Thank you very much, Mr. Chair.
Good morning and thank you for the invitation to appear before you today.
As indicated, I am Patrick Finn and am the assistant deputy minister (materiel) at the Department of National Defence.
I am joined today by the director general, international and industry programs, Jennifer Hubbard, who is currently also serving as the chairperson of the NATO Support and Procurement Organisation's Agency Supervisory Board.
The materiel group serves the Department of National Defence and the Canadian Armed Forces as a central service provider and functional authority for all defence materiel acquisition and support.
The materiel group's activities contribute to Canada's commitment to the NATO alliance. As highlighted in “Strong, Secure, Engaged”, NATO is a cornerstone of Canadian defence and security policy. Canada remains as committed as ever to this alliance, as evidenced through our contributions to various missions.
Canada contributes to the capital acquisition of all alliance common-funded capabilities through the NATO security investment program. This includes major capability delivery programs, such as the air command and control system and the preliminary work currently under way on the alliance future surveillance and control program.
NATO procures these common-funded capabilities, and provides a range of other services.
Of key interest to the materiel group is the NATO Support and Procurement Agency, known as the NSPA, which is headquartered in Capellen, Luxembourg, and provides integrated, multinational logistics and procurement support solutions for its stakeholders, operating on a no-profit, no-loss basis.
The NSPA manages a diverse range of activities, from support to operations and exercises to the provision of logistics services and life cycle management, including large-scale weapon systems acquisitions for its alliance customers.
For example, the agency's central Europe pipeline system program manages the operation, financing, and maintenance of an integrated cross-border fuel pipeline and storage system in support of NATO's operational military requirements during peacetime, crisis, and conflicts, including expeditionary operations.
The NSPA is the executive body of the NATO Support and Procurement Organisation, of which all 29 nations are members. Those nations are represented in the organization's agency supervisory board, which directs and controls the activities of the agency.
An official from my organization represents Canada at the agency supervisory board's meetings, and as I mentioned, Jennifer Hubbard is currently the chairperson of the board. This position was originally from 2016 to 2018, and we have been asked to extend her tenure until 2019, which I think speaks volumes about her capability and abilities.
Access to the services of these NATO procurement agencies has been invaluable in supporting Canadian Armed Forces missions. As the Canadian Armed Forces rarely deploy abroad alone, the use of these NATO agencies in multinational circumstances has proven to be a responsive and effective way to conduct coalition contracting for common goods and services.
During the military mission in Afghanistan, Canada and a number of allies obtained real life support at Kandahar Airfield through the NATO Maintenance and Supply Agency, the predecessor to the NATO Support and Procurement Agency. The agency served as the NATO contract integrator for the provision of a wide range of services, from food to camp infrastructure.
As a result of Canada's membership in the NSPA's multinational tube-launched, optically tracked, wire-guided, or TOW, missile system partnership, Canada has upgraded its TOW missile systems over the last four years and continues to rely on the agency for the maintenance of these systems, including the supply of spare parts.
My officials are currently working with their counterparts at Public Services and Procurement Canada and the Treasury Board Secretariat to examine our existing procurement authorities and to enable enhanced use of the NATO procurement agencies where appropriate, to better support future Canadian Forces military missions abroad.
As Canada's senior government representative responsible for defence materiel matters, I attend the twice-annual Conference of National Armaments Directors plenary meetings at NATO Headquarters.
The Conference of National Armaments Directors—or CNAD, if you prefer—reports directly to the North Atlantic Council and is tasked to advise the council on armament matters; act on issues pertaining to multinational co-operation in the research, development, and production of military equipment and systems; and contribute to the coherent, transparent, and mutually reinforcing development of common capability requirements.
My participation as Canada's national armaments director at the plenaries allows me to influence the improvements of the alliance's military capabilities. It also provides an opportunity to share national perspectives and best practices with all parties. Reporting to the Conference of National Armaments Directors are a variety of main armament groups that have developed a broad portfolio of multinational co-operation efforts in the naval, land, air, and joint domains.
The work undertaken by the conference and by the main armament groups underpins NATO's capability and interoperability, and the projects the conference governs and oversees are high profile and often very sensitive.
Before I close my remarks, I want to highlight a very important initiative to improve the delivery of NATO common-funded capability programs.
After successive reports by NATO's internal auditors found that the alliance's common-funded capabilities were being delivered over budget and behind schedule and were often falling short of requirements, the Secretary General directed the formation of a group of senior experts to analyze the problem and make recommendations for improvement.
