OGGO Committee Meeting

     Good afternoon. We are in session.

    Witnesses, thank you for your patience with us.

    Welcome to meeting number 44 of the Standing Committee on Government Operations and Estimates.

    Mr. Shimooka, welcome back to OGGO. We'll start with you for a five-minute opening statement.

    Then we'll go to you, Dr. Fry, for your opening statement.

     Again, I'm sorry for the wait. I appreciate your patience.

    Go ahead, please.

     Thank you, Chair.

    I really appreciate the opportunity to speak to this committee about the topic of buy Canadian provisions, with a specific focus on my own research, the defence industrial base. I'll keep my remarks short, as I'd like to maximize the amount of time for the members to ask questions with regard to their specific interests.

    On the whole, increasing the scale of domestic defence production is a laudable goal, but caution must be taken in how it is applied and where. Certainly, there have been notable successes in our history. The industrial buildup during the Second World War was a critical component of Allied war efforts and proved transformational for our country's economy. At the same time, care must be taken to avoid some of the less inspiring outcomes. We must avoid the temptation to develop highly specialized capabilities that are designed for bespoke Canadian requirements or tailored purely for domestic jobs. Our history is littered with examples of high-cost, low-capability orphan fleets, colloquially known as “unicorns”, that have not realized sustainable industrial outcomes. They consume scarce defence resources and have led to a less effective military. Rather, what should guide defence industrial development are strategic and military considerations that will determine the demand and need for capabilities. This is a call that a number of other expert witnesses have repeated across various parliamentary committees over the past six months.

    Being able to produce capabilities at large scale has become a hallmark of a modern defence strategy. As is evident in Ukraine today, militaries must be supported by an industrial enterprise that can provide thousands of drones, artillery shells or other consumables daily to ensure victory. Herein lies a significant challenge. Contemporary defence supply chains, like their civilian counterparts, are highly complex and can span dozens of countries, hundreds of suppliers and tens to hundreds of thousands of components. While specialization can increase efficiencies, it can also be highly vulnerable to disruption due to conflict or changing geopolitical dynamics. Many have argued that through reshoring supply chains, Canada might be able to develop resilience from such events. However, if the process of developing sovereign supply chains results in systems that are produced at low levels and high costs, it can have negative consequences that are similar to supply chain disruption.

     Many different approaches can manage these issues and bear examining. There are no clear right answers. There are just different approaches to managing cost, risk, capability and industrial development, which I hope we can discuss today.

     Thank you for your time. I look forward to your questions.

     Thank you very much. Again, it's wonderful to have you back with us.

    Dr. Fry, welcome to OGGO. The floor is yours for five minutes.

    Thank you, Mr. Chair.

     I want to thank the committee for the opportunity to share my thoughts on the buy Canadian policy here today. I am a post-doctoral fellow in the department of political science at Dalhousie University. My research centres on Canadian policy responses to a changing global economy.

     In my view, buy national procurement is an example of a mature response to this context. It offers new, good-paying jobs for Canadians while mitigating our supply chain vulnerabilities. It also has precedent. Our trading partners—namely, Australia, Mexico, the United Kingdom and the European Union—are doing the exact same thing. Through my own interactions with civil society actors, I know our partners are studying what we're doing very closely.

     On this front, I have good news and bad news. The good news is that the buy Canadian policy may be the most ambitious of its kind in Canada to date. The bad news is that buy Canadian is limited. Our free trade commitments leave little room for buying national. This is compounded by a small supplier pool. On average, we receive less than two bids for a given tender. In turn, the delta between the status quo and buying Canadian is not as large as either advocates or critics will claim. My own investigation found roughly nine original 2025 contracts that could have been impacted by a national supplier preference. That's nine of 56,000.

    This does not mean that we cannot do more. In that spirit, I'd like to focus my comments on the leakages question. For a buy national policy to succeed, it must address four loopholes that enable foreign entities to siphon contract value from Canadians. Here, prime contractors can send value upstream to a foreign parent company, which is the origin loophole, cross-stream to a foreign joint venture partner, which is the joint venture loophole, or downstream to foreign suppliers through subcontracting or sourcing, which are the subcontracting and sourcing loopholes, respectively.

     As written today, the policy effectively addresses two of those loopholes. First, the policy eliminates the joint venture loophole by requiring all parties to meet the definition of a Canadian supplier. Second, the policy navigates the sourcing loophole reasonably well through content and material requirements.

     Third, however, the subcontracting loophole needs clarity. The policy defines a Canadian supplier as one that does not subcontract “in a manner that results in minimal value-added activities being performed within Canada.” This is too vague. Subcontracting varies by the sector. The policy must explicitly define what excessive subcontracting is. We must also follow our partners, like the United Kingdom, and have stronger public disclosure around subcontracting.

     Last, the origin loophole remains wide open. While it is an improvement over what we had before, our definition of a Canadian supplier still allows foreign-controlled suppliers to pass through. We need stronger criteria. No doubt the committee may hear different ideas on what those criteria should be. Some see potential in IP, while others prefer control and others yet prefer employment. Ultimately, this is a normative question. My own view is that Canadian employment is a better indicator of origin than others, but these are not necessarily mutually exclusive. We can and should have multiple pathways for suppliers to establish their country of origin.

     Beyond these loopholes or leakages, I want to draw the committee's attention to three other items very quickly.

     First, the success of this policy hinges on better data collection and public disclosure. It is not sufficient for PSPC to tell us that auditing is being done independently.

     Second, the policy is ambiguous over its waiver system. As I understand it, policy exceptions will be at ministerial discretion. This can lead to inconsistencies. In the United States, by contrast, the Biden administration created a “made in America” office to scrutinize waiver conditions under buy America. Canada may be wise to do something similar. This idea is not mutually exclusive with the procurement ombud's recommendation to create a chief procurement officer position.

     Third, and last, it is not a secret that manufacturing workers are disproportionately bearing the brunt of American trade actions. I believe our procurement has a role to play in offsetting this struggle. Here, I am especially favourable to a buy union policy, as a follow-up to buy Canadian, that can play this role without the spectre of trade disputes.

     I will end there. Thank you.

     That's great. Thank you very much.

     Before we start with Mr. Patzer, I want to bring up a point that came up in the last couple of meetings about the speed at which we are talking to help out with our translation. I think we'll be fine today, but just keep it in mind, please.

     Mr. Patzer, go ahead.

     Thank you very much, both of you, for joining us today. I appreciate your testimony.

     I'll start by offering a few extra minutes, if you have any other gaps in the policy that you would like to highlight. I think you both targeted a few, but if there are any other gaps you'd like to address, go ahead.

     Mr. Fry, I'll start with you.

     That's a good question. I'm a bit of a policy nerd, so I love talking about policy and what could be.

    I really want to fixate on the role of a centralized office in creating transparency around this policy. A lot of my comments in my opening remarks were fixated on data gaps. Subcontracting is the most obvious gap, in my view, but sourcing is as well. Without this data, it's very difficult for an independent person like me, or even the attentive public, to draw conclusions on what buy Canadian can do, or even...the delta between the status quo and buy Canadian, going forward.

    We'll see a lot of big numbers. This is not a problem unique to the Canadian federal government either. We're seeing this with provinces as well. They've listed some really massive and attractive contract values going to domestic suppliers. The issue is that they're defining “domestic supplier” by address, which doesn't go far enough. I focus a lot on the leakages question, because I think it's the big issue here. We can quibble over the thresholds being quite high.

    The other thing I didn't mention in my statement is this: We're clearly trying to play through exceptions within trade agreements with national security language. I think this is a fairly astute approach, going after larger-value contracts while provinces go after low-value contracts. There's more to be gained here, providing we get it right in terms of the data.

    Thanks.

     Mr. Shimooka, do you have a few more thoughts?

    My focus, generally, is on the CAF, our international security environment and providing the military with the capabilities it requires in both peacetime and, potentially, wartime.

    One of the issues, as I see it and as I alluded to in my remarks, is that having the capacity to produce munitions, arms or whatever at scale is a challenge that not only Canada is facing. If you look to allies like the United States, the United Kingdom, NATO countries and Asian countries, they are very focused on their ability to produce at scale.

    One of the areas I somewhat worry about, due to some of the language and thinking behind it, is wanting to completely replicate some of these productive systems or approaches completely within Canada. However, if the intent of this policy is to look at what is required in wartime and the needs of the forces, and to build out a system that is flexible enough to deal with multiple challenges—because the international environment is quite unstable and we don't know where a conflict may be—I think it would really serve us well. As it currently exists in the defence industrial strategy or how it is being foreseen, our approach doesn't make that easy. It's often done through existing.... Let's say you have to procure something—the Canadian patrol submarine project. You do that through ITTs and...what's coming out of that, rather than a more proactive approach that says, “No, these are requirements.”

