Mr. Chairman, firstly I would like to thank you and the members of the Committee for the opportunity to address you today.
As you said, I am joined here this morning by Luc Brûlé, Director of Earth Observation projects at the Canadian Space Agency, who is also the Program Manager for RADARSAT-2, and by Mr. Robert Lefebvre, Director, Legal Services, at the Canadian Space Agency.
As you may be aware, the mandate of the Canadian Space Agency is to promote the peaceful use and development of space for the social and economic benefit of Canadians.
My remarks today will focus on the Canadian space program, the current context of Canada's space industry, and the Canadian Space Agency's relationship with MDA.
With the launch of Alouette in 1962, Canada became the third nation in space, after the former Soviet Union and the United States.
Canada's achievements in Satellite Communications, Earth Observation and Space Exploration are the result of visionary, targeted and sustained efforts.
For example, thanks to the previous investments in space, our communications satellites now link far-flung communities.
With the launch of Hermès in 1976, Canada was the first country to have its own direct broadcast satellite.
Satellite data helps ships to navigate our waters, helps us to track oil spills and monitor natural resources, and assists disaster response in Canada and the world over. Canadian-developed space-borne instruments provide critical information on changes occurring due to global warming and in the protective ozone layer.
Despite its relatively modest size, the Canadian space program has flourished because of ingenuity, strong cooperation with industry and the research community, and targeted investments, as I have mentioned.
NASA and the European Space Agency recognize the Canadian Space Agency as a valued and trusted partner. Simply put, in terms of the return on our investments in space and our place in space activities, Canada punches well above its weight.
At the outset of the space program, the Government of Canada identified key areas in which Canadian science and technology could develop and excel. The role of the Canadian Space Agency has been to help set the strategic direction for the Canadian space program, a program delivered in close collaboration with Canada's national space industry.
Mr. Chairman, the Canadian Space Agency has worked to find the most effective and cost-efficient means to deliver benefits to Canadians. An important way of doing this has been to support a viable and competitive space industry.
The Canadian Space Agency Act states specifically that one of our functions is to “promote the transfer and diffusion of space technology to and throughout Canadian industry”.
Our relationship with industry and academia is key to us. Approximately 65% of the Canadian Space Agency's annual budget is contracted out.
This approach has been mutually advantageous. It has provided us with a means of leveraging the talents of our space industry and science community to generate meaningful benefits for Canadians. It has also produced significant economic benefits for Canadian industry. With 200 firms—mostly SMEs—employing 6,700 highly skilled employees, Canada's space industry generates roughly $2.5 billion in annual revenues, 50% of which are from exports, the highest ratio in the world.
Let me speak briefly about our relationship with MDA.
Members of the committee, the Canadian Space Agency has had a longstanding and productive relationship with MDA. In the past five years, approximately $430 million of the Canadian Space Agency contracts have been awarded to MDA. This represents 50% of the Canadian Space Agency's overall contracts to business in that time period.
Many are familiar with the most visible products of this relationship: the Space Shuttle's Canadarm; Canadarm2 and now Dextre on the International Space Station; RADARSAT-1 and RADARSAT-2.
Questions have arisen regarding the nature of the deal with MDA surrounding RADARSAT-2. Under the Agreement between the Canadian Space Agency and MDA, MDA owns RADARSAT-2, and the foreground intellectual property. MDA Geospatial Services Inc., a subsidiary of MDA, is the licensed operator of the satellite, which, incidentally, is and will continue to be operated from the Canadian Space Agency's own facilities in St-Hubert.
In return for its investment in RADARSAT-2, the Government of Canada will receive $445 million worth of data over the lifetime of the satellite. The Agreement contains provisions to ensure the Government of Canada receives its pre-purchased data over the useful lifetime of the satellite.
At the Canadian Space Agency, we are reviewing the contracts we have with MDA in order to ensure that the government obtains the services and products it has contracted for with MDA, and, as such, to ensure that Canadians fully obtain the benefits from those undertakings.
Thank you for your attention. We're open to questions from the committee, Mr. Chair.
Thank you very much for your question.
When we at the Canadian Space Agency look to the future, we do not see a bunch of dark clouds on the horizon. We look back at what the Canadian Space Agency has been able to achieve over the last years. We look forward to things in the future--some of which you mentioned--and continued successful ventures by the agency.
