:
Thank you, Mr. Chairman and members of the Standing Committee on National Defence. I very much appreciate your invitation to appear before you today to support your study of military procurement and associated processes.
I'm currently employed as the senior advisor to the Center for Defense Information, a non-profit organization, a division of the World Security Institute, which is a Washington, D.C.-based national security study centre. To help ensure our independence, the World Security Institute and the Center for Defense Information do not accept any funding from the federal government, any other government, or from any defence contractor.
In my current capacity I'm called upon sometimes to provide independent expertise on various defence matters. I have about 30 years of experience involving U.S. defence systems and equipment. My remarks today will be based on those experiences and may not apply to the situation in Canada, which may be quite different from that in the U.S.
I want to note from the outset that many U.S. military acquisition programs work very well. You never read about them in the newspapers. They provide the user with the intended capabilities and they work just fine. However, in some recent years there have been some disturbing trends. For example, in some recent years, 80% of U.S. army systems did not achieve 50% of their required reliability in operational testing. Not long ago, two-thirds of U.S. air force systems had to halt operational testings because they weren't ready for it. Going back a little farther, the navy has also had to deal with its difficulties. In 1992 there was a period where only 58% of navy systems undergoing operational testing to support a Milestone III decision were successful. The navy instituted several changes and a few years later their success rate was up to about 92%.
More generally, today there is concern about finding ways to reduce technology risk in U.S. defence acquisition programs, which too often overrun their costs and schedules.
When such problems arise, it's usually, I feel, because of a general lack of realism, which manifests itself in four ways, the first being unrealistic requirements. While we all want our soldiers, sailors, airmen, and marines to have the very best equipment, and they also of course want more capable systems, that can translate into multi-mission systems, and this can lead to more complicated, multi-functional systems, often with computers and sensors working together for information fusion. These days, practically everything has a computer in it, as we see in our everyday lives.
For example, the cancelled Crusader howitzer program had roughly a million lines of code in its computer. Some people would be surprised that a howitzer would need that sort of computational power, not unlike what you might have on a modern jet fighter aircraft.
So in the United States today, what often happens is the technical challenges that must be overcome to achieve effective multi-function systems are regularly underestimated.
It's also not uncommon for the U.S. Department of Defense to have unrealistic expectations for costs and schedule as well as performance. Sometimes this originates in proposals first put forward by industry. To make new proposals attractive, the U.S. defence industry may overstate what can be delivered and how inexpensively.
But whether it's driven by contractors or by the government itself, this can lead the contractors to buy-in, as the phrase goes, in order to be competitive. This often is caused by a failure by both the government and the contractor to fully understand and address the technical challenges in a program early. When the technical challenges have not been candidly identified, the cost of schedules to solve these problems can overrun by billions of dollars and many years of delay.
Also, with the intent of saving time and money, sometimes the military departments or defence contractors turn to commercial off-the-shelf or non-developmental items, so-called COTS/NDI. Usually these items are really not on the shelf, in the normal sense of the phrase, commercial or otherwise, and if they are, often the designer of these equipments never contemplated that product would be put to military use in a harsh military environment.
I feel a third area of unrealism is that too often the U.S. Department of Defense goes into highly complex technical programs expecting the contractors to deliver under firm, fixed-price contracts. Even if they are not firm, fixed price, many contracts are structured with little or no incentive to continue development to improve the system and every incentive to get into production as soon as possible. Also, the contractual environment for these contracts often requires defence companies to make unrealistic bids simply to be competitive. You've heard the phrase “you can make it up in production”. Later, if production quantities are cut, which they often are, that further reduces the prospects for profit.
Finally, fourth, in the sense of preparing for a realistic operational environment, sometimes defence acquisition programs underestimate the importance of the operational environment, such as bad weather, the stresses of battle, or operational loading. For example, computer systems may be loaded much more heavily in battle than in the laboratory. Sometimes acquisition programs do not prepare adequately for operational testing, which by definition will be operationally realistic. Complex systems that have done well in the laboratory sometimes do not perform well in realistic operational tests.
With these issues in mind, I have laid out ten solutions for you, ten things you may already be considering or you might want to consider. I don't think I need to go through each of those ten things. I think they're pretty self-explanatory. They range from increased parliamentary oversight and review, competition in contracting, to making sure you pay attention to the technical details. I won't take your time by going through those ten things, but I'd be happy to take questions when the time comes.
As I said at the outset, not all my suggestions will be appropriate for the Canadian government. For one thing, the scale of most Canadian military procurements is different from that in the U.S. However, the trend in defence procurement worldwide is toward larger, more complex, and more costly systems that involve advanced technology, computers, and software, and these big systems are difficult to manage.
Thank you, Mr. Chairman.
:
Mr. Chairman, thank you.
Mr. Chairman, ladies and gentlemen of the committee, thank you very much for inviting me to participate in a review of the government procurement process.
