THE STANDING SENATE COMMITTEE ON NATIONAL SECURITY, DEFENCE AND VETERANS AFFAIRS
EVIDENCE
OTTAWA, Monday, March 23, 2026
The Standing Senate Committee on National Security, Defence and Veterans Affairs met with videoconference this day at 4:01 p.m. [ET] to examine and report on defence procurement in the context of Canada’s commitment to increase defence spending; and, in camera, to consider a draft agenda (future business).
Senator Hassan Yussuff (Chair) in the chair.
[English]
The Chair: Welcome to this meeting of the Standing Senate Committee on National Security, Defence and Veterans Affairs. I’m Hassan Yussuff, the chair of the committee and a senator from Ontario. I’m joined by my fellow committee members. I welcome them to introduce themselves, beginning with our deputy chair, Senator Al Zaibak.
Senator Al Zaibak: Mohammad Al Zaibak, Ontario.
Senator White: Judy White, from Newfoundland and Labrador.
Senator Ross: Krista Ross, New Brunswick.
[Translation]
Senator Youance: I am Suze Youance from Quebec.
[English]
Senator Dasko: Donna Dasko, Ontario.
Senator M. Deacon: Marty Deacon, Ontario. Welcome.
Senator Cardozo: Andrew Cardozo, Ontario.
The Chair: Colleagues, today we are meeting to continue our study of defence procurement in the context of Canada’s commitment to increase defence spending. We have the pleasure of hearing from three panels of witnesses today, including academic experts and defence companies.
For the first panel, we welcome, from the Aerospace Industries Association of Canada, Mike Mueller, President and CEO; from the Canadian Council for Indigenous Business, Michael Jacobs, Co-Chair of the Board of Directors, and, by video conference, Michael Byers, Professor, University of British Columbia.
Thank you for joining us today. We begin by inviting you to provide opening remarks to be followed by questions from our members. I remind you that each of you will have five minutes for opening remarks. We will start with Mr. Michael Jacobs.
Welcome, and thank you for being here.
Michael Jacobs, Co-Chair, Board of Directors, Canadian Council for Indigenous Business: Thank you, honourable senators, for inviting the Canadian Council for Indigenous Business, or CCIB, to appear today. I am a member of Curve Lake First Nation, the CEO of Cambium Indigenous Professional Services and the Co-Chair of the Canadian Council of Indigenous Business.
As Canada commits to reaching 2% of GDP in defence spending and meeting its NATO obligations, we are witnessing the largest planned expansion of defence procurement in a generation. This moment presents not only a national security imperative but a defining opportunity for economic reconciliation with the Indigenous peoples of Canada.
The Canadian Council for Indigenous Business brings proven capacity and expertise to this discussion. The CCIB is an Indigenous-led, non-profit organization that exists to strengthen the capacity of Indigenous entrepreneurs —
The Chair: Mr. Jacobs, I would ask you to slow down a little bit for the translators.
Mr. Jacobs: Okay. It might be the nerves. You said five minutes, and I have 17 pages here. Thank you. I was really slow in my hotel room today, I promise. I was like, I’ve got to speed this up a little.
The Canadian Council for Indigenous Business brings proven capacity and expertise to this discussion. The CCIB is an Indigenous-led non-profit organization that exists to strengthen the capacity of Indigenous entrepreneurs while helping Indigenous businesses access high-value business relationships and opportunities.
The number of CCIB-certified businesses has more than tripled over the past decade, and today our proprietary procurement platform, Supply Change, provides a verified pipeline of over 1,800 certified Indigenous businesses. Through Supply Change and our Indigenous Business Defence Sector Accelerator program, we’ve already connected Certified Indigenous Businesses, or CIBs, with major defence prime contractors and provided training on regulatory compliance, security clearances and supply-chain integration.
Our November 2025 report, Partnerships in Procurement, maps pathways forward to increase Indigenous participation in defence sector supply chains.