Canada has done remarkably well in the area of space, and we're not flattering ourselves when we say this. I think this is recognized and there are others who say this. NASA and the European Space Agency look to Canada as a significant partner, and continue to do so. They come to us essentially for our contributions.
You indicated a number of initiatives that are under way, and some just recently completed. We have just put Dextre, the final contribution of Canada's robotic suite, on the space station that went up. It's a successful piece of ingenuity. It demonstrates Canada's knowhow in the area of space.
You mentioned the James Webb space telescope, which is the in-space telescope that will replace Hubble as the next generation. It's a huge piece of the kit, and Canada, through the Canadian Space Agency, is contributing to that.
I could go down a list of other achievements. A lander that's going to Mars in May, I believe, contains a piece of Canadian technology. The weather station on that contains some Canadian technology.
There's always more that we could be doing, but I'm quite convinced that the future is fairly bright.
Mr. Chair, members of the House Standing Committee on Industry, Science and Technology, I am Daniel Friedmann, president and CEO of MDA. I have been with MDA for 29 years, involved with our systems business throughout that full period in various capacities.
Thank you for providing me the opportunity to discuss the proposed sale of MDA systems business to ATK. I have time until 3 p.m., and I am here to answer your questions.
I would like to provide facts around certain issues that have been raised and to summarize the reasons for the sale and the benefits to all parties, especially Canada.
Issue number one is RADARSAT-2 control. RADARSAT-2 is a Canadian satellite operating under a licence granted by the Government of Canada in accordance with Canadian law and regulations. This licence provides the government with control over operation of the satellite and the use and distribution of the data received from the satellite.
It is important to note that this control is not dependent on corporate nationality of the licensee. Nonetheless, I understand that concerns have been raised that a sale to a corporation with foreign ownership could restrict or eliminate the ability of the Canadian government to control the operation and use of RADARSAT-2.
I believe the Government of Canada has all the necessary powers and authority to ensure that in future it will continue to exercise full control over RADARSAT-2 as it now does.
What MDA has, which will be passed on to ATK, is the right to market to other customers data not purchased by the Canadian government. This right to sell the data is subject to Canadian government agreements, Canadian laws, and Canadian control and priority of the satellite.
For that right, MDA and ATK have to and will pay, which effectively means a reduction in the cost to the taxpayer.
Issue number two is the control and ownership of Canadarm2 and Dextre. The Canadarm2 and Dextre were purchased from MDA under standard Canadian government contracts. They're owned by Canada. Canada decided what logo would go on them. Canada named them. Canada negotiated the contracts with the U.S. government to contribute these robots to the international space station.
The operations being sold by MDA to ATK have built these robots and will continue to maintain them and the contract to the Canadian government, and hopefully will have an opportunity to build more robots in the future.
Issue number three is the taxpayers' investment in MDA and their right to see something back for that investment. The investors in MDA are the shareholders of MDA, the very majority of whom are Canadians. These Canadian shareholders include over 1,000 MDA employees. Government and private pension funds from many provinces, including Quebec, Ontario, and B.C., representing many thousands of Canadians, and the Ontario teachers' pension fund are our largest shareholders.
The Government of Canada has certain space and defence requirements. The government procures systems to meet these needs just as it procures ships, planes, uniforms, roads, and bridges.The government has a policy to ensure that the work is, to a maximum extent possible, carried out by Canadians in Canada. This policy does not discriminate by ownership, and many Canadian requirements are met by Canadian subsidiaries of foreign corporations.
In the space area, MDA has won these procurements both in Canadian ownership and U.S. ownership--and, by the way, we were 100% owned by Orbital Sciences at the time of RADARSAT-2. I do not know where the 67% confusion came from.
MDA has executed that work with great diligence and pride and has provided outstanding value to the crown. MDA has levered some of these contracts and has built an international export operation that today accounts for more than half of our systems business. This has created jobs across Canada and has certainly been good for Canada.
MDA employees under any ownership, and in future under ATK, will continue to provide the crown with value for money, win contracts competitively, and export aggressively. Canadian taxpayers have received and will continue to receive full value for the contracts they award to MDA.
In the case of RADARSAT-2, it is worth remembering that MDA won an open competition to design and build a complete system. No doubt you have heard from the CSA that RADARSAT-2 is a world-class system meeting or exceeding the operational needs of the Government of Canada. This so-called investment by the Government of Canada in the RADARSAT-2 satellite is a prepayment for data to be delivered to the government over the next seven to ten years. The Government of Canada's rights to this data will continue to be protected under this transaction, and taxpayers will get their money's worth as contemplated.
