Good morning, ladies and gentlemen. This is the Standing Committee on National Defence, meeting 24.
We are at the moment short one minister, the . I understand he was to lead off, but we do have two other ministers here, and I'm sure they're quite able to do their presentations.
I'm going to make the ground rules clear so we understand what I'm expecting today. Pursuant to Standing Order 108(2), we are studying the next generation of fighter aircraft. That's what the topic is, and that's what we're going to be talking about. If you wander off into other areas, I'll drag you back.
Ministers will have seven minutes. I will notify the minister at six minutes to sum up. I'm hoping to get to three rounds today. Panel one will go from 9 until 11 o'clock. We have another panel that will go from 11 till 1 o'clock, and another panel from 2 until 4 o'clock.
I will give 10 minutes on the first round, five minutes on the second round, and five minutes on the third round. I assume we will have many questions.
This committee is for the members to ask their questions, so I'd like to see as many as we can. In the absence of our chairman, the , I will, as the vice-chair, take the committee today.
Welcome, Minister. Attendance was not taken, but absences were duly noted--but I'm glad you're here.
Minister, you have seven minutes. At six minutes I will intervene and let you know you have a minute to go, and then we'll go to the first round of 10 minutes.
Are there any questions?
As there are none, Minister MacKay, you have the floor.
Thank you, Chair, chers collègues
. I'm happy to be here to have the opportunity to speak to the government's intention to acquire 65 F-35 Lightning II aircraft to replace our current CF-18 fleet. This will happen by the year 2016; we will begin to receive the aircraft that year.
Two and a half years ago, the Government of Canada released the Canada First defence strategy in Halifax, Nova Scotia. In CFDS we committed to rebuilding the Canadian Forces into a first-class modern military, an integrated, flexible, multi-role, combat-capable military, a military that's able to meet the threats of today and tomorrow.
We identified six key missions for our modernized armed forces: conducting daily domestic and continental operations, supporting a major international event in Canada, responding to a major terrorist attack, supporting civilian authorities during a crisis in Canada, leading or conducting a major international operation for an extended period, and deploying forces in response to crises elsewhere in the world for shorter periods.
Our commitment, colleagues, to procure the F-35 is part of the overall strategy to give the Canadian Forces the tools they need in order to deliver security to Canadians.
This government has already made considerable progress with equipment procurement. We have delivered the C-17 strategic airlifter, which has reliably brought aid and supplies from one corner of the world to the other—be it Alert, Haiti or Afghanistan. We have accepted delivery of our first C-130J tactical transport aircraft, which are preparing to make their operational debut in Afghanistan this winter. We have begun work on recapitalizing our family of land combat vehicles, and our recent announcement of the National Shipbuilding Procurement Strategy has paved the way for the renewal of the fleet.
And now we are addressing the need for a new fighter aircraft.
Mr. Chair, I welcome the discussion today surrounding the next-generation fighter. Indeed, it's not unlike the debate surrounding the CF-18 announcement in the 1980s. People said the fighter aircraft at that time were unnecessary, but look at what they have done. Look at how they have served us over the past three generations. We bought them to meet the demands of the Cold War, but they have performed admirably, not only in western Europe but during the first Gulf War in 1991 and again in Kosovo in 1999, and in the Canadian skies today, as we sit here.
We have grown to understand the importance of not only having fighter aircraft in our inventory but also of having one that is flexible enough to deal with the threats and the missions that were unexpected at the time in which they were procured. We know that some of the threats faced by the Hornet in the 1980s and 1990s have faded. Others, like the occasional test of our air identification zone by aircraft with strategic capabilities, have in fact persisted. New threats have emerged.
All the while, we know that our force continues to need to be ready. They need to exercise vigilance. While we have carefully invested to help keep our CF-18s remain effective in a challenging and changing environment, we cannot keep them flying indefinitely. We know that buying new fighter aircraft requires considerable investment but will result in major benefits in return to Canada. When we presented the Canada First defence strategy, we knew that, and we determined that notwithstanding the changes in the security environment, this was not a capability that we felt Canada could or should forgo.
An operational gap, I stress, is not an option, because we still need fighters. We still use them every day. They allow us to protect our sovereign territory, our airspace. They enable us to do our part, along with other American allies, as we fly alongside them as part of NORAD. They also allow us to rapidly and effectively project leadership abroad when the call comes.
When we retire the CF-18s between the years 2017 and 2020, as we inevitably must, we will need a capable replacement. The Lightning II joint strike fighters will inherit those key responsibilities and are the ideal aircraft, in my view, to allow our men and women in uniform to accomplish their work.
This is the right plane. This is the right number. This is the right aircraft for our Canadian Forces and for Canada. In fact, it's the best plane for the best air force. We believe they deserve this equipment.
If we don't make this purchase, there is a real danger we'll be unable to defend our airspace, unable to exercise our sovereignty, or unable to share our responsibilities through both NORAD and NATO. I think we can all agree that such a position would be untenable for Canada--a country that spans six time zones, a country whose total area is almost ten million square kilometres, a country with more than 243,000 kilometres of coastline, the world's largest, and a country with numerous international obligations and varied and challenging weather systems. So the government has announced its commitment to acquire the F-35.
As a fifth-generation aircraft, it is the only plane that can fill the requirement laid out in Canada First Defence Strategy. For a next-generation fighter, the F-35 Lightning II is a technological leap. It combines leading-edge attributes, including stealth and advanced sensors, to make this aircraft more reliable, more survivable and more effective than anything else available. It is the only aircraft able to meet all the operational needs of the Canadian Forces.
But that is not all. It is the most affordable option on the market. Its production line will remain open longest—providing excellent support well into the middle of the century. And it will allow us to be seamlessly interoperable with our American and NATO allies long into the future.
It has already generated—and will continue to generate—economic and industrial benefits for Canada as part of a larger global supply chain, which ministers Ambrose and Clement will speak to shortly.
Mr. Chair, let me conclude by saying that Canada needs this aircraft. This is an aircraft that will enable the Canadian Forces to meet the increasingly complex demands of the missions that we ask our pilots to perform. It's a capability that we need for our sovereignty, for patrolling our airspace, and for ensuring that we can shoulder our share of the NATO and international load, and lead by example.
Mr. Chair, colleagues, we have the best sailors, soldiers, and air personnel in the field. They deserve the best equipment to ensure that their missions are a success and, of course, to allow them to come home to their families safe when the job is done.
I look forward to your questions.
Thank you. Merci beaucoup.
Thanks for the opportunity to speak today to the committee about the opportunities being made available to Canadian companies.
The JSF is the single largest fighter aircraft program in history. It is a multinational effort to build an affordable, multi-role, and stealthy fighter aircraft. The total value of the program is expected to exceed $383 billion U.S. Total production is expected to reach up to 5,000 aircraft. JSF partner countries are anticipated to acquire more than 3,000 aircraft, and it is forecast that export sales could exceed 2,000 additional aircraft.
Canada has been a participant in the JSF program since 1997. We participated in the extensive competitive process to determine who would produce this next-generation fighter and the ultimate selection of Lockheed Martin as the JSF manufacturer in 2001.
On July 16 our government announced its intention to acquire 65 F-35 Lightning II joint strike fighter aircraft to replace our current fleet of CF-18s. Not only are these the right aircraft for the job, but this is the right program to keep Canada at the forefront of the aerospace and defence industry.
By investing in the Joint Strike Fighter program, not only is the government equipping the Canadian Forces with a state-of-the-art aircraft, but it is also opening up unprecedented opportunities for Canada's aerospace industry, including the creation of highly skilled, well-paying jobs for Canadians.
Our participation in this program has our Canadian aerospace industry engaged. This program provides high-tech work and long-term economic opportunities for Canadian aerospace and defence companies from all regions of the country. The program is truly unique in terms of the access offered to Canadian industry to participate in the production and sustainment of this volume of aircraft. The scope is tremendous. Canadian companies will have an opportunity to provide products and services for not only Canada's fleet of 65 fighters but for the entire global JSF supply chain. With that work involving as many as 5,000 aircraft, this opportunity will create and sustain jobs across Canada over the 40-year proposed lifetime of the F-35 aircraft.
In 2006 all nine JSF partners agreed that best value and affordability would be a key element in the success of the JSF program. This drive for competitiveness, along with the scale and international nature of the program, led to a unique industrial participation approach. Canada's commitment to this JSF gives Canadian companies privileged access to work on this project along with the other JSF partners. This means that as the JSF moves toward full production, Canadian firms will be even better positioned to supply components for the purchases of all JSF partners. This opportunity has been secured as a direct result of Canada's early and continued commitment to the program.
The Joint Strike Fighter program provides unprecedented opportunities to Canadian businesses, which can begin to carve out a place for themselves in the global supply chain that will shape the aerospace and defence sectors over the next 40 years.
Thanks to industrial agreements with Lockheed Martin, Pratt & Whitney Canada and General Electric/Rolls-Royce, Canadian-produced parts will be used in the construction of F-35 airplanes. These Canadian suppliers will also be called upon to provide maintenance throughout the useful life of the airplanes.
Canadian businesses will be able to bid on F-35 maintenance contracts, for both Canada's fleet and those of our partners. This will mean direct economic investment as well as new jobs for Canada.
It was critical to make this commitment right away, so that Canadian aerospace companies could take advantage of the tremendous opportunities under this program. This will give the country's suppliers enough time to prepare for production, support and subsequent development phases.
In order to facilitate the JSF program industrial participation approach, the federal government has already signed industrial participation plans with each of the JSF prime contractors: Lockheed Martin, Pratt & Whitney, and GE Rolls-Royce Fighter Engine Team. These agreements allow us to identify opportunities for Canadian companies to develop technologies for the JSF program.
I'll give you an example. Honeywell, based in Mississauga, designed the JSF thermal management system, and NGRAIN in Vancouver, B.C., developed the 3-D visualization tools for the JSF. The industrial participation plans include guaranteed access to competitive opportunities within the JSF partnership. Our highly capable companies will compete for work in areas such as high-speed titanium machining of complex parts. As a matter of fact, Héroux-Devtek, a company visited by yesterday in Dorval, Quebec, has been awarded contracts to perform the machining of various JSF parts.
The plan also includes strategic opportunities awarded to Canadian companies that are determined to offer the best value to the program. We see these strategic opportunities turning into contracts at Canadian companies such as Avcorp, which is building wing-tip structures in Delta, B.C.; Bristol Aerospace, which is building horizontal tail structures in Winnipeg; Goodrich, in Burlington, Ontario, which will be conducting landing gear maintenance; and Composites Atlantic, which will be manufacturing composite fuselage parts in Lunenburg, Nova Scotia.
Moving forward, the Government of Canada will be working closely with Lockheed Martin and the other JSF primes to identify further opportunities for potential Canadian suppliers and receive updates as the total benefit to Canada obtained through our participation in the JSF program goes forward.
It's a pleasure to be here, and I should note I am joined by my ADM of acquisitions, Tom Ring. It's a great opportunity to address this committee to talk about the replacement of Canada's CF-18 fighter aircraft in 2016-17.
As Minister MacKay noted, in 1997 Canada became a partner in the joint strike fighter program, and as a part of that program Canada participated in a lengthy competitive process. It was headed by the United States, including a concept demonstration phase, which led to the selection of Lockheed Martin as the JSF supplier in 2001. Since joining the program, the Government of Canada has contributed to the design, development, and demonstration of the joint strike fighter aircraft.
Two years ago our government, as part of the Canada First defence strategy, made a commitment to acquire a next-generation fighter to replace the CF-18. Following on its participation in the joint strike fighter program and its commitments under the Canada First defence strategy, the Government of Canada announced on July 16 its intention to procure 65 F-35 Lightning II aircraft. Deliveries are expected to start in 2016. Canada's purchase of the F-35, the only next-generation fighter that is available to Canada, will ensure interoperability with our major allies well into the middle of this century. In fact, almost all of our key allies are partners in the JSF program and many have committed to acquiring the F-35.
By making this decision now, the Department of National Defence is able to start planning for the introduction and use of the aircraft in Canada. Most importantly, Canada's acquisition of the F-35 is a good news story for Canada's defence industry. Because of our commitment to purchase the aircraft, Canadian aerospace and defence sectors gain immediate priority access to bid for contracts for the entire F-35 global supply chain, estimated at as many as 5,000 planes.
This will mean the creation of high-tech, high-value jobs for Canadians over a long period of time right across the country. In fact within this global supply chain, Canadian industry is very well positioned towards approximately $12 billion in targeted opportunities, representing more than 65,000 man-hours of work.