[Translation]
As some of you know, prior to retiring from the Public Service in 1999, I spent almost three and a half years as the Assistant Deputy Minister (Materiel) in DND (the post currently occupied by Mr. Dan Ross, who previously appeared before you on February 8).
Prior to that I spent over 30 years, as both a military officer in the Canadian Forces and a senior civilian in DND working exclusively in the field of logistics, materiel management, and procurement.
I have appeared before this committee or its previous iterations on several occasions to answer questions on defence procurement. The last time I appeared before your committee, just prior to my retirement, was just over eight years ago, to be exact, it was March 2, 1999.
At the time, I provided a detailed overview of the defence procurement process, including the extensive actions we were taking to reform the process. Committee members might wish to look at that presentation of eight years ago, as many of the reform initiatives I spoke about then are similar to those still being talked about today.
[English]
For example, several of the previous witnesses have mentioned buying more off-the-shelf equipment as a way to shorten the procurement process. This is not a new concept. In a statement on Canadian defence policy of April 1992, the Conservative government of the day stated that in future defence procurement it would:
- avoid unique Canadian solutions that require expensive and risky research, development or modification of existing equipment.
Shortly after that, in a budget impact statement on national defence in April 1994, the then Liberal government stated that DND would:
…emphasize the purchase of equipment ‘off the shelf’, the use of commercial standard technologies, and unless absolutely necessary, the avoidance of military specifications…
In my presentation in March 1999, in outlining those things we did to reform the acquisition process, I noted our move to use more commercial off-the-shelf procurement. I cited the purchase of the Bell 412 helicopters as one of several examples. So in fact, buying off the shelf has been advocated and used very successfully by DND for many years.
[Translation]
In spite of concepts like these, there is still a very real sense that there is something wrong with defence procurement at the Department of National Defence—that it needs to be fixed.
Not just here in Canada—you can read about attempts to reform defence procurement in the U.S., U.K., Australia—in fact in most major western defence departments. Judging by the amount that has been written and talked about, it is evident that procurement reform is and has been a very high priority in defence departments for many years now.
[English]
Why haven’t we found the solution? As I said, the problem is not just in Canada. For example, a Jane's Defence Weekly article in October 2005, in reference to procurement reform in the U.K., had the following headline: “Smart Acquisition still not working, says committee”. A BBC News headline in February this year read: “Armoured vehicle delays condemned”. And here's a quote from the U.K.'s Commons defence select committee, which stated that a requirement identified nine years ago still remained “nothing more tangible than a concept”.
[Translation]
So while some progress has been made in recent years, everyone still seems to want to totally reform the system.
[English]
In my opinion, the system is not totally broken. I do not agree, for example, with one of your previous witnesses, Mr. Alan Williams, that a radical new organization has to be created. The existing procurement system can, however, be significantly improved, and unless we take decisive action now, in ten years' time, potentially we may still be pointing to buying more off-the-shelf equipment as the latest reform.
[Translation]
Last year, the Conference of Defence Associations Institute published a paper entitled "Creating an Acquisition Model that Delivers".
[English]
In English, that's “Creating an acquisition model that delivers”.
[Translation]
Indeed, the President of the CDAI, General Manson, was one of your previous witnesses.
Chapter 2 of the paper, which I wrote, presented some suggestions as to how the acquisition process should be changed to make it more consistent, timely and less costly. The chapter is only six pages long and I, of course, recommend that your committee read it.
[English]
At this time, however, let me highlight the recommended ten-point plan in that chapter.
First of all, no acquisition should start without a clearly understood and accepted statement of the capability deficiency that is to be rectified. Equally important, it should be limited by a clear understanding of what it is not intended to do. “SOR creep” is a major contributor to added time and complexity in procurement.
Secondly, there must be early industry involvement in identifying possible solutions to the capability deficiency. In many cases the solution to the capability deficiency may, in the end, not even be an equipment procurement.
The process should employ well-trained, knowledgeable, experienced, cross-departmental integrated project teams as soon as the requirement has been identified.
Procurement strategies must not just identify the risk, but strategies that inherently minimize risk need to be adopted.
Contracting processes that support greater use of performance specifications as opposed to overly detailed technical specifications, should be encouraged. However, there will still often be occasions where there is a need for detailed technical specifications.
In awarding contracts, potential suppliers' past performance should be very much a considered factor.
Procurement strategies will vary from project to project, but the rationale for selecting a particular strategy, whether it be competitive, sole source, or use of an ACAN, must be consistent and be clearly understood. The process must also recognize industry as a partner in the process with legitimate expectations and costs. Too often they are viewed as the adversary in the process.
Very importantly, underpinning the whole of defence procurement there should be a government-stated defence industrial base strategy, such as the U.K. and Australia have each recently published.
There should be greater use of positive contractor incentives, and not just penalties.
Lastly, DND must have a realistically stable future funding line. Before being allowed to proceed, each project should present a realistic cashflow profile. Projects should be “gated” under specific cash/timeline targets, subject to cancellation for failure to meet the agreed “gates”.
