggest projects that we have been engaged in, that Canada has been engaged in. That is one that is going to be used as a large facility, but it is a large facility to do a lot of small science. That is, investigators from many different communities will use that facility, whether it's in genetics or materials science or a whole variety of areas. There were something like 19 or 20 universities that came together to make that particular facility happen. That's one of the big ones.

Let me give you some—

Mr. Eugène Bellemare: When you say facility, do you mean the lab or do you mean the building?

• 0920

Dr. David Strangway: In this case, it was the lab and the building. The building was incidental to the lab. They obviously had to have the building in order to put it in. It was based upon the originally existing accelerator lab that was there, so it's an extension to the building. It's not a completely new building absolutely from scratch, but it does include a lot of new equipment and facilities, and it does include some building. The total project is about $140 million, as you will understand, and our contribution is $56 million for that particular project.

Mr. Eugène Bellemare: Who provided the rest of the money?

Dr. David Strangway: In that case, it was a variety of sources. Some of the rest of the money came from federal agencies other than the granting agencies, because the federal agencies themselves are eligible funding partners. A significant amount of the money came from the Province of Saskatchewan, so the province itself put in a significant amount and, interestingly, in this particular case, the City of Saskatoon actually put money into the project as well. There were three levels of government involved in the matching of our funds, but there will also be, in the longer run, a significant private sector participation, because this will be a facility that will be used by the private sector for their measurements of genetic materials and so on.

Mr. Eugène Bellemare: And the bad guys...?

Dr. David Strangway: Before I go to the bad guys—and I'm not going to give you specifics of bad guys, but I'll give you some of the general nature of bad guys—in terms of a second category of projects, we set aside one category that we called new opportunities.

The new opportunities category was to assist young or new faculty members who are being brought into the system in Canada. The idea was that many of these people have a great deal of difficulty in acquiring the facilities they need to do whatever it is that they're very good at. We have set aside a fund, which was up to $40 million in the first round. We have supported 213 projects coast-to-coast, involving 400 new scholars.

I'm not picking one out of that category, but what I'm saying is that this has had an enormous impact. What we're hearing from these young people is that, first, they didn't know that Canada cares about what they do. They're really excited that there is this kind of investment in what they do.

The second thing they're telling us—and we hear this from most of them—is that this will permit them to really achieve their potential. They tell us that without this they could not have achieved their potential, that with this they can stay in Canada and still be doing very good work that is competitive.

Thirdly, they say—the young people are pretty consistent in this—they're very proud to be able to be doing this and they want to share what they're doing with Canadians. They want Canadians to know what they're doing and to understand that what they're doing is important to the country.

This new opportunities program has been a real success.

Mr. Eugène Bellemare: What kind of people do you turn down?

Dr. David Strangway: Let me give you a generic example of the kind of project we turn down. There have been a lot of requests for buildings. Building needs are very serious on campuses. We all know that. In the past two or three decades, they haven't had the funds to properly refurbish or to create facilities.

Let me give you a “for instance”. For instance, suppose we have two proposals. One says that they need a new building but the building is really to replace an old facility where the roof is leaking and there are problems with it and they're going to keep doing the same things. Suppose there is another building for which the people are coming forward and saying they need new space because they have new faculty members and new positions coming on stream, with a whole way of bringing people together to do things differently—and by the way, to do this they need a new building.

There are a number of projects that were turned down that were in the nature of the first kind, which was, “help me to do what I'm doing and have been doing all along”, and there are a whole lot of projects that are saying, “help me to do something differently and much better than I was able to do it in the past”, crossing discipline boundaries and so on.

There would be several projects that were turned down where it was on the lines of business as usual; that would be one of the examples. What we're looking for is not just helping them to do what they're doing now. We want them to think about how they can do things better, about how they can do things more effectively. That's what we're looking for in the proposals.

The Chair: Last question, Mr. Bellemare, please.

Mr. Eugène Bellemare: That threw me off.

Dr. David Strangway: She threw you off or I did?

Mr. Eugène Bellemare: She did. I lost my train of thought.

• 0925

An hon. member: The train left the station.

Mr. Eugène Bellemare: Yes.

Dr. David Strangway: That's all right. We have a a brain research institute.

Some hon. members: Oh, oh!

Mr. Eugène Bellemare: Touché. That's good.

Of the people you provided with funds who are true innovators as opposed to maintenance...how many of them have stopped their projects now?

Dr. David Strangway: How many have started?

Mr. Eugène Bellemare: Stopped. For example, you've given money for something innovative, for a lab or a part of a building, and they've started the project but it's gone haywire, it doesn't exist any more, it's done. Are there any like that?

Dr. David Strangway: Not that we know of. Now, to be fair, this program—

Mr. Eugène Bellemare: Whoa! Not that you know of...? Don't you monitor these things?

Dr. David Strangway: We are monitoring them. What I was just going to add, however, was that the program is only just getting started. Our first grants went out a few months ago—

Mr. Eugène Bellemare: Oh.

Dr. David Strangway: —so we will be doing a lot of monitoring. When I come back next year, I'll be able to give you a much better answer to that question.

Mr. Eugène Bellemare: Thank you.

The Chair: Thank you, Mr. Bellemare.

Mr. Jones, please.

Mr. Jim Jones (Markham, PC): Maybe my question is redundant if the program just started, but I was going to ask about one of the things that really will demonstrate whether the country has a good future in research, that is, patents. How many patents have been generated in Canada by these organizations that are getting funded on these projects?

Dr. David Strangway: Again, my answer is really the same: we cannot give you that answer today. But what we are doing is preparing a process by which we will be seeking progress reports—short papers—on what every one of the investigators or investigator teams is receiving from us. We would expect to have the first cut at that information available by the end of this calendar year and, again, I think we'll be able to give you a much better answer to the question.

I should add that what we're doing is providing the capital. Of course, they also have to deal with the question of the operating costs and what I call the non-capital research infrastructure needs and so on.

We will claim a lot of credit for those activities, but when it does come forward, I think it will be important for people to understand that there will be a shared contribution. We put the capital in and we make the capital investment, but in order to get that return on investment there will have to be the operating activity so that they can pay the salaries of the individuals, the heating costs, and all of the rest of that. Some of that will come through the granting agencies.

But we will be compiling that information about where we have been a major participant in helping them to do that.

Mr. Jim Jones: Of the projects that you have approved, how many do you estimate will ultimately result in a product down the road?

Dr. David Strangway: That's a very hard question to answer. Being explicit, as I think was said in answer to some of the earlier questions, we are looking for the returns to Canada, and in a number of cases there are spin-off companies being formed as a result of this. That's the information we're looking for.

In fact, I think we will see a significant amount of economic activity arising from this, more in some cases than in others, and for longer terms in some cases, but it will reinforce that activity.

Interestingly, in terms of the matching funds, it looks as though roughly 20%, most of the rest—with 40% from us, roughly 40% from the provinces—is coming from private sector partners.

We also expect that one of the consequences of having these fine facilities is that there will be more interest in doing collaborative projects with the private sector. For example, I mentioned the light source project in Saskatoon. It's inevitable that people who are interested in using X-rays to determine structures will have to use that facility. As I was indicating earlier, it is very central to the pharmaceutical industry because of their interest in genetics and in the structures of proteins and so on. It's also very important to people who are interested in surface studies. When you look at things like aircraft and some of those kinds of things, what happens on the surfaces of materials becomes very important.