Canada's participation in the program is already paying off. Canadian companies have been competing for contracts within the program, and they have demonstrated considerable success. On July 21, just a week after our announcement, Avcorp announced the signing of an agreement with BAE Systems Operations Limited for the production of the outboard wing for the carrier variant of the F-35 used by the U.S. Navy. This agreement may represent in excess of $500 million U.S. in revenues over 10 to 15 years of production, and approximately 75 direct and indirect jobs will be created by this contract at Avcorp.
Avcorp Industries, based in Delta, British Columbia, is only one example that clearly demonstrates that the joint strike fighter program brings significant benefits to Canada and Canadian industry. In total, 85 Canadian companies have won approximately $850 million in contracts through our commitment to the program thus far, and this is just the tip of the iceberg. A tremendous door of opportunity has been opened for Canadian companies because of our decision to purchase these planes. If our commitment were revoked, this enormous door of opportunity would be slammed shut in the face of Canadian industry.
The JSF program is the right program to keep Canada's aerospace sector competitive well into the 21st century.
Canada's participation in the Joint Strike Fighter program opens up significant opportunities for the Canadian industry, and especially that of Quebec. Canada's industry will be able to participate fully in the program, which will help to build long-term business relationships in the aerospace and defence sectors. For instance, the head of Héroux-Devtek, an aerospace company with plants in Dorval, Longueuil, Laval, Kitchener and Toronto, told me yesterday that a successful bid could help generate 20 to 25 years worth of work for its staff.
Critics often cite unreasonable delays in the military procurement process as a key factor affecting the operational capability of the Canadian Forces. The joint strike fighter program is a prime example of how the government can procure the right equipment at the right time for our forces. By participating in a program designed to permit NATO allies to acquire advanced fighter technology at the lowest possible cost, the government is also ensuring that Canadian taxpayers receive the best return on their investment.
This announcement is also another indication that our government is committed to rebuilding the Canadian Forces and ensuring Canada's future safety and security while delivering, as Minister Clement said, on long-term economic benefits to our key industrial sectors.
Thank you, Mr. Chair. I'd be pleased to take questions.
I wouldn't presume to correct the chair, but I think would agree that it's actually not “drag the puck”. I think “rag the puck” is the term you're looking for.
The Vice-Chair (Hon. Bryon Wilfert): But in my part of the country, it's dragging the puck.
Hon. Dominic LeBlanc: Okay, but in Atlantic Canada--the Minister of Defence and I know--it's called ragging the puck.
Madam Minister, Mr. Ministers, thank you for your presentations.
I have a rather specific question for my friend, Minister Clement, and then I think my colleague will continue with someone else.
Mr. Clement, you admit that this is the largest military procurement contract in Canadian history. Not only did you not hold a competitive bidding process in Canada for the contract, but, in our view, you also turned your back on Canada's aerospace industry. In the past, a contract of this nature included contractual benefits for the industry. Dollar for dollar, the company that won the process had a contractual obligation to spend that amount in partnership with Canada's aerospace industry. Since the total value of this contract could reach $9 billion—and, may I add, you cited numerous examples of Canadian companies, and we are delighted that they have been able to participate in the program thus far—why do you or did you not ultimately insist on a legal contractual obligation that would require Lockheed Martin, for instance, to spend that amount in partnership with the Canadian industry? In our view, you failed to impose a contractual obligation on the company to spend that amount.
Thank you for the opportunity to respond. I would like to say a few words about the supply chain.
It's important to understand that all of the allies who were involved in developing the program have agreed that there will be competitive bidding by the subcontractors to build the plane, so no country is going to have automatic offsets in this model. But what you lose there, you gain with the global supply chain. Instead of forcing, through offsets, a dollar-for-dollar account, as the honourable member has suggested, for the 65 planes that Canada is ordering, you in turn get to bid, as a Canadian contractor, for the 3,000 planes that are part of the alliance that is building the plane, plus the other 2,000 planes, so a total of 5,000 planes that are going to be ordered throughout the world.
That's the upside. The upside is you're part of the global supply chain. You're not building for 65. You might be building for 5,000 planes over the next 40 years, and that is a very positive upside.
I've talked to our industry, and our industry has told me they're ready to compete. They want to compete. They will win the contracts. They are winning the contracts. They're already doing so. Avcorp is a good example, with that $500-million contract the week after we announced that we're in for the F-35s.
So yes, it's different from your normal procurement, but the difference is a positive difference in our access for our great Canadian aerospace companies to the global supply chain.
I want to welcome the three ministers and tell them how honoured we are to have them here before the committee this morning.
Mr. Chair, I would like to draw your attention to the fact that this is a first in terms of F-35s. To my knowledge, this is the first time that we are going to give up guaranteed economic benefits for Canadian industries.
In my opinion, the ministers are being overly optimistic. It is just wishful thinking. They say that because we have the best companies, they will without a doubt benefit. What recourse is there if Lockheed Martin or someone else in the chain says “sorry, but we do not accept CAE, L-3 or Héroux-Devtek”? So far they have gotten small contracts, but others will get them in the future. We will end up with a contract that makes no guarantees. That is the risk we run right now.
That concerns certain countries such as Israel and Australia. It is important to keep a certain amount of independence with respect to the supplier, namely, Lockheed Martin. What I mean by keeping a certain amount of independence is holding on to Canadian sovereignty. That is something very important to me. When the supplier is in control, the supplier decides who will get what. There is no recourse to say that, according to clause 6.2.3 of the contract, that is not what it says. There will be nothing on economic benefits. That is huge, extremely important. We are leaving our companies hanging, without any legal or contractual standing. I would say that is a major issue.
Up to now they have said that the production line is important and that our companies will be part of that production line. It has to do with the acquisition costs. But I have not heard anyone talk about end support service. Our companies are world leaders in providing end support service. And when I say end support service, I am referring to aircraft maintenance, to the training of pilots and maintenance technicians. If we do not have the contracts, we cannot provide the training. So it involves high-tech content. As soon as you do not have contractual guarantees, you cannot ask for any transfers of intellectual property. Lockheed Martin can keep all that and give us small contracts. We will not have any recourse against them.
Now is the time to include the importance of economic benefits in the contracts. That also needs to be shown to Lockheed Martin. You say our companies are world leaders, and some of them are in your own backyard. You mentioned a few of them: L-3 MAS, Pratt & Whitney Canada, CAE and Héroux-Devtek. They are in your backyard, and you should protect them. You should guarantee them a minimum amount of economic benefits. You should not be handing that over to Lockheed Martin simply because it has been there since the beginning and will give us some contracts. It does not work that way. You have to stand up for taxpayers. Taxpayers are having a hard time accepting the bill. It would be easier for them to accept if they knew there were going to be economic benefits and that jobs were going to be created in Canada. As it stands now, there are no guarantees.
Would you agree to starting negotiations immediately? Would you agree to sitting down at the negotiating table with Lockheed Martin? You are the customer. Personally, when I buy a car, I include the options I want in the contract. If the option I paid for is not included, I am not satisfied, and I can go after the dealer. But if there are no contractual clauses providing protection, no matter how much you say our companies are the best in the world, they will fall by the wayside. I hope that does not happen. I have confidence in those companies. We need minimum guarantees.
Are you willing to discuss minimum contractual guarantees and economic benefits with Lockheed Martin? If not, you are giving up a part of Canada's sovereignty, and Lockheed Martin will be making the decisions instead.
I would like to answer that question.
This approach includes guaranteed access to the supply chain. The approach is new, of course. It does not provide a contractual guarantee but a guarantee of access to the supply chain. We are talking about roughly 5,000 planes.
This is a new model. Yes, there is no guarantee of each contract. I admit that. It's clear in the MOU. But we have guarantees that we will have preference, as part of the original group of suppliers and as the original creator of the aircraft, that our companies, Canadian companies, get to bid as part of this global supply chain.
That's the upside. Our industry and our companies are anxious to be part of the global supply chain. That's what's in it for them, and that's why this new approach is so important to them.
I think the minister wants to respond on the service support.
Yes, thank you very much.
Thank you, Mr. Chair, and I must say, I find it refreshing to hear the honourable member talking about Canadian sovereignty. I wish you had the same faith in the aerospace industry as you had in other forms of sovereignty, because you said yourself, back in July of this year--I'm quoting you, --that Quebec companies are “all pleased about the project”, that they already have contracts with Lockheed Martin, and that “we say it’s important” that these maintenance contracts be given to those companies.
Well, some of those companies that are under the Aerospace Industries Association of Canada...and I'm quoting now from Mr. Claude Lajeunesse, whom I think you're familiar with. He says, “The Next Generation Fighter is the single largest military aircraft procurement program of the Government of Canada in the foreseeable future and will positively affect the Canadian aerospace industry for decades to come.”
And I can quote others in the same area. Mr. Richard Aboulafia, vice-president of analysis, Teal Group, in Quebec, described the JSF program as a game-changer that is estimated to capture more than half of the world fighter production by 2019.
Also Gilles Labbé, chair of Aéro Montréal, president of Héroux-Devtek, said: “This is a historic procurement for Canada and excellent news for the Quebec aerospace cluster and the entire Canadian aerospace industry.”
On your question, Mr. Bachand, about maintenance and sustainable costs, as you will know, we are still maintaining and sustaining the current fleet of CF-18s, so sustainable costs continue through the life of the aircraft. We'll receive that aircraft around the year 2016-17, and then on as we receive all 65 planes. So the cost of sustainment is anticipated to be in the same order of magnitude as the CF-18 fleet. That is to say--and I think it's quite remarkable when one considers that we will have had those planes for 30 years--the cost of maintaining them will be comparable, somewhere in the range of $250 million annually. When you project those dollars from 1980 dollars to 2010 and onward, it's the same range, same order of magnitude, and that's because we're in a global supply chain.
In fact, as more companies buy this aircraft, and because we're in the MOU, we will in fact see the potential for the cost of the aircraft to come down. Countries like Israel have joined on, and Japan and Singapore are similarly looking at buying this aircraft. If they do, the potential costs of ongoing sustainment, because we're in the global supply chain, could come down.
I resent the implication that you're questioning my word about a true open and transparent process--
Mr. Jack Harris: It's--
Hon. Peter MacKay: --if you'll let me answer the question, Mr. Harris--when that is in fact what happened. I think Minister Ambrose quite clearly laid out how this process began in 1997. There was a rigorous, inclusive process. It's all on the record. It's all there for anyone who wants to take the time to look at how we arrived at the decision to purchase the F-35. It is very clear that this was an open, transparent process. It is in fact the only fifth-generation aircraft on the market. As Minister Ambrose said quite emphatically, there is no competition for a fifth-generation aircraft, because it is the only one.
Yet, having stated that, this process went on for years. It went back to 1997. I commend the previous government for entering into the process, because in fact it was that early decision to enter into that MOU that allowed us, for the investment of roughly $170 million, to receive over $350 million in benefits already as a result of that early decision.
So we have continued in that MOU, and now exercise an option that was available to us in the MOU, as a result of a competition, as a result of rigorous examination and consultation with both industry and people like the Chief of the Air Staff and his predecessor Angus Watt, all of whom gave advice that this was the right plane for the right price for the Canadian Forces and for the country.
I am very confident that we've made the best decision for Canada.
We do in fact know what the costs are, Mr. Chair. I just stated not five minutes ago that it'll be roughly in the area of $250 million annually, and that price may come down. That's a result of being part of the global supply chain. It's the part of being in a competition that allowed us to make that decision. So any suggestion that being outside that process now would be to Canada's advantage is simply wrong. It's wrong-headed. It's factually incorrect.
We've been the beneficiaries of being part of a continuum that goes back to 1997. That was the initial decision, to go into the concept demonstration phase. Then in February of 2002, we entered into the system development and demonstration phase. In 2006 we entered the production and sustainment phase and follow-on development phase, and then of course we made a further investment. Then in 2008, there was a very clear public declaration in the Canada First defence strategy that we would be replacing the next generation of fighters.
All of this is on the public record. All of the evaluation is there, and there's been much public commentary. In fact, I would quote a member of this committee, Mr. LeBlanc, who's here with us. He said:
I have every confidence that Canadian companies would be well qualified to compete for defence contracts. Our expertise in many sectors of these industries is world leading....Our cooperation with the United States, for example on joint strike fighters has earned Canadian companies substantial industrial benefits.
This is from Hansard, dated October 23, 2003.