I will be the first to admit that there is nothing especially unique or even radical in the above suggestions. I'm not calling for a major reorganization. What I am advocating, however, is a more consistent and predictable procurement process.
As I stated in the conclusion to the chapter, too often large, complex acquisitions are handled in what amounts to an ad hoc manner. Compromises are made as necessary along the way to make sure the project continues to advance, often with little consideration to the downstream risks or the time and cost implications.
[Translation]
Mr. Chairman, as the Auditor General said a few weeks ago, the process of defence acquisition is complex and will always be so. And I would opine that the political environment in which it exists makes it even more complex. But we should be able to do better.
[English]
Mr. Chairman, I would be happy to answer any questions that committee members may have.
Mr. Lagueux, thank you for your presentation. You've made ten recommendations to the committee.
In terms of how I and Canadians see the role of members of Parliament, I think it would certainly be to address the issue of accountability to the government in power, to ask questions, and to ensure taxpayers get the best bang for their bucks, as my colleague Mr. Bachand said.
When we look at military procurement and it appears to be a sole-source contract, of course, MPs and the Canadian public become nervous, with some justification.
You said you disagreed with Mr. Alan Williams, who appeared at our committee and who's written a book called Reinventing Canadian Defence Procurement. On one of the recommendations Mr. Williams made, you said you disagreed with his recommending a different process or a different kind of department. One of the recommendations Mr. Williams made was that a lead minister should be designated for defence procurement.
I'm relatively new to this committee. I've only been on it for a year. One of the things that has been very stark to me on the committee is to have a variety of ministers and deputy ministers come before the committee. When I and others have asked specific questions about the procurement process, we get the answer that we should ask the question of the other minister coming the next week or that it doesn't fall under.... It's been very difficult to pin down which minister has specific accountability in this process, and I find it very frustrating.
I'm going to ask you this. Why would you be or are you opposed to the recommendation that one minister should have final accountability on the process?
I'm sure is pleased to know that the Camaro will soon be back on the street again.
Clearly there is quite a difference--and Mr. Coyle alluded to that in his comments--between what the American armed forces procure and how they go about procuring it and how we do that.
Certainly the American system, given the size, the money, and the technology, is to develop a new system from the ground up--whether that be a fighter airplane or a new artillery system or whatever--and put a lot of money into research and development, and obviously have a very robust operational test and evaluation of those systems.
We, in Canada, of course don't have the size of the budgets that the American armed forces have. For example, their defence budget is bigger than the total Canadian government budget. And our armed forces are less than one-third the size of the U.S. Marine Corps. So the scale is vastly different in terms of the money.
We cannot afford to develop from the ground up these kinds of weapons systems, so it makes sense for us, then, to buy things off the shelf. These things have already been proven, having been developed by the United States armed forces or by other allies around the world.
Therefore, the tendency is not to try to develop expensive, unique Canadian systems that are very costly, for all the reasons Mr. Coyle has explained, and that give no guarantees of delivering exactly what you want in the end in any case, unless you have a lot of time and a lot of money and a lot of resources to do that.
Given our size and given our scale, buying equipment off the shelf, whether it be C-130Js or C-17s or helicopters or whatever, makes a lot of sense for us. But as we buy off the shelf, we need to ensure that those various platforms and the systems that come with them integrate into the existing systems and platforms.
There has to be Canadian involvement at that point, because if you cherry-pick a bunch of different systems and then throw them all together, you have to make sure that they communicate together, that they operate together, and that they perform together. This is something that is not necessarily being tested by our allies, since they have, perhaps, a different grouping.
There is a Canadian role to play here in those systems. Particularly when it comes to systems integration, and particularly when it comes to mission systems, we need to have a capability here in Canada to develop those things and to modify those things to our requirements.
:
First of all, I'd like to extend the regrets of Madame Dabrowski, the general manager of the AQA, who could not be here today.
[Translation]
Mr. Chairman and honourable members, it is a great privilege to be before you today to present the interests and concerns of over 200 SMEs of the Quebec aerospace industry which we represent through our association, the AQA. Thank you for this opportunity.
The AQA urges the government to work more collaboratively with industry and all stakeholders well in advance of the procurement process and throughout the entire life of the aircraft in a manner that will support an existing and established Canadian aerospace industry and help take our Canadian troops bravely and confidently into the 21st century.
The Quebec Aerospace Association and its members are pleased with our federal government's intentions to invest in new aerospace equipment to serve the fundamental and growing needs of our Canadian Forces at home and abroad. We applaud this bold effort to bring our forces strongly into the 21st century.
The members of the AQA are based in the region of Montreal and its surrounding areas, which hosts the third largest aerospace centre in the world. This is the only aerospace centre in North America that comprises all the necessary elements to build an entire aircraft and service it throughout its life. This is a jewel for Canada that is to be respected and promoted for the benefit of all Canadians working in the high technology industry. This centre of excellence is also the envy of our international competitors and if our Canadian government is not strategic in its apportionment of business flowing from these major military procurements that will essentially define the shape of our aerospace industry in Canada for the next 20 to 30 years, then Canada risks losing our hard-earned market share and the 40,000 jobs that it supports.