So we expect not only to have private sector participation in capital, we think there will be a lot of private sector joint projects and we think there will be spin-off companies. We think that on all those fronts there will be the kind of activity that I think you're referring to, but this is going to take time and it's going to be measured over time.

What's very encouraging in terms of the proposals, though, is that in those proposals the institutions are looking at those very questions and addressing those very questions as they think about it. There's a kind of culture change that's taking place. They're saying yes, this is part of what we are all about.

• 0930

The Chair: Thank you, Mr. Jones.

Mr. Keyes, please.

Mr. Stan Keyes (Hamilton West, Lib.): Thank you, Madam Chair.

Thanks very much, Dr. Strangway, for your presentation to us this morning.

I'm going to take a theme here: what's in it for the Canadian taxpayer?

When we had NSERC before us—and NSERC has been around for a while, whereas you're just kicking in and starting up—they did admit to me that they do a very poor job in trying to get a return on investment. In your presentation, you mentioned that the Parliament of Canada in 1997 prescribed that we invest in capital infrastructure. The term “invest” means to me that there's going to be a return of some kind to the Canadian taxpayer.

Are you confident that you have the mechanisms and procedures in place to ensure that two years down the road you won't come to us like NSERC has and say that you have some problems with this in this particular area, so that there are tangible returns? Maybe you can give me an example of where the Canadian taxpayer, as you prescribed here.... As it says here, we are investing 40% in a project, with 60% coming in matching funds from other partners. I would imagine that those other partners are certainly going to draw up the papers to ensure that they get a return on their investment.

If we embark on a project at the research level and a product comes about as a result of that research project, is the Canada Foundation for Innovation going to ensure that the Canadian taxpayer will get a piece of the action, so to speak, so that there's a reinvestment of funding to the Canada Foundation for Innovation and that as a result, one day these projects might be funding this very program without having a need to come to the federal government for more money?

Dr. David Strangway: Let me be quite clear. When I say investments and return on investments, I am not talking about an agency that has been set up to receive the “cashback”. This is not entirely or totally analogous to the private sector return on investment.

What we'll be looking for on the return on investment is going to be defined in a somewhat different way. We are going to ask people to report to us and to tell us, and for us to be able to review what they have been accomplishing as a result of this.... In part, it's in answer to the question from over here. For example, in December we will organize a major conference on innovation. One of the things we will do there is to ask these various investigators to tell us what it is that they have been accomplishing, so that there can be a reporting back, in a written and public manner, that describes what those individuals or groups of individuals are able to do and have been able to do on behalf of Canadians.

We are not looking at the private sector model of a particular cashback so that we become totally self-sustaining. We are making the initial investment. We use that terminology because what we want is that all of the people who are on the receiving end of this funding, from the other sources as well as from us, are looking at what they are doing, which is in fact helping Canada to do a better job in the whole area of innovation. So it's—

Mr. Stan Keyes: It all sounds very noble—

Dr. David Strangway: Well, it is.

Mr. Stan Keyes: It sounds very noble and very lofty, but the reality is that if we're participating in a project or in some kind of research that will ultimately result in a product that is patented, why the heck aren't we signing a deal that says, look, we're there for you, it might not work at the end of the day, but we know that we'll get intangibles as a result of our investment? People will get jobs, there will be research in a field that may not come to fruition with an actual tangible product...and those are good. But at the same time, if it does result in a tangible product, why aren't we...? Maybe we've put the cart before the horse on this one, but why have we decided not to get some kind of return on the end product for the Canadian taxpayer?

Dr. David Strangway: There will of course be a return to the Canadian taxpayer, but it will not come back into the central agency. Where it will go.... You should realize that while we work with investigators and investigative teams—

Mr. Stan Keyes: This is good, so—

Dr. David Strangway: —we work specifically with the institutions.

Mr. Stan Keyes: Okay.

Dr. David Strangway: So how it happens in the patenting policies and spin-off companies and so on is that it will be the institutions that will be taking positions in these. They may take an equity position in a spin-off company. They may actually make an independent investment.

• 0935

Mr. Stan Keyes: An institution like what?

Dr. David Strangway: Like a university or a teaching hospital.

All or most of these institutions now have intellectual property policies. The return on investment in those areas will go back to those institutions, following their intellectual property processes. That's what we want to document, because we want to show that in fact that kind of activity has happened, that the money won't come back to us centrally; it will go to those institutions to help them do the job that they're doing on behalf of taxpayers.

Mr. Stan Keyes: So the Canadian taxpayer is investing 40% into a university that is carrying out research in a particular area.

Dr. David Strangway: That's right.

Mr. Stan Keyes: The university's research results in a product, a biotech product, a whatever product—

Dr. David Strangway: Exactly.

Mr. Stan Keyes: —and the university invests in that product. It gets a return, but if we back it up to the 40% original investment, we can sit back and say, boy, we did a great job, and we can look at the progress that, first, the the product has made—

Dr. David Strangway: That's right.

Mr. Stan Keyes: —then the patentor of that product, and then the university, as a piece of the action on the product.

Dr. David Strangway: That's right.

Mr. Stan Keyes: But all we can say is what a great job we did.

Dr. David Strangway: Yes, but we will want to document it so that we know the answers to those questions. We want to be able to show that the investment is returning but that it is going to be returning through the institutions rather than back through us.

Remember, those institutions are also supported by the taxpayers.

The Chair: Last question, Mr. Keyes.

Mr. Stan Keyes: This is a twofold question. Is there a limitation? If an organization comes to you and says they have a idea for a central research idea, a collective somewhere.... Let's say it's like Microsoft—big companies with big money. Are they just as eligible to receive that kind of funding as anyone else is? Or do we say to them, look, you make a lot of money, so you make your own investment in that kind of research? How big do you get?

Dr. David Strangway: Our funding goes only to not-for-profit institutions.

Mr. Stan Keyes: Okay.

Dr. David Strangway: Our funding does not go to the private sector. The objective is for the institutions to find the private sector partners to come in with them.

Mr. Stan Keyes: At the end of the day, do we own the building? You spoke of those buildings.

Dr. David Strangway: Again, the building, the title to the equipment, will remain with the institutions.

Mr. Stan Keyes: Oh. Not with us?

Dr. David Strangway: Yes.

Mr. Stan Keyes: So we provide $56 million for a building?

Dr. David Strangway: In this case, it wasn't just a building.

Mr. Stan Keyes: No.

Dr. David Strangway: It's a whole lot of really—

Mr. Stan Keyes: And all the ancillary stuff.

Dr. David Strangway: Equipment and so on.... The title of that will remain with the University of Saskatchewan.

The Chair: Thank you, Mr. Keyes.

Mr. Jaffer, please.

Mr. Rahim Jaffer (Edmonton—Strathcona, Ref.): Thanks, Madam Chair.

Just to follow up on that one question that Mr. Keyes was asking, you say you develop partnerships with the non-profit institutions and then it's the institutions' role to maybe source out industry partners and so on and so forth. In the case of, say, the University of Alberta, where they do have the office of industry liaison that sources out those types of relationships, do you have any direct involvement, then, with them? Would it be through the department levels that you would source out various projects and funds? Or would it be directly through their department of industry liaison that you would partner with them?