I completely agree with the defence critic for the Liberal Party, Mr. LeBlanc.
Yes, Mr. Harris, there is a statement of requirements. As I indicated before, the procurement process does not drive the requirements, the requirements drive the procurement process.
The Canada First defence strategy, two years ago, very publicly committed us to purchasing the next-generation fighter. Since then, the defence department and Public Works have been doing research to confirm that there is only one next-generation fighter available for purchase by Canada.
To change the statement of requirements to hold a competition for the sake of holding a competition, when we know there is only one plane available that meets these requirements, would be, frankly, dishonest. It would be a waste of resources and time, and it would particularly be a waste of resources and time to companies that would be looking to compete.
That's exactly right, Mr. Hawn. In fact, your experience as an ex-fighter pilot itself speaks volumes on your understanding of that fact.
We've been involved in many international consortiums in the past. In the case of many of these aircraft you've mentioned--the C-130J, the new C-17 heavy-lift transport planes, the Chinook helicopters--Canada benefited from participating in these programs with, most notably, the United States but other allies as well.
What would threaten our sovereignty, quite frankly, at a practical level, would be not having aircraft capable to defend our airspace, not having aircraft able to go up and meet any airborne threat.
You know full well, having flown CF-18s, that we need to be there to meet and greet any airborne threat--or any maritime threat, for that matter. This type of aircraft, the F-35, gives us that ability. That, first and foremost, is the responsibility of the Canadian Forces: to protect Canada and North America and to participate interoperably with other allies be they NATO or NORAD allies. That interoperability, that cooperative approach in both procurement and the defence of Canada, North America, and participating and international operations, is exactly what protects and promotes our sovereignty both at home and abroad.
That's right; it's not even stealth, is it, Peter?
Voices: Oh, oh!
The Vice-Chair (Hon. Bryon Wilfert): Go ahead, Mr. LeBlanc. You have five minutes.
Hon. Dominic LeBlanc: Thank you, Mr. Chair.
Perhaps I could pick up on some earlier questions to Madam Ambrose around the whole notion that there was in fact a competitive process held. My understanding—and she can correct me if I'm wrong—is that the United States Air Force had a competitive process a decade ago to look at its needs as the United States Air Force--its future needs.
The minister talked about a U.S.-led process. That would imply that other countries participated in that competitive process. Perhaps you could tell us how the Canadian armed forces or the Canadian air force or your department participated in Washington, D.C., in a competitive process a decade ago to acquire these aircraft. Specifically, how would that competitive process, held in the United States, bring value to Canadian taxpayers? And what role directly did the Government of Canada have over the last decade in this allegedly competitive process?
Well, perhaps the honourable member could tell me
that, since it was his government that was in power at the time when this MOU was signed. And I thank him for that, because I think it was the right decision at the time. Being part of this memorandum of understanding with the joint strike fighter program has offered unprecedented benefits to Canadian companies over the last decade.
You're correct; if you look at the history of the JSF program, you'll see that Canada entered in 1997. There was a lengthy and rigorous and competitive process that took place. It was U.S.-led, but all allies were partners to that. We participated in the process and all partner nations, including Canada, were a part of this, which led, as you know, to the selection of Lockheed Martin as the partner for the JSF manufacture.
The important thing to recognize is that because we are part of the memorandum of understanding for the joint strike fighter program, we have an opportunity to procure through the MOU. If perhaps your party were elected and you decided to turn your back on this MOU or pull us out of the MOU—or if you decided to hold another competition, which would signal that we would be out of the MOU—it would obviously impact Canadian industry because we would no longer have priority access to the global supply chain, which we do today thanks to our participation in the MOU. We would lose our spot in the production line, so we would incur delays in the procurement process and we would also pay more for these planes.
Again, your government was the one that signed the original MOU and participated in this program, and I thank you for that because this has been a historic opportunity for Canadian companies to date. We've seen almost $800 million in benefits up to now, and we expect billions of dollars more in benefits to Canadian industries. At the end of the day, this is about jobs.
Yesterday I was at Héroux-Devtek. They have 1,500 employees. They have two plants in Ontario and three plants in Quebec, and they make parts on the F-35. Every F-35 that's sold to partner nations around the world means more job creation just at that one company, and we know of 90 companies like it across the country.
Minister, you've referred to different MOUs that were signed as this program evolved. I think you're correct in saying that there has been a series of different MOUs signed by previous governments and your own government.
Is it not correct, however, that in the most recent MOU, or the 2006 MOU that was signed by your government, in article 3.2 it makes it very clear that the actual procurement of a joint strike fighter will be subject to the participants' national laws and regulations and outcome with respect to the national procurement and decision-making process?
What I'm saying is that I don't think it's as simple as you say, that if we decided to have a competitive process we would somehow be breaking the MOU and getting out of the MOU, and therefore be unable to benefit from the investments that previous governments, and your own, have made, I think with considerable value. Why could we not participate through the MOU in a more open and transparent process, where we might learn, for example, the statement of requirements that you've referred to this morning?
Thank you for the question. Yes, clearly this aircraft has been in the conceptual design phase since the mid to early nineties. It obviously will come online for full production sometime in the next number of years, and we're scheduled to take possession of said aircraft around 2016.
You can see, because of the extensive and high-tech nature of the aircraft, because of the on-board equipment, because of the stealth nature of the aircraft, which is unique to its abilities.... As has been mentioned now a number of times at this committee, it's the only--and I stress, the only--fifth-generation aircraft on the market. So the production has been lengthy and extensive.
Again, this has benefited Canadian aerospace to be part of that development. As my colleague has said, Canada has been part of that. Canadian aerospace has been involved since 1997.
To that end, these aircraft quite simply are the best on the planet, and we want the best aircraft for our Canadian Forces. We expect a lot of them. They have many demands on them, as does their maintenance crew. We believe they deserve this level of support and they deserve that type of aircraft so they can complete their mission safely and come home safe to their families, with the job done.
I'm very confident: based on the advice of the current Chief of the Air Staff, General Deschamps, his predecessor General Watt, and the chief of procurement we have at the department, Dan Ross, whom you'll be hearing from as well, all of this speaks to the necessity of this type of aircraft.
People ask what an F-35 is. It comes with stealth capability, which allows us to see that potential threat before it sees us. That is the stealth capability. It is virtually invisible, which is cutting-edge technology based on years and years of research and tremendous investment. We are the beneficiaries of that investment by virtue of being part of this MOU.
It also has incredible on-board capability to communicate with other aircraft of the same nature. That is to say, within an international operation these aircraft can virtually talk to each other. That is of tremendous benefit. The on-board weapons system is state-of-the-art. All of this speaks to what is described as a fifth-generation aircraft.
Now, I'm not a person well versed in all of the technology, nor am I a pilot. General Deschamps and others will speak to that capability. That unique aspect, that stealth, that fifth-generation capability--that is what makes this the right aircraft, at the right price, which we've spoken to, with the benefits of being in the process early. All of these indicate that this is a decision that was well contemplated by the department, by the experts, in consultation with industry.
This fifth-generation aircraft, I'm very confident, will serve us well into the future, not just on the existing threat scenario but what may come. That's looking out, projecting out, as we did with the CF-18, at what potential threats might exist for our country, and it is in keeping with our global responsibilities.
Thank you very much, Mr. Chair and dear colleague.
The Department of National Defence is clearly planning to base half of these new aircraft in Bagotville and half in Cold Lake. The Bloc Québécois asked that 40% of the aircraft be based in Bagotville, but the Government of Canada exceeded expectations with a 50-50 split. So it is good news for the base in Bagotville.
Clearly, with respect to the training squadron, that will be announced in the future. That is very much based on the need. We have not stated the full training program as yet, and we'll examine that as we move closer and closer to the delivery date of the aircraft; determinations will be made about where those other aircraft will be based. But currently there will be 24 in Bagotville and 24 at Cold Lake, where Mr. Hawn made the announcement. The operational needs will dictate that decision, as you would expect.
We'll continue the use of existing basing at those two locations, with the infrastructure that's there that supports our current jet-fighter operations. The basing of the F-35 at CFB Bagotville with 425, and with 409 Cold Lake, will provide the continued significant economic opportunities that exist for those two communities. That is to say that having those two main bases for the aircraft will continue the jobs, will continue the presence of military personnel for those communities, which I know you are extremely interested in. Ultimately it will reduce the overhead training costs to have these two existing bases continue with that operation and to optimize what we can do with the aircraft.
That's correct, there was a competition when it came to who became the manufacturer of the JSF. Canada, as you know, entered into the JSF program in 1997 as a partner with our other ally nations, and through the program there was a lengthy, rigorous, and intense competition to choose the company that would then build the joint strike fighter. That concluded in 2001. Lockheed Martin was chosen as the manufacturer for the joint strike fighter.
Canada has participated in the joint strike fighter program for over a decade now. Canadian companies have participated in not only the development and design, but now the manufacturing of the actual aircraft.
In 2008, two years ago, the Department of National Defence stated in their Canada First defence strategy policy framework that they committed us, Canada, to purchasing the next-generation fighter. It's our job to then take those requirements and assess what suppliers are available. DND concluded that only the F-35 met their requirements. It's our job to then validate that conclusion. We did validate that, and therefore we agreed to acquire the F-35 through our memorandum of understanding. As part of, I believe, chapter six in the memorandum of understanding, we are able to acquire the F-35 through the MOU, and by doing that, we gain access not only to the global supply chain, but we get a discount on the aircraft and we get priority place in the production line.
It's good news for the military in terms of meeting all of their requirements. It's good news for the Canadian taxpayer because we get a discount by procuring through the MOU. And it's good news for Canadian industry because we get priority access to the global supply chain of up to 5,000 aircraft.
Just to hearken back to your comment, it was in fact a Liberal defence minister, Art Eggleton, back in 2002, who really pursued this initiative, and he said of that initiative:
This initiative will provide DND as well as Canada's aerospace industry with an excellent opportunity to be involved in one of the most exciting aerospace defence programs of the 21st century. Our participation will greatly enhance interoperability with our allies....
This is what Mr. Eggleton, then defence minister, said in 2002. To compare it to the potential fallout and cost to taxpayers of what happened with the cancellation of the EH-101 program by then Prime Minister Chrétien, you're right, when he took his pen and wrote zero helicopters, guess what? We still have zero helicopters when it comes to the maritime program, at a cost calculated to be upwards of $1 billion. So we spent $1 billion not to buy the aircraft, because of that cancellation.
Angus Watt, then Chief of the Air Staff, upon hearing those comments and the intention of the Liberal Party to potentially cancel or delay the contract, said this: “I am particularly appalled at the Liberal announcement that they would cancel this contract at the first opportunity. As a former Sea King squadron commander earlier in my career, I know only too well the consequences of such political games.”
That's exactly the unfortunate reality; the political games can cost the air force, can cost our ability to defend our airspace, and can cost billions to Canadian aerospace. I wish we had a less partisan, more bipartisan, approach to procurement. That would benefit the men and women in uniform. It would benefit them in the ability to do the important work that we ask of them.
Minister MacKay, this hearkens back to a conversation I think you had earlier with Mr. Hawn. From this testimony and from what I've read, there is one thing that bothers me the most, that concerns me, and that is the fact that we are on a slippery slope towards procurement in the future. By that I mean we're inheriting things that are forced upon us in a situation where there is less Canadian input and from which, in future, there may be fewer perceived benefits. I'll give you an example.
You talked about perceived new threats. We had a release from the 's office about the Tu-95, which I talked about earlier. Now, you said, along with Mr. Hawn, and you gave evidence, that this is a perceived threat...and it enhances our ability to defend Arctic sovereignty; therefore, if a Tu-95 comes close to Canadian airspace, we now have the ability to defend.
But how can you talk about this particular plane when, from my understanding, the speed of the F-35 is 1.6 Mach, whereas that of the CF-18 is 1.8 Mach, which makes the CF-18 faster. Not only that, if this plane is going to run up against the Tu-95, it is, in your words, virtually invisible.
So this is part of the concern I have about this. Some of the reasons why this plane is good for Canada don't really jibe.
You also mentioned...but I'll let you answer that first.
I thought it was going to go to my colleague Mr. Wallace, but that's fine.
I certainly want to thank my colleagues for appearing today. It's a pleasure for me to be back on the defence committee, even if it's just for a day. I certainly enjoyed my time on this committee, for the first year of my term as a member of Parliament. It's good to see Mr. Bouchard back here as well. We spent some time together going around and talking to various people in regard to our military.