    Maybe we should partner with countries proactively in order to work together. Then, instead of having a domestic-only supply chain, we build one that is flexible and can engender greater demand internationally, because they could utilize the same system through interoperability and whatnot.

    We've heard some claims about a potential contract with Saab creating 10,000 jobs. Industry experts have questioned that.

    What do you make of this?

    I wrote a report in January about this topic, looking at the history of the Canadian defence aviation industry. Saab's proposal is largely going to be for licensed domestic production of the Gripen fighter. Most countries have moved away from this model. If you look at our allies, they are going towards joint production, as with the Eurofighter and the F-35.

     My view is that, with licensed production, the quality of job you get is not very high. It's usually an approach that doesn't really engender a lot of follow-on production, because you're only producing it to your standards. Some of the quotes out there say that it's...somewhere between 6,000 and 10,000 jobs. I don't think that is credible at all. If you look at the production Saab does at Linköping, which is where they produce fighters, it's around 4,000 or so. If you look at Brazil, which is doing assembly on the Gripen, I think only several hundred jobs are currently there.

    I don't take those as credible numbers.

    Thank you.

     Mr. Fry, you wrote a different article, in which you talked about the “administrative overload” that would come as part of some of the flaws of this program.

    Do you want to highlight that a little more?

    Buy Canadian is generally considered to be a positive discrimination approach to social procurement, if you're thinking about it in terms of the literature. Oftentimes, scholars will cite “buy national” as an easier approach than altering bid assessments. You limit competition from the start. Then, from there, you adjust bid assessments.

    That's not what we're doing here. We're allowing competition and international suppliers, providing they have an agreement with Canada to still participate. Then, we are introducing additional bid assessment components thereafter. We lose the benefit commonly associated with positive discrimination approaches to social procurement. As a result of that, there's going to be a bit more administrative overload.

     Thank you.

    Thanks, Dr. Fry.

    Mr. Danko, go ahead, please, for six minutes.

     Thank you, Chair. I'm really glad to be part of this conversation this afternoon.

     I really appreciated the opening comments here. I think there's a lot to dig into on this topic. Buy Canadian is a very important priority for our government, and I think it's something that Canadians are talking about quite a bit as well. If I'm being completely honest, it's perhaps a bit overdue.

    My first question is for you, Mr. Shimooka. In your opening statement, you talked about supply chains, different alliances and also the importance of building up our own national Canadian capabilities in industrial manufacturing. From your expert research, are there specific sectors that we should focus on?

     Yes. I think these aren't too surprising in terms of the sectors you were going to talk about. Aerospace, given the size of the Montreal and Winnipeg hubs—and in Toronto as well—I think is an area. Also, for some of our maritime areas—Halifax certainly, with the NATO DIANA— there is a reason it's such a core area. I'm from British Columbia, and the west coast has many sorts of firms that work really well in these areas. I think that to some degree we don't want to reinvent the wheel in a lot of these areas. We want to really build on the existing capabilities.

     I think what's really interesting now with military capabilities is that we are seeing a transformational period in capabilities. There are a lot of good on-ramps because of AI and a sort of autonomy, and a sort of new...what we call “attritable systems”. We don't have to have this huge overhead of having a manned capability that requires a lot of testing and all of that to ensure we can have a system that we put into service. If it's lost, we replace it with a new iteration. You see this in Ukraine. You see this in the current conflict in the Middle East.

     I think those are the areas that we should focus on, but I would argue that it's still going to take Canada time to build up the engine and get the traction to get it moving forward. Given some of the challenges we have right now with our lack of military capability and the delayed modernization that we've had for 20-some years, we really probably realistically have to look at a two-stage approach. Maybe we can even partner with some allies or buy foreign systems, but also while funding some of these underlying areas and giving them opportunities, certainly, with our capabilities, but also funding that. There's a bit of a mismatch with where their maturity is versus our current need for capabilities as well.

    Thank you.

     Dr. Fry, I was listening closely to your introduction in talking about Canada's free trade obligations and agreements. I spent a lot of time in the private sector writing procurement contracts, and then at the municipal level, and one of the frustrations, especially with the public sector, is low bid and having very little flexibility about who that contract can be awarded to.

    You talked about some challenges with the current buy Canadian policies with those areas of “leakages”, as you called it. Also, then, you talked about some of the other jurisdictions around the world that are doing this well. I'd ask you if you can maybe talk about some of those other best practices, particularly with our free trade partners, with our allies, and if there's anything that Canada can learn from what's working well around the world.

     That's a big and important question.

    First and foremost, I agree with you that while there are cases where lowest price is a factor, that's obviously not always going to be the case. Introducing additional considerations to best value is natural, and I tend to be very supportive of national considerations and domestic content requirements, where they are also appropriate.

     It so happens that Canada is not independent in this re-evaluation or recalibration of best value to match the moment. Obviously, the United States has done this since 1933. They also had “buy American” nine years before we did, so we have some catching up to do on that front. That has been evolving with each administration. I would say that if you really want to look at a jurisdiction, they're not always the best case on policy, but in this case, when it comes to buy national, the United States has one of the better approaches, especially when it comes to small business set-asides, which I believe is an intention for the policy down the line. I would look to the United States there. Their data regime is also fairly sophisticated as well.

    The United Kingdom has taken an interesting approach. It's very possible that they're actually drawing inspiration from the Canadian government's approach as well. They're allowing ministers to have the discretion to use national security exemptions within trade agreements to potentially reserve contracts for national suppliers. There's some similarity there. What I really like with the United Kingdom is that for larger contracts—and this isn't universally the case—they require prime contractors to advertise subcontracting opportunities on the government portal. It's imperfect, and it may slow down the procurement process, but it does provide a bit more transparency to subcontracting, which you may not get in other bids.

    The other approaches that are evolving right now—the European Union with the Industrial Accelerator Act, Mexico with plan México, and Australia with the buy Australian plan—are still in very early stages. We'll see where they go in terms of their approach.

     I would look to the United States and the United Kingdom as the first and second examples if you want some inspiration.

     Thank you.

     Madame Gaudreau, go ahead, please.

    Thank you, Mr. Chair.

    That's really interesting, Dr. Fry. In fact, I'm going to go further.

    The objective of this policy, if I'm not mistaken, is to develop our industrial capacity and Canadian industrial resilience. However, how can a procurement policy lead to the development of industrial sectors, such as research, training and capital? Is this policy necessary, or should we start by thinking about long-term actions for our industrial resilience?

     That's a great question.

    I'm a firm believer that buy Canadian should not be done independently of other actions. It has to work in concert with several different strategies if you want to have an industrial strategy. The reality is that, while I'm very much in favour of buy Canadian, it is more of a middle to long-term strategy, especially in terms of outcomes.

    There are a lot of firms, suppliers and businesses that are struggling right now. If you don't have those supports right here and now, then they won't be able to benefit from the buy Canadian policy down the line. I can also understand that there's some frustration with public procurement as a vehicle for industrial policy, because it's a bit more passive, especially on the supplier side of things, because you're waiting for suppliers to come and place a bid. Subsequent to that, there is some action, and not every corporation, not every firm and not every supplier has the in-house capacity to participate in bids in the first place.

    That's part of what I was recognizing in my opening remarks. We don't actually have that much competition, because the transaction cost, the overhead, is so significant. If you're a firm that's struggling right now, that may not be sufficient in and of its own right now. I recognize that there are other policies out there that may help offset that.

    Is the fact that we were not proactive in dealing with our champions in the face of….

    We were talking about aeronautics. There has been offloading, among other things, for certain businesses in the supply chain. They want stainless steel, but try to find stainless steel.

    Should we consolidate upstream what we had before, and then deal with….

    I am certainly proud of Quebec, because we have a lot of champions.

    I would like to hear your opinion, Mr. Shimooka.

     One of the big areas we can talk a bit about is the buy Canada provisions, because there's been a bit of a pendulum shift. In defence specifically, we made it difficult for Canadian suppliers to win Canadian contracts. We would, in some ways, fund a capability through its low levels of technological readiness and through the system and then force it to compete against a foreign option. It would lose, and then all the investment is gone. My worry is that we may go too far in the other direction. That can be discussed.

    What I would say is that the reason you say, “Let's talk about Montreal and the aviation hub there” is that you've seen sustained investment. One of my concerns is that, right now, we're in a moment when defence seems very important because of some of the issues we've had south of the border. Obviously, the Canadian military needs much more capability and all that, but I worry that in two or three years' time, we aren't going to see that sustained investment.