Our core objective today is clear: to ensure this historic defence investment does not replicate past patterns, where economic benefits remain concentrated among non-Indigenous firms. Instead, Indigenous economic participation must be embedded directly into the structure of defence procurement. We recommend mandating Indigenous business set-asides starting at 5% and scaling to 10% of total defence procurement value. These set-asides must apply to both prime contracts and subcontracts in high-value sectors: aerospace, shipbuilding, cybersecurity, munitions and NORAD modernization.
Employment and cooperation with Indigenous communities are valuable and necessary. However, jobs alone are not enough to achieve meaningful economic reconciliation. Generic “Indigenous content” or employment targets may satisfy compliance requirements but fall short of delivering ownership, business growth and economic independence.
Dedicated Indigenous business set-asides address this gap directly. They create wealth and asset ownership within Indigenous communities, not just wages. They build long-term industrial capacity and supply-chain expertise so that Indigenous firms become permanent players in strategic industries. They foster intergenerational economic independence.
With tens of billions in new defence spending over the next decade, even a 5% set-aside would direct several billion dollars to Indigenous businesses. Using established economic multiplies, that translates into transformational reductions in the persistent income and wealth gaps that still separate Indigenous and non‑Indigenous Canadians.
For set-asides to work effectively and transparently, they must be supported by a trusted verification system. That is why formal recognition and integration of CCIB’s Certified Indigenous Business Directory are indispensable. Our directory is not based on self-declaration. It requires independent third-party verification confirming at least 51% Indigenous ownership and control, ongoing annual compliance monitoring, secure internal data management supported by role-based access controls and audit-ready verification processes that help ensure the integrity of directory information.
This rigorous process addresses concerns raised by the Auditor General of Canada regarding verification weaknesses and would deliver immediate policy benefits, including faster procurement timelines, greater trust from prime contractors and evaluators, maximum value-for-money for taxpayers and assurance that contracts reach authentic Indigenous enterprises.
In closing, CCIB respectfully recommends that the committee urge the following concrete actions. First, legislate Indigenous business set-asides at, at least, 5% scaling to 10% across all defence procurement, including major capital projects. Two, mandate the use of CCIB’s verified Certified Indigenous Business Members Directory for eligibility verification. Three, invest in Indigenous business capacity building to support participation in advanced defence sectors. And, finally, implement transparent monitoring metrics that measure not only jobs but contract value, wealth retention and long-term capacity development.
Canada stands at an historic juncture. The defence investment presents an unparalleled opportunity to advance economic reconciliation in meaningful and measurable ways. We respectfully urge the committee to seize this moment. National security and economic self-determination are not competing priorities. They are mutually reinforcing goals that Canada can and must achieve together. Chi-miigwech, and I welcome your questions.
The Chair: Thank you, Mr. Jacobs.
Mr. Mueller, the floor is yours.
Mike Mueller, President and CEO, Aerospace Industries Association of Canada: Thank you, Mr. Chair and all senators, for the opportunity to appear before you today and contribute to this important study. We have appreciated the Senate’s support of the industry over the years and look forward to a great discussion today.
I’m here on behalf of the Aerospace Industries Association of Canada, representing Canada’s world-class aerospace sector that supports more than 225,000 highly skilled workers and their families and contributes over $34 billion to GDP.
The release of Canada’s Defence Industrial Strategy, or DIS, which will guide this increase, is an important and welcome milestone, and as you are aware, our industry has long been calling for it.
I also take this opportunity to recognize the Prime Minister and his government for moving forward with this strategy in an expeditious manner.
Now that we have a strategy, we need to ensure we have government and industry working in tandem to extract every opportunity for industry, regardless of size, company or location. The strategy provides a solid foundation and road map identifying key sovereign capabilities that include aerospace and its critical operations. The strategy deserves praise. However, strategy alone does not deliver capability or grow our defence industrial base.
As I stated, success will depend on implementation and on close coordination between government and industry. The strategy also clearly identifies this as Pillar 1, and is dedicated to the renewal of the government’s relationship with industry.