Dr. David Strangway: You're talking about Jim Murray, my old employee when I was at UBC. We lost him to the University of Alberta. We regretted that greatly.

Fundamentally, we make the agreements that we make in transferring the dollars for this facility to the institution so that we would be working with the office of institutional research or with the vice-president of research at the University of Alberta. Obviously the department and the individual investigators have a very deep vested interest in it, but because there is this very large amount of matching money that has to come into it, and because these are very large investments in many cases, we deal strictly with the institution, centrally, and they work out their arrangements with their individual investigators or individual departments.

Mr. Rahim Jaffer: Okay.

Dr. David Strangway: So there would be a lot of input, both in the proposals as they come forward and in responding to the proposals. Our letters would not go to the individual investigator. Our letters would usually go to the president of the institution, who would then work it down through the system. We don't work at the departmental level, and that's different from most of the granting agencies that actually deal with individual investigators.

Mr. Rahim Jaffer: Right.

There's another thing I had a question about. You said that the CFI injects up to 40% of the capital costs for infrastructure projects and the remaining 60% is made up elsewhere. Could you tell me how much of that 60% would be private funding, from industry, let's say?

• 0940

Dr. David Strangway: Roughly speaking, it looks as though it's going to turn out to be 40% CFI, 40% from the individual provinces, and 20% from the private sector. It's not quite as simple as I've described it, and it varies in projects, but it's roughly a 40-40-20 basis.

Mr. Rahim Jaffer: Last week we had the National Research Council in front of us. One of the things I asked the president about was that obviously in this country we have some pretty aggressive tax credits when it comes to R and D—

Dr. David Strangway: Yes.

Mr. Rahim Jaffer: —more aggressive than even the U.S., I think. Yet somehow our levels of investment in R and D are quite low in comparison to some of these other countries. I wanted to know, from his experience, what he would suggest are obstacles in the way, obstacles that we as legislators should maybe be looking at to see what we can do to make incentives better or to review the tax system or whatever it might be. He gave us some of his suggestions, and I'm going to ask the same thing of you because you're dealing in that sort of area. What are your suggestions to try to deal with this?

Dr. David Strangway: I don't have a lot of suggestions on the tax front. Obviously the Canadian context in general is pretty supportive in terms of tax credits and so on, and it is one of the countries that in general is better for the purposes of scientific and research and development tax credits. The issue for us and, I think, the reason—in part—that the CFI was set up, is this: are we giving our people, and not only the young people, the tools that they need in order to be competitive? We're in an era of what I call continuous scientific revolutions.

I can remember in the earlier parts of my career where a revolution in science would come along every 10 or 15 or 20 years, but today they are almost constant, just continuous. The world is moving very fast in this area and the question is, in part.... It's not an answer to the tax part, but the part that we're looking at is whether we can give people the tools they need to really be competitive so that they are fully competitive and can, as I say, release their creative energy to go into this.

For us, the second element of this is this focus on—it has been mentioned earlier—the question of patenting and company spin-off and so on. That's relatively new thinking in Canada. There are some institutions where spin-offs have been taking place for a long time, but this level of activity is increasing dramatically. We think that giving them these tools will help that. Partly we're trying to do this within the existing tax structure.

Now I do have to say that there is one small issue which is of concern—actually it's not so small. You don't give tax credits for research and development where it is a capital project. For our particular activity, we do have an issue. I think we might do a little better in terms of private sector participation if there were a recognition that capital investment made through an institution could be given a tax credit.

But the main approach for us is to give people the tools they need. There are problems, opportunities, and solutions, and there are tools in between. We provide a very significant element in giving people tools that in fact they never could have dreamed of, even a few years ago. Yet today you must have those tools. You cannot be competitive if you don't have those tools in people's hands.

The Chair: Mr. Jaffer, please.

Mr. Rahim Jaffer: You mention the tools needed to be competitive. Again, I just want to focus on the one issue that also came up when we were talking to the president of the National Research Council. One of the problems, maybe because of lack of competitiveness with the U.S. to some extent, when it comes to tax structure, is that there's a sort of a branch plant mentality, as he mentioned—

Dr. David Strangway: Oh, yes.

Mr. Rahim Jaffer: —whereby you have a lot of the innovations taking place in the U.S. and a lot of the money being spent there, but operations of their companies working here. As one of the tools for competitiveness, like you mentioned, would you say that we need to evaluate that issue when it comes to comparing tax scenarios between the U.S. and Canada?

Dr. David Strangway: I think you probably do. The tax issue, which is not directly a CFI issue, is almost to the whole question of the brain drain question and getting into personal tax levels. That's another agenda and I think you can spend a lot of time talking about that question.

• 0945

It seems to me there are two conditions for keeping these bright, talented people in the country or bringing them back to the country. The first is compensation and tax, and that does need to be looked at. The second is providing them with the tools and the capacity to deliver their potential. I said earlier that what I'm hearing from the young people is this: with this particular piece of equipment or with this particular facility or whatever, they're going to be able to do their very best work and they're going to be able to stay in Canada.

There is more than one reason why people decide to go somewhere else. One of the reasons is something that we can do something about. The other reason is something we can't do anything about, and that, of course, comes.... It's not just taxation, by the way; it's also the compensation levels. That's a very serious issue, but we are creating an environment in which they can stay here and do their very best work.

The Chair: Thank you very much, Mr. Jaffer.

Mr. Lastewka, please.

Mr. Walt Lastewka (St. Catharines, Lib.): Thank you, Madam Chair. I'm glad you clarified where the matching funds or partnering funds are coming from. I still notice the 20% in the private sector. We in Canada have the great problem that the private sector is not investing more in research.

I also note that Canada has a deficiency in productivity and innovation in machinery, equipment, and tooling. Every chart that comes on shows that. Are there any projects you have that are specific to that area?

Dr. David Strangway: There are projects under review. In fact, the panel is meeting as we speak. The board meets on June 22 and will make the final decisions of this first major round of proposals. There are some in that area in the mix. I can't tell you for sure what the outcome is going to be, but within a month we should be able to answer that question.

Mr. Walt Lastewka: I've noticed that over many years—

Dr. David Strangway: There are such projects in the mix.

Mr. Walt Lastewka: —the amount of automotive research in Canada really went down—

Dr. David Strangway: Yes.

Mr. Walt Lastewka: —mainly because of the desire of the Big Three to have their research close to home. But I also note that Windsor is very close to the headquarters of the Big Three—

Dr. David Strangway: Yes, sir.

Mr. Walt Lastewka: —and many efforts have been to try to support more automotive research in that area. I don't come from that area, but promoting it closer to headquarters is the right thing to do. Is there any work being done in order for us to get part of those big dollars in investment back into Canada that the Big Three put in North America?

Dr. David Strangway: Well, I think a publicly aware decision was made in the March competition. To be very candid, the Windsor project, the University of Windsor-Chrysler project, did not get funded. However, what happened was that Carmen and I went down to visit the University of Windsor and to visit the people at Chrysler to say to them that this is a very important area for us, here are the ground rules, here's how the system works, and if you're going to come back to us—and we'd like you to come back to us—this is how our panels are functioning and working. The particular proposal was not seen by the panel members to be one that should be supported.