    I know that the Prime Minister has talked about how we're going to hit 3.5% according to the NATO guidelines, and with that level of funding, you can sustain, build and create new capabilities, especially if we identify the right ones and do that. If we don't get to that point, we've created a policy that's designed for 3.5%, but we only hit 2.5%. That delta is so significant that you just don't get the outcomes you want. You have high cost capabilities. Much more funding is put into sustainment, because the production line is too small, and we close it.

    When I think about the history of how the Canadian aviation industry, let's say, came about, especially in the 1940s, 1950s and 1960s, you had that sustained investment. You had real identification of what the needs were and how the Canadian industry could effectively go there. Also, we looked at what our partners needed. The Sabre fighter was exported broadly because it was a NATO standard that was understood. It requires a lot of this smart thinking, but also sustained interest and funding for it.

    I agree. It's not a bad thing to buy Canadian, but we need to think more about a policy of industrial sovereignty. When you make a commitment, you don't break it because of a change in party or government. This is a matter of ideology. Although there is positive discrimination and it is relevant, I fear that we are not well prepared for the next step.

     Thank you very much.

    Mr. Gill, go ahead, sir.

     Thank you, Chair.

     Gentlemen, I was talking to the Windsor Construction Association this morning, and one of the questions they brought up was in terms of precedence. Municipal governments have their own version of buying local or buying Canadian. The Province of Ontario has something similar, the Buy Ontario Act, and now we have this new policy implemented by the federal government. Which side of the government takes precedence over all these things? That's the confusion that they have, and so do I.

    Who is the top dog, let's say?

    Dr. Fry.

     It certainly depends on the contracting entity. I'm not sure if I totally understand the question, but perhaps you mean who's leading the way in terms of policy design?

    Yes.

    We have different policies, and the reality is that when you navigate from one jurisdiction to another, you may have a completely different set of rules, and that creates some complications for suppliers.

    Buy Ontario is more fixated on low-value contracts below international domestic thresholds, whereas buy Canadian is doing a very different strategy. It's fixated on high-value contracts where we can reasonably justify a national security exception and try to bring that contract home. Who do I think...? Now I'm changing the question. What more would you like to know? Is it which jurisdiction should lead the way and whether there should be more leadership on this front?

    Yes, in terms of auditing, oversight, is it going to be checked after the fact? Is it going to be checked before the contract is awarded, whether it's a provincial contract or...? Sometimes there are joint contracts that are offered. Who is going to be leading? Is it going to be dependent on who's spending the most money?

     Again, it comes down to the contracting entity, but you could also get into the complications around grants and contributions. We had this example with line two, for example, where the federal government had its own contribution and claimed that it was part of the buy Canadian policy. Ultimately, that was a contract to be awarded by the TTC, so it wasn't a federal government contract, but we are applying the logic to our grant and contribution.

     One other question that I heard from somebody else was, how does article 13.4 of the CUSMA impact this buy Canada policy? Article 13.4 has rules against discrimination against suppliers based on foreign ownership. Our affiliations, and as you pointed out, Dr. Fry, the origin loophole stays wide open, and the USTR has pushed back against this policy.

    We have seen some push-back internationally, not just from the United States. I will say that in my view, some of that is a tad hypocritical given the experimentation that's going on with some of those jurisdictions. In the United States, of course, it's going back to the 1930s.

     The point taken, though, is that this policy purposely works and discriminates against suppliers based upon their origin and also introduces offsets, which are generally prohibited in international trade agreements and even domestic trade agreements.

    Here we are explicitly trying to navigate those agreements by using the national security exception that's generally included for just about any agreement. The language sometimes varies. We're saying that the strategic procurements of these sectors are so fundamental to our national sovereignty that they are reasonably justified as an exemption. The United Kingdom is doing something very similar, so I think we're on solid ground here. It is plausible that an international partner may protest this in some way or raise a dispute. I think it's unlikely, but that is the risk of going for high-value contracts instead of the low-value contracts that you see in Ontario.

     Mr. Shimooka, would you like to contribute?

    My area of specialty is with basically federal procurements in defence.

     I'll keep it very short. I think one of the challenges that you have there is who leads this in terms of capability versus the output for jobs or other objectives. I think this has become a somewhat fraught area, because I think there is a focus to try to develop economic activity. However, as I said before, inasmuch as I think there's an intent right now to hit 3.5%, that sort of funding level even now, because of the atrophy of the forces over the last 20 years here, isn't that much. That's not going to go as far as many people will believe.

     As a result, I think there's going to be a bit of a struggle as to how much capability we can buy of either foreign or partner foreign, versus how much we can get domestically and look towards building a Canadian industry. I think that that's going to be a significant conflict point, for lack of a better word, that's going to exist within any future, upcoming procurements.

     Thanks.

    Ms. Rochefort, go ahead.

    Thank you, Mr. Chair.

    Mr. Shimooka, I must apologize, because when I first listened to you speak, I was very disappointed, as a Canadian, with your lack of belief in the capabilities of Canadians. That was my first reaction. As I listen to you, though, I have a sense that you actually believe in the framework that was introduced—the framework of Canada's—

    On a point of order, Mr. Chair, I have no interpretation.

    Perhaps Ms. Rochefort could speak in French.

    Yes, I can speak in French. I should do that more often.

     Are we working again? Okay.

    I stopped the time. Go ahead, please.

    My sense is that what you're speaking about, to some extent, is Canada's defence industrial strategy, which speaks to building when we can, partnering when we can't build and buying when we're unable to either build or partner.

    In your words, I sense that this is what you're basically saying. We will prioritize domestic production first, will have a joint development with trusted allies second and have off-the-shelf foreign purchases last. Am I correct in my conclusion?

    The sense I get, then, is that maybe your overall concern is with longer-term sustainability. We're doing this now, but will we maintain it in 10 years, that investment and that support? Would that be a fair conclusion?

     I would agree to a certain point. The emphasis, to some degree.... I would change it a bit, where I think that a partner is really critical.

     If you look historically.... Even during the Second World War, a great example is that Canada built tens of thousands of aircraft. However, Canada did not build a single aircraft engine in Canada because C.D. Howe, a minister at the time, and others realized that this would be too complex, would take too much time and would prevent us from actually making a usable output of our industrial capacity.

     I'd like to think that.... Given how I view an industrial supply chain, whether it be a ship, a fighter or anything like that, the reality is that we're never going to have a defence autarky. There's always going to be a component built outside of Canada.

    I think the build, partner, buy is fine. I'm not disagreeing with that, but we have to be really careful about trying to be too much, just doing the buy or the build at home. What I want to ensure, to some degree, is that the requirements for how we develop what we're buying are going to be commensurate with the potential scenarios that the Canadian Armed Forces in our country are going to face.

     Again, I'm not disagreeing that we need domestic production. I'm not saying that. I think it's really important. This is an area that's been highly starved of funding for decades. You can even go to the Cold War to see that we didn't fund this properly.

     It doesn't necessarily have to be an either-or, in some ways. It just requires a lot of care and attention, realizing that we may make decisions to procure from a certain country or have parts with a supply chain in a certain country, but they may close that off. There are European countries that are highly concerned about what's going on in the Pacific Ocean, with China and whatnot, but there are others that may not want to be participants, and they may close their supply chains. I think we have to be really flexible and just be more aware of how we go about this area.

    Thank you for expanding on that. I appreciate that very much.

     Mr. Fry, when we say the buy Canada policy aims at building Canada strong, it in fact has two focuses. The first is leveraging every possible.... That's what I really like about the strategy. For me, it's about how we leverage every dollar from the public to strengthen Canada, but equally it's to leverage every possible public dollar to grow Canadian industries.

    Would you agree with this viewpoint that there are really two focuses included in the buy Canadian policy?

    In large part, I would agree with that assessment, yes. I believe the policy clearly has a mission statement. I have no issue with those missions. I'm entirely in favour of buy Canadian and buy national procurement. I think it's a smart response at this moment.

     I would disagree slightly in terms of leveraging every dollar. Part of what I'm raising as a concern in terms of leakages is that there are still ways in which foreign suppliers can benefit from our contract value, even if the contract is indeed covered by buy Canadian. We need to make sure that we're closing those loopholes so that more contract value becomes domestic value. Yes, I do agree with the aims of the policy.

     Building on that—

    I'm sorry, but that's our time.

    Is it, already? My gosh, that went fast.

    All right. Thank you.

    Madame Gaudreau, go ahead.

    I'll follow up on that, actually.

    Dr. Fry, I see that in local communities, there have been buy local policies for decades to boost business, but upstream, there was a political will to invest and be more flexible. Today, I hear you, and that's more or less what I'm seeing. What about our businesses, our champions who have been let down, and our pride?