To ensure that the Canadian view and best practices in program governance could influence the work and recommendations of the group of senior experts, my organization was represented on the group. One of the key issues we have stressed is the adoption of best practices that we use in Canada. We are pleased to report that our recommendations made their way into the recommendations contained in the final report that was presented to the Secretary General in April 2017.
I believe this issue epitomizes how Canada's commitment to NATO, its participation in NATO forums, and its provision of expertise and national best practices can make a meaningful contribution to the entire alliance.
I thank you for for allowing me to provide some opening comments, Mr. Chair, and we welcome your questions.
Thank you, sir.
What a pleasure to have you here.
Part of the focus of our NATO study is around the relationship between industry and NATO, and therefore how the government is ensuring that we.... Obviously we don't deliver capability in procurement without industry. We need industry to stay on that bleeding edge of technology. A lot of that bleeding-edge thinking is being done in NATO, and of course there's interoperability and interrelationship with other nations as a result.
I'd like to understand from you the value of the common funding. I'm sure you don't have those stats right here, but I'd like to ask you to get them for our committee. What is the percentage that Canadian industry wins of that common funding on an annual basis? How does that compare with our NATO partners, relative to our contribution?
Then I would like to understand the trend and whether we've been winning more or winning less, and how that trend has been going over time.
With respect to that thinking about how Canadian industry is playing in that space, could you also tell us what the breakout is by industry? In our defence procurement here at home, we know how much is spent on communications, electronics, socks, and so on. I don't know what that industry breakout is, but I'd like a feel for what it is.
With respect to that question, I know we had a NATEX—a NATO technical adviser—with the NATO communications information agency. Certainly the communications information agency is a critical piece in the command and control aspect of procurement and NATO, and Canada has a significant command and control capability. I'd like to understand why we no longer have one, what the thinking behind that was, and how we're ensuring that industry has that liaison or window or information, because of course you can't bid on something if you don't have your man in Havana, so to speak, and we no longer have our NATEX in NCIA in NATO.
I think those are things that we look at all the time for the very reasons you're suggesting as well.
Fundamentally, as far as NATO procurement goes, if I could just quickly set the scene, as far as equipment goes and some of the things you gave as an example, NATO is ultimately about bringing the militaries of the allies together. Large procurements of what we would do in Canada are typically around ships, armoured vehicles, and aircraft. Those are done by the nations. They're actually provided to NATO. It's not a key area, with a few exceptions, in how they operate the AWACS and how they're looking to future systems.
As you indicate, a large part of it is the glue in how things come together. I will tell you, as we look at it from the NATO Support and Procurement Agency—and we have the stats—that for what we invest, Canada exceeds its contribution. I was there last fall. The agency tries to maintain kind of a balance, because, not surprisingly, all of the allies view it as we do. Yes, they want to have this military capability, but they don't want everybody else's industry to have a leg up, so they watch that very carefully.
There is a system, if you will, whereby offsets apply. Allies come together to work on certain projects. They'll join up to certain things, and the countries that join are entitled to that.
Thank you for the question.
As indicated, I sit at the Conference of National Armaments Directors, where I have engagement a number of times a year with my colleagues, both in plenary and in bilateral engagements. We have other bilateral engagements and we speak a fair bit in a Five Eyes context.
In the broad approach of how we typically do major procurements, government establishes policy and makes those decisions. We then have a project or program approach that speaks to two gates entering definition, and then implementation is pretty standard among all our large allies.
We may be structured differently. In Canada, we have a separation between what my organization does and what Public Services and Procurement Canada does and what Industry, Science and Economic Development does, but almost all of our peer nations, I would say, have a similar breakout. It may be within their department of defence, but nevertheless they break it out that way.
I would say that in the context of all the things we need to do, ensuring we are gaining value for taxpayers' money is pretty common across the broad allies. I have not come across the silver bullet that we would adopt from somebody else's system, where they've kind of cracked it. We're pretty similar that way, in authorities and how we do things. Timelines can ebb and flow, but there are a lot of parallels and similarities between us and our allies in terms of large military procurement.
In some cases, yes; in some cases, no, it is not.
I think back to my point that when we talk about procurement, are we talking platforms or other things? I would say, as an engineer myself, that in the civilian sector you see standards and things that occur around communications from organizations such as the Institute of Electrical and Electronics Engineers, IEEE, and you can acquire very quickly, but the problem—and we've experienced it—is that when we've been leading-edge in acquisition, or faster than allies, we lose interoperability because some of our key allies are not keeping up with us. It's almost who goes when, and what happens then.
Interoperability is not just about speed of acquisition, but it's ensuring, in the context of NATO, that we're all actually taking the same step at the same time. We're better off to be behind but able to communicate with each, rather than being rapid and losing that.