But that was basically a message from us and from our board to those particular individuals to say that automotive research is of interest and is important in the country.

We have two more major competitions coming up. One will call for proposals this fall and one will call for proposals next fall, a year and a half from now. The proposals will be due in January 2000, and we will evaluate them over the next few months. In the next round we hope to see some really first-rate proposals in the area of automotive research.

Now, you understand that this is a very interesting agency, because we're always faced with the struggle of getting the best ideas from the community that's involved and not giving them too many guidelines and, on the other side, giving them enough guidelines so that they can respond responsibly to the demands. What we've done with the University of Windsor and Chrysler is to describe how we work, describe how we function. They may come in with a new proposal or they may not. That's a matter for them to decide. My point basically is that there's a strong feeling that there are aspects of automotive research that can and should be carried out in Canada, because it's obviously a very large part of our economy.

Mr. Walt Lastewka: That's why I'm bringing it up, having been involved on the other side. Research left Canada because of the Canadian lack of support for automobile industry research and development.

• 0950

Dr. David Strangway: The University of Windsor and Chrysler have jointly built a major facility in Windsor that is oriented in this direction. There are other institutions in the country that have dimensions of research in the automotive area which are of considerable interest as well. We may see some institutions coming together to make a joint proposal in this area, but I can't tell you what's going to come in and I can't tell you what the outcome is. What I can tell you is that we've given signals that we believe this is an important area and that we think it's appropriate to submit good proposals.

Mr. Walt Lastewka: My concern is that every chart I see on productivity shows machinery equipment and tooling as a low part in Canada—

Dr. David Strangway: Yes.

Mr. Walt Lastewka: —and we're behind the U.S. in that area and we're behind the U.S. in supporting that area.

Dr. David Strangway: Yes.

Mr. Walt Lastewka: The CFI is probably a good facilitator in making it happen, but I still—

Dr. David Strangway: We're a good facilitator at making it happen and I hope we do make it happen, but we also need the good proposals in order to help to make it happen. But as I say, we have some on the plate today that fit some of those areas. In the automotive area, it will not be until the next competition now, but let's look for something good from them.

Mr. Walt Lastewka: I guess my continued work in this area stems from the fact that any time we can get research from a global corporation to do sole-searching in Canada, we should be supporting it to the nth degree, because we then become the researchers on the global scene.

Dr. David Strangway: That's right.

Again, not to pick one automotive company over another, but that's one of the things that was fascinating about the Chrysler project in particular, because it is a commitment to do major amounts of their research in Canada. They have the mandate from head office to do that. Interestingly, through that process they are able to give people at the universities access to computing facilities that are unbelievable; the facilities are across the border, but they can still get access to them to do their research projects and so on.

I think there is more coming. We are in the process of reviewing this first round with people over the next few months. When we put out the call for proposals in September, we'll be reflecting on what we have learned as a result of this first cut and thinking about how to do better the next time.

Mr. Walt Lastewka: I guess I look at it from this standpoint. On the one hand, this whole committee has been pushing to get more private funds into research, and then when we hear of someone who wants to put in private funds, we tend not to support it. That's how it has been perceived.

Dr. David Strangway: I understand that. I guess the only point I'd make again, without getting into the ins and outs of the specific proposal and so on, is that the guidelines we gave them were basically how they could put together a really first-rate proposal. I think we'll see something, but who knows? We certainly have responses back from the president. Our interface is always with the presidents or vice-presidents of the institutions. I think we will see things back from them. They've indicated to us they intend to and have said how much they appreciated our visit—they got us to our plane late on the way home, but other than that it was a great visit.

Mr. Walt Lastewka: I know of other universities that had additional research to be done in aluminum and so forth, where the private sector was going to put up money. We're lacking in that area.

Dr. David Strangway: Yes.

Mr. Walt Lastewka: I've done work with some universities on the welding of aluminum sheet metal and so forth. In this country we have very few skills. We have to go to—

Dr. David Strangway: I come from British Columbia. They've been trying to do aluminum hulls on the ferries out there—with some difficulty.

Mr. Walt Lastewka: Well, if we're—

The Chair: Mr. Lastewka, I have to move on.

Mr. Walt Lastewka: If we're improving machinery and equipment and tooling in manufacturing, we need to do some additional research and development—

Dr. David Strangway: I understand that, and that will be part of the call for proposals. There are some proposals in the mix now that are looking at some of those questions, but I understand the point.

The Chair: Thank you very much, Mr. Lastewka.

[Translation]

Ms. Lalonde.

Mrs. Francine Lalonde: I would like to know how much was invested in each of these three projects. I studied the material that you handed out to us. While you mention an amount in excess of $350,000, you do not specify exactly how much was invested in each project. I am certain that this information is public knowledge and I would like to have it, Madame Chair.

• 0955

[English]

Dr. David Strangway: We will be providing that in due course. The next round of the competition, of the board decisions, is on June 22. What we'd like to do after that meeting, then, is to put all that information together so that you get the global picture—project by project, but you get all the projects then.

[Translation]

Mrs. Francine Lalonde: However, you should be able to give me that information since you have already approved these projects.

Ms. Carmen Charette: You're correct in stating that over $350,000 has been invested in these projects. As of March, 59 projects...

Mrs. Francine Lalonde: That's right.

Ms. Carmen Charette: We'll get that information to you.

Mrs. Francine Lalonde: Thank you. Could you explain to me the difference between projects funded under the Innovation Fund, as opposed to those funded under the Research Development Fund and the New Opportunities Fund?

Ms. Carmen Charette: The New Opportunities Fund is designed specifically for new academic personnel hired by universities across Canada. That's the program Mr. Strangway was talking about where a certain amount of money is awarded to provide infrastructure during the first year.

The Research Development Fund is designed specifically for institutions that receive less than 1 per cent of the research funds awarded in the country. Generally speaking, these are the smallest institutions. Approximately 37 institutions are eligible for funding under this program.

The Institutional Innovation Fund is our largest program. Some 29 institutions can apply for funding under this initiative which, as I said, targets infrastructure projects.

Mrs. Francine Lalonde: You just mentioned another source of information that could prove valuable to us. You said that 37 institutions receive less than 1 per cent of the total in sponsored research at Canadian universities. Therefore, you must have a table of some sort listing each separate institution and the percentage of funding it received. Do you distinguish between provincial funding, private funding and federal funding?

Ms. Carmen Charette: We do have that information. As a rule, we know what the 40 per cent we allocate represents. We can automatically calculate the source of the remaining 60 per cent of the funding.

Mrs. Francine Lalonde: I see. I would now like to bring up another matter that concerns me. Funding comes from a variety of sources. The federal government has slashed transfer payments to the provinces, particularly for education. These cuts, which represent a 40 per cent decrease in funding since 1995, have dealt a serious blow to universities which are now suffering from underfunding problems and cannot purchase new equipment. The government imposed these cuts on the provinces based on population figures.

The federal government then turned around and created the Innovation Fund, the Networks of Centers of Excellence Program and the CANARIE Program. There are also a number of granting councils in existence. Institutions appeal to all of these sources for funding, including provincial bodies. Undoubtedly, situations arise where applications for funding for the same program are examined simultaneously by various organizations. Isn't it a fact that some duplication does occur?