    My big fear right now is about business succession. Are we going to be swallowed up or, on the contrary, are we going to use foresight and ensure that we preserve skills, innovation and, ultimately, who we are? Do you think the government should already be on the offensive to ensure business succession, or even consolidate what we have as industries?

     Yes, I do agree that we need to do more beyond just the policy itself. As I mentioned during the last round of questions, this is more of a passive, middle- to long-term strategy. In my view it's still entirely justifiable—and necessary, given the moment—but if you're not providing supports to industry now, then it's difficult for them to benefit in the middle to long term.

    Is this independently an industrial strategy? In my view it isn't. I think there are strategic components to it, especially around the sourcing policy, in which there's a clear philosophy: We're thinking about steel, aluminum and wood. There is clearly an ideology and clearly an aim here, whereas in the other components of the policy, there are also aims but, again, they're more passive.

    As I mentioned before, I want to see this done in concert with other measures. That's not to say that buy Canadian, in and of itself, is an unworthy idea or that this policy is unworthy, but it can't function if we aren't investing more in industry.

    That's great.

    Mr. Shimooka, you have a few seconds left.

    The nice thing about defence is that it is an investment, in some ways. If you're talking about $70 billion or $100 billion in defence investment over however many years, there's real funding coming in there.

    Even when we're buying from abroad, the ITB policy in some ways ensures that there's some of that. I think there are quibbles on that—that's not the thrust of your question—but I think it does allow that. I think there are ways to do it more effectively at times.

    Thank you.

    Thank you, Mr. Chair.

    Thank you very much.

    Go ahead, Mr. Patzer.

    Thank you very much.

    Mr. Shimooka, is there any chance that this strategy might actually cause procurement costs to increase? Are there any concerns around that?

    I think so, to some degree. For a lot of the policies, it depends on how they're constructed. One of the challenges that you can see.... Let me use the example of Poland. Poland sees the threat as being extremely high. They have, in many of their procurements, just completely disregarded any reciprocal offset formula for their systems. Often, in cases, you'll see the cost of their procured capability compared to a country like.... Let's say that they bought F-16s several years ago. They could be 20% to 30% lower just because there's no reciprocal offset, and that's because they're buying a finished good from another country, and the offset policy does basically incur additional costs. It can frequently have that effect.

    Now, often the question is, are we buying something that's going to ensure there's a sustainable industry, as I talked about before, about licensed production, or is this going to be something that ends after the last aircraft or whatever is produced? Those are questions. It can very easily increase costs. Historically, in Canada, some of this has actually increased cost significantly when we have had a buy Canada policy. It has to be weighed between what your industrial effect is and what we are trying to achieve going forward.

    Mr. Fry, just building a little more on the issue around how trade agreements work, is there potential for further restrictions to buy Canada because of some of the trade deal requirements that we have? I'm just following up on my colleague's question.

     Yes, and one question I have is that there's clearly a desire to have a small business set-aside, which is a great idea. The challenge is we don't have that derogation within CETA, so that undercuts our potential to have a small business set-aside unless we want to make it very low value. That's an example of where we haven't quite carved out our needs to reflect our wants today. That's what I'm concerned about the most.

    There may be some internal desire—and this speaks to a larger issue, as I was mentioning earlier, around waiver conditions or exceptions—to waive or accept a procurement because there's a fear there's a larger international supplier who might kick up a storm as a result of domestic preference conditions. I'm worried about that potential hazard as well, an informal chill on the use of the buy Canadian policy.

     Are there any concerns around the $5-million floor? It started at $25 million, and it's dropping to $5 million. Is that going to create a bit of an issue for small businesses in particular trying to get into the space?

    I don't think so. Whether it's $25 million or $5 million, both are generally covered with an international trade agreement, so that's not really the issue. What it does is open up a lot more contracting opportunities.

    In 2025, for example, when we were looking at contracts—original contracts valued over $25 million—I believe it was about 35. Now we're opening it up to about 280. Not all of those are going to be reserved for buy Canadian, for various reasons. Some of them have limited procurement, and some of them never have competition to start with, so there are other restrictions that further limit that sample, but we are now growing to a larger number of contracts. Ideally, small businesses may benefit from that, but for them, the larger contracts can be very difficult in terms of tendering, because the bid documentation they need to fill out can be so cumbersome. You're submitting almost a novel when you're participating in some of these processes. For them, it's going to be very challenging, and that's why there needs to be an additional small business aspect to the policy, and I understand that is planned at some point.

    What about intellectual property? Generally, when you're buying an OEM piece, you don't own the software that you get with it. If we're trying to build more things in Canada, or even if we're importing some goods from another company, in the case of the Gripen fighter—if the government decides to go that route—is there any concern that we don't actually own the software, and, therefore, we have that issue around not having the ownership of that IP?

    That concern has been raised by some civil society actors. There are many people in this space, and some of them really want some IP criteria to be included in the definition of “Canadian supplier”. I personally prefer employment, but I'm open to either being a potential condition for qualifying as a Canadian supplier.

    Part of it comes down to what your philosophy is for a buy Canadian policy. Is it about driving entrepreneurship, or is it about mitigating the current effects of trade actions, principally by the United States, but also instability more broadly? If it's the latter, then maybe employment is a better condition; if it's the former, then maybe we need more language around IP.

    Go ahead, Ms. Sudds.

    Thank you, Chair.

    Thank you to both the witnesses for being with us today.

    I will say that in my riding of Kanata, here in Ottawa, there's been a lot of discussion about the opportunities that the buy Canadian policy presents, typically around defence companies as well as in the dual-use or technology sector. There's lots of discussion and lots of excitement.

    Dr. Fry, in a previous answer you made the comment around it being an ambitious policy, that it's necessary but is not an industrial policy, and that it should be done in concert with other initiatives. I'm paraphrasing, but I think that's what you said.

    I'm curious about your perspective, given that we've also moved forward with the defence industrial strategy, which does obviously include the tenets of the buy Canadian policy.

    What is your perspective on how those complement each other and reinforce the policy itself?

    That's a great question.

    I'm not quite an expert on defence policy, so I think Richard might offer a bit more insight on that specifically.

    To the ambition versus restriction conversation, and specifically around industrial strategy—I think that was the term I used—the literature and now, increasingly, civil society are divided between industrial policy and industrial strategy, where the latter sounds a bit more active and the former sounds a bit more passive.

    I think there are strategic components to the policy. I really do. In the sourcing policy, or the materials component of the policy, there's very clearly a philosophy here. We are thinking about industries that are being impacted by American trade actions, and we are trying to ensure that we are sourcing from those industries at home so that we mitigate the effects of those actions to the best degree possible within public procurement.

    There are inherent limits to public procurement. That's why I and many others believe that industrial strategies need to include other policies in concert with each other to mitigate those effects and perhaps allow some of those suppliers, who may reasonably benefit from this policy, to participate in the first place.

    One of the key indicators I'm looking for from the buy Canadian policy is whether we are going to see more participation. I mentioned in my opening remarks that tenders on average have fewer than two bids. If we can get that up while having a buy Canadian policy, that would be a positive indicator. I'm looking for that specifically—if this policy will incentivize new entities to step forward and participate within public procurement.

     I agree. That's a great metric.

     Mr. Shimooka, would you like to comment on that as well?

    I think your point about small and medium-sized industries in Canada is a really good one. It's been really challenging for them historically. Even today, we are potentially on a defence.... The DSRB, or the defence, security and resilience bank, announcement may come soon. One of the big issues is obtaining capital for increasing their ability to meet some of these demands.

    We have to realize that the defence environment is highly regulated. There are security concerns. In some of these areas, even in dual use, there are very few firms that can actually work within that space, and getting the talent necessary is going to require years of development through education, funding and whatnot.

    When we think about these areas, it's nice to see that companies are excited to go forward with this. My previous comments about sustainability of funding notwithstanding, trying to reduce some of these regulatory barriers and create the ability for them to participate in the defence marketplace, for lack of a better word, is really important.

     As a comparative example, if you look at the United States over the past 10 years and how they have tried to transform the Department of Defense's ability to contract firms by looking at non-traditional suppliers, that is now seen as a real strength for their ability to procure new and novel systems that are becoming more and more important for places like Ukraine.

    In order to sustain what you're asking for, that's an area that needs a hard look.

     Building on that—and we haven't touched on this yet today—part of the buy Canadian policy is to bring forward, quite soon, a small and medium-sized business procurement office. If you were to provide your insights or guidance around how best that office should be shaped, what would you prioritize?

     I'll put that to both of you briefly, because we're probably out of time.