We look forward to working with the government to ensure there is alignment, clear signals and a more strategic whole-of-government approach to building Canada’s defence industrial base. The DIS recognizes aerospace as a sovereign capability and a key enabler of Canada’s national defence and security. It is one of the few sectors in Canada with a full-spectrum capability to design, build, certify and sustain through training and also in-service support to complex systems, including aircraft and space-based assets.
World-class Canadian capability is already embedded in the support of the Canadian Armed Forces and our allies. We have the industrial base, the skilled workforce and the technological expertise required to deliver, provided the right conditions are in place. Canada’s civil and defence aerospace sectors are deeply interconnected, relying on the same workforce, supply chains and industrial capabilities.
One cannot thrive without the other.
An integrated approach will strengthen alignment across civil and defence priorities and reinforce Canada’s long-term competitiveness in the strategic sector. The question before this committee is how increased defence spending will translate into real capability for the Canadian Armed Forces and real gains for Canadian industry, the economy and the workforce. If Canada is serious about strengthening its defence industrial base, which I believe it is, the focus must now be on execution, moving quickly from intent to implementation.
The strategic sets a clear direction toward security, sovereignty and prosperity. It also reinforces a fundamental point: Without industry, there is no defence. For industry to deliver at the speed of relevance, it requires clarity, predictability, and transparency and translating the strategy into clear demand signals that will determine success.
In this context, procurement reform is essential, and the Defence Investment Agency will be critical to this effort. I expect that the Defence Investment Agency will better align defence requirements, industrial policy and procurement decisions, helping ensure spending translates into real capability.
Industry is encouraged by its creation, and as the government will be putting forward legislation, we are encouraged that the government has identified the Defence Investment Agency as a catalyst for change and not an additional layer of process. We feel there is political commitment toward a broader cultural shift across government with stronger incentives for speed, collaboration, and results, driven from the top, and we are looking for and expect clear accountability.
The global security environment is rapidly evolving, with allies and competitors scaling their industrial capacity at speed. Canada’s aerospace sector is a strategic advantage, and the opportunity now is to fully leverage it.
The Defence Industrial Strategy sets the direction. The task ahead is to ensure that increased defence spending translates into timely procurement decisions and real capability. That will require alignment across policy, procurement and industry, and a consistent approach that gives companies the confidence to invest in scale in Canada. It will also require moving with greater speed, recognizing that timely capability is, itself, a strategic advantage.
Canada can be a stronger ally by being stronger at home. Canada’s aerospace industry stands ready to partner with the government to deliver on these objectives. Thank you very much, Mr. Chair.
The Chair: Thank you, Mr. Mueller. Finally, we have Michael Byers, who will join us. Mr. Byers, you’ve got five minutes.
Michael Byers, Professor, University of British Columbia, as an individual: Thank you very much. In a strange merger of centuries and technologies, I’m speaking to you from a 400-year-old cottage south of Oxford, England. I’ll jump right into it with a somewhat more cynical perspective.
In recent decades, the Canadian civil service has performed poorly on defence procurement. With long delays and costs that greatly exceed what Canada’s allies typically pay for similar equipment.
One factor is Canadianization, when military leaders insist on modifications to equipment that, in unmodified form, is already in service with allies.
Sometimes, Canadianization extends to ordering the design and testing of a new model of equipment — such as the Cyclone maritime helicopter — from a manufacturer that already has a production line for a proven model — such as the Seahawk.
Another factor is a deep-rooted culture within the Canadian military leadership of maximum interoperability with the U.S. military.
This can lead to resistance to the procurement of non-U.S. equipment, which can include “fixing the specifications” to favour U.S. equipment.
Arguably, this occurred with regard to the recent purchase of Boeing P-8 surveillance aircraft despite the presence of a credible alternative from Bombardier.
The culture of maximum interoperability can also lead to long delays, as military leaders hold out for the U.S. equipment they want, like the F-35.
Long procurement timelines mean that equipment is often out of date before or shortly after it is delivered.
We face this situation with the River-class destroyers, which will be vulnerable to AI-driven long-range submersibles of the kind that China is already testing.