Defending the interests of the SMEs that provide the working backbone to this great centre should never be misunderstood as a notion of historical entitlement. Rather, it has taken many years and a formidable level of government investment of Canadian taxpayers' dollars to create and nurture this centre. Canada has great reason to be proud of this achievement and must support a military procurement policy that leverages this expertise and capability to maintain our market and technical position.
Aerospace is a strategic element of Canada's overall industry. This industry must be properly nurtured, or else Canada risks losing its leadership position in the world aerospace market. It is not acceptable to allow a sole-sourced bidder to arbitrarily decide where the work should go in accordance with their agenda. Canada's agenda for aerospace must be respected and defended by the Canadian government. The CIBs from military procurements are seen as key strategic opportunities to leverage Canadian R & D investments and leapfrog our Canadian know-how and expertise to maintain a competitive advantage versus our U.S., European or Asian competitors. Our international competitors are doing everything possible to develop their own centres of excellence. Canada must do the same or lose market position, lose market share and lose jobs. It is inconceivable for the government to turn its back on these investments and risk losing its current position as one of the largest and possibly the most dynamic aerospace centres in the world.
More specifically on the subject of CIBs, the notion of the Canadian aerospace industry competing for downstream contracts after the bidders are handed multi-billion dollar contracts without any competition is inconsistent. In fact, under the current conditions, the Canadian aerospace industry as a whole, and particularly the SMEs of Quebec, have little to no visibility or control into how a sole-sourced bidder will decide who will get contracts, as there is no indication of a formal competitive process for deciding how contracts will be allocated. The only regulations that can govern these allocations are the guidelines of the CIB agreement that put demands on how the bidder is to distribute the potential work.
Without a strong and focused CIB plan, a sole-sourced bidder has essentially been awarded full power of decision on how the Canadian industry will participate. This is completely unacceptable as it jeopardizes our entire aerospace industry in Quebec with an impact that will be felt for the next 20 to 30 years a legacy that the AQA firmly believes it must protect and defend.
In the opinion of the AQA, there is an inherent partnership that exists through the best and worst of times between Canada's military and the industry that supports it through innovation, investment and perseverance. The AQA supports a coherent and collaborative procurement approach that considers the benefits to all stakeholders when making major procurement decisions. The stakeholders include and are not limited to the Department of National Defence and the brave troops that rely on state-of-the-art equipment, Public Works and Government Services Canada, the industrial players and the associations that represent them at all levels, the institutions that work collaboratively with industry in R&D efforts, and Industry Canada which plays a critical role in understanding and preserving the fabric of our vast aerospace industry. There has been a serious lack of transparency throughout this recent military procurement process on behalf of the federal government. The decision to go sole-source, the fragmented CIB plan, and the lack of support from our government for strategic CIB distribution leaves our aerospace industry and our SMEs in Quebec at grave risk.
The AQA recommends that the Canadian government implement a traceable small business set-aside of at least 20% stemming from each contract awarded to a foreign firm to ensure that our SME aerospace industry is well maintained in Quebec. Similar programs already exist elsewhere and in particular in the United States. This type of initiative will ensure that the grassroots of our industry is included in the successes of our procurement endeavours.
[English]
The AQA firmly believes the only way to ensure the best deal for all Canadian stakeholders in a military procurement is through an open and competitive process that begins well in advance of the procurement target date, with transparent consultation involving all stakeholders, to consider each important perspective in delivering the best equipment to our troops. This process should be designed to address the overall collection of military mission requirements while considering how the procurement process can leverage Canadian expertise in delivering state-of-the-art solutions to the end-users.
The objective will be to ensure the highest quality of support to our troops and provide vital incentives to our aerospace industry to step up to the challenge of meeting these needs. This process is a vital and necessary step that must be taken if Canada is to fully benefit from major military procurements. To achieve this will require much effort, careful consideration, and planning, but the alternative is a divided and fragmented strategy that leaves the industrial stakeholders largely disenfranchised from the military procurement process and a procurement policy that is deleterious to the maintenance of our global industrial prowess in aerospace.
The SME members of the AQA are more than industrial players in the aerospace industry. They are family-run businesses that have been built through sacrifice and dedication to a craft or a vision of making a contribution to Canada's success. The only way to protect these visionaries and dedicated people is to quickly establish a more competitive and transparent military procurement strategy that includes the collaboration of all stakeholders to guarantee that Canada is well defended and remains at the leading edge of aerospace technology. Together we stand.
Thank you. Merci beaucoup.
Go ahead, sir.
Mr. Peter Simmons: Good morning, ladies and gentlemen.
Mr. Chairman, thank you for the opportunity to address the Standing Committee on National Defence.