     Yes, I'm afraid we are out of time. Perhaps you can provide your answers to us in writing.

     Colleagues, we are done.

     Mr. Shimooka, it was wonderful to have you back at OGGO. I appreciate your time.

     Dr. Fry, it was great to have you here. Hopefully we'll see you again another time.

     Colleagues, we are going to suspend for about two minutes, and then we'll get to our next round.

    We are suspended.

     I call the meeting back to order.

    We have two new witnesses. One's virtual. Can I just ask that if you have a question for the two of them, you direct it to someone specific? That way, our online guest, Mr. Straisfeld, will know if it's being directed to him.

    We'll start with Mr. Yurichuk. You have five minutes for an opening statement.

    Go ahead, please, sir.

     Good afternoon, Mr. Chair and members of the committee. Thank you for inviting me to take part in your study on the buy Canadian policy.

    My name is James Yurichuk. I'm the founder and CEO of Wuxly. Wuxly is a Canadian-owned manufacturer of advanced outerwear, military soft goods and engineered textile systems.

    Since launching in 2015, 99% of everything we've made has been made right here in Canada. We employ more than 50 people directly in Mississauga and 300 in a supply chain from coast to coast to coast. We're exactly the kind of company the buy Canadian policy is meant to support. We're Canadian-owned, Canadian-made and built on a domestic supply chain.

    I'm here today because I believe Canada can be a global leader in sovereign, high-performance, cold-weather and soldier systems designed and built right here at home. Like a Swiss watch or an Italian suit, there's something special about Canadian-made outerwear. The buy Canadian policy should take note of this, because there's an opportunity to strengthen Canada's global reputation.

    Canadian preference should be strongest in sectors where supply disruption creates national security risks, including defence textiles, PPE, Arctic gear and public safety uniforms. We should treat and prioritize them just as we do critical minerals, steel, aluminum and wood products. If Canada cannot design, engineer and manufacture critical soft goods domestically by Canadian companies, then we are exposed.

     We saw this when COVID hit. Wuxly maintained its Canadian supply chain, so we were able to quickly pivot. We produced more than 10 million pieces of PPE for Canada here at home, for frontline workers, when they needed it the most.

     When Russia invaded Ukraine, standing by was never an option. Wuxly evolved again and delivered more than 250,000 military soft goods to Europe. Here in Canada we have quickly become a world leader in female combat uniforms, with over 40,000 sets delivered to Ukraine, along with sleeping bags, parkas, tank covers and various soft goods that were all made in Canada.

     Today, our engineered textiles are tested, trusted and used in the harshest conditions in the world. We have the domestic industry to build on, but this industry is becoming fragile. According to ISED's numbers, Canada imports roughly 17 billion dollars' worth of apparel imports each year. Too many of those are resold by foreign-owned firms, hollowing out our Canadian operations, talent and IP, with billions and billions of dollars ultimately leaving our economy. Sadly, contributing to this grand number are military clothing imports from Asia, which Canada continues to allow to clothe our Canadian Armed Forces.

     Sovereignty is not just about fighter jets, shipyards and exquisite systems. Canada has a real strategic advantage in cold-weather and Arctic textile systems, and our allies are taking notice. We can't let this opportunity slip by. Demand is growing at home and abroad, and deployments are only increasing year after year. This is where Canada can truly lead. Given the room to grow, we can create thousands of jobs and bring real skills back to the places that lost them.

    That is why the buy Canadian policy matters, and that is why it is the right direction. Its success will come down to how it is implemented. Today, a product can be called Canadian while the ownership, IP and value chain sit offshore. Enough with the maple washing. True domestic value means Canadian ownership and IP, Canadian manufacturing and Canadian suppliers—not just the seller's address or office.

    We have to treat technical textiles and defence soft goods as strategic industrial capabilities, just like wood and steel. That means secure supply chains, speed when a crisis comes, stronger quality control in jobs and skills, and know-how that stays in this country.

    As a Canadian company, we're asking for a fair opportunity to compete at this pivotal moment—not just for now but for the long term. When the world thinks about gear built for the extreme cold and harsh operating conditions, Canada should be the country it thinks of. We have the expertise, environment, climate and industrial base to build on. The question before this committee is whether we choose now to be that country.

    In my former career as a CFL player, my coach used to preach that we have to be brilliant at the basics. For Canada, this means getting the fundamentals of this policy right so that we can maximize its full potential.

    For the soldiers protecting this country and representing Canada around the world, and for the allies who are counting on us, let's reawaken the Canadian textile industry. Let's make the world's best outerwear right here at home in Canada.

     Thank you. I look forward to your questions.

    Thank you very much.

    We'll now go to Mr. Straisfeld for five minutes.

    Go ahead, please.

     Thank you very much, Mr. Chair and members of the committee.

    It's a great opportunity to appear here to talk about Canada's buy Canadian policy.

    I come before you not as an academic or a career public servant but as an innovator, an entrepreneur and a contractor who has spent years working with Canada's defence, manufacturing and industrial sectors. My perspective is shaped by experience on the ground, working with companies that create jobs, invest in communities and support Canada's strategic interests. As president and founder of MRE Canada, a company specializing in domestic food production and manufacturing for the Canadian Armed Forces, I understand the importance of Canadian sovereignty, not only for our military but for the resilience of our economy and supply chains.

    Today, countries around the world are investing heavily in domestic manufacturing, because they've learned a critical lesson: When demand surges or crises emerge, access to essential supplies cannot always be guaranteed. For Canada, this extends beyond major weapons systems. Military rations, ammunition, components, packaging technologies, logistics systems, advanced materials and electronics all contribute to the operational readiness. A military cannot operate without sustainment. It cannot fight without supply chains. At its core, a buy Canadian policy is more than a procurement policy. It's an economic policy, an industrial policy, a sovereignty policy and, increasingly, a national security policy.

    The recent years have exposed vulnerabilities in global supply chains, whether they're caused by geopolitical instability, trade disruptions or other international crises. Canada has learned that dependence on foreign suppliers can leave it exposed when other nations prioritize their own needs. Resilience requires more than trusted trading partners. It requires the ability to produce, sustain and scale critical capabilities here at home. Building that capability or that capacity requires long-term investment, and those investments depend on the confidence that government procurement will remain consistent over time. We've seen what happens when that confidence disappears. When Canada faced critical shortages, businesses stepped forward, invested capital, expanded facilities and built domestic production capacity. That was during COVID-19. However, when the immediate need passed, many were left competing against lower-cost imported goods without sustained support. Much of that capacity disappeared, and those investments were lost. That lesson should not be forgotten.

    The same principle applies today in defence manufacturing. If government expects industry to invest in new production lines, workforce development and infrastructure, companies must have confidence that procurement commitments will endure long enough to justify those investments. A successful buy Canadian policy should therefore be measured by not only the contracts awarded today but the industrial capacity that exists 10 or 20 years from now. The question is not whether Canadian companies can compete. They already do. The question is whether our procurement system gives them a fair opportunity to succeed. Too often, procurement focuses on the lowest upfront cost, yet true value extends far beyond the purchase price. When contracts support Canadian workers, research and development, tax revenues and domestic supply chains, the economic return benefits the entire country. Every dollar spent with a Canadian supplier supports jobs, innovation, apprenticeships, exports and future growth. This is particularly important as Canada works to strengthen its defence industrial base. We cannot build a resilient defence ecosystem overnight. It requires sustained investment, predictable procurement and confidence that domestic firms will have the opportunity to grow.

    To succeed, a buy Canadian policy must be implemented carefully.

    First, Canadian content requirements must be meaningful and transparent. Canadians should have confidence that products labelled as Canadian genuinely create value in Canada.

    Second, the policy must support small and medium-sized enterprises. Many of Canada's most innovative firms begin as small businesses but face significant barriers in navigating complex procurement systems. Today's small firms can become tomorrow's industrial champions.

    Third, the policy must focus on long-term industrial development rather than short-term political objectives. Buy Canadian should not be viewed as protectionism. It should be viewed as a strategic investment. Every major industrial nation actively supports sectors it considers essential to economic prosperity, resilience and national security. Canada shouldn't be different.

    In closing, Canada faces a strategic choice. We can continue to treat procurement primarily as a purchasing exercise focused on short-term costs, or we can recognize it as one of the most powerful tools available to strengthen our industrial base, economic resilience, emergency preparedness and national sovereignty.

    The lesson is simple: If capacity is not maintained, it's eventually lost. Once lost, it becomes difficult, costly and time-consuming to rebuild.

     If Canada wants domestic companies to invest, innovate, hire and expand, we must provide confidence that strategic Canadian capabilities will continue to be valued long after the crisis has passed. A successful buy Canadian policy should not simply purchase Canadian products. It should build Canadian capacity.