A similar situation threatens our next fleet of crewed fighter jets, which could be rendered obsolete by AI-driven combat drones that cost much less than crewed fighters and can endure much higher G-forces.
These and other problems make it improbable that the civil service will be able to spend the dramatically increased funds now being directed toward military procurement, or at least to spend it in a timely, responsible and effective manner.
All these challenges have been exacerbated by the Canadian government’s Defence Industrial Strategy, which prioritizes the growth of the domestic defence industry in its procurement plans.
Can we realistically expect our civil service, with its track record, to complete defence procurement in a timely, responsible and effective manner while focusing on lifting hundreds of small Canadian companies into globally competitive firms?
The Defence Industrial Strategy is all the more suspect because it appears to treat subsidiaries of large U.S. defence companies as Canadian, which they are not in terms of their corporate and, also, political control.
Treating these subsidiaries as Canadian companies undermines the sovereign autonomy the government says it wants to achieve.
As a result of these factors, we may end up with equipment, such as the F-35, that is vulnerable to having its operational capability limited by the U.S. government.
We might end up with “nice to have” equipment or infrastructure that, strictly speaking, is not necessary, as we prioritize reaching 5% of GDP.
We might continue expensive procurements that no longer make practical sense such as a full 15-ship fleet of River-class destroyers because of a desire to get many billions of dollars out the door.
In my assessment, the Canadian government has three quite different priorities with regards to national defence in this order: Assuring U.S. President Donald Trump that Canada will reach 5% of GDP on defence spending. Two, growing the Canadian defence industry so that the country becomes less dependent on the United States. And third, revitalizing the long-neglected Canadian Armed Forces so that they can defend the country and support our allies and interests abroad.
I recommend that the order of these priorities be flipped; that the government should start with a defence policy — not an industrial strategy — and focus on urgent procurement needs.
I also recommend that the Canadian government ensure that all defence spending is necessary spending. There is a feeding frenzy under way as a result of the dramatic increase in funding, with lots of proposals and lobbying for “nice to have” projects.
In short, instead of rushing to do everything at once, the Canadian government should identify the country’s most urgent defence needs and fill those gaps before moving on to other things.
Thank you.
The Chair: Thank you, Dr. Byers. We will now proceed to questions. Colleagues, we have our guests until 5 p.m. today, and as always, we will do our best to allow time for each member to ask their questions.
With this in mind, four minutes will be allotted to each question, including the answer. I ask that you keep your questions succinct in an effort to allow for as many questions as possible.
I would also like to offer our first question to our deputy chair, Senator Al Zaibak.
Senator Al Zaibak: Thank you to Mike Mueller and the two Michaels for being with us today.
My first question is for Mr. Mueller. We are a leading nation when it comes to technology and innovation, especially in aerospace technology and the aerospace sector.
Elon Musk studied at a Canadian university. He went on to establish PayPal, then eBay, Tesla and SpaceX, among other things. I’m quite curious as to why, in your opinion, we don’t have our own version, our Canadian version, of SpaceX, SpaceY, or SpaceZ, our own sovereign Canadian cloud computing and our own low-Earth orbit satellites, which we are capable of producing, owning and operating. I’m wondering if you have any views as to why we don’t and whether the Canadian defence procurement strategy can be conducive to creating such kinds of enterprises.
Mr. Mueller: Thank you, senator, for the question and the comments.
For a long time, one of the pieces that we have been calling for is an aerospace or industrial strategy, and that’s been lacking in this country for a very long time, which is why we’re so encouraged by the Defence Industrial Strategy.
As you rightly asked, how do we keep that innovation here in the country? Not only innovation, but also commercialization. How do we take it to commercialization and then from commercialization to export, which is so incredibly important? If you have the innovation but you can’t commercialize it in Canada, then you can’t export it. In the aerospace sector, 70% to 80% of what we do is export-related, so it creates good-paying jobs that contribute to the GDP here in the country.
I would say that we do have a world-class space sector, perhaps not a SpaceX, which gets a lot of media attention, but we have world-leading companies here in Canada doing a lot of similar types of enterprises. I think of MDA Space. I think of Telesat and Magellan and numerous small- and medium-sized businesses feeding into those supply chains. However, I would say, number one, we finally have a strategy, which is great news. It provides some of the bases for those building blocks.