The standards I talked about are really important for us. Some are in communications; some are in environmental and naval architecture and things of that nature. For communications, for some systems, because those authorities are further down, we are more agile than in the very large procurements that include offsets and other things.
What we are trying to do in many cases now, when we go to get authorities for surface combatants or other areas, is to establish from the outset that rather than doing big mid-life refits and so on, there will be continuous technical refresh, continuous technical insertion. We will seek authorities from the board and from other places that enable us to establish a contract that says that as the U.S. Air Force upgrades its C-17s with new communications, every time our aircraft goes through the repair and overhaul pipeline, it comes back upgraded. We're trying to change some of those approaches so that we are less requirement-specific in terms of “We need to do this” and more about “How do we keep pace with our allies?”
It really is more about keeping pace than it is about speed of advance.
I do have a bit of a list here, sir, if you'll bear with me.
There are a number of areas where we're looking at it in larger programs, but there are also a lot of things we're doing in smaller areas, investing in smart defence, smart procurement, and some things of that nature. It's almost more on the innovation end of things, where we're looking at different things.
In a number of areas that NATO is investing in, Canada is not always a participant, such as the allied ground surveillance and what they're doing with the Global Hawks. For us, one of the key areas is in the alliance future surveillance and control project. This is what comes after AWACS, which I believe has been extended until about 2035.
In looking at it now, we are asking what it is that we do. NATO is doing a very good job by not coming back to ask, “What's the airplane that replaces the airplane?” but “What is the approach, and how do we do it?”
We are looking at projects within “Strong, Secure, Engaged” for the replacement of the Auroras. NATO is working in some of those very areas. It is an area where our air force has looked at joining the like-minded nations. Again, it's not all 29 nations of NATO; a subset of those nations is looking at it. We can join in that area.
We're heavily involved in the communications, command, and control areas. There are a whole bunch of areas of smart defence that we're working on as well.
Thank you, sir, for the question.
I think the Permanent Structured Cooperation agreement in the EU is what you're talking about. It is something we've talked about a little bit at the Conference of National Armaments Directors.
Usually when we get together, for half of the day we invite the EU and others, and some of the partner countries, to come and join us so that we can discuss some of these things. I would compare it to NORAD in North America. It is a separate piece, and if you read through.... I had a chance to look through some of their things. They talk about commitments to the EU force and through the PESCO, but that does not preclude NATO and other things.
There's already a degree of common procurement going on among the EU countries, so this brings it together a bit more. I don't think it's in competition. I think it will help bring them forward to their 2% or otherwise.
I would say that through some of the discussions we've had about advancing projects and being careful about it, even in NATO there is often a struggle in some of the projects to bring real expertise and capacity together. It falls to the 29 to provide people, and not everybody who has domestic projects and a lot under way is going to provide a lot of people. There's usually a constant call there.
Certainly what I've expressed to my colleagues is a caution to make sure that the NATO projects aren't the ones that suffer. They have their domestic projects and they're putting people there, and now they have the EU projects and they're putting people there, so that's an area we're trying to be very careful about. A lot of it in the context of the EU—
Thank you for the question. I think that a lot of what NATO has done with the agencies, starting in about 2012, has been extremely useful. I think I'm going to flip this around to what Canada could do.
For us as a nation, having access to the agency, what they do, and what they do competitively, and being able to use their contracts and their approach, where appropriate, is of great value.
There are areas where I would like to use it even more. At times we run into a debate or discussion about what it is, about whether it's sole-sourcing and whether we're kind of taking it out of Canadian industry and things of that nature. I would say it's about ensuring that we don't have barriers that prevent us from using the agency and the things they do—where appropriate, where we don't have the capability, where we may not already be in contract, and where it's not an issue of national security. I would look at it through that lens. In terms of NATO, it's to sharpen up more....
The other thing I would say is on this issue we talked about, the group of experts. As always with NATO, as it went through, there was a lot of debate and discussion. There are nations that would want to have much more control at every step of every project on almost a continuous basis. From my experience, even for ourselves, if there is that continuous oversight, it will never advance.
Mr. Mark Gerretsen: Okay.
Mr. Patrick Finn: That would be a key piece: the right interventions at the right time, and the right time to step away and let the project teams advance.
I think there are a couple of different things.
Let me speak to the Auroras. We still have some years ahead as we add more capability to the aircraft. We're just finishing the life extension of the aircraft to 2030, which is a pretty significant capability investment. We've seen it operate in northern Iraq to great effect. As the commander of the air force calls it, particularly as upgraded, it is still probably a premier anti-submarine warfare aircraft in the world.