Issue number four is Canadians' future in space after this sale. Canada's past and future in space was and will be up to the Government of Canada. It was Canada that decided to join the U.S. space program with the Canadarms. It was Canada that decided to be a leader in RADARSAT satellites, and Canada's future as a space nation depends on what Canada decides to do. The role of industry is to support Canada by providing cost-efficient solutions and building what the government requires. To that end, MDA has been there for Canada for many years. Irrespective of ownership, we have delivered value for money, and ATK is committed to continue to do so in the future.
Canada's future as a space nation is not foremost dependent on the ownership of its space industry, but rather on the vision, initiative, and space budgets of the government. If these are in place, the Canadian space industry, under any ownership, will continue to prosper and reach new technological feats, as it has in the past.
Now let me address the reasons for the sale and the benefits of the sale.
For our company to be a strong Canadian operation, with state-of-the-art capability to perform Canadian government contracts when and if required, we need top-notch, world-class employees and state-of-the-art work that keeps them challenged and provides them with opportunities for personal growth. In fact, we do enough state-of-the-art work to employ 1,500 people in Canada at the moment. A portion of this work is available in Canada, but only up to the level Canada decides to support at any given time. Therefore, we have and we must continue to grow our export business.
By far the largest growth opportunity for exports is represented by the U.S. space and defence market. To gain the required access to this market, we need a partner, a partner with proven capability to win U.S. government procurements, a partner that can and will lever our technical excellence, but without the duplicate capability that could render ours redundant, a partner that employs U.S. citizens with government access and security clearances. Without this partner, we cannot get the work.
We have tried non-ownership-related partnerships, and although they could satisfy our shareholder return, they would not provide a long-term sustainable solution for our employees. This is because a partner who is a non-owner always wants to duplicate the capability in the long run to reduce dependence, while an owner is focused on levering the purchased asset. The sale to a complementary company that undertakes to keep and nurture those jobs and technologies here in Canada, as our previous owner did, does achieve all the benefits to Canada and our Canadian employees. That is why we have chosen this path. It is the best path.
Mr. Chairman, I want to thank you and the committee for giving me the opportunity to explain how Canada's interests are taken care of and why this proposed sale of the MDA systems group to ATK is a particular win-win situation for everyone. Canada retains a viable systems company capable of meeting national needs. Our employees are ensured access to the largest international market, virtually guaranteeing exciting career growth in the space field, and ATK attains access to a world-class capability as the core of its new space systems business.
It is the brilliant work of Canadians who, over the years, have created the symbols of national pride and technology prowess that have captured the imagination of all of us. They are the ones who have pushed the frontiers of Canada's space capability avidly, whether owned by Canadians or Americans, whether governed by Conservatives or Liberals. It is these Canadians who deserve the opportunity to expand their horizons and play a role in the international frontiers of space technology. With this sale, the business and Canada are positioned to advance into the next league of the world's stage.
I'll be glad to answer your questions.
As I said, I have been in the marketing field to the United States. I've been under a U.S. owner. Mr. Thompson is a very capable engineer, but he's not in this field of marketing.
When we were owned by a U.S. company, our U.S. work went up. Not only did it go up, but we became the number one company in the world to build ground stations for high resolution satellites for the U.S. government, and we are that today. That employs over 100 people in Canada today. All of the work, except for some very small amount, is done in Canada.
What he was referring to about RADARSAT-2 was that we were trying to import U.S. technology into Canada to build RADARSAT-2. We were trying to buy a satellite bus from our own parent company, and the U.S. government blocked that export permit, just as Canada can block the export permit of Canadian technology to the U.S.
When they block that export permit, we have to go buy from another country. There is no block going the other way.
Now, having said all that, the ITAR regulations are bureaucratic. They're slow. They're there to protect a whole pile of interests, and they do get in the way, but they're workable. We work with them today. You need to facilitate some people on both sides of the border. If you have that, it's very workable.
We did it for five years, and under Orbital Sciences, our company doubled its employment in Canada. It was the highest growth we've had in our history, and you can't blame it on the president or give the credit to the president, because I've been the president for a long time in both scenarios.