As I said in my opening remarks, we really need to start executing on that. Thank you.
Senator Cardozo: I have two questions, and I will pose them quickly to give you as much time as possible because the chair watches the clock closely.
I say that respectfully, chair.
Mr. Jacobs, first, you talked about Indigenous business. Is your association also focusing on Indigenous employees that may be hired by Indigenous businesses or non-Indigenous businesses, and whether you think there are people who are ready to be in the industry now or are in the industry? I would assume part of what you’re talking about is training Indigenous workers as well to be in these fields.
I also have a question — I’ll just pose it in time — for Professor Byers. You indicated some of the problems with the current area, but given the fact that the government has put us in or decided to be in a position where we must move fast, I wonder if you could give us your thoughts about how to take care of some of the pitfalls that you’ve outlined.
Mr. Jacobs, if you could begin.
Mr. Jacobs: Thank you very much for the question.
The Canadian Council of Indigenous Business, in general, is about business and the business enterprises that are members, Indigenous and non-Indigenous.
When we talk about the employees that would benefit from that opportunity, those conditions would be set aside in the procurement, whether it was some sort of Indigenous participation plan or element that would drive that.
Indigenous businesses, if we own them, generally would work toward those employment measures. Yes, employment is a function or a result, but what we really would strive to have is Indigenous inclusion across the board. That includes a board of directors, CEO roles, project controls and apprentices, right from top to bottom. How do you incorporate that without an Indigenous-led solution? The Indigenous-led solution, the CCIB, the business owners and the organization and the communities that strive in that space will be the ones that drive that with heart and passion.
The aerospace industry will drive that with us. If we say we want to be partners and work together, we will work together toward getting those spaces for employees. It might be about capacity. We might need to build capacity. We might need that education function.
It’s a complex economic development answer, but the reality for CCIB is if you include us in the projects, get the income, get us generated, get us owning those projects, then we will be able to drive the end result following that. Meegwetch.
Mr. Byers: Quickly, I wanted to stress to everyone that we are in a national emergency with regard to our defence and security. We are looking at a superpower, Russia, engaged in an aggressive war in Europe, a rapidly rising China that has expressed an intention to acquire Taiwan and our closest neighbour, engaged in an illegal war in Iran that has included war crimes, like the killing of more than 100 schoolgirls on the first day of the attack.
These are very perilous times, and we have a Canadian Armed Forces that has been badly neglected for decades.
My point is that the Defence Industrial Strategy will not be seriously implemented and delivered for 5, 10 or 15 years. The civil service cannot manage that, so we need to focus on the priorities and fill in the gaps. For example, get a fighter jet fleet, get improved ships, get more personnel into the Canadian Armed Forces and, above all, adapt to new technologies.
The Ukrainian military has held off the Russian army by innovating incredibly with regard to drones, and we’re not there. We are just not there. We are decades behind in terms of adapting to these new technologies.
The Defence Industrial Strategy is great, but it’s assuming that we will be in a peaceful and stable situation for 5, 10 or 15 years, and I don’t think we can count on that. It’s more of a process than a strategy and does not focus on the urgency of the situation. Thank you.
Senator Cardozo: Thank you, professor.
[Translation]
Senator Carignan: My question is about the new Defence Investment Agency the government announced as part of its new defence industrial strategy. I think it’s a good start, and I think it was time for such a measure.
Nevertheless, I’d like you to tell me, in concrete terms, what behaviours or potential pitfalls the agency has to avoid in order to be as effective as possible.
Mr. Mueller: Thank you for your question.
[English]
I think if it is more of the same, senator, that will be an issue. As Dr. Byers points out, if it is more duplication, more process, and more issues to go through, then that will be a huge pitfall.