Minister MacKay, I guess my question would be to you, through the chair.
The absurdity of the Liberal position has been put out to us. The flip-flop on this particular policy is absurd to me, but I guess we shouldn't be surprised. We've seen it before. My understanding of the CF-18 fleet is that each of those aircraft has an operational time limit of about 5,000 hours on each air frame. We're approaching the end of life, I think, for those aircraft. We started off with nearly 140. I think we're down to 80 or so that are now functional and operational.
The members of the opposition are calling for cancellation of a program that they've started. Canada is now heavily invested. The options, I think, have been laid out quite clearly to us. We can jump out of the program, and then make a decision to buy back into the program, or just buy the Lightning F-35 at the higher rate than we can, actually, because we're part of the program now.
The other option, I guess, if they were to opt out, would be to go look for a fourth-generation fighter, which clearly doesn't meet the operational requirements. Or heaven forbid that a future government might even say that we don't even need fighter aircraft anymore.
I guess my perspective, to you and to all of my ministerial colleagues here, is that when it comes down to looking at it, those are the four options. Going back to a fourth generation...I don't think we can increase the operational lifespan of the CF-18. I think the current fleet of CF-18s is done. Even if we reduce our operational demands and flying time, we're looking at, what, 2020 at most?
Can you clarify which of those four options seems to make the best sense? Those are the only four options, as I see it.
Mr. Chair, purchasing new aircraft obviously makes the most sense. I thank my colleague for the question.
In fact the Prime Minister was recently in Montreal to announce a further investment in upgrade in the existing fleet of 78 CF-18 fighter planes. So that new investment will allow us to project out to at least the year 2020. We're scheduled now to start receiving the F-35 around the year 2016 or 2017. There won't be an operational gap. That will allow for the training to take place, for the additional transition to occur at air bases like Bagotville and Cold Lake.
As you said, we've seen this movie before when it comes to the cancellation or the delay of contracts. We've seen that film. It's a nightmare. It's called the cancellation of the Sea King replacement. We're now flying 45-year-old Sea Kings as a result of that decision. That political partisan intervention, with a strike of the pen, saw that contract burned at a cost of $1 billion to taxpayers, and at a significant cost, I would say, to the air force in terms of our ability to continue to patrol over the Atlantic and the Pacific and to have those aircraft available to us for international missions, the counter-piracy type of missions, etc., in places like the coast of Africa, off Somalia.
It's important not to have operational gaps. These investments are forward looking. These investments allow us to ensure that we will have this fifth-generation aircraft, as you've mentioned, which is unique, which doesn't mean going back and buying older aircraft that will not have the parts and the spares and the supply chain that we will benefit from with a new fifth-generation aircraft.
This is the right plane. It's the best plane on the planet for the best pilots and the best Canadian air force that we can put forward to protect our country, to participate in international missions, and to do what Canadians expect of them in promoting and protecting our sovereignty.
Thank you, Ministers, for being here today.
It's actually an honour for me to be here today. I'm very proud of the fact of our government moving forward on the F-35s. As a matter of fact, today another minister, , is touring a plant in the city of Burlington: Goodrich Aerospace Canada. About 130 people work there. They're in the business of service and maintenance of landing gear. They're getting an opportunity to compete and to have a contract to work on this F-35 program that we have.
When I'm back in my riding and talking to people where these jobs are being created and maintained, are there....? Are you telling me today that they'll not only be able to work on services and parts for the Canadian fleet of F-35s, but because of the MOU and the relationship we have with our partners, those jobs may exist for maintenance and work on the F-35s of other countries?
What's the timeframe? Is this an opportunity for them for 40 years? What is the advantage to Burlington in the long run, based on what's happening?
I think it's fair to say that it has an impact on their morale. It also affects, in some cases, decisions for their families in terms of where they may be based in the future, and their future career plans. It also has an impact internationally with respect to confidence from our important allies, NORAD and NATO.
I want to come back to the question of the number of aircraft, the 65. Under the current MOU, which, to their credit, the previous Liberal government signed and we've continued, this will allow for the potential for other purchases at a preferred price. It will allow us maximum flexibility in terms of meeting the security environment that may exist in the future.
Certainty is important, and avoiding an operational gap, I stress again, is the most important thing from the air force's perspective. They want to be able to do the job and do it efficiently and effectively with an aircraft that they have confidence in.
We ask a lot of these pilots, and for them to go out over the Atlantic, fly at those altitudes, and meet those challenges, they need an aircraft of fifth-generation capability.
I would like to return to the MOU. I reiterate this because it's of concern to me.
I appreciate the process by which that was started in 1997, but in terms of the future, to be masters of our own domain, to decide what is best for Canadian personnel, I certainly feel that what concerns me about this is that we have given away many elements of our own decision-making to a much greater cause.
I appreciate the fact that Burlington has some good work going on. I appreciate the fact that our people who work in this industry can do incredibly good work and compete internationally. But I also feel that Canadians also demand a dollar-for-dollar IRB in many respects, and I'm concerned that we have pushed this policy aside for reasons of stealth--for want of a better term.
Again, 3.2.1 of the MOU of 2006 states:
Actual procurement of JSF Air Vehicles by the Participants will be subject to the Participants’ national laws and regulations and the outcome of the Participants’ national procurement decision-making processes
I am concerned that we're forgoing that. In the beginning we said that we would have an open, transparent process, but we keep going back to a decision that was made in 2001. And it was one that was more of a done deal than anything else. That kind of freezes us out.
No, because this is a unique project in the world. Never before have nations come together to create a fifth-generation fighter plane that allies will utilize in an interoperable way. There is no precedent for this.
You keep asking why we are doing it this way or why we aren't doing it the other way. This is the first time this has ever been done this way. The upside, as I keep saying, for Canadian industry is that they are part of leading-edge provision of parts and service that will open the door to global supply chains for decades to come.
If you want proof for that, the proof is that already, through the MOUs that Industry Canada has signed with the primes, 85 companies have already been identified as potential contracts for the primes. Now, you say, well, 85 companies have been identified, and ask what that means. So far--so far--60 of those companies have signed contracts.
So if you're asking me whether it is working for Canadian companies, the answer is yes.
I want to make a couple of observations, and I hope we have time for a quick question.
The industrial participation process, the contracting process, has evolved. The Canadian industry has evolved. The departments have evolved. The Canadian Forces have evolved. The opposition has not evolved.
When I started the...as part of the new fighter aircraft program in 1977, which became the CF-18, the plan there was phase-in plus 15 years and we'd be acquiring a new aircraft. That meant in 1988, plus 15 years, we'd be acquiring a new aircraft. This is overdue. We are getting on with it finally.
To quote Mr. Simms, an aircraft's speed capability is a measure of performance. By his logic, the CF-104, which is a Mach 2 airplane, will be superior to both the CF-18 and the F-35, and of course that is nonsense. Both airplanes, the F-35 and the CF-18, carry Mach 4 missiles. That's the point. Some of these comparisons don't show a total understanding of the situation.
We've been focused on the air sovereignty mission in the Arctic. That's only one mission that this aircraft is going to perform. The aircraft is going to perform many missions—all the missions the CF-18 performed and probably more. The fact of stealth doesn't actually make the airplane invisible. A Russian bomber or anybody else will actually see us when we fly up beside them. They will know we are there. They just won't see us approaching at nearly the range that we were used to before. So there is a tremendous lack of understanding of some of the basics of this kind of a program and this kind of an aircraft.
I have a quick question, probably for Minister Clement, through you, Mr. Chair. We talked about the competitive process. If we rolled the clock back and we started the competitive process, would that not equal delay? Would that not equal lost contracts? Would that not equal lost jobs? Would that not equal damage to the Canadian economy?
Members, we will start with the second round of witnesses.
With us today is Dan Ross, assistant deputy minister for materiel. We also have Lieutenant-General Deschamps, Chief of the Air Staff. We have Michael Slack, F-35 project manager, director of continental materiel cooperation. We have Colonel Burt, director, new generation fighter capability, Chief of the Air Staff; Tom Ring, assistant deputy minister; and Johanne Provencher, director general, defence and major projects directorate.
I understand that only three people are presenting, and we'll start with Lieutenant-General Deschamps.
I welcome you, General. You know the drill. We're going to have five minutes for your presentation. We will then go to a seven-minute first round, followed by five-minute rounds. This is an opportunity for members to ask as many questions as they can.
General, I turn the floor over to you.
Thank you, Mr. Chair, committee members. Thank you for the opportunity to discuss the acquisition of the F-35 Lightning II Joint Strike Fighter as Canada's next fighter aircraft.
The CF-18 Hornet has provided outstanding service to Canada for more than 28 years. It will remain our front-line fighter until the 2020 timeframe, when it reaches the end of its life expectancy. This will allow for phase-in of the Lightning II.
Manned fighters are essential to our ability to maintain control and sovereignty over our airspace, whether in Canada or during operations abroad. This is a fact of modern air power. All industrialized nations acknowledge it.
Neither unmanned aerial vehicles nor any other air platform can carry out this demanding and complex task, whether they are operating in the air-to-air or air-to-ground environments. If you do not control the airspace over which you are operating—maritime or land—you will likely fail or take unacceptable losses. You must be able to deny an adversary use of that airspace to win. This need is recognized by the government's commitment in the Canada First Defence Strategy to acquire new fighters.
Analyses of our mandatory requirements for Canada's next fighter have made it clear that only a fifth-generation fighter could satisfy those requirements in the increasingly complex future security environment. The Lightning II is the only fifth-generation aircraft available to Canada. Not only that, but the F-35 offers the best cost value of any fighter available to us.
The F-35 Lightning II and the joint strike fighter program bring unique advantages. The F-35 Lightning II is designed with stealth technology--that is, low observability--that significantly reduces its electromagnetic signature and reduces detection by enemy sensor systems. It provides lower risk and improves survivability for the pilot, and provides enhanced intelligence, surveillance, and reconnaissance capabilities.
The Lightning II incorporates advanced sensor and data fusion technology to gather, synthesize, and display information. This will help pilots understand the tactical situation at a glance, make complex tactical decisions quickly, and take decisive action.
The aircraft takes care of much of the data-gathering and synthesis that pilots now do themselves, which has become almost overwhelming in its quantity and speed. In effect, the aircraft is the co-pilot.
The aircraft will be interoperable with our allies. Nine like-minded nations are partners in the JSF memorandum of understanding, and our interoperability with them will be seamless, safe and effective within NORAD and NATO and on coalition operations. The aircraft is sustainable. We will be able to replace lost aircraft—or acquire additional aircraft if the future global situation demands it—because the production line will operate until at least 2035.
As well, software will be upgraded on an ongoing basis. Canada will not have to contract individually for upgrades, bringing huge cost savings and keeping the aircraft up to date as technology evolves.
There has been discussion about the safety of a single-engine versus a twin-engine aircraft. Modern single- and twin-engine fighter aircraft have virtually equivalent engine-related attrition rates. In other words, there is no statistical difference in survivability from either engine failure or combat damage, but the single-engine configuration has significantly lower procurement and maintenance costs.
In summary, the F-35 Lightning II will provide Canada with the greatest probability of mission success, and the greatest probability that our men and women will survive, returning safely from their missions.
We require the F-35 Lightning II to protect Canadian interests and to counter tomorrow's threats. Procured and sustained through the joint strike fighter program, the F-35 is the best value for our taxpayers' dollar and will keep Canada at the forefront of fighter operations, enabling our fighter fleet to remain relevant, flexible, viable, and sustainable well into the middle of this century.
Thank you, ladies and gentlemen.
Thank you, Mr. Chairman.
Today, while responding to some of your questions, I hope to be able to clarify some of the information that has been circulating and to confirm that the F-35 is the right choice for Canada and for the Canadian Forces.
The F-35 is the only fifth-generation fighter available in response to the Canada First defence strategy. The only other fifth-generation aircraft, the F-22 Raptor, is solely an air superiority fighter and is not deemed exportable by the U.S. government.
A fifth-generation fighter is critical, as it encompasses technology such as stealth and sensor fusion, elements that cannot be added on to an existing aircraft; they must be designed in. These capabilities are critical to mission success and mission safety. Our new aircraft needs to remain relevant for 35 years. The threat is not standing still; it also continues to grow in capability.
In examining costs, it's important to recognize that the quoted $9-billion program cost includes a lot more than the cost of 65 aircraft. The $9 billion also includes almost $2 billion in contingency and currency escalation, as well as elements such as the integrated logistics support, weapons, infrastructure simulation, etc., all of which would be intrinsic in any fighter that you chose to acquire.