There are a lot of investments in that capability, a lot of positive outcome. We've seen its performance on training and what it can do. “Strong, Secure, Engaged” talks about a maritime multi-mission aircraft. It is later in the investments, but that is because of what we're doing with the Auroras today.
In the context of NATO, the big thing is that NATO at this point is not looking at what aircraft replaces the AWACS, but at what the capability should be: how do we do it? Is it more satellite? Is it more allies? Is it a network of things? NATO is also looking at the maritime multi-mission aircraft. A set of countries is looking at that. We're contemplating joining that group of like-minded nations.
That is really about the multi-mission capability. What we do post-Aurora versus NATO is still in the infancy of what we do post-AWACS. The two could wind up aligning if it becomes a network of things. Does our Aurora and its replacement then become part of that network?
In the context of NATO procurement, which leads to their operations, the approach is similar to that of Canada's. In my career in procurement, 20 years ago, although IP was something that was there, we talked about it quickly because, quite frankly, we could give you the whole intellectual property for an aircraft or a ship, but unless you had the entire industrial complex to build it, it wasn't worth that much. Today we're in a very different situation because of software technology and those sorts of things.
At the same time, we're more interested, but for a lot of companies, it is the crown jewels. It is something they guard very closely. For us, almost on a procurement-by-procurement basis, we look at how we will do it, how we will approach it. The view is not amorphous in industry, so if you're a provider of equipment, you want to guard it; if you're a supporter of equipment, you want us to acquire it.
We spend a lot of time looking at the right amount. There's ownership of it. There's licence to use it and to have it used. That's an area for us. Generally, as the Government of Canada, we tend not to seek ownership, because having that might preclude Canadian companies from having opportunities elsewhere, and that is not something we want to stand in the way of. We've seen that with Lockheed Martin Canada and their success around the world in updating New Zealand frigates. We've licensed them in the foreground IP that we own, and we do that in a number of cases. We have a similar agreement with MDA, now Maxar. The Triton system was enabled by some of the IP we have that we paid to develop.
The issue, sir, becomes one of, as you negotiate and do it, what you can afford, what you can do, how much access you need, and how much access you can get. I understand exactly what you're saying in the context of in-service support, whether it's by industry or it's by our own fleet maintenance facilities and service battalions and air maintenance squadrons. We try to be very judicious at this and strike a balance, and it's very similar in NATO. They have a practice such that if it's the foreground—what's done and what has occurred—it's theirs, but it's almost on a procurement-by-procurement basis.
In the case of the Canadian surface combatants, we probably spent the better part of a year on, among other things, negotiating intellectual property. We took a position and closed a lot of it, but there were certain things on which the bidders had such different views that we literally set them aside and said that for whoever is selected, we'll establish a short window in which we will complete the negotiations on intellectual property with them, and if we're not successful, we'll go to the second-scoring bidder.
It's exactly as you indicate. There could be a policy to say we'll own it all. We'll break the bank.
The other issue with intellectual property, from my experience, is that owning all that capacity brings with it a duty to maintain it, which is not trivial. I've literally seen at times that we've bought it, locked it up somewhere and not touched it for years, and have then come back to it and found that its utility was limited and that it would have been better to have been retained in the hands of industry.
The issue often is access for a right to use and to have it used. Even for NATO, you can take that position, but where do you find yourself in the discussions with industry?
There are two things. If you want to move an amendment to remove the date, I'm okay with that. I believe the minister needs to be here, since this is a policy discussion more than a discussion on the operational side. CDS can be here to talk about the operation, how it's changed, and where the training in advise and assist has gone in the last number of months.
As to the workload the committee is facing, I encourage you, Mr. Chair, to have a steering committee meeting so that we can look at how things are drawn up. I know that in January we received a list of all the different panels that are potentially available to us to look at in the NATO study. If you look at that, there are over 30 different panels to do. It will take us forever to get through them if they're all available. I don't know if we need to do each and every one of those panels.
At the same time, we want to make sure that.... Having one main witness here today for a two-hour meeting was maybe not necessary. We should have had two or three main witnesses for a two-hour meeting, or just two one-hour meetings. Those are the things we need to discuss as a steering committee to better orchestrate the workload and deal with some of the.... The peacekeeping motion has to get dealt with here sooner rather than later, because time has moved on.
I'm okay with you taking out the 30 days, but this is a policy discussion more than an operational discussion. It's the future of the mission, and it is the minister's responsibility to provide those briefings.
Also, we haven't had a briefing on this, either as critics or as a committee, for almost a year. Leaving it until June or the summertime.... You in the Liberal Party may be privy to what's happening, but we and Canadians and the opposition don't know what those operational plans are.