I apologize for the slight hoarseness. I will do my best to maintain volume and clarity throughout.
Lockheed Martin is proud to be again supporting Canada and the Canadian Forces, this time by being selected to provide a new fleet of tactical transport aircraft through a clearly defined and demanding qualification process. The C-130J is a mature, operationally proven aircraft and an excellent choice to replace Canada's aging C-130 fleet. The older C-130s have long been the tactical workhorse of Canada and most western allies.
The new workhorse has already proven its operational capability. In recognition of this capability, during recent testimony in Washington, United States Air Force Secretary Michael Wynne said:
If you gave me another dollar, I would know exactly where to spend it...it would be on C-130Js. Using the C-130J Hercules to move equipment and supplies takes ground-force convoys off the roads...and the plane has therefore become the workhorse in the war against terrorism.
With a large procurement such as this, Lockheed Martin recognizes the requirement to provide best value and return on investment to the Crown. In accordance with Canadian acquisition terms and conditions, the aircraft price can be easily validated as fair and reasonable. In addition, we also recognize the requirement to provide robust industrial regional benefits, and I will address those later.
In the short time I have this morning, I would like to describe to you the evolution of the C-130J and the success that operators are having.
As is often the case in evolving advanced weapons systems, some critics continue to belabour developmental issues resolved long ago. Today I will give you a balanced, factual report on the C-130J's real-world status.
The C-130J, as any sophisticated weapon system, took time to develop, refine, and ultimately deploy. No new aircraft is immune to developmental risk. Optimism, no matter how professionally packaged, is no substitute for this reality. At Lockheed Martin we have been designing and building military transport aircraft for over 50 years, and we pride ourselves on our ability to resolve technical and performance challenges.
The C-130J first flew in 1996. The aircraft received Federal Aviation Administration certification in 1998 and deployed operationally with the Royal Air Force in 2000. Any early issues encountered have long been resolved, and Canada can be confident in receiving a combat-proven, fully certified aircraft, the most advanced airlifter in the world.
The C-130J's launch customer was the United Kingdom, and we have subsequently delivered aircraft to the U.S. Air Force, the Air National Guard, the Air Force Reserve Command, the United States Marine Corps, the United States Coast Guard, the Italian Air Force, the Royal Australian Air Force, and the Royal Danish Air Force--a total of 149 aircraft to date.
Our operational experience just gets better and better. Both the United States Air Force and the United States Marine Corps have completed their first two years of C-130J deployment in southwest Asia. During this time, four USAF C-130Js conducted 5,444 sorties over 10,750 flight hours, delivered 12,681 tons of cargo, and carried 70,350 passengers. The Marine Corps KC-130J air-refueling tankers completed 6,659 sorties, logged 13,082 flight hours, moved over 11 million pounds of cargo, transported over 32,000 personnel, and offloaded a staggering 83.9 million pounds of fuel.
On these deployments, the C-130J has achieved one of the highest reliability rates of any aircraft in theatre.The aircraft typically maintained a 93% mission-capable rate, which is almost unheard of in a military aircraft deployed to a combat theatre. In addition, the C-130J can execute in one tasking what it would take two older C-130s to accomplish. This is achieved through more payload capability, greater range--meaning no stops for fuel--which, in conjunction with increased power and speed, makes the overall mission time shorter.
The added benefits of the C-130J go on and on. For example, the C-130J is not encumbered, as older C-130s are, by a lack of performance due to altitude and heat. The C-130J is often the only aircraft that can get into short high-altitude austere fields in locations such as eastern Afghanistan. A 2,000-foot dirt strip at 6,000 feet of elevation on a 95-degree day with 20,000 pounds in the back is no big deal for this aircraft. That is not in a brochure; it is a fact of C-130J operational life.
These success rates have also been experienced by the Royal Air Force, which conducted the first ever C-130J combat mission in 2002, and the Italian C-130J fleet, which has now surpassed 50,000 flight hours, mostly in Iraq, Afghanistan, and North Africa. The Danes are deployed to Afghanistan, and the Australians are in both Iraq and Afghanistan. These customers are using the aircraft for what it was intended to do, in a very challenging environment and in a real theatre of operations, on missions ranging from humanitarian support to combat operations.
The global C-130J fleet has now surpassed 350,000 flight hours. The aircraft is seeing real combat operations every day, and it has a proven modern weapon system.
With the C-130J, Canada has selected a worthy and proven asset to support its commitments around the world. This selection was made against some of the most stringent selection criteria we have ever been asked to meet.
Upon assessing their requirements, many nations have found the C-130J is in a class of its own. It alone has the capability to provide the tactical transport support that military forces require: the capability to carry a significant load over long distances, but also the ability to operate dependably in austere conditions and demanding environments.
Operators such as the United Kingdom, Italy, Australia, and Denmark had aging C-130 fleets, and they all took a similar approach to Canada. They sought solutions, evaluated options before them, and determined that the C-130J is the only aircraft in the world with the capability to modernize tactical airlift fleets.