     I thank you very much, and I look forward to your questions.

     Thanks.

     Mr. Patzer, go ahead, please. You have six minutes.

     Thank you very much, Mr. Chair.

    Thank you to both witnesses for appearing here today.

    Congratulations on a fantastic career, Mr. Yurichuk. I'm a big CFL fan from Saskatchewan, but I digress.

     As part of the buy Canadian policy, the government has said for a long time now that it will launch the small business procurement program in spring 2026. It's June 2026, and we still don't have that program out there. What concerns do you, as an SME yourself, have when there is a delay in this part of the program?

    That's a great question.

    I'm sorry to hear about the Saskatchewan fan part, but aside from that, I think, as an SME, that there's always a runway. There's a burn. You get certain signals, and you try to react and triage some of the signals that you're hearing from industry and government. When they're not brought on time, that means the runways are taking up space and the cash is burning. You have to make decisions. Making these decisions quickly helps the small and medium-sized businesses, so we're certainly in favour of bringing some of this timing forward.

     For you, then, what would be the most important thing that should be part of the policy? What would be some of the definitions, requirements or targets for you to really make sure that you fit into this policy?

    I think it would be just really looking at the real Canadian factors. Where's the company from? Where's the ownership? Where's the operation? Where does the IP land? It would be looking at all of the things that truly make it Canadian. It can't just be partial or piecemeal. Where is that wealth ending up when a project is complete? Understanding those factors and giving some credits towards true Canadian companies will certainly help out a company like ours.

     There's a concern that government contracts will be bundled and that it could create a reverse incentive working against an SME. Do you see that as a potential problem, that you could be squeezed out because of the bundling by larger companies to get those contracts?

     Certainly in the past what we've seen is projects favouring incumbents. They reach a certain criteria, and it's tough to make that for the insurgents like us. Sometimes you see the ladder getting kicked once they're up there. Unbundling them a bit and giving some opportunities—not making it $1 million to make.... We've been part of proposals where it cost us $400,000 or $500,000 just to put the proposal in. There's a lot of work, and that really sidelines a lot of companies. I heard an earlier witness mention two proposals as the average. We have to get those numbers up.

    You touched on another piece there. I've heard from other businesses in other areas. We hear a lot about, say, shovel-ready projects. That's a buzz phrase that we hear a lot. In your case, it's more of a shovel-worthy type of project. You have capabilities, and you have some capacity, but if you're able to get that bid without having to go through $500,000 or $1 million in building a report and a proposal, only to be denied and to lose that money that you could have been investing into your company or into whatever your next line of textile might be....

    Would you see some value in something like that, something where we know you have the capability, so you can be successful without having to go ahead with a massive spend just to find out it's lost?

    Yes, a trend that we've been seeing south of the border is these two-phase contracts. If you meet the certain capability, they show you what the reward can be at the end of the way rather than just putting the whole contract all together. In our case, let's say that we have to make a jacket that's good for -60°. If we make it to -60° and hit that goal, then there are 1,000 jackets behind it.

    That is a rudimentary example, but making those off-ramps and de-risking it for both the buyer, Canada, and the supplier in industry will certainly favour the SMEs.

     Right on.

    If this is at all to be successful, and let's just say the government does manage to roll this out, what is the opportunity for you as a Canadian supplier?

    In our particular case, I think there's quite an opportunity to fill a meaningful capability gap here in Canada, bringing in thousands of jobs that we've lost overseas as we continue to import 17 billion dollars' worth of apparel each year. Bringing these jobs back would be super important.

     There's also an opportunity to export. As I said during my witness statement, we are known around the world for being cold-weather experts, yet we continue to export a lot of this work outside the country.

     If you can believe it, Canada now imports our long johns, our base layers for the Canadian Armed Forces. We let go of our long johns. We have to bring these back, along with other things, the outerwear and everything that goes into it. We were once known as the best outerwear country in the world. We've let it go over the last 30 or 40 years.

     In the U.S., they protected themselves—

    I'm afraid we're past our time. I have to interrupt there.

     Okay. It's to be continued.

    Yes.

    Go ahead, Ms. Sudds.

    Thank you, Mr. Chair.

    Thank you to both of the witnesses for joining us today.

     I'm going to start online, with Mr. Straisfeld.

    One of your last statements in your testimony caught me, that the buy Canadian policy can't be just about buying Canadian products but about building industrial capacity. Obviously, these are really important goals as we think about what we'd like to come out of this policy.

     I asked a similar question in the first hour to another witness.

     Given that we introduced the defence industrial strategy shortly after the buy Canadian policy, they are building blocks. The defence industrial strategy is really about building that industrial capacity across this country in key capabilities that we have identified as areas where we want to see sovereign capabilities.

    I'm curious about whether you view that in the same way, as complementary in that building block that we needed to put in place.

     The assessment is correct, and I'll amplify it a bit more.

     I was at CANSEC last week, and I was speaking to a lot of manufacturers we would want to partner with as an SME. As an innovator with my foundation, I've gone through ISED programs like NGen, IRAP, NRC and ISC. There they teach us to work collaboratively, to expand and to build a network so you can build greater and bigger things.

     When I sat down at the Canada pavilion to speak to the military people there, it was very clear that they have no idea what is available in the market. At the same time, the whole idea of building resilience and buying Canadian is also finding a way to get all ministries and all groups that are interested in purchasing.

    I'm going to be a bit funny in this and say that there should be something like a Canadian Idol for investment and procurement. There should be a catalogue, so that, if you are looking for something weird, you could go to that catalogue and find some SMEs, some medium and large companies that can do this.

     I think that plays into what I was building on and what you were suggesting with the last panellist earlier.

    That's fascinating.

    One thing I've learned recently, which I think is quite excellent, is that the team that built the defence industrial strategy has now set up a portal where companies can register. I would suggest that it's trying to bench those strengths and capabilities we have in the incredible thousands of companies across this country.

     I take your point. It is certainly something that needs to happen. I'm starting to see some building blocks to meshing the sector a bit closer together.

     I think I'll pivot. Thank you very much for that. I'll go to the room and to Mr. Yurichuk.

    You made some comments around some of the struggles in being a small or medium-sized business. As was rightly pointed out by one of my colleagues, we are in the process of establishing a small and medium-sized business procurement office to help address some of the challenges that an SME would typically have had in the past, trying to do business with government.

     I would value your insights as to what would make this office most efficient and effective for you.

     I think industry engagement is important, but real signals are important. Right now industry is going out to events every week, and there are different conversations happening. There's a lot of excitement building up, but we really need to put pen to paper and start rolling out those contracts. The speed of those contracts will be very important to the SMEs.

    You know, there's a real eagerness. There's excitement out of CANSEC. The industry is very excited to get going on some of these exciting projects.

     Most definitely. Thank you.

    Mr. Straisfeld, maybe I'll go to you on the same question.

    I'm sorry. Could you quickly rephrase the question?

    Yes. I apologize. It was with respect to the new small and medium-sized business procurement office. What would make that most useful and relevant to you in terms of being helpful moving forward?

     I think it's a great idea. Perhaps we can put some guarantees in there. One of the biggest problems with small and medium-sized enterprises, in any funding program that has a portion for them, is that there's always a danger—I've heard this with a lot of our projects—that the money has already been spent or has been tapped out, and we don't understand how it was possible. The key here would be to analyze a fund that is really dedicated to those.

    You were mentioning before the $5 million up. A lot of us are going to band together for the $2.5-million project. We're going to try to get together, so that we can get that funding. I think if it's open-minded enough to allow for people to collaborate, to share and to work like they do in other ISED-sponsored programs, it will be very successful.

    Thank you very much.

    Madame Gaudreau.

    A little birdie told me you've been to Montreal before, right? Was it Sherbrooke?

    Yes.

    That's great, so you'll be able to answer me in French.

    I want to come back to the fact that there are two ideologies. Given that you know a bit about what is happening in Quebec City, there is an ideology of industrial sovereignty, of rolling out industrial clusters. What we're experiencing, particularly outside Quebec, is self-regulation. When we talk about this issue, can we call on your expertise? Does it make sense?

    Having been in this industry for just over 10 years, I think Quebec has been a leading province in terms of mobilizing the industry and being forward and helping projects to get online. A lot of that is the collaboration. I go to industry events within Quebec. I see that brotherhood and sisterhood among Quebec companies. I think it's one for other provinces to look at and emulate, because with that they seem to be winning projects. When I look at Quebec in terms of a province, I see that there are a lot more mandates on made in Quebec and made in Canada. That's something I'm certainly looking at as an Ontarian.