Ms. Carmen Charette: In most cases, there is little overlap between the projects that we examine and those that are submitted to the granting councils, for example, because of the scope of the projects. Using the mechanisms that we have developed, we try as much as possible to complement the work of other agencies.

• 1000

We have also endeavoured to harmonize our procedures and to conclude agreements with some partners, the provinces included, to prevent overlap and duplication. As part of these agreements, we do an evaluation that a partner can take into consideration in any future decision-making process. For example, a granting council had examined a project involving a synchrotron and we were able to refer to its assessment. The initial evaluation was incorporated into the next assessment.

We try to avoid duplication in the evaluation process as much as we can and to ensure that procedures complement one another.

Mrs. Francine Lalonde: The head of the NRCC informed us that he took into consideration provincial priorities. Can the same be said of the CFI?

Ms. Carmen Charette: Yes. Under the terms of the agreement reached with Quebec, when the province does an evaluation, it sends us a list indicating certain priorities and we take these into account when we do our own evaluation.

Mrs. Francine Lalonde: That doesn't mean that you respect these priorities, merely that you know what Quebec or Ontario want, in terms of their respective priorities.

Ms. Carmen Charette: That's correct.

Mrs. Francine Lalonde: Thank you.

[English]

The Chair: Mr. Shepherd, please.

Mr. Alex Shepherd (Durham, Lib.): Thank you very much.

Just very quickly, of the private sector partners you have, what percentage of them would be foreign owned? Would you know that?

Dr. David Strangway: I don't know that. I would think a fair number of them are not foreign owned, but that's one thing we would have to look at. We were talking about the potential of this Chrysler project, which of course would be clearly foreign owned, but I don't have a feel for that. We can look at it.

Mr. Alex Shepherd: Okay.

I've been looking through the projects, and they all look very interesting. How do you ensure that the infrastructure you're financing is a unique one, in other words, that it's one that the university system wouldn't have evolved by itself anyway? How do you know that the science you're underpinning is unique and evolutionary as opposed to a lab that they needed on their spectrum of development anyway and they're just accessing your funds to do it?

Dr. David Strangway: That's of course a very hard question to answer because, as I was saying earlier, fundamentally what we're after is that way of doing things differently from or better than they have been able to do them in the past. What they have to do is to show us what it is that's missing in order to make that happen. That is very much our objective. Would some of these people try to get it anyway? Maybe they would. Would they have the capacity to get it? Not very likely, given the way the funding of universities is today, as she was saying earlier. The institutions have less capacity to respond to these kinds of activities. We are trying very hard to ensure that it is, if not unique, at least coordinated.

Now what we did in a number of fields is that we brought together panels to look at areas like high-performance computing, to look at areas like genome centres, genetic centres, and so on. We asked them to look at multiple proposals that we had from across the country and say to us basically how they fit this in so that nationally there is a basic capacity to have access to high-performance computing. We've done this in libraries. The process is just being looked at now, but, for example, there are 67 universities that have signed on to a proposal for a digital library.

So we are trying to address that very question; I think we're addressing it reasonably successfully, but we are learning as we go, as well, so I think the next call for proposals will be more sharply focused in this kind of area. In some of these areas there is the need for a coordinated national strategy, yet at the same time we don't want to be so prescriptive that we don't get the really good ideas coming out of the community.

Mr. Alex Shepherd: How do we ensure that we get the maximum bang for the buck in the sense...? I'm aware that a lot of the equipment is probably foreign constructed but do you, in granting a proposal, insist or try to encourage the purchasing of this equipment within Canada? In other words, you get two bangs for the buck in that you're supporting the evolution of that technological industry as well.

• 1005

Dr. David Strangway: We haven't done a lot of that. In the area of buildings, that's of course all Canadian. In the area of equipment, it tends to be the very latest something or other, and that tends to come from Japan or from Europe or from the U.S. Yet if you're going to be right out there on the cutting edge, these are the tools that you must have.

In the case of the accelerator lab that I mentioned before, a lot of that will be homemade and homegrown, because they will be designing that facility not quite from scratch; they have the accelerator lab, which is the core, and then they will be building that facility.

When it comes to computers and the nuclear magnetic resonance machines and so on, we don't have big industries in those areas and we certainly don't have the machines that you can buy in Canada. I would love to have more focus on that, but I think we would be unrealistic if we pushed it too far.

Mr. Alex Shepherd: I understand that, but there's also the flip side. It's so easy for a purchasing agent or somebody to just say that they'll order all this equipment without actually considering the Canadian market first. I wondered whether it was part of your policy to consider the Canadian market first.

Dr. David Strangway: It is not at the present time, but it's one of the questions that we need to look at and reflect on.

Mr. Alex Shepherd: Thank you.

The Chair: One more question, please.

Mr. Alex Shepherd: What is missing from this scenario? We've talked to Mr. Carty and others. There's still something missing within this evolutionary technological synergy. Some people say the private sector in Canada is not really up to speed on commercialization. You're telling me that 80% of this has to be government funded—

Dr. David Strangway: Yes.

Mr. Alex Shepherd: —and that this private sector maybe isn't as up to speed as it could be. Are there some other things you see that we could do as a government to encourage more of that development?

Dr. David Strangway: Well, I could speak on this subject for hours, but let me try to summarize it in just a few minutes.

I think there is an increasing climate of awareness of this activity in the Canadian context. What is happening is that large numbers of small spin-off companies are being created, so there's an enormous amount of dynamism that's beginning to happen.

At my own former institution, we used to count 10 or 15 companies a year being spun out. One of the issues is that when they get to a certain size and they have some very unique process and all the patent protection and so on that they need, the question is, how do they grow to the next size? In our policies at the university, that is very often where we gave preference, first to provincial companies, secondly to Canadian companies, and finally to offshore companies. In the end, when they reached a certain size it was very common that you had to go in with the offshore companies.

So there is an evolution from the small to the medium that we can handle well. In our particular context, we have a very difficult time in going from the medium to the large, in effect. I don't know if that's an issue that governments can deal with. I don't know just how to deal with that. That's one issue.

In terms of other dimensions that are missing, to be very blunt, I think we all know that research funding, not just from the private sector but in Canada, has not competed very well with the rest of the world. I've been visiting the U.K. and France, and I've spent a number of years in the U.S. We still are way down the curve in terms of the funding of these kinds of people.

CFI is an enormously big shot in the arm and that is going to do a lot of things. However, let me also describe some of the problems that CFI is going to create or is creating.

When we have a very large facility or, for that matter, a medium-sized facility, and we support it, there is the need for ongoing operating funds to go with that. Canada has not really fully got its act together in how to do some of the larger-scale projects, in bringing together the capital and the operating capacity. I think that's one of the issues that somehow, together, over the next couple of years, we have to start looking at.

• 1010

The second question, which I think was raised earlier, is that if you look at what the capacity of the universities is today, let's stop and think.... Let me not get into federal transfer payments, because if you get into that you can go forever. But let me point out that the institutions are having a harder time providing the tools and the support structures.