As we speak, discussions have begun between the Norwegian and United States governments to obtain--urgently--new C-130Js. There are other countries making similar decisions right now.
Canada has done what many other countries have done and what many will do. The C-130J is the only available, affordable, and proven transport aircraft. We designed and built the C-130J to meet a clearly defined operational need, based on our many years of experience in building both tactical and strategic military aircraft.
With respect to industrial regional benefits, Lockheed Martin recognizes the requirement for Canadian industry to realize the benefits of a robust IRB plan. Accordingly, we have been working diligently with Canadian companies. Our plan is already well populated and contains value-added, long-term programs for Canadian industry in all regions. To illustrate our historical and ongoing commitment to Canada, Lockheed Martin has invested more than $3 billion in Canada over the last 20 years. In addition, it has satisfied more than $200 million in IRBs since the early 1990s alone. There are many trusted and very competent suppliers in Canada that have benefited from Lockheed Martin's IRB obligations and worldwide supplier base in the past. The acquisition of a new tactical airlift fleet for Canada will see that proud cooperation extended for generations through the continued fulfilment of IRB requirements.
Also, we will respond to the requirement for a 20-year in-service support operation that will be executed by a Canadian industry team. Lockheed Martin has had a long-term relationship with many Canadian companies in the global maintenance and support of our products. We are confident in our ability to facilitate a very attractive arrangement--one performed in Canada by Canadians.
As with the current CC-130s, Lockheed Martin will respond to Canadian-defined requirements that will lead to Canadian industry's exercising sovereign support of its new fleet.
I could speak at great length about this amazing aircraft. I could speak at even greater length about the benefits to Canada. But that would be far too much of my now failing voice. For those who would like to hear of the aircraft's performance from a C-130J operator, I have passed to the clerk copies of a CD containing a briefing given here in Ottawa by Colonel Larry Gallogly, United States Air Force. This is a factual description from a senior airman who has direct experience with the aircraft.
I will be prepared to answer any questions you may have at the appropriate time.
Thank you, Mr. Chairman.
Good day. It is a privilege and an honour to be here and to address this important committee. Mr. Chairman, thank you very much.
My name is Antonio Rodriguez-Barberán. I'm sorry I have a terrible, long Spanish name. Not only that, but I have a terrible Spanish accent. You should listen to my accent in French. So if you don't mind, I will continue talking in English. I am vice-president of sales for EADS CASA, based in Madrid, Spain.
As you know, EADS is one of the world's largest defence aerospace companies. Included in the EADS family, we have companies such as Airbus and Eurocopter. As a group, EADS has many solid long-term business relationships with Canadian industry, purchasing high-tech goods worth about $700 million Canadian per year.
My responsibilities can be translated in short as being responsible for the Spanish part of the business of the EADS group, but basically they encompass sales within our military transport aircraft division, including sales of the C-295 plane, which we are offering for the fixed wing search and rescue replacement program, and which is why I am here today.
But I am not alone. I have the pleasure of having next to me Mr. Richard Bertrand from Pratt & Whitney Canada, representing his company, but not only his company; he is also representing all of our Canadian team, consisting of CAE, Thales Canada, and Raytheon Canada. They are all part of our team and strategic partners in our worldwide marketing strategy.
Designed as a result of global military customer requirements, the C-295 is a multipurpose aircraft that is developed for tactical lift, search and rescue, maritime patrol, and surveillance. Today it is in operation in all and any geographic and environmental conditions, in war zones such as Afghanistan and Iraq and in peace missions worldwide. As a consequence of this, the C-295 is operational, it's proven, and it is cost-efficient.
The aircraft's combination of operational performance and efficiency has made it the world leader among medium military transport aircraft. Overall, we hold around two-thirds of the world market, which means that our Canadian strategic partners are also holding two-thirds of the world market and have access to this market.
The C-295 family of products has sold over 300 units in 30 nations, including units for the United States Coast Guard for search and rescue. In particular, the C-295 has been delivered to and is operational with countries such as Spain, Portugal, Brazil, Finland, Poland, Algeria, and Jordan. It is operational in war zones such as Afghanistan and Iraq today.
In my experience I have also found that most militaries and governments prefer cost-effective solutions when it comes to large-scale procurements. This applies to the actual acquisition and the in-service support, which is where the real costs are found.
The C-295 has put special emphasis on providing the best availability and reliability rates at extremely competitive operational and acquisition costs. In the design and the manufacture of the C-295, we are proud to be partnered with Canadian companies such as Pratt & Whitney Canada, CAE, Thales Canada, and Raytheon Canada. Each one of the C-295s sold worldwide creates value and jobs in Canada. The C-295 team looks forward to showcasing the aircraft to Canada in a best-value competition for fixed wing search and rescue. It is the ideal combination between operational capabilities and efficiency, both largely due to its world-class Canadian content.
I would like to pass the microphone to you, Richard, to continue with your presentation.