    It's a fact that, if the market is self-regulating, this policy right now….

    This is going to be my question for Mr. Straisfeld: Is it really an issue for you to be dependent on the market? In recent decades, we haven't managed to find a niche or develop sectors. Do you agree with me?

    In a way, I agree with the policy that's now in front of us.

    I'm in military procurement. I think that when we say buy Canadian, it's for every province: I want maple syrup from Quebec, honey from Ontario and fish from British Columbia or Nova Scotia.

    If we build this buy Canadian policy, we guarantee that, when the state of the world changes, we will maintain the principle of having relationships we can rely on.

    Since I still have a bit of time left, in terms of growing or maintaining your roll-out, what would help a company like yours the most? Is it ensuring public contracts, more capital, predictability or perhaps even a really well-developed industrial strategy? What do you think?

     In our particular case—each one is unique—we just want a chance to compete within Canada, and we want Canadian support behind the industry. I look at Norway, South Korea and France. These are similar-sized countries that have stood up big primes. Those primes have been grown and developed by their home countries over the years. Those are the companies that became primes in Canada. We want the support to become a prime within Canada and to be able to sell as primes over there.

    Excellent. From what I hear, they are recognized and valued, but also supported. We're talking about Quebec, but there isn't just public money and grant money, there is a support model. To keep you going, should that be incorporated into the buy Canadian policy?

     This would certainly help us in our effort to fill the capability gap here, and to export.

    I have 10 seconds left, Mr. Straisfeld. What do you think?

    In a way, I agree with you.

    That's as simple as it gets.

    Mr. Chair, the interpretation was challenging in that round. You're doing a good job, but it's hard to focus, even for our witnesses, I'm sure. I don't know what's going on, but I want to emphasize that the second round was challenging.

     I'll have the clerk follow up on that while we go to our next round.

     Mrs. Block.

     Thank you, Chair.

     Thank you very much to both witnesses for joining us today.

     Mr. Yurichuk, your SME is navigating procurement. You mentioned in a previous answer that some proposals cost $400,000 or more to get to the point where they can be submitted. No part of buy Canadian is removing or delayering the previous rules that drive up the upfront costs of procurement.

    I'm wondering if you could elaborate on what barriers exist before a bid is even submitted by SMEs.

     I can speak to some of the procurements I've been seeing come up at PSPC recently.

    There are things that could be easily done here. I don't think we've done our full due diligence on what's available in the industry within Canada. The example I'll use is the traditional Mountie hat. If you can believe it, we're not making those in Canada right now. When we asked PSPC, they said, “Oh, we're not confident in the capability of Canada to make this Mountie hat.” This is an iconic hat. This is something we absolutely have to make here.

     When I look at defence textile and apparel systems, I often see some groups continually buying in the U.S. They put in the Berry amendment around 1943, which provides that all military textiles be made in the U.S. We're competing against a U.S. market that has grown over the last 80 years, along with an Asian supply chain and PSPC not fully understanding the capabilities of the industry. This makes it extremely difficult to compete. There absolutely is the capability to make these and other niche products in Canada. I desire to bring that back.

     Thank you for that.

    I know that the government has been promising an SME procurement program for buy Canadian. We heard here today that they are going to be creating an office for SME procurement. It should come as no surprise to any of us that the confidence this might build into a process is somewhat lacking, given that this government is really great at building bureaucracies and not really great on delivering.

    I want to ask you a question about Canadian content. As far as Canadian content goes, you've just highlighted that the Government of Canada doesn't have any confidence in companies here to be able to manufacture a quality hat for the RCMP. Can you comment on how critical pre-existing supply chains are to SMEs?

    I think the strength of our company in particular is the ability to work on a coast-to-coast supply chain. One thing we've stood up as a company is the Canadian Mobilization Apparel and Gear Network. We now have 70 SMEs that are all Canadian-based and Canadian-owned, from coast to coast to coast, and able to make some of these products.

    Along with some of the activity that you're doing, we're also starting to have to make a naughty list. We're making a naughty list of stuff that should be procured here in Canada but is being outsourced right now. This is not a list that you want to make right now, because it is stuff such as the Mountie hat, which should be made here in Canada, that's going to make that list.

    Are SMEs worried about supply chain disruptions that might occur given the buy Canadian policy we have that the government has put in place?

     I think the SMEs are hopeful that it helps to advance their position. Most of the SMEs here are operating as Canadians, so there's hope in that regard. It's the pen to paper that's going to help to get you to the next gear. That's why every defence event is sold out. That's why there's so much excitement right now.

    You're hopeful that this policy will challenge the status quo and that there will be more opportunity for Canadian businesses to do work with the Government of Canada.

    Please give a yes-or-no answer.

    Yes.

    We are out of time. I'm sorry.

    Next is Ms. Rochefort.

    Thank you.

    I enjoyed hearing you talk about the excitement that's been created by the government's industrial defence strategy. That's very good to hear. It's government in action.

    I also very much appreciated and enjoyed both presentations. You spoke about Canada's entrepreneurial spirit being alive and well. That's really wonderful.

    I also thought that it was very enjoyable to see the breadth of products that could potentially be available throughout Canada under the defence industrial strategy. We think of ammunition and certain elements, but you're obviously doing different products that we may not think of or that aren't as common in the field of defence.

     Thanks to both of you for your presentations.

    I have the same question for both of you. It's building a bit on the question of my colleague, Madam Sudds. This is an opportunity to move forward on a small business procurement program, but your viewpoint is very important. It's in partnership with industry that we're moving forward and very much on your thoughts. We've touched on your thoughts, but could you summarize what you would like to see in the upcoming small business procurement program to make it easier for SMEs to do business with the federal government?

    The question is for both of you, Mr. Yurichuk and Mr. Straisfeld. Whoever would like to go first, could you summarize in bullet form—one, two, three, four, five, six—what would be the essential key points?

    Mr. Straisfeld, if you like, you can begin.

    Voices: Oh, oh!

     Thank you, James. I appreciate it.

     Very simply put, when you talk about SMEs.... James and I are old friends, and we actually worked together during COVID to supply PPE. My company was a company of four or five people and James's was a much larger SME. When you're talking about SMEs, there are going to be different levels of SMEs. You're going to have the basic SMEs, the intermediate SMEs and the senior SMEs, before they become large.

     I think an open-mindedness in terms of what's good for the goose not necessarily being good for the gander.... I hate using clichés, but this is something important, Madam Rochefort.

    The second one comes back to this idea of timed-out money. You have to dole it out in the sense that we need stuff, so yes, you're on the list, high up, but then, are you innovative?

    In my case, I came into this industry because I was making drones and munitions. I came into the food industry because the military had a contract for MREs and 95% of it was U.S.-based. I didn't like that. I rushed to go out there and create a relationship of Canadian food suppliers so the next MRE kit was going to be 95% to 99% Canadian. I'm very proud to say that I've done that. There are a lot of people who have that innovation skill who are SMEs and might need the help at your level at that office to put people together.

     One of the big criticisms I had with ISED a long time ago was that if you lose a competition, you lose, but you shouldn't lose. You should say, “You didn't make it, but we'll mention you. You can then go on to some sort of portal somewhere and put your stuff out there. If somebody thinks that your technology is good, they can work with you, and you can come back to us as a joint thing.”

     SMEs, I think, require a little love. They require a bit more understanding, because a small enterprise with four or five people might not have all their financials and might not have all their stuff, but they can pull the trick and do the job, as I did.

     Well said. Thank you for that.

    Yes, Mr. Yurichuk.

    These are few things I'd love to see: Canadian-made priority, speed to contract, predictability of project pipeline, transparency on the timeline, ability to partner early in projects and innovate with Canada, and having Canada pick strategic Canadian partners from SMEs.

     Thank you.

    In your other comment, you talked a bit about your company and the opportunities internationally. You do see the Buy Canadian policy as a means to grow internationally.

    Would that be correct?

    That's correct.

     We're a classic company that's exporting far more than what we sell in Canada. I can only envision now with this defence ramp-up, if we're to be supported domestically, what kinds of capabilities we could bring to Canada but also export.

     We started as a $5,000 investment in the Kickstarter. We've been able to export hundreds of thousands of goods to Europe. I can only imagine—if Canada made us a meaningful partner—the things that we could do, not only here in Canada but also to bring jobs and to export and deliver Canadian-made goods elsewhere.

     Madame Gaudreau.

    Mr. Straisfeld and Mr. Yurichuk, I have two and a half minutes. I'll ask both of you.

    Since the beginning of the study, I sometimes feel as though we talk about buying Canadian, but a little less about making, owning and innovating Canadian. It's just buying Canadian. I would like to know if, in your opinion, we have a real industrial strategy in Quebec and Canada or if we are still in procurement mode.