Canada first joined the international joint strike fighter program in 1997, as the minister has talked about, with a view to ensuring that we would have the most up-to-date information throughout the process. We had full-time participation in the joint project office from the beginning, initially with one person and now with the team we have there today.
You may also recall that during the early part of the joint strike fighter program, Canada and its eight partner nations participated in that vigorously fought but fully open and transparent competition process that again the ministers have referred to, which resulted in Lockheed Martin being selected over the Boeing candidate--the so-called battle of the X-planes.
I'd just point out as well that the partners, including Canada, had direct input into the operational requirements document. The United States Air Force and the United States Navy in the joint project office, with the full-time participation of allied officers, had input into what the requirement would be, and they needed to do that to ensure that the needs of the allied partners would also be met, without which they would not have continued to participate. We were fully briefed throughout that process, resulting in an announcement of the Lockheed Martin success in 2002.
Today, some 10 years later, we believe we were successful and the government has selected the most capable and affordable fifth-generation aircraft available to serve Canada's needs for the next 30 or so years. At the same time, Canadian industry, which has already received over $800 million in F-35 contracts, stands to be in a privileged position to participate in over $12 billion in upcoming opportunities over the life of the aircraft, a life that is only just beginning.
It's important to note that there is a surprising amount of Canadian content in the F-35, content that will continue throughout the life of the program for purchases of all F-35 aircraft. For example, components such as the thermal management control system, horizontal tails, and wing skins are all being produced in Canada. Additionally, Canadian industry will be well placed to ensure that the through-life support of all these aircraft in use around the globe could represent upwards of another $4 billion in economic opportunities.
Many have questioned the expected in-service support costs of the F-35. These costs clearly are not fully defined six years before we've taken delivery of an aircraft, but I can assure you that, as Minister MacKay said, they will be comparable to support costs of our current CF-18 or any other modern aircraft. For example, an F-35 returning to base from a mission will call ahead and tell the logistics system what exact replacement parts are needed before the plane lands.
We are currently working and cooperating with our joint strike partners to develop the most efficient global support concept possible for this fleet, such as the joint pooling of spares to reduce our overall service costs.
Ladies and gentlemen, that concludes my opening comments.
As you mentioned, my name is Tom Ring, and I am the assistant deputy minister of the Acquisitions Branch at the Department of Public Works and Government Services Canada.
As many of you will know, Public Works and Government Services Canada operates as a common service agency for the Government of Canada. Its activities are directed toward providing service and support to departments, boards, and agencies' programs. In accordance with the Defence Production Act, the Minister of Public Works and Government Services Canada has exclusive authority to buy or acquire defence supplies and construct defence projects required by the Department of National Defence.
The acquisitions process requires that departments define their operational requirements, including the essential characteristics of the goods or services being sought. Upon receipt of these requirements, Public Works examines the potential sources of supply, identifies applicable contracting issues, and develops a contracting approach. A key task in the procurement process is to ensure that the acquisition of goods and services meets the government's overall policy goals and objectives.
All of the above steps in the procurement process are done in accordance with the government contracting regulations and rules in a manner consistent with the principles of fairness, openness, and transparency, and all the while maximizing value for Canadian taxpayers.
With respect to the issue before us today, Canada has been a participant in the joint strike fighter program since 1997. This early participation in the program allowed NATO allies, as was mentioned by my defence colleagues, to participate in a program that did not include any obligation to purchase but allowed us to be directly involved in the competition that was held to identify which supplier would be selected to develop the joint strike fighter. It also afforded Canadian defence industries significant opportunities to be part of the overall program, and the government's announcement of its intention to acquire the F-35 on July 16 represents an important milestone in this process.
In the Canada First defence strategy, the government included a commitment to replace its fleet of CF-18 fighters with a next-generation fighter aircraft. Based on this commitment, the Department of National Defence developed a more detailed statement of requirements. My colleagues from National Defence have mentioned that already, and will speak further, I am sure.
As a result of this, National Defence advised Public Works that it had determined that only the F-35 Lightning II meets the requirements for a fifth-generation fighter capability. The Department of Public Works and Government Services validated this requirement, as established by the Department of National Defence. While other fifth-generation aircraft do exist, they are either not available to Canada or are in development with non-allies. Having determined that only a single source of supply exists to meet the approved requirement, the next stage of the acquisition process is to assess the options for how that good or service should be acquired.
As has been discussed already, the F-35 can be acquired through the joint strike fighter program memorandum of understanding. This approach offers numerous advantages over procuring through a foreign military sales option. Not the least of these advantages is an 8% reduction in cost. Thus, acquiring the F-35 through the joint strike fighter memorandum of understanding is consistent with the Government of Canada policy to acquire goods and services at the best value to Canadian taxpayers. Finally, the F-35 will meet the operational requirements as set out in the Canada First defence strategy.
I'd be pleased to respond to any questions you have.
I'm going to address that question and then turn it over to my colleague to talk about some of the process for the development of the statement of requirements.
Perhaps if I could, sir, I'll begin by just describing a little bit about the procurement process. As was mentioned earlier today, the formal part of the procurement process begins when a statement of requirements has been developed by our client and provided to us. Prior to the development of an actual requirement or what are the specific needs, there is often, frequently, a dialogue between ourselves as the service provider and the client department about the development of those requirements and the needs, and the statement of needs, so that we can be involved in the process, but it is to the client to actually develop those requirements and give them to us.
There was an awfully long process, as I think you've referenced, between 1997 and the current time, where a program was in development, requirements were being developed, decisions were being made, and approvals were being sought. But when that process has been completed, the requirement then is given to the Department of Public Works and we then activate the formal part of the procurement process.
I'll leave it to my colleagues to speak to some of the details around what transpired between 1997, as you say, and 2010.
I think it's a good question, because every time I've been out recently, talking to different groups of folks about the program, the first question people ask me is typically, “Why do we need fighters?” If you can't answer that question, then no matter how much money it is, it seems to be too much. So I believe that's a fundamental question.
As I tried to express in my opening remarks, right now the only thing that allows any country to exercise control of its airspace is the manned fighter. There is the potential that in the future unmanned technology would be mature to the point where that might become an option. It doesn't mean it would be cheaper, but it might become an option.
Right now we don't see it being a feasible solution for many decades, and neither does the United States, because it's investing enormous sums of money in that next generation of fighters, as are all the industrialized nations, western and others. So the manned fighter remains the critical platform that's required to maintain control of your airspace, with regard to both a situation of awareness and a capability for deterrence and acting.
The definition of threat, sir, depends on what the circumstances are. There are two components to deterrence. Deterrence comes from having awareness of or at least being alert to what's out there and having the ability to react. For us the combination of that would translate into knowledge, situational awareness, and readiness. Readiness is made up of people and equipment and training.
The two add up to deterrence. If you don't have situational awareness, if you don't know what's going on inside or outside your own domain, then you're very prone to surprise and some very negative outcomes.
As for the second component, if you don't have the capabilities to react or act, then you're also likely not to be successful. Therefore you don't have a deterrent effect.
For us it's really about maintaining balance. As we looked at the future scenarios and the very uncertain future security environment, it was part of our analysis.
I think the minister more specifically committed to a fair, open, and transparent process. Government officials, as I said in my opening remarks, had been watching and doing an analysis of both the statement of requirements and what was available more broadly in the marketplace.
Clearly we had participated in a fair, open, and extremely rigorous process from 1997 to 2002, when the Boeing proposal was unsuccessful over the Lockheed Martin proposal.
Officials looked at that, and with our colleagues in Public Works asked, first, was that was sufficiently transparent? Was that sufficiently rigorous, fair, and open? As well, did it deliver the solution that here, in 2010, was the most appropriate solution in terms of cost, operational performance, and so on?
Obviously we were of the view that this was a rigorous and fair and transparent process.
What we're looking at, I guess, is a backward bidding process, by the sounds of it, putting it back nine or ten years.
Mr. Ross, I believe it was your predecessor, Mr. Williams, who said:
The only way to know for certain which aircraft can best meet Canadian requirements and at what cost, is to put out an open, fair and transparent statement of requirements and request for proposal, and conduct a rigorous evaluation of the bidders' responses. The bid that meets the requirements of the Canadian military with the lowest life-cycle costs would be selected.
That's the formula for a standard operating procedure for government procurement, particularly when you're looking at choices and military needs.
It seems to me that somehow or other you're being asked, and your officials are being asked, to shoehorn into a government decision something that doesn't even look like this because the military needs weren't the ones that came out first, in the last six months, and said, “Hey, here's what we expect, here’s what we require, and how do we best achieve that result?”
It seems to me that somebody has made a decision that they want this particular fifth-generation aircraft and that everything else is being tailored to suit that decision.
Mr. Chair, it's important to point out that my role, of course, and any service chief's role, is really not to get involved in the debate that we're hearing this morning. We're certainly aware of it and it is an important one, but our job is to look ahead and decide what government expects us to do, and therefore look at the best means of delivering on those expectations. That's what we've been doing in developing the statement of requirements that we then internally get sanctioned and approved through rigorous discussion and analysis, and at some point, if the government decides it wants to move ahead, it goes into a procurement process and would then be translated into a request for proposals, and that's where that would be expressed.
Certainly we've followed our process, as you would expect. The fact that now we're into a discussion on how the procurement will occur is certainly a valid one, but I think we've followed our process, as we would for any other program.
I will ask Mr. Slack to also comment. As the project manager, he's been involved in the program for 13 years, right from the beginning.
Now, right from the beginning, when we initially signed that first MOU, as I said in my opening remarks, we put full-time people into the joint program office in Washington. Even in the most early days, the only real participants in that were the Americans, the British, and Canada.
Right from the beginning, the joint project office was keenly interested in understanding what the needs of the partners were in terms of lethality, survivability, and affordability, without which those partners would not have proceeded to continue in the program and actually acquire aircraft. It had to respond to the needs of all of the partners. That's one of the reasons you see three variants today: conventional takeoff and landing, which we're buying; carrier variant, which the British and the Americans are buying; and a short takeoff and landing variant, which, again, the British and the Americans are buying. We had direct input into the operational requirements document that drove the competition between Boeing and Lockheed Martin.
Just to go back to what's already been expressed in different questions, we've been looking at this for several years...clearly Colonel Burt and his team, and the folks before him as the program was evolving from 2001 and so on. Once the government decided in 2008 that we were going to replace the CF-18, then that gave us the impetus to finalize our views of the future requirements.
So the analysis had been ongoing, but clearly now that we understood the government wanted to move to a new generation of fighters for the future security environment, we were able to complete our analysis and then do a final check, looking around to make sure that we had looked at every possible opportunity out there for us to look at what we were going to table as our requirements.
It's safe to say that we certainly considered how we would approach this option. Something that didn't come out is we have three major missions. The minister has kind of mentioned them, but we have to defend Canada--clearly, number one--North America, and then of course there's peace and security as part of our contribution abroad.
We can't really afford to buy three airplanes to do those three big missions. It's been brought to bear, do we really need stealth to go to intercept or deal with something like a Bear and so on? Clearly there are ranges of options. Unfortunately for us, our ability on a resource basis to afford multiple fleets to do the really high-end stuff and to do, maybe, the less demanding stuff is not there.
If you look back at the history of the air force, we had thousands of fighters in World War II, hundreds and hundreds in the Korean War, still hundreds in the 1960s, 1970s, and 1980s. We're now looking at 65. Therefore quality does count, because to do multi-roles in multi-domains, from high-intensity, high-demand environments that we can't predict, to maybe the home scenario, which doesn't necessarily require all those skills sets or all those capabilities, we have to consider that. Obviously, a mixed-fleet option for us is not affordable.
So the requirement is there. You could meet the requirement by having multiple fleets, but that option was not viable, just from a resource perspective. The F-35 meets all the needs and is affordable. So to us that was a very compelling argument.
It's an important component. We talk about what interoperability means. Up to now we've spent a lot of money on upgrading the CF-18 so it would be functional to work outside of Canada within NORAD and, of course, with the coalition, but I would say it has first-level interoperability. We can talk to other people, and we can share some data, and that's an important first step.
The F-35 would take it to a whole new level, which would mean in the end that we could communicate using means through which we can't right now. Right now we still have to use a lot of verbal communications that give away your position. They are a means involving compromise, if you will. We need to exchange some electronic information with our friends out there, but only a limited amount.