One of the items that we have been strongly advocating the government about, regarding the Defence Investment Agency, is that it reduces the complexity, and it introduces speed, clarity and also accountability into the procurement process, which is absolutely required. This is why I think that the implementing legislation is going to be very key, and I would encourage the committee to keep track of that whenever it is introduced, because you will require the streamlining of the process.
One of the pieces that I was pleased to see in the strategy that has been tasked to the Defence Investment Agency is that renewed relationship with industry, because that has been lacking for a very long time.
Again, setting the requirements early and having discussions with industry so that Canadian industry can adequately respond in a timely manner. There is a new Defence Advisory Forum, which we expect to be part of, that will bring together the industry to have these discussions. Earlier engagement with industry is absolutely critical. By identifying the capabilities that are required in a timely manner where it makes sense to do a development project, you can do that where it makes sense to do something else. Having clarity and predictability is going to be absolutely key.
The Defence Investment Agency will fail if it is more of the same, but I am encouraged. It does have the political backing, and the political messaging is coming, which has, quite frankly, been lacking. I am encouraged. As I say, the devil will be in the details moving forward.
[Translation]
Senator Carignan: I see.
When it comes to the decision making, the political direction has to be there in order for it to happen. Once the procurement and decision-making process is under way, though, shouldn’t there be less politics?
[English]
Mr. Mueller: I will leave that to politicians and senators to determine if there is less politics required. From an industry perspective, I would say that clarity and predictability are absolutely key. As well, a strategy and an implementation that will transcend any one Parliament are absolutely critical for industry to plan. Again, within the Defence Industrial Strategy, there are ambitious targets that the government has set. For industry to be able to respond to that, there have to be consistency, transparency and predictability. Especially in aerospace, this is long lead times and long innovation cycles. We have a world-class industry that can do anything. We just need the direction, and we need the cooperation, that cultural shift of engagement with industry. Again, transcending different Parliaments is absolutely key.
The Chair: I know Professor Byers wanted to make an intervention. You will have to make it very short if you don’t mind.
Mr. Byers: Somewhere in the system, there needs to be someone questioning, challenging the specifications that are fixed by the Department of National Defence with regard to things they want to procure. With the procurement of the P‑8 surveillance aircraft over the Bombardier competitor, that was a decision made in the Department of National Defence. I’m not sure it would be caught under the new process that has been developed. Thank you.
Senator M. Deacon: Thank you to our guests for being here.
Procurement is something that has been on our minds for an awful long time through defence but also through our Standing Senate Committee on National Finance and having conversations where Canadian industry does feel engaged and a legitimate part of the process. I don’t want to repeat, although I love the questions we have heard so far, but I would like to ensure that I understand.
Mr. Mueller, you have described in your last answer to my colleague some of the issues. I would like to know, just with respect to timing and clarity, all the terms. What have you not been able to do that you think you could do now under these new conditions that should unfold the way they do? What have you missed the boat on, or what has become so frustrating that you are actually excited about, maybe a quick win with this culture shift and a longer win?
Mr. Mueller: Thank you for the question. I don’t know if I can point to one specific miss, but I think Dr. Byers described the long timelines on a lot of these files that have been ongoing.
We have missed out on the opportunities that could have been there by doing things in a more expeditious manner. If you can get the requirements out earlier, you can start planning earlier, financing earlier, forecasting out jobs, training across the board. How do you build out the supply chains within the country?
We have often been stuck in this transactional approach to procurement on a case-by-case basis as opposed to painting a picture and a strategy that will allow businesses to plan across the board.
I would say the strategy is not the total solution. It is an encouraging sign. It has got to be the implementation. There are still quite a few questions on capability and road maps. The identification of strategic partnerships, what does that mean? We’re expecting that to come sometime in the summer or fall. I talked about legislation that will have to implement these things. There are still quite a few pieces to provide that clarity of demand signal, which industry requires.
Again, we haven’t had that long-term demand signal. It has been a case-by-case basis, which has taken far too long. If you have the strategy, you can paint out the demand signal that you know it is coming. You have discussion with industry on requirements, what we can do in the country, what capabilities we require in the country and how we build the required capabilities.