Capital research infrastructure is what we are about. What we have not addressed yet is what I would call the non-capital research infrastructure, the technicians, the people who help to run the facilities, the people who keep them up to speed, the people who, when it needs a new piece of software in it, can go out and get that piece of software. There's a whole dimension which I would say is the operating grants we get through the councils, and then there are the non-capital infrastructure costs, which are very real costs. In neither of those are we doing enough.

I don't have a record of this, but I have had a number of people in the private sector tell me that if you over-expend on capital you can actually drive a company into bankruptcy, because they cannot in fact support this major investment and get the cashflow to back it up in order to get the use of it.

So I think that over the next year or two we have some really interesting issues...to be sure that we have the act together so that we are releasing the creative energy of Canada's scientific and engineering community. I think we've gone a long way and I think this program is doing an enormous amount, but there are more pieces before we really have the act together.

Imagine putting $60 million into a facility in Saskatoon. It is a terrific thing to do, but the work they had to go through to try to cobble together a guarantee that they can do the operational funds when that thing is up and running...it was really immense; they really had to go very far out on a limb.

I think there is a set of issues that, among government and some of the granting agencies and ourselves, we somehow need to address. I would say that the two of them are, first, operating grants for the granting agencies, and second, what I would call the non-capital research infrastructure, which the universities are less able to provide.

The Chair: Thank you very much, Mr. Shepherd.

Mr. Jones, please.

Mr. Jim Jones: In 1997 or 1998, how many patents were generated in Canada, and how many patents were generated in the U.S.?

Dr. David Strangway: I have the data somewhere, but I don't have my fingers on it, so I don't know. Canada actually does reasonably well in the patenting world. The question isn't so much how many patents were granted, the question is, what do we do with them, in effect, and what do we do with the licences? In fact, there is a very interesting statistic that I was given: on per dollar expended by government on R and D, Canada is number one in the G-7 countries in terms of patents. You're getting an enormously big bang for your buck in terms of actual patents, because we really are number one in the patents. We're also number one in the publications per dollar of grant.

Now, are those meaningful? I don't know. The real question is, in effect, what do you do with it?

Mr. Jim Jones: In your program, who owns the research and the patents?

Dr. David Strangway: The research stays with the institution and according to the institutional policy.

Mr. Jim Jones: Who has access to that research?

Dr. David Strangway: That is a matter for the institution itself, then, to work out with its partners. It may create a spin-off company or it may license it to an existing company. I don't know exactly, but in my own former institution I'd say about half of the revenue we got was from licensing and about half was from taking an equity position in a spin-off company.

Mr. Jim Jones: It was my understanding that in the U.S. whoever granted money to the university had access to the patents and that was one of the ways that they—say Japan, for example—were able to get a lot of free research done by all the universities in the U.S. Can that happen here?

Dr. David Strangway: It's not quite the same in the U.S. What they actually have in the U.S. is a thing called the Bayh-Dole Act—which doesn't mean that you should buy pineapples. Those are the names of the two senators who put the bill in place. What that actually requires is that the institutions who receive granting money have explicit policies that grant the patent rights to the institution, so the institution has a vested interest in making something out of it. It doesn't actually necessarily go back to the central agency. What they require before they'll transfer funds is that there is a policy in place, and that the policy then has the institution in fact holding a significant part of whatever the benefit is from that patent.

• 1015

We don't have it quite as rigorously here, but we're well down that road. As you may know, there is a big study underway by the people at Industry Canada with respect to the patenting and licensing of this activity through the institutions. In almost every case, it actually goes back to the institution and the institution is the one that then gets the benefit. Most of them are publicly supported institutions, so in a sense it's getting back to the taxpayer, but it's getting back through the institution rather than through the central agency.

The Chair: Thank you, Mr. Jones.

Mr. Peric.

Mr. Janko Peric (Cambridge, Lib.): Doctor, what's the process and the timeframe between the starting point and the approval point?

Dr. David Strangway: Its quite long. Let me point out that the proposals were received around the beginning of June last year. For the first program of the new opportunities for the new faculty members, those proposals were actually out in the fall. For the smaller projects to the smaller institutions, those projects have been going out as they submit the proposals and as we review them. Some of them are out and some of them are in. We get those turned around within a few months.

For the very large ones, we put those out. We needed panels and we needed a lot of reviews. We put out the lot of them in March of this year and the second lot will go out in June of this year. We think we can shorten the cycle time. Next year we will do the call for proposals in September for the proposals we do at the end of January. It's our intention to have the decision made and out within six months. We're learning along the way.

Mr. Janko Peric: How many people are involved in that process to approve one particular project?

Dr. David Strangway: It varies. In the case of these large proposals, we almost always have external reviewers. It goes out for comments from people who are experts in the field. We will put together a panel. If the project is over $4 million for the CFI funds, we will send a panel to actually visit or have a face-to-face meeting with the actual institution and the investigator team so that we get a first-hand feeling as to what it is they are trying to do.

That comes back to the central panel, which we call MAC, the multidisciplinary assessment committee. That's the one that gives us the key advice. They recommend it to us and we in turn take the recommendation forward to the board. The final decision is the board's decision, which in this case was made in March for the larger ones and, for the second round of larger ones, in June.

Mr. Janko Peric: Don't you feel that time-wise the banks are much more efficient than this institution?

Dr. David Strangway: Oh, no question, but we have to go through assessment of these processes, and one of the things that we have heard from people at the cabinet level is that they are very pleased with this process because it is an arm's-length process. It's a process in which there is peer evaluation and panel evaluation, and the decisions are being made in that forum.

Also, we have the ability to turn down things. People never like to be turned down, but if they're turned down by their peers and the experts in the field they take it better than if they're turned down because they failed at a political process. What we find, by and large, is that they don't like our negative decisions but they accept them because of the process. So we often speak about CFI as an institution that is very committed to process and integrity of process.

Mr. Janko Peric: How many people will be involved in this Saskatoon project, especially scientists and the institutions...? How many people will you physically hold and stop from leaving Canada?

Dr. David Strangway: In Saskatoon, they are talking about a team of something like 200 people who will be building this facility. It will take several years to design, build, and construct it, and to do all of the fine tuning and so on that's needed. That's what they talk about in terms of the construction phase.

• 1020

When we get into the operational phase, this will have a whole set of beamlines. In the original commitment, we have required that they construct 6 beamlines. They will eventually perhaps construct as many as 15 or 20 beamlines. That means—

Mr. Janko Peric: May I stop you there? Sixteen or twenty: how much additional money will be needed?

Dr. David Strangway: I honestly don't know the answer to the question. That will be where they will be going, for example, to the private sector to say, “If you want access to a beamline, would you help us build a beamline?” CFI, if it's still in existence, might become a recipient of proposals for that, but they will come from people who want to use it. We're insisting that there be 6 for the users immediately. If they get up to the 15 beamlines they're after, there will be a constant flow of investigators from across Canada coming in. There will need to be two or three people to actually run the beamline and to be able to help people who come in who are not going to be experts in the use of this—they're experts in something else—and to help them use this facility. There will be a steady flow of people moving in and out of Saskatoon to make their measurements. They might go in for a day or they might go in for a week.

Mr. Janko Peric: Super.

I have two more questions. First, how many different sectors will benefit from those beamlines?