The F-35 allows you to share with partner aircraft basically the entire situational awareness that the platform sees, which dramatically changes the effect you can have with a smaller fleet of airplanes. So when we go into operations abroad with like-minded coalition nations with the same platform, the airplanes are exactly the same. Therefore, we reduce our need to bring everything with us. We can share resources. We can quickly go into an operation without weeks and weeks of training, because we have exactly the same kit and the same software. It will make a big difference in how we do business as a coalition.
I would like to welcome everyone. For a while now, it has been my understanding that only Lockheed Martin will have in its possession the fifth generation and stealth aircraft. I understand your argument that as soon as we decide we want a stealth aircraft and a fifth generation, we cannot use a competitive bidding process and that, regardless, no one else manufactures fifth generation and stealth aircraft. Basically, you think it is pointless to hold a process, from what I understand.
The fact remains that certain people are not entirely satisfied with the performance of the aircraft. I will read you a statement made by Eurofighter, as good a competitor as any. There is the Super Hornet, but there is also the Eurofighter. I will read you the quotes in English because they are taken from an English-language publication.
Eurofighter say they have conducted internal simulations
—Colonel Burt may understand what is meant by “internal simulations”—
in which four-ship Typhoon combat air patrols, supported by an Airborne Warning & Control System (AWACS), defeat eight-ship JSF formations 85% of the time.
I would like to know whether or not that is true and what you think.
Further on, it says:
There are also suggestions that other simulation series pitting the JSF in one-on-one scenarios against such modern combat types as the Su-35 or the J-10 “do not always end in a JSF victory”....
Perhaps I could start, and Mr. Slack could give you some more specifics on studies that the partner countries and the joint project office have done.
In a more global sense, we expect it to be in the same range of $250 million annually that we spend on F-18s or any other similar aircraft. However, we'll have not a fleet of 138 but a fleet of 65. We'll have a single engine instead of dual engines. It's well known that fifty percent of the maintenance cost for a jet fighter is for the engine. So we're going to a very reliable level of technology and engine that is several generations beyond the F-18 engine, and a single engine.
Clearly, globally again, we are going to exercise the economy of scale, with all of our partners, on spare parts, maintenance procedures, the cost of developing new releases of software, and so on, and we really hope to drive that down below what we have had to expend to maintain our F-18s.
Perhaps Mr. Slack could comment a bit more on some of the detailed studies.
I will leave the industrial participation question to my colleague Mr. Parker from Industry Canada. I think he has some very positive things to talk about.
From the defence procurement point of view, things have changed dramatically. We have gone from the lowest price compliant, detailed specifications--a process that took a decade--to performance-based procurement. We've demonstrated that repeatedly over the past four or five years. And we have delivered new capabilities, for example, armoured logistics trucks to Afghanistan in 10 months. It's driven by performance and not by perhaps a 50,000-page detailed specification of engineering drawings that is onerous, difficult, and frankly incomprehensible to most human beings.
That process has driven years out of the defence program. It is combined with the Canada First defence strategy, which is a clear blueprint of funding commitments by this government, and accrual budgeting from the Department of Finance, where you can finance that initial procurement and then effectively mortgage the repayments through our normal budgeting process over the life of equipment.
Those three things--performance-based procurement, a long-term commitment of funding and a plan, and accrual budgeting--have made an enormous change in how defence procurement is taking place in this country. Without any one of those three, we would not be where we are in, for example, re-equipping the air force.
As we say in Newfoundland, God love you, then.
First of all, made the point about there being the same criticism today as there was back then. Well, I think the CF-18 was a fine aircraft and it served us well. Maybe in the absence of that criticism it would not have been as good. We hope to raise the bar in this particular situation, and I'm sure Mr. Hawn would agree.
Mr. Parker, I want to go back to that point you just made about the global supply chain. It is unprecedented, indeed. I would like to ask a few questions about that on the flip side. It seems to me that the way we're going is that future procurement of aircraft or vessels, whatever it may be in the Department of National Defence, will be subject to that global chain; therefore in some cases the ability to get needed parts in a very quick manner may not be as efficient as it was before. In other words, if we had the same airplane, the F-35, the same aircraft the Americans have, they may demand more because of the mission, whether it be Iraq, Afghanistan, or the next chapter.
How would that affect us? Certainly when it comes to less sovereignty for us...dare I use the word. At any rate, it's the only word I can come up with.
Less sovereignty would certainly put us...hopefully not in a precarious position when parts are needed, because I know that we have that situation when it comes to search and rescue.
Perhaps I'd just fairly quickly point out that Mr. Slack has already talked to the ITAR's special access that will be in place for all the partner countries and that actually takes that off the table.
In terms of intellectual property, we clearly will get access for Canadian companies to fully do maintenance on the joint strike fighters as they do on Hercules or C-17s and so on, particularly first-, second-, and part of third-line maintenance.
The other point I would make is that all the Canadian suppliers, with an amazing amount of Canadian content in the joint strike fighters, will participate in the sustainment over the next 35 or 40 years of 5,000 fighters globally, and they actually already have the technical data and the IP of all those components that are Canadian.
The third thing I would say is that these modern aircraft are heavily software-driven. They are not mechanical hydraulic machines anymore. The software to take off from a runway for an F-35 is more than 10 million lines, and the partner countries individually will never be able to manage that software themselves. The war-fighting software in it alone is tens of millions of lines of code. They are heavily software-driven and very complex. We are not absolutely sure at the present time what level of third- and fourth-line maintenance will be done by individual partners, or would need to be done. We are about six years away from our first aircraft, and we will be able to determine what that looks like at that time.
I've spoken about that a bit before, and I'll just review a little bit of the logic of where we are.
People are certainly allowed to have their opinion, but one thing you have to understand is that things evolve very quickly. In technology writ large, and certainly in military operations at large, future technologies that are currently foreseen or in existence will be very challenging, because we're not the only ones developing good technologies. Therefore the future security environment is going to be very challenging both in conventional terms—nation-states that will have a lot of high technology—and the distribution of technology to non-state actors. Therefore we have to be able to deal with that range of challenges in a complex environment, either as a nation or as part of a coalition.
As you look at all those threats, whether they are advanced fighters or surface-to-air threats or maritime-to-air threats, we have to be able to deal with that. If not, we going to have to look at our defence policy.
As we looked at all those future challenges, we did the analysis of what we needed to get that would be good 30 years from now. We had to look at the leap in technology we'd have to make. We're getting fewer and fewer airplanes because they're costing more and more. So the few airplanes we have must be agile; I can't wait for another three years to get another airplane because we see a new threat on the horizon.
So we looked at all those options and said the only way we could at least have fairly high confidence that we'll be able to be agile 20, 25, or 30 years from now is with this technology. It gives us the best chance of success in an uncertain future, given the rapidly evolving technology.
Other folks are working hard to achieve fifth-generation capabilities. Other folks have very advanced surface-to-air weaponry. So these things will challenge us. Offshore, at some point, there's technology that can be put on ships that will challenge us, such as cruise missiles. There are other things that we have to worry about in the future. That is why we looked at all those things and said, “What gives us that flexibility?” Fifth-generation is the tool that we have looked at.
If that's the case, the F-35 becomes, of course, the lead contender, and it's the most cost-effective solution in all domains. For us, it was the most obvious, logical outcome of our exercise in looking at what the future would hold for us.
As I mentioned earlier, I can't afford going to multiple fleets of airplanes. This government, Canada, would be hugely stressed to buy fleets that are specifically just for North America and then a fleet for anything offshore. We just can't go that way, given the huge cost of multiple fleets.
This gives us the best solution. It's multi-use. It's flexible well into the future, and, as the minister mentioned, should we be wrong, if we didn't get the number right because the security threat becomes more prominent and we, Canada, have to do something more robust, we can change that without having to redo an entire fleet procurement. Within two years, we can have more airplanes. It's money, but you can make that decision—any government—10 years or 15 years downrange.
That's something we don't have with any current programs, where you buy what you have, and you have what you've got because they stopped making that airplane and the software and the weaponry. That's why this program is very powerful. It gives governments, plural, into the next 30 years, options.
I've had a brief chat with and my colleagues from the opposition. We'd given notice just to make sure we were in under the line, but clearly this is a subject of great interest to parliamentarians and to a number of witnesses who I understand are on a list and obviously couldn't be scheduled for what was a fulsome day today.
My suggestion--I'm in the hands of the chair and the others who've been on this committee longer than I have--is that next week, or at the first opportunity, the steering committee would be seized of a schedule where we could have additional hearings and hear from additional witnesses with respect to the acquisition of the next generation of fighter aircraft.
So the motion, just to put it on the record, would be that given the number of witnesses who are relevant to this study, the committee schedule further hearings on the issue of the next generation of fighter aircraft.
Mr. Chair, I think we can find a way next week to identify the appropriate times and panels of witnesses, but that would be the text of a motion. Merci.
Again, I don't want to waste the committee's time. I had a brief conversation with .
I also spoke with Mr. Bachand, as well as with Mr. Harris and my colleague Mr. Simms.
We have some concerns about documents and information that ministers in particular referred to this morning, statements of requirements, research. The referred to research her department has done.
Mr. Chair, it's more to inform you and colleagues, if we can find a way in working with the parliamentary secretary to find an accommodation, I'd certainly be happy to do so. If not, then next week or at the first appropriate moment I think that some of us will want to bring forward a motion around the production of some of these documents. But we'll certainly have a chance to talk with and others to see if we can find a way to circumscribe it if it's appropriate.
I'm left, Mr. Chair, having heard the ministers this morning, with the sense that we should have a chance to see some of this information they referred to. We'll find the best way to get at that, perhaps next week.
Mr. Chair and members of the committee, thank you for inviting Avcorp to speak at this key defence committee session.
First, who is Avcorp? We're a small aerospace company based in British Columbia. We currently employ approximately 500 staff, and we have facilities in both B.C. and Ontario. The company is a designer and builder of aircraft structural assemblies in both metallic and composite materials. Founded over 50 years ago, the company started out building floats for float planes, and it has evolved into a supplier to most of the large OEMs in the aerospace industry. Our key customers today are Boeing, Bombardier, and Cessna.
We are very pleased to be here today to talk about the decision on the F-35. Since 2005, Avcorp has been working to diversify its portfolio of business by adding defence contracts. The aerospace industry is cyclic, and not having defence work in our portfolio was always seen as a disadvantage. To date the company has been successful in winning work on the CH-47 under the current Government of Canada procurement process, and recently we were able to announce a contract on the F-35 program. We will participate in the global supply chains for both those programs.
One of the key things we'd like to highlight is to thank the public servants at DND, Industry Canada, and Public Works for the time and effort they put in to making these opportunities a reality for Canadian industry. Certainly we, as Avcorp, value their hard work.
The impact of participation in the F-35 program for a company like ours has been extremely significant. By participating early on in the program, as Canada has, we have been able to realign our technology base and train our people to be ready to take on this work. That has put us in a position to compete on a global basis and win significant contracts.
A key part of the process has been the transfer of technology into the company for the F-35. That not only enables us to do this kind of work, but it will also allow us at a later date to transfer this knowledge into our commercial programs and hence build on this technology transfer to compete on future major platforms, like the 737 replacement or the A320 replacement. The issue of technology transfer in a program like this is absolutely key to the long-term success of the industry.
Continued participation in the program by Canada is essential. It will ensure that more opportunities will be forthcoming for other Canadian companies, and obviously it will allow companies that have contracts to continue to participate. We believe the important issue for us now should be to focus on driving more of the subcontract work into the Canadian SME supply base, because again we see the technology transfer opportunity and growing the capabilities of the industrial base.
Any delays or pauses in this process mean we would leave opportunities by the wayside. This program is picking up speed. Production is starting to ramp up, and the window of opportunity on certain types of contracts will close as those aspects of the program are locked down for production purposes. There are significant challenges to the program in the arena of capacity. The Canadian industry, as strong as it is on the global stage, has a wonderful opportunity to get more than our fair share, let's call it, on this program because we're not limited by artificial numbers like we would be under an IRB program. We have essentially unlimited capability to take on work if we have the capacity to do it and if we have the will to actually invest to make that happen. So there is really no upper limit to what Canadian industry can do on this program.
Mr. Chair, thank you very much. That is all I have at this point.
Mr. Chair, members of the committee,
let me thank you for your invitation to testify at this very important committee session.
Having listened all morning, I should also thank the members of this committee for the excellent work they are doing on behalf of all Canadians.