    I'll start with you, Mr. Straisfeld.

    I completely agree that, as Canadians, Quebeckers, Ontarians or citizens of any other province, we have the intelligence and spirit of innovation to do whatever we want.

    As I said before, I had a 60-day contract to make meals. I'm working with companies in Quebec and Ontario to expedite the replacement of food from American companies. We don't have the technology to do it ourselves, but that's the mission I have now. I would like to work with people in Quebec to buy machines, create technology, conduct studies, do research, be a world leader in five years and no longer need to buy from the United States.

    I'm an entrepreneur myself. Making bold moves is risky. Of course, buying Canadian is attractive for growing your business, but you also have to feel supported. We need to avoid the culture of market self-regulation.

    Again, does buying Canadian lack teeth without manufacturing, innovation and support? What do you think?

     We have broadly identified some of the capabilities that we want to bring into the defence industrial strategy, but what will really show it to me is when we start seeing more Canadian companies that are truly the primes within Canada.

    The signals that I've been hearing, when going to the different talks, are that we're only trying to go halfway. We're only trying to get to 50% of bringing in this Canadian domestic capability. There's still a lot of attention going towards foreign-owned primes.

     When it becomes a true defence industrial strategy is when we make the Canadians the primes. When we bring the Canadian companies underneath the tent, we help grow those companies, and we do those strategic partnerships.

    Thank you.

    I'll go back to you, Mrs. Block.

    That's why I chose the word “hopeful”, and I didn't choose “confident”.

     I want to circle back to what you've been saying and ask whether, in fact, you have been engaged in, or are aware of, any consultations that have taken place across the country in regard to this small and medium-sized business strategy for the buy Canadian policy or in regard to the creation of an office. Have you been engaged in any consultations, or are you aware of any?

    I've heard it talked about in various panels and events such as that, but spoken to in an official capacity there's been not much further than this conversation today.

    To our other witness, have you participated in any consultations in regard to the creation of an office for buy Canadian SMEs?

     No, I have not, but I would love to.

    Let's hope that happens before the office is actually created.

    Chair, I want to use the rest of my time to move a motion that I put on notice last Friday, if I could.

    Go ahead.

    I think everybody got a copy of this motion. It's a short motion. I will read it into the record because there is one correction I need to make at the end of it.

    That's the correction that I would make. I note there was a typo there. I've attached the date of June 16, so that's why I'm taking up time to do it today in this committee meeting.

    I will simply say this. We know that Health Canada gave $300 million to Canada Health Infoway to develop and implement PrescribeIT, that they had every intention of replacing the fax prescribing system and that, at its height, it processed less than 5% of prescriptions. I would hope, then, that members at this committee would see the value in hearing from Mr. Green and doing a two-hour meeting to dig into this contract, which resulted in very little value for the money.

     Ms. Rochefort, go ahead.

    I'm not sure on procedure here, Mr. Chair, but we still haven't concluded our rounds with the witnesses. Is Madam Block just tabling this motion at this point, and then—

     No. She's introduced it.

    She's introduced it. Are we going to finish, then, or...?

    It depends on how long it takes to settle the motion. If it's within a moment, we'll continue with Mr. Gasparro, who has the last round. If it's going to be longer, we will dismiss the witnesses when we reach that time.

    I see. Okay. Thank you.

     I'm starting the speaking order. As a reminder to everyone, I will note who's speaking and the next person, and that's it. I will not be nagging you. Put your name on the speaking list. If debate runs out, it runs out.

    Ms. Sudds.

    Thank you, Mr. Chair.

    Is it possible to have this circulated, just so I have it at my fingertips?

    It was circulated a couple of days ago. We can recirculate it, though.

    Do you mind? Off the top of my head, I have a few comments. I paid attention when it came in.

    First of all, I would posit that a very similar study has been proposed at a number of other committees, including the health committee. That's what I have been told. I would suggest, Chair, that we should be stewards of resources here in the House of Commons. I think the duplication of efforts isn't necessarily needed in this moment. We have a full agenda ahead of us. We have studies under way. I do not see the value of our disrupting that schedule, with the few short meetings that we have left, when this is already being reviewed at other committees.

    I have Madame Gaudreau.

    Mr. Chair, seriously, the purpose of this committee is government operations and estimates.

    We were on estimates, and we are analyzing beforehand what is coming with the buy Canadian policy. However, when money is involved, we need to stay in our lane, and our responsibility here is to ensure that we have all the information we need to shed light and set the record straight.

    In my opinion, and I know my colleague who works in health, this is not resolved. The goal is not to wait for a finding by the Auditor General that will be published in the public accounts. Let's do it now.

    How will we be able to make good on our commitments? We have the M‑16 study and this study here that needs to be completed. There are also other motions on notice. I can't add weeks to the year, but we will be on break shortly.

     Mr. Gill.

     Chair, I was actually present at the health committee when this subject came up. They declined the offer to bring the health minister in to speak to this matter.

     I will say the same thing I said over there. We have a sacred obligation to the taxpayer. We have to respect them as well. Denying taxpayers those opportunities to listen completely to what's going on.... This $300 million is not chump change. That's a significant amount of money. We have to at least look at where things went wrong, and we need to correct them.

     This is not a blame game of any kind. It's an investigative game. How do we do this, and how can we get better at doing what we do?

    Thank you.

     I have no one else on the speaking list, so we will go to a vote.

    (Motion negatived: nays 5; yeas 4)

    The Chair: Fortunately—or unfortunately, depending on your view—the motion is defeated.

    We will now go to Mr. Gasparro for our final round.

    Go ahead, for five minutes, Mr. Gasparro.

     Wonderful.

    Thank you both for being here. I'm an Argos fan, so I'm obviously a born-and-raised Toronto guy.

    That is your time, Mr. Gasparro.

    We'll just end on a high note.

    For the three people watching at home, I will note that the Conservatives are saying that it's all downhill from here.

    In my riding of Eglinton—Lawrence, I have the original Canada Goose manufacturing facility. They've obviously expanded over the years. They employ hundreds of people, so I have some line of sight on the textile industry and how important it is, still, to communities across the country. I see it in my riding every day.

    You touched on this, as have others: From your perspective, how critical is buy Canadian, not only for SMEs but also for the industry more broadly?

     It's very important, especially at this critical moment in time. There are a few things going on. We're having this supercycle in defence. We're having this rapid technology advancement in terms of AI and robotics. When I look at textiles, I can see that there's going to be more automation and innovation brought online in the next five to 10 years than there has been in the last 100 years.

    We really have to capture these moments happening in Canada, or else we're going to be trailing and watching other countries continue to make our goods and siphon Canada's wealth off.

     Not to go way back down memory lane, but when I was doing my MBA, we did a foreign trip. We went to Vietnam and toured some of the textile facilities there. There were—excuse the analogy—football-field lengths of people lined up at sewing machines. They had the whole supply chain right there, to the point where individuals were tagging the garments. I have some grey hair on my head, so I don't want to say when this was, but it was a long time ago.

    You referred to the repatriation of some of those jobs in a previous answer. Can you connect the dots among what's happening overseas—like in that example of the textile industry being shipped to other jurisdictions—the automation taking place and some of the capital investment we can see here in the country for buy Canadian?

     Certainly.

    What I think has happened is that we've lost a lot of engineering. There's engineering in designing a product and having it made elsewhere, but there's also engineering behind making that product locally. Industry has to do its part to make that cost-effective. This is a trend we're seeing in defence right now. They want cost-effective solutions.

    Again, this is a great time to bring things back, because, with AI, automation and robotics, this is when we can dedicate more time to the engineering of manufacturing, instead of allowing other countries to take that over again. What's happened over the last 30 to 40 years in textile is that they've learned off our dime. They've learned how to do things and how to make things efficiently. Now it's time to take it back and make things efficiently at home, creating high value with consistent quality.

     Really, what you're also touching on is capacity building, so that our country learns how to do this again.

    We definitely have to hit that muscle memory, because it's not going to happen overnight, going from zero to 100. We have to prepare ourselves in various areas.

    Again, for the one I'm most focused on, we see this as a critical capability. There's so much focus on the north. It's not only about getting people online so they can operate in the north. It's also about the systems that operate in the north. For batteries and engines, there are textiles in the equation that allow them to stay insulated and that prolong their usability in harsh environments.

    That's why I came here. It's so important to me that we look at textiles as a critical industry in Canada, definitely.

     That's great. Thank you.

    I apologize. We're past our time.

     Witnesses, thank you for being with us today. We appreciate your time.

    If there's nothing else, colleagues, we are adjourned.