:
I would like to thank the committee for this opportunity.
[English]
As Antonio mentioned, I am here on behalf of the manufacturers in Canada, who join me, as mentioned, and who are behind me, CAE, Raytheon, and Thales.
We are here to emphasize that included in these aircraft is world-class technology made in Canada. In fact, we are world leaders in this field.
[Translation]
The key components of the C-295 aircraft, including its turbo jets and avionics are manufactured in Quebec, which means that the total Canadian content is about 50%. The aircraft's flight simulator is also manufactured in Canada.
The Canadian components of the C-295 are to a great extent responsible for the aircraft's success. Since early in 2001, the C-295 has been a world leader in its category with more than 50 units sold.
[English]
To that you can add the in-service support in Calgary, a large percentage of the value of the contract, plus the sensor suite, in addition to avionics in Toronto. Our company's support, while significant in Quebec, counts major input from our plants in Halifax, Mississauga, and Lethbridge. In deference to my Spanish colleague, this is a real Canadian solution.
Our association, the Aerospace Industries Association of Canada, when it appeared before you, looked for investments that ensured better value for money and direct support for our industry. This is one of the most exceptional cases in point. The funds that had been allocated for this project were more than sufficient.
A central question today is that there is likely no program currently, but the need is there. Search and rescue for Canada and around its borders is military in one aspect, but it falls on the cooperation and teamwork of civilian and military people. It calls for the maximum effort of the best resources available from our nation. Search and rescue is there to protect Canada' s citizens, and we believe it would be appropriate to use an existing globally accepted Canadian solution, which in fact could be delivered in well less than a year.
The companies with me today are in two-thirds of the world's search and rescue solutions, and we've been there since the inception of the C-295.
[Translation]
In the ongoing discussions on the procurement of search and rescue aircraft, it would be important to remember that a Canadian solution does exist.
[English]
We are looking for a fair and open competition. We are able to compete globally and win globally. We are simply asking to be given a chance in our own country.
Thank you.
:
Thank you very much, Mr. Chairman.
Good morning gentlemen.
Mr. Bain, you and I will get along quite well, because we share the same opinions. The Bloc Québécois will probably tell you that they introduced a motion in the House, and it was supported by the Liberal Party. When it was in power—and that day will come again—the Liberal Party believed in the regions and invested massively in the aeronautics industry.
My friend has a cold; he should drink some water. I am happy to see that he now believes in the regions, because he should have a word with Boeing's employee of the month, Maxime Bernier.
I might have one bit of criticism for your association. A year and a half ago, we told you that something would be happening and that there would be some problems. At the time, our industry critic, Mr. Jean Lapierre, had met with Ms. Dabrowski. We would have liked your association to take a firmer stand, because it was too late in reacting. The contracts are already signed, and we are at the mercy of foreign companies.
There is also a problem in Ontario. I met with the people from the Ontario association, and they agree with what you have said. I have no questions, but I simply wanted to make that comment. The Liberal Party, which could be the next government, is in a position to deliver the goods.
[English]
Mr. Simmons and Mr. Crisler, thank you very much for being here. You will understand, of course, that I have several questions, since you have your contract, and it was kind of a freebie because there was no competition.
I'm troubled a little bit. Maybe it's the best equipment. Our role in the opposition is of course to provide the best equipment for our forces, but when we hear statements like those of Mr. Coyle, when we hear statements from the Pentagon.... You're saying it's factual, and it's your job to say that, but I have a copy of the air force program saying that it's not efficient, that you have some major issues, and that maybe the equipment at the start is okay but the maintenance has some problems. Now it's relayed to you, since this government doesn't want to do its job, and you're the one that will provide the contracts to the others in Canada. I hope you will focus on R and D and Canadians.
What do you have to say about what the Pentagon was saying about your plane? Mr. Schmitz, the inspector general from the United States, said the same thing.
It was exactly the same thing when you had Rumsfeld. I think he's a friend of the armed forces and definitely wanted, in his own perspective, to provide the equipment to the air force. The guy wrote a letter himself saying that we should pull the plug on your company.
So would you explain to us what's going on? You're saying it's the best thing in the world since sliced bread, but why are there all those reports? Why are they saying there are some problems?
We have insiders in the department who, instead of having criteria, would rather trace a line in the sand and say we have four or five principles and that's it, go for it, enjoy yourself. Would you tell us what is really going on with that issue? Are they all wrong? Are you saying those reports are not accurate? The last one is from January 2007.
[Translation]
So it is rather early.
[English]
I don't understand why we have so many problems with that.
Don't you think, Mr. Chair, maybe the best thing would have been a competition, so that we could have had both make their pitch, and taxpayers would get more of what they deserve for their money.
What do you have to say about all those reports?
:
I am delighted, Madam. If you'll allow me, I'll start with your last question.
Today, the equipment you are using in Canada is extremely old. You are using platforms, especially with the Buffalos, that are 40 years old. I think it's an objective statement if I say they are very much at the end of their lifespan. Not only that, but the equipment was designed 40 years ago.