In 2009 the aerospace industry generated $22 billion in revenues; 80% of that was export. It provided value-added jobs to over 80,000 Canadians, from St. John's, Newfoundland, to Lunenburg, Nova Scotia, Moncton, Saint John, Montreal, Mirabel, the greater Toronto area, Winnipeg, Calgary, Abbotsford, Delta. I hope you get the message: our companies operate across this country.
Now, going to the F-35 decision, AIAC has been advocating for a timely decision to be made on the next generation of fighters, which was part of the Canada First defence strategy. We were therefore very pleased with the Government of Canada's announcement of its intention to proceed with the acquisition of the new generation of fighters this past July.
Several member companies' involvement in this platform date back to 1997. AIAC was favourable to Canada's involvement back then because it involved companies early on in the process, thus presenting rare opportunities for them to be involved at the level of concept development.
This is also a rare opportunity for companies to get fully involved in developing a new major platform. This idea is at the heart of AIAC's concerns, as described in our report on future major platforms, drafted in 2008.
The “future major platform” initiatives aim at positioning Canadian industry to win large, long-term, value-added job creation packages, on the platform of the future, over the whole life cycle of any aircraft.
As you all know, the F-35 is based on direct industrial participation. This implies that partners, stakeholders, must work together in order to ensure a maximum of opportunity. You've heard this morning from ministers and public servants that this could go as high as $12 billion, excluding sustainment and foreign military sales. We want to make sure that we get our fair share of the $385 billion that these planes will generate and cost over the period of 20 to 40 years.
Several companies have been and will be making significant investments up front in order to ensure their competitiveness to win mandates in these contexts. These are important, expensive business decisions that require stability, predictability, and a climate of certainty around the decision.
This decision provides the Canadian aerospace industry with an unprecedented opportunity, as long as we are able to work closely in order to derive maximum benefit for the entire country.
Now that the decision has been made, the AIAC will work at ensuring that Canada reaps the benefits in an optimal way. We need value-added jobs, technology transfer, as you just heard, and long-term stable contracts. We'll focus now on our efforts to make sure that companies are in a position to win the opportunities and, in collaboration with pertinent government departments, that a clear accounting system is put in place to track not only the quantity but the quality and the amount of work that Canadian companies will gain from this partnership.
Our role will be to ensure that our companies develop in a context where they will be able to derive optimal benefits. We also insist that a control system be implemented to ensure the quality and quantity of jobs created as well as of the work assigned to our companies under this partnership.
As for the maintenance of fighter planes, and pilot education and training, the AIAC Defence Committee will set up a task force with the objective of analyzing the options and recommending to the Government of Canada the best practices to implement.
In the meantime, we will strive to facilitate access for our companies to the global sustainment opportunities that are currently available, such as the maintenance of main systems—there are 40 of those—depot maintenance, and forging alliances with partner nations with more modest aerospace capabilities.
Thank you, Mr. Chairman, for the opportunity to appear today.
I am speaking to you as the vice-president of Government Affairs in Pratt & Whitney Canada's president's office.
Pratt & Whitney Canada has a proud 80-year history of continuous innovation, achievement, and success.
Today, we employ about 9,200 people worldwide and close to 6,200 across Canada in manufacturing, engineering and research sites, including those in Halifax, Longueuil, Mirabel, Mississauga, Thompson and Lethbridge.
We are a global aerospace leader, shaping the future of business, helicopter, and regional aviation, with new-generation engines. We've introduced a record of 65 new engines into production, more than any other company in the world, over the last 12 years alone, that exceed ICAO standards for low emissions and noise.
Our ongoing success is proof positive of the benefits resulting from our 50-year relationship with the Government of Canada. We have a public-private partnership, in the true sense of the term. The company and I, as its employee, have been proud to work with Conservative and Liberal governments in developing appropriate, beneficial and collaborative programs, as well as coordinated strategic support tools, and to contribute to our common goals of global economic prosperity.
Pratt & Whitney Canada is the single largest R and D investor in the Canadian aerospace sector—over 50%—and we rank amongst the top four companies in all industries in Canada in terms of annual investments in R and D. We're also pleased to invest $15 million each year in 16 Canadian universities. Investments give engineering students full exposure to the gamut of leading-edge aerospace research, from new theory right through to real-world applications on our current family of engines.
Since you've had a full morning of discussions on the joint strike fighter, let me come right to the point in terms of Pratt & Whitney. To start, it's important to recognize that the decision by the Government of Canada earlier this summer to exercise its longstanding option to move forward and acquire the 65 joint strike fighters is the next logical step in a process that began way back in 1997. While the actual F-135 engine for the joint strike fighter will receive final assembly and tests by Pratt & Whitney in the U.S., the F-135 program is very important to Pratt & Whitney Canada and Canadian industry.
Back in October 2004, Pratt & Whitney Canada was awarded a contract to provide engine-critical hardware, the integrally bladed rotor, or IBR—not IRB but the IBR, as we call it--for the 135 engine. This win, and the research we do, was in part due to our collaborative efforts with Canadian universities, of which I spoke a moment ago.
The knowledge that we have developed and applied to these IBRs will allow us to create a global centre of excellence. Indeed, being the best in the world at high-value, high-skilled, and high-innovation tasks is a policy goal that has been pursued by successful federal governments for the past 20 years.
Second, Pratt & Whitney has already awarded 20 JSF-related industrial participation contracts across Canada, with more contracts currently in negotiation.
The government's decision to move ahead with the joint strike fighter is good news for all these companies in terms of future sustainment opportunities and is critical to being able to plan activities and future investments with greater certainty.
As Paul mentioned, and it's important to emphasize, certainty is very important for industry. If there is going to be ongoing uncertainty, suppliers in countries where the purchase of a joint strike fighter has been concluded could have an advantage.
That certainty is important given the vulnerability of the current economic recovery in the wake of a global recession that has strongly affected and continues to affect the global aerospace industry.
We are confident that Pratt & Whitney can be competitive and win contracts based on the global support model, which is different from how we usually proceed when it comes to industrial and regional benefits, and large-scale military acquisitions.
Indeed, the opportunity for Pratt & Whitney Canada and our value chain partners to provide depot, repair, and equipment for a potential fleet of 2,000 or 3,000 or 5,000 aircraft--whatever the final market will be--instead of just 65 aircraft is immense.
Honourable members, Pratt & Whitney Canada is well positioned for these global sustainment opportunities.
We thank you for taking the time and for giving us the opportunity to be here today.
Gentlemen, thank you for your presentations.
I have two questions, which will probably be for Mr. Lajeunesse.
Your company represents the Canadian industry. I represent a predominantly rural region of New Brunswick. You mentioned Moncton as well as nearby Dieppe. A number of small companies are making efforts, and some of them have been doing so for years. They are becoming increasingly competitive or are at least showing growth. Mr. Kalil said that he represents a small company with 500 employees. My colleague from Newfoundland and Labrador and I think that this company is rather large.
Mr. Lajeunesse, if you were based in the Atlantic region, for instance, what could the federal government and especially the provincial governments do to help your industry and the members of your association, which are probably not all large, well-known companies, be competitive and prepare for the kinds of benefits you have described so well? What can be done in terms of a regional development strategy? That is a term that can mean so much and yet so little all at the same time. If you were an entrepreneur in New Brunswick or in Newfoundland and Labrador, what kind of support could you ask your provincial government and the federal government to provide so that you would not be left out simply because larger companies necessarily have a larger share of the market?
Mr. Chair, I have the following concern. I'm worried that, if the government agrees to implement a measurable process, the economic spinoffs will be lacking as the project develops.
You were here this morning. There have not been many comments on the bidding process. Concerns have rather been raised on the economic benefits. For example, if taxpayers invest $16 billion in the project, they will definitely expect the same amount to be generated in economic benefits. The minister told us—and you seem to agree—that it was not the normal way of doing things, given that the memorandum of understanding states that economic benefits policies must not be taken into account. The possibility of reaching up to 3,000 or 5,000 platforms should have been considered instead. That's where the novelty lies.
Meanwhile, as long as there is no contractual obligation, there is a risk, you will agree. If you realize that things are not developing at the speed that you expect them to develop, your measures do not allow you to revisit a contract and tell the others that they have obligations.
Isn't there a way to establish a two-track approach that says that we are competitive and that we want to have access to 5,000 aircraft, but that we are asking for a minimum of economic benefits? In your opinion, would such a hybrid formula work?
Again, with us today is, for instance, Magellan Aerospace. Pratt & Whitney Canada works very closely through Magellan, Haley Industries in Renfrew. We have a long history of being able to do that, and part of our responsibility....
Just so you understand, under the former TPC agreements that we had, and the new SADI agreements, as part of the commitments we make, we make commitments to work with those SMEs and to help them get along. As a matter of fact, we work very closely because it's part of our mandate. And the other companies that come into Canada....
You mentioned IRBs before, by the way, and you know, we shouldn't say one or the other. I think we're blessed with both now. When you do an investment on an IRB—for instance, in Mirabel, and Monsieur Laframboise is going to benefit because we're going to have an announcement in October—those things are very important. They became part of the IRBs. At the same time, if I am able to sell IBRs, which I mentioned before, I'd like to do it to more than 65 planes, which I would do under an IRB kind of agreement in the future.
Members of the committee, we are continuing with the national defence committee, meeting number 24, panel four.
For Project Ploughshares, we have Ken Epps, senior program associate, and John Siebert, executive director. And by video conference from Calgary, for the Centre for Military and Strategic Studies, University of Calgary, we have Robert Huebert, who is the associate director.
Gentlemen, the rules are very simple: you have five minutes. That's five minutes for both of you, five minutes for the gentleman on the screen, and then we will go to a first round of seven minutes. All questions and answers are to go through the chair.
Gentlemen, you have the floor.
Thank you, Mr. Chair, for this invitation to Project Ploughshares to address the standing committee on the proposed purchase by Canada of 65 joint strike fighter F-35 aircraft.
In our view, with respect to what has also been heard today, we don't believe the case has yet been made for this acquisition. Given the projected cost and complexity of the JSF program, there has been suprisingly little detail made available on costs, benefits, and, especially, anticipated missions of the aircraft. We'll focus on the strategic environment, and then the affordability, industrial benefits, and opportunity costs of the JSF program.
The Canada First defence strategy released in June 2008 highlights the international circumstances in which security threats emanate to Canada from “failed and failing states, civil wars and global terrorism”. There are also emerging “nuclear-capable adversarial states”, pernicious “Islamist militants in key regions”, and the “buildup of conventional forces in Asia Pacific countries”.
On the domestic front, Canada First identifies possible terrorist attacks, human and drug trafficking, foreign encroachment on Canada’s natural resources, and potential outbreaks of infectious diseases. In our view, you'd be hard pressed to create a credible scenario from these threats where a stealth-enabled fifth-generation jet fighter is logically part of the Canadian Forces response. Canada First also focuses on being a strong, reliable defence partner, and that Canadian Forces remain interoperable with the U.S. military.
We would argue that Canada can be good ally and neighbour without the purchase of the joint strike fighter, and the Canadian Forces do not need them to be interoperable with the U.S. military.
Mr. Chair, the government has emphasized the affordability of the F-35 aircraft. However, U.S. government sources now cite the per-unit cost of the JSF at close to twice the initial projected price.
Denmark, Norway, and the Netherlands have postponed their F-35 procurement decisions until the rising production costs stabilize or are guaranteed. The projected life-cycle costs for the Canadian F-35 aircraft, essentially the costs of operation and maintenance, have not been made public by the Department of National Defence. A former senior Canadian defence procurement official has stated these costs may be two to three times the $9 billion cost of acquisition. A report in The Globe and Mail based on government documents placed life-cycle costs at $17 billion, meaning the total program outlay over 20 years would be almost $26 billion.
These figures support our estimate, using U.S. government studies, that the Canadian JSF program costs could total $30 billion over 30 years. Surely these figures redefine the meaning of affordability.
The Canadian military aerospace industry has fared well in winning program subcontracts, yet future Canadian industrial benefits face two major risks.
The first is that the projected global market for F-35 aircraft will continue to shrink. Initial global projections have already been revised downward from a high of 6,000 aircraft to the current 3,200.
The second risk is the changing nature of U.S. military trade relationships with JSF program partners. For decades, Canada has had a unique military trade relationship with the U.S., easing access of the Canadian military industry to the U.S. military market. However, recently announced changes to U.S. export controls, combined with growing pressure from JSF partner governments to ensure subcontracts for their industries, will likely alter the comparative advantage the Canadian industry has enjoyed in the U.S. market to date. The terms of the JSF partnership agreements, as they now stand, do not obligate U.S. prime contractor Lockheed Martin to guarantee subcontracts to Canadian industry.