Dr. David Strangway: Many different sectors will. The one that gets the highest-profile attention is the question of working up the very complex molecules, protein structures. Protein structures seem to be where an awful lot of the action is today in the world of genomes. As you move into the use of genetic information and the design of experiments, the design of drugs, whatever it might be, you need to know the crystal structures, and you have to go there in order to get these very complex molecules, crystal structures. That's one area and that's probably a real driver right now.

There's a lot of interest in materials from people who are interested, again, in complex molecules and who can't get at the structures with ordinary X-rays, very low-energy X-rays; they will be using it as well. As we move along, though, I think what we will also find is that there will be fascinating new things and new ideas that come along—which, because it's there, people will be able to use.

It's a very diverse thing. It can be used for things even in materials testing. If you want to look for fractures in aircraft wings and things of that sort, that can also be used to try to understand the issues of fracture and fatigue.

Mr. Janko Peric: This is my last question. Before you approved funding for that project, did the institution submit a business plan? If they did, did they mention how long it will take them to be self-sustaining so that taxpayers won't have to feed it with more money? If the private sector benefits from that, the private sector should pay for those benefits.

Dr. David Strangway: The private sector will pay for its share of the usage. That's the model they have. They did submit a business plan to us. The interesting question with some of these kinds of facilities is, can you in fact develop it in such a way that enough of the use covers all of the operating costs? I think that probably the answer to that question is no. This has not happened with the other large facilities around the world.

For the use that the private sector makes of it, which will be significant, there will be a cost chart worked out. We have a preliminary indication of what that looks like, but it will be several years before that's actually implemented.

For the users that are not from the private sector, by and large the international protocols are that if you want to use somebody else's facilities somewhere else around the world, you like to get access to it for free for your scientists, so you have to provide some kind of free access back and forth. What you do is you put together panels that say this is a first-rate experiment for which this facility makes sense and this is a first-rate experiment for which that facility makes sense, so you have a process of allocation.

The operating costs will be covered to a large extent by organizations such as NSERC and the Medical Research Council, because their scholars will be using these facilities. That's where I come back to this question I was mentioning earlier. There will be operating costs done on behalf of the scientists of the country who are not from the private sector and who will be big users of these facilities.

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The Chair: Thank you, Mr. Peric.

Mr. Keyes.

Dr. David Strangway: So it's not going to run completely off the public funding.

The Chair: Thank you.

Mr. Keyes, do you have another question?

Mr. Stan Keyes: Yes, Madam Chair. I have one question and one request of Dr. Strangway.

The question: how many Canadian universities will receive a part of the, as you said, $400 million—

Dr. David Strangway: That's right.

Mr. Stan Keyes: —for the initial...? How many Canadian universities will be recipients?

Dr. David Strangway: The universities have been divided, basically into the group that receives less than 1% of the granting council funds and the group that receives more. Roughly speaking, there are 37 in the less-than-1% category, and they will all be receiving some money. They must have a formula against which they have to compete, so they know what they will get eventually. Then there are those that receive over 1%, and there are roughly 29 of them. It's something like 65 to 70 institutions, which is most of the universities in Canada.

Mr. Stan Keyes: I see that you mention your—

Dr. David Strangway: I should also have added, by the way, that there is a small program for colleges, and we are now reviewing a college demand.

Mr. Stan Keyes: I noticed that in your remarks you said universities, colleges, hospitals, and not-for-profit research institutions, and I wondered.

Dr. David Strangway: Right.

Mr. Stan Keyes: Second, this is a request, not a question. Could you supply to this committee the list of these organizations or any others that are going to be or are in receipt of funds from CFI so that we may see that list along with any associated information with a particular application? I don't need the whole application; I just need the one line saying that they're going to do this or that.

Dr. David Strangway: Let me say that I would like to do that on or about June 22, which is only two or three weeks away. The reason I say that is that with respect to the first of the college competitions, those decisions will be made on June 22. The larger ones of the second part are also going to be done on June 22, and the new opportunities ones are there too. We'll be able, on that date or within a couple of days of that, to give you a complete breakdown in the various categories, institution by institution, and you'll be able to add it up province by province. This will be the first complete round of all of our programs having gone through one cycle.

Mr. Stan Keyes: Great. If we could get that list from you to the clerk and if the clerk would distribute to the members, I think it'd be beneficial for us. For example, I have McMaster University in my riding, and they do a lot of research—medical, engineering, and otherwise. But when I hear those kinds of numbers coming from you for investments in universities.... We hear the public outcry: oh, you're not investing enough in universities, or you're not investing enough in colleges or whatever. There's the equation that we can demonstrate from a list that you would give us—

Dr. David Strangway: That's right.

Mr. Stan Keyes: —to say to people, here, what you see is the direct cash transfer from the feds to the province for you, but here is all the taxpayers' money that we're also spending on universities, etc., which is never brought into the news articles or calculated in on how much investment the Canadian government does at the university or college level. It would certainly be a help to me in demonstrating to my constituents that we do invest a lot more than you think in university.

Dr. David Strangway: We want the same information for much the same purpose. We get the same kinds of inquiries from the institutions and occasionally from people like yourselves who will give us a call and say, what's the picture? We think that with this, within two or three weeks from now, you'll have a very good global picture.

Mr. Stan Keyes: Great. I'd appreciate that list. Thank you.

The Chair: Thank you very much, Mr. Keyes.

I just have a couple of brief questions from the original meeting that we had with your group in February 1998. At the time, Dr. Gagnon was here, and one of the things that we talked about was the development of smaller universities in sustaining their vital role as innovation leaders in Canadian communities. I'm just wondering how that has worked for the process so far. The committee was concerned at the time that larger institutions would overshadow small institutions.

Dr. David Strangway: One of the things that Carmen, Denis, I think, and I—and others, when the opportunity arises—have been doing is visiting the various institutions across the country. We made a point of visiting some of the small institutions as well as some of the larger ones. We really want to get a feeling for the next call for proposals for what kinds of lessons they have for us, for what kinds of issues we have created for them, and for what kinds of opportunities we have given them.

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From the small institutions—and also the large ones—we've had enormously positive feedback. Basically what's happening with the small institutions is that we set aside a goal of $40 million of our share and have said that they could compete for this. We then said, looking at the size and the scale of each institution, that there's an envelope that's set aside for each of the smaller institutions. They then had to submit proposals against this known envelope.

In some cases, they have submitted enough proposals that are good enough that they have all passed and they have in fact used up their allocation. In other cases, they're just putting the proposals together now. In yet other cases, some of them were turned down because we really didn't think the quality was suitable. What we're hearing is great pleasure about the fact that this is a fund that was set up so that they could bring together some of their small but very good teams to get support.

Recently I visited Royal Roads, Trent University, and the University of Regina, all of which were really excited about the fact that we had been able to give them this kind of support. What they found was that they have a lot of excellence, often in quite small teams, but they have what I was calling “spikes”. There are some really interesting spikes at many of these smaller institutions, and they were very pleased that this program was set aside so that they could have, in their view, a level playing field in the overall competition.

The success rate wasn't particularly higher for them than it was for anybody else, even though there was an envelope. Again, the processes and the quality assessments were done, and we're getting very good proposals from them. I would have to say that from the smaller institutions we've had good feedback, by and large. Now, if you go to an institution where somebody just got turned down, they're not particularly happy on the day they got that particular piece, but by and large, we've had very positive feedback from the small institutions.