As an engineer, I can tell you that there are proven technological solutions and available in Canada as of today, with some of our partners, that are simply not used today. Today you are basically doing what is called visual search. There are search radars, infrared and optical solutions, and quite a lot of new systems. Just as the technology has advanced on the PlayStations for our children, the same and more is happening in this type of search and rescue technology. It is available, it's there, and it's used everywhere in the world. I'm surprised that in one of the most advanced countries in the world this technology is not used to save lives.
Regarding the process, our expectation was very simple. We wanted to have an open and fair competition. That's it. Today, it seems that the program that was a top priority last year is no longer a top priority. It seems that the funding has somehow been delayed for the next years.
As I've told you, I'm a foreigner, so all this information was given to me during the last two days, but it looks like your beautiful British Columbia coast has to wait quite a long time to have a prepared means of search and rescue as plans have been put forward today. I wouldn't like to comment on that, though, as every country fixes its own priorities.
:
Thank you, Mr. Chairman.
I would like to thank the industry representatives. I enjoyed hearing what you had to say and the proactive role that Canadian companies are playing our aerospace industry. I also heard Mr. Coderre's siren song to the industry. I would like to remind him that the witnesses are here to remind us that we have just emerged from a decade of darkness; those very words were spoken by the highest-ranked individual in the Canadian Army, and he was referring to military equipment procurement. I might also remind him that the Liberals have no intention of buying any C-17s; they will be leasing them. Those are facts that must not be forgotten.
I listened to Mr. Bain, who represents the Quebec Aerospace Association. I am aware of your concerns. However, there are a few conflicting statements in your presentation. You talk about competitiveness, but you say that the government should intervene. There is a bit of a contradiction there, and I would like you to explain it to me.
Canada's policy is very clear. Our new government wants every dollar invested in military equipment to stay in Canada. Mr. Bernier, the industry minister, clearly explained to us that all regions will benefit, with hundreds of millions of dollars going to Quebec for the C-17 contract.
On one side, you have the Liberals leasing aircraft while on the other, the Bloc have no procurement plan. The current government is committing to four aircraft, which is a much broader and more global procurement strategy.
I would also like you to tell me about your association's proactive involvement. This morning, for example, the people from Pratt & Whitney, which already belongs to a consortium, suggested a Spanish plane as a solution, and told us that the solution was Canadian. We have to become involved upstream rather than downstream. I remain extremely confident that the C-17 will bring enormous benefits for Quebec.
:
First of all, with respect to competition, I understand that at the political and ministry levels, there are many agendas that have to be considered when you're deciding to make a large procurement. The main point of our presentation here today is that when those decisions get made, they should go through a competitive process, because that ensures that the best equipment, that the best value is delivered to our troops.
The other point in our message, which I think you drew a question on, was how we justify the fact that we should have work necessarily associated or apportioned specifically to Quebec. As we tried to explain in our presentation, just as it is with any organization, company, or product, there are strategic advantages and strategic elements that form part of anything you have in industry.
In Canada, it's a fact that the aerospace industry is centred in Quebec. It's a fact that there has been much time, effort, energy, dollars, blood, sweat, and tears to make that a reality. It therefore does not seem like a handout to me to say that's a strategic part of our nation, just as British Columbia is a strategic part of our nation, just as Newfoundland and Labrador and everywhere else have strategic advantages. When Canada stands up and talks about aerospace, we think of Quebec, just like we think about other industries in different areas, without stepping into that pot and trying to identify where they belong.
Aerospace in Canada has a very strong centre in Quebec, and that is something worth defending strategically. Just as you defend things strategically in a military mission and you look for strategic airlift or you look for strategic equipment, you look for where the best elements are. The elements to make the aircraft exist in Quebec. That's something worth considering. It's not something worth leaving out of hand and telling it to defend itself. That's not how you treat your strategic benefit. It's not how you provide incentive to industry.
Industry does not want to know that after we've been nurtured, we're going to be left alone. Madame Black used the expression “orphan”. We don't want the industry in aerospace to be orphaned by not considering the fact that it took many years and much investment to get it to where it is.
On the other side of your question, you also commented on our relationship with the OEMs. Let me take a step back. The AQA represents the SMEs, the small to medium-sized enterprises. Small to medium sized-enterprises, as I put it in our presentation, are family-run businesses. They're mom-and-pop shops. They don't have lobbyists. They don't have high-priced consultants. They don't have heavyweights who can come and knock on your door everyday here on the Hill. They have the Quebec Aerospace Association. What we do is speak on their behalf. When you're considering a military approvisionnement important, we ask that you please include consideration for these organizations that, to much extent, are the dreamers and the backbone of our aerospace industry in Quebec.
I can't think of stronger words than to say we rely on the OEMs to leave that vision. There are very important OEMs in the Quebec region, and we're very proud of that. We just want Canada to consider all the agendas.