I'm going to be limiting myself to three major issue areas. The first one is the need for the F-35s; the second is the competition or the alternatives, as is often being discussed in the media; and the third, a couple of critiques that in fact suggest that the decision to buy the F-35A may not even go far enough, that we may want to be considering buying some of the B variant.
Let me start with the need. One of the biggest challenges we are facing in trying to decipher whether we need an F-35 is, of course, the type of crystal ball that one needs. If we look back to when we made the decisions for the CF-18s, those go back to the mid-1970s, 1978 and 1979, and we still see the CF-18 being utilized in ways that, quite frankly, no one predicted back in the late 1970s. It is expected that the F-35 in the traditional Canadian context will go beyond what we're saying, so we're seeing a possibility of it still being utilized by 2050, even possibly 2060, and of course, that presents all sorts of challenges in terms of trying to predict the future defence needs.
What we have seen in the last 20 years since the end of the Cold War is that air power remains a critical enabler for almost any conflict that occurs. This includes conflicts even of a low intensity such as Afghanistan, but the American dominance of air superiority in this context usually hides from the public view what a critical point it is in being able to have the various airspace, hence battlefield, dominance that is required.
The other issue, of course, is trying to look at who they would be utilized for. From a security perspective, the issue that many people are the most concerned about is the resumed interest by the Russians in their bomber capability. The Russians had stopped all bomber patrols in 1989, but then in August 2007 resumed them, with numbers that are confidential and that the government has not been sharing with the greater Canadian public, but it is rumoured to be higher than what is released on the occasional report of Russian bombers in our airspace. Even more important, however, was the spring announcement by Putin and the head of Tupolev that the Russians are now in the process of designing and hope to deploy by 2017 or 2018 the next-generation stealth long-range bomber. This is not to confuse capabilities with intent, but it suggests that there will be challenges going well into the future.
The other issue in terms of need is that as long as the Russians continue with a bomber capability, regardless of what Canadians think of the intent of the Russian government, the Americans will take it very seriously. If we lose our fighter capabilities with the expected retirement of the CF-18s with no replacements, Canadians will then have to accept that the Americans probably will feel it necessary to do the various air patrols that CF-18s are currently engaged in, creating, of course, sovereignty issues of themselves.
In moving to the issue of the source and contract, one of the greatest challenges we face is that we are seeing a concentration worldwide of who has the capability of making advanced fighters. Currently the options really are the Europeans, who have banded together to create the Eurofighter, but this is an older technology. Some estimates suggest that it probably is not going to be any cheaper than the F-35s, but once again the jury is out in that particular context.
The Super Hornet is considered one option, but once again that is technology going back to the 1990s. The Americans have a congressional law against the export of F-22s. The Swedish V fighters will probably go out of business, because as has been mentioned earlier, all of the other Scandinavian countries are looking at purchasing F-35s rather than going to the Swedish, and it is expected that it probably will be the death knell of the Swedish fighter capability.
That leaves the Russian and Chinese variants of the fighters, and Canada has always had a policy about buying any of its advanced military capabilities from either one of the countries.
In terms of critiques, I would like to offer something that probably goes against most of the critiques and suggest that perhaps Canada is not thinking quite far enough. The variant that we are going to be purchasing is the F-35A. These are basically what the Americans are having to replace their F-16, their air force fighters. They are presumably a very good aircraft in terms of a relatively short airfield, but it is their B variant, the short takeoff and vertical launch, that the Marines are to purchase, that Canada should think about buying, at least a few.
The reason, I would suggest, is that all the predictions are, of course, that Canada will be involved with oversea deployments and with the Arctic opening. The reality is that we probably will find ourselves in a circumstance in the future where having at least a handful of the F-35Bs to be placed on a future naval combatant vessel--probably in terms of a replenishment-sized vessel, one has to acknowledge--might be very useful, with an increasingly ice-free Arctic, in terms of being able to ensure Arctic sovereignty and security and also in terms of any future oversea deployments against any foes we don't know at this point in time.
In conclusion, if we are to be honest with ourselves, within the strategic environment there is no indication that we are seeing a diminishment of the type of security requirements for “fast air”, as the air force likes to refer to it. Nor, unfortunately, do we see any viable competitor. I would argue that perhaps we have not gone far enough in looking at some of the future capabilities we will be needing.
Thank you very much.
Thank you, gentlemen, for your comments and your observations. I think they're very interesting.
Perhaps through you, Mr. Chair, I can ask a brief question, and if there's time remaining, I will give it to my colleague Mr. Simms.
Mr. Epps, you referred to decisions made by, I think you said, Denmark, Norway, and the Netherlands to delay procurement of the F-35. One of the concerns was escalating costs. I think the American general accounting office and American authorities have had some review and some concern about what seem to be fluid costs, not only in terms of the per-unit cost of the plane, the actual initial procurement, but also for the maintenance over the life cycle. You talked about that, and you used figures that are considerably higher than some we've heard at this table today.
I'm wondering if you could expand on that, or share with us other information you have about other countries, or what your concerns might be with respect to escalating costs, both for the initial purchase and with respect to the life cycle of the aircraft.
Yes, I think one of the points to make about the JSF program is that it has been almost universally controversial within all the partner countries that are participating in the program. As you mentioned, in the U.S. alone there's been a lot of debate about the rising costs of the aircraft program, and some doubt as to what the final costs will actually be. The GAO report you mentioned leaves open what the final costs may eventually be.
In terms of the partner countries and the extent to which they have now committed to the program, based on my review of a number of periodicals and industry articles that have referred to the program, we know, for example, the Netherlands, in August of this year, said it will not make a decision on the purchase of the joint strike fighter until after the next election, which is expected in 2014.
Norway has said it will not sign a contract until it is assured that the aircraft will be available at the lowest price, which isn't clearly defined but is presumably lower than what is expected at the moment.
Denmark, in March of this year, delayed its decision on acquisition because of rising costs, and the government there is saying it's waiting for costs to stabilize.
Meanwhile, we also know there's a major defence review going on in the U.K. We don't know the outcome of that review, but The Economist already has suggested, in an article last week, that it might result in the order for JSF aircraft being halved.
In Italy, there are federal budget cuts under way. The suggestion there is that there is a fairly basic commitment to the JSF program, but again the numbers are unknown.
All of that is to say there is still considerable doubt around how the partners are going to be committed to this program.
Let me follow up on that. Certainly this creates quite a bit of apprehension in the whole thing if many of these countries are not going to fulfill their orders.
To the Ploughshares group, I want to ask you about this cost measure again. In your submission, you do say...well, you're quoting a former bureaucrat, estimating that as borne out by a recent GAO report, which noted the JSF program office now estimates life-cycle costs to be $764 billion, and you used $30 billion for this country alone.
Based on your research, then, how does that compare with how we've procured certain aircraft, such as the CF-18, in the past? Did they go through a similar process, and were costs much higher than first anticipated?
I put that question to our friend at the University of Calgary as well.
I would like to welcome our guests.
I visited your Project Ploughshares website. I looked at what we might call the six pillars. You are talking about economic equity, political participation, being inclusive, respect for human rights, the integrity of individuals, and a healthy environment. The last two points are particularly important. You are talking about developing peaceful ways to resolve conflicts, as well as reducing and putting strict limits on instruments of war. Could you expand on this last point?
I personally agree with your statement that we should resolve conflict through diplomacy, development and peaceful means. But the lessons we've learned from history encourage us to be cautious. Everyone knows that non-aggression pacts and treaties of friendship between nations have often been broken. When that happens and if we have not taken the necessary precautions, we may have to pay a fairly high political, economic and human price.
If the JSF was not in the picture, would you agree that the Canadian air force had to be modernized so that it had a small reserve in case conflict resolution through diplomacy and development was not successful?
Thank you very much, Chair.
Our approach is that definitely conflicts exist and will continue to exist and that the pursuit of peaceful means of resolution of conflicts is preferable to the resort to violence, and so we talk about the reduction to the resort to violence.
We also believe that Canada, as a wealthy nation with no existing threats to its territorial integrity, has an incredible array of choices about where it might invest to both secure the monitoring of territorial land and waters and also contribute to longer-term investments in international peace and security. We say there should be a military capacity, and that military capacity should be properly equipped for missions that we choose to define and also define how we want to participate in them.
The range of threats, as I've indicated, that even are supported through the Canada First defence strategy, that we are currently facing and foreseeably facing into the future, are of a nature that a joint strike fighter with stealth technology probably will not be used. In fact, some comparisons have already been made in this room throughout the day. The CF-18 came into place, we have this range of possibilities, we couldn't predict them all, and we can't predict into the future. In fact, even at the height of the Cold War, which is a significantly different strategic environment than we are in now, fighter aircraft were rarely used in the full capacity to which they were designed.
So we are a placing a question for this committee. More analysis and public debate should take place: what is the nature of those threats, and is the JSF the place to invest the dollars we have available, which we acknowledge are not unlimited?
It isn't, and the reason why is that you have to ask why the Russians had the motivation to resume bomber patrols when in fact we had more or less worked out arrangements at the end of the Cold War whereby we acknowledged how these are perceived as escalatory activities, or at least as creating a mistrust that had not been there before.
The question is why, then, in 2007? One could say, okay, they were doing it because Putin was getting more money back into the military and they wanted to show that it was for domestic consumption. But, if anything, there are reports in the open literature saying that our governments are not sharing the degree to which overflights are in fact occurring. In other words, there are suggestions that the numbers are substantially higher than those announced by, say, on a trip to the north.
If that is true--and I have no way of verifying whether it is--one has to ask the question, are the Russians are doing it for domestic consumption, are they doing it for intelligence-gathering, or are they doing it for other various reasons?
The other issue that's suggested in the open literature is that the Russians, unlike NATO, do not share pre-flight clearances. In other words, the Russians are staying in international airspace, and they're not required to.... But as a confidence-building measure, when NATO does similar activities, we tend to notify the Russians that we will be having these exercises, and we give them advance notice. My understanding--and I stand to be corrected--is the Russians are not doing this in that particular context, which raises concerns for me regardless of how they're portrayed as a means of political advancement.
This is the interesting question. It gets very much into the gestalt of how we try to understand what the Russian intentions are. There are the arguments that Putin is doing this, of course, simply for domestic consumption to show that he is the strong man. In other words, there is this whole aspect that he's not even focusing on the outside world.
However, the issue of course is why in 2007 they had maintained this at substantial cost and, of course, whether they are going to follow through with the new advanced bomber as they say they are. If they don't, many of the premises of your question are, indeed, in order.
The second part of your question is whether we actually need the F-35. Theoretically, could we have a cheaper aircraft, something that perhaps will provide us with the type of air superiority or at least air surveillance that fighters give us? The answer is in theory yes, but we simply don't see that type of company capability.
As I said, the Eurofighter is probably going to come up at a cost roughly akin to what the F-35s are, or at least that's the speculation. That may be proven to be wrong, but it's an older technology, and it won't last quite up to the 2060 timeframe. I expect we'll be seeing the F-35s go...despite the government saying they will be replacing them sooner.
If you're not willing to go to the Russians to buy your fighters, there really are going to be limited options. You either go with the F-35, which may not be a perfect fit, or you go with nothing. It's almost the type of choice that any government...and this was reflected, of course, even with the Liberals when the initial contract in the mid 1990s to engage in the development of the F-35 was taken. This is the real challenge any western government outside of the United States is going to be facing.
I guess my response to that is that it's along the lines of the unknown. We're talking about going for the Russians, who probably will not be the major issue.
When you say NORAD knows, well, of course we have recently seen the re-coverage of the events of 9/11, and NORAD was not able to respond to the type of capability, the type of threat, that people were not perceiving. NORAD, as everyone knows, was looking outward, not inward. When somebody decided to turn these aircraft into basically what amounted to be cruise missiles, NORAD did have a problem understanding and responding.
I'm not saying there is a continuous terrorist threat of using aircraft as cruise missiles, but we have to have serious debate on the question of having a response capability that goes beyond surveillance and on what we do when we have this type of threat.
Unfortunately, a fast aircraft is still your best means for the necessary force on force when you are dealing with very short time periods. At least that's the argument amongst most of the air power circles. You want to have that quick capability that goes beyond simply knowing what's happening. Let's be blunt: we're talking about using deadly force against some future...[Technical difficulty--Editor]