The Chair: One of the other issues that came out when we met—again, this was back in February 1998—was the fact that the funds would be there not only to strengthen Canadian research interests but also to help prevent that loss of talented Canadian researchers who end up in the United States or in Europe due to the calibre of the research we are able to do now.

I know this only from where I come from and from my own personal experience, and it goes back to Mr. Lastewka's questioning: I just have grave concerns about the loss of potential when I look at Windsor. I understand that there are criteria and guidelines and things that you're putting in place, but when I look at what happens just north of where we are—most people would say south of the border—when I look at what they're doing in Michigan and I look at the Chrysler Tech Center that's over there with over 3,000-plus employees, I look at the fact that they've made a substantial investment in Canada and have said that this is where they want to be in that community.

When your board sits down and makes decisions, I hope they realize—and this would apply, I would assume, across the country—that companies won't put those dollars out there forever.

Dr. David Strangway: Yes.

The Chair: Although you may have this round, the next round, and the next round, one of the concerns we had as a committee in February 1998 was that there was a lot of uncertainty about how things were going to work and about criteria. We couldn't get the answers we wanted, and we never did get the answers that we asked for at that committee meeting.

I'm just concerned now as we hear that people have been turned down. I hope that you going out and meeting with them will encourage them to reapply and will encourage other groups across Canada to reapply, but I also hope it'll encourage companies to stay on board, because they're not going to stay on board indefinitely. That's not how companies do business and the government recognizes that. I hope the CFI recognizes that as well.

Dr. David Strangway: We do recognize that.

To come back specifically to the Windsor case, when Carmen and I went down to visit, we visited not only with the university but with the people at Chrysler. We had a very good session. They showed us the facilities, the joint activities they have there, and the investments they're making.

There's no doubt that they have made massive investments there, that they have committed in this area. We really wanted to share with them what the reviewers said, what the panel members said, and what the site visit team had had to say at face-to-face meetings and so on, because we thought that the fairest thing was to give back the basis upon which that decision was made. Now, obviously we didn't give all the names of every individual who was a reviewer of the proposals, but there was a panel and they met face to face with the panel.

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As I was saying earlier, I think, we went down there with the sense that this was really an important thing for Canada and that it was important for us to make sure that the dialogue stayed open, that they understood what the basis was for that.

In terms of the earlier point you were making, I can't help but come back and say that this new opportunities program for these young faculty members has been incredibly exciting. It has been incredible to hear these people say over and over again why this facility helps them to do what they do and to deliver most effectively what they can do. In the initial competition, we set up about $40 million as the envelope. As we go ahead through the rest of the life of CFI, and as a result of the new money that we were given in the budget, we have substantially increased that for the coming few years. We are now putting aside a further $90 million to $100 million to basically do this side of our activities that gets right down to those new young scholars.

You probably know this, but one of the things that's happening in the universities and the hospitals is that there's an enormous turnover taking place. There are a lot of people who are just my age; I officially retire at the end of June. I'm one of those people brought in during the 1960s in the big expansion; there was a whole host of people. I believe that within the next five to ten years we will see a 30% to 40% turnover in the faculty membership in the universities. Now, to compete for those people—because this is happening everywhere—Canada is going to need every last leverage that we can bring to bear to be sure that Canada is getting and keeping the very best people in these areas.

I emphasize that we are in for massive changes in the institutions. This is one of the tools for that activity. We can be one of the tools that can help to keep them here. Frankly, what's also going to happen is that because of this competition you're going to see the salary structures take off. If you want to get the best damn people in the country, you're going to have to compete globally now, because this pool is not very big and the demand is already beginning to take off in a very big way.

That's going to be an increasing problem for the institutions, because here they are, more or less on their knees at the present time, and now they're trying to figure out how to bring in new young people—not always young people, but mostly young people. How are they going to do that? Not only do they need the facilities, which we can help them with, they're going to need salaries that are.... I'll bet you that within three years they'll be paying the incoming faculty members higher salaries than the retiring faculty members, simply because that's where the market is and that's where the competition is.

I think there's a whole set of issues in trying to get them, to keep them, and to retain them, and the institutions are going to need help.

The Chair: That leads me to my next question. When we look at the CFI and the valuable contribution that I believe it's going to make to our infrastructure and our research and development across Canada—as we say, it's one of the tools—I wonder if the evaluation of how successful it is will really be available by the time the fund is no longer there—if that's the case.

I wonder, when we talk about attracting new people and the importance of doing these projects and expanding and the dollars.... As a committee we've been looking at where we fit as a country and whether the dollars are there or not there. How do we ensure that we continue to attract and keep the best and brightest here in Canada as well as ensuring that our research is developed? I'm just wondering, from the evaluation process that we know you're still developing for CFI—

Dr. David Strangway: Yes.

The Chair: —when you think we'll actually be able to evaluate the success.

Dr. David Strangway: We would be delighted to have an opportunity to come back and talk to you at some time before the next budget cycle—

The Chair: Okay.

Dr. David Strangway: —because our agenda is moving very quickly now.

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I should add that in addition to this, there is an interesting issue of...I'll call it international; we have tended to think in Canada that maybe we should invest in somebody else's beamline somewhere else and give Canadians the opportunity to go to the U.S. or to go to Europe or wherever in order to get access to facilities.

That is an important element, but I think that we have a chance in Canada to do more than that. We could do programs in an international arena in which we would do collaborative things. For example, an investment might be made in Canada with one institution and there might be a partner-institution in some other country that would make an investment in their country. What you would see coming out of this are joint activities that complement each other. I believe there's an interesting opportunity to do that.

If we want to really put ourselves on the map as a knowledge-intensive country and a knowledge-intensive economy, I think there's also an interesting opportunity to think about doing a few things in Canada that would be so unique that people, instead of saying, well, let's figure out how to get our people outside.... Let's do something so unique in Canada that we can get some of the people from other parts of the world to come to Canada because we have something that is absolutely unique in this sense.

One of the dimensions we would like to talk about in the coming months, I think, is not only about what I would call the granting council operating funds, what I would call the non-capital research infrastructure. I think we also would like to talk about the notion of putting Canada on the international map even more, so that we would become a place that people want to come to because we have these really fine and unique facilities, whatever they might be, and because we have figured out not only how to put the capital into it but also how to make sure an operating budget goes with it.

If I sound enthusiastic, it's because I am really enthusiastic. This has been an incredible opportunity given to those of us at CFI. We have a small staff of 19 people and these 19 people are so committed and dedicated you really wouldn't believe it. It is truly fun to do this.

I think if we can work together with you there's an opportunity to do some really fun things and at the same time make Canada one of the major focal points in the knowledge economy. We're one of the tools—just one, but we're one of them.

The Chair: Thank you very much, Dr. Strangway. On behalf of the committee members, I want to thank you and your colleagues for being here this morning. We appreciate not only your presentation but the discussion that has ensued. It's been very interesting, and we appreciate your frankness as well.

We're going to suspend now for five minutes, and we wish you well as you go on in your ventures in the next round.

Dr. David Strangway: Thank you.

The Chair: We're suspended for five minutes.

[Proceedings continue in camera]