I think another missing piece is a national security policy. If I had to do it, I would do a national security policy that would identify the threats we have as a country. That would flow down to the Defence Industrial Strategy and then be operationalized through the Defence Investment Agency. We have sort of done it backwards, in my opinion, but again, we’re moving in the right direction, which is very encouraging from an industry perspective, but there still is a lot of work that is required.
Senator M. Deacon: Thank you. It is so important to hear from industry.
Mr. Jacobs, when we are looking at the strength of our Indigenous-owned defence companies, particularly as it relates to the Arctic, I’m wondering if there are lived experiences from communities in the North that trickle down into companies owned and operated in the Arctic and the equipment that they are selling.
Mr. Jacobs: The capacity is there; the knowledge is there. The companies are under a lot of modern treaty type areas. To be brief, yes, absolutely, but it is going to require partnerships to realize it. It has to have those partnerships and those alliances.
One of the things I wrote down was Indigenous Peoples in the North as being part of the strategy. If we’re not a part of the answer, then Canada is missing something.
Senator White: My colleagues’ questions lead into mine. Mine are for the two Michaels, so Mike Mueller, you are off the hook on this round. I don’t know if we have ever had a panel with three Michaels. I will go to Michael Jacobs first.
One, can you highlight for the committee some of the most significant structural barriers that Indigenous businesses face in trying to attempt to enter supply chains? Two, again, for information purposes, I think it is important that we hear what specific defence subsections, such as aerospace and logistics, that Indigenous people may already be well positioned in.
Mr. Jacobs: Thank you for the question. It’s a really important differentiator between the two, actually, because one of the biggest barriers is overall project scope and magnitude, and, as well, if we don’t have it in Canada, how do we become part of the partners that aren’t part of the Canadian solution?
When we have Canadian partners within the aerospace industry, for instance, we can work with them to work on scope because they have the Indigenous feel. They have reconciliation action plans, and they have all those elements to go along with it, so they have an interest in doing that.
As well, if policy aligns with that, then we participate. When you start to talk about the overall scope of some of these, it becomes an issue, so what we want to see is some of the scopes broken down into spaces where we know we have that capacity and the ability. If we break down that scope, and we break down some of those scopes and have that procurement strategy actually target the Indigenous businesses that are there — where there are competitive entities — to be fair and transparent, still, we don’t want to take that away from the government as a tool, but we also want to be able to participate where we can participate and help where we can help.
I think that was one of the questions about scope and where it is. There are certain spaces where we can help better, we can help more, and we can really influence Canadian spaces with that.
Can you repeat the second part of your question?
Senator White: I wanted to know what specific defence subsections are Indigenous Peoples already well positioned in.
Mr. Jacobs: Yes. We are very well positioned in what I would call regional activities. If you think about investing in barracks, for instance, our regional participation can really help in those spaces to keep costs down and be really effective. When there is a large regional spend, we can partner with our own Indigenous Peoples.
My community, Kingston, as well as probably 12 other communities, can put together a fairly successful bid on the regional side, but when it comes to technologies, we have the technologies. When it comes to NORAD spaces, we have those people in those places, and I would be happy to provide those lists of businesses to you and to follow up with the Canadian Council for Indigenous Business to provide what capabilities we have in those spaces today to help you identify where that is.
And some — I shouldn’t limit all of our people — that the scope isn’t there, but that barrier is scope, and that barrier is access to be there.
Senator White: Thank you.
If I could ask Dr. Byers a question.
I was really fascinated with your presentation, and I appreciated your frankness, but given the role that northern Inuit communities, in particular, play in safeguarding Arctic sovereignty, I would like to see that any procurement approach be able to ensure that their investments meaningfully support the communities.
I would be really curious about how you think that procurement for Arctic capabilities — including surveillance and emergency response teams — could be aligned with people in the North and with what we need for a defence procurement strategy.
It’s just a small question.
Mr. Byers: Thank you for that question.
As you probably know, I spent more than a decade working on Arctic sovereignty and security issues, and I’m a big fan of the Canadian Rangers. I’m also a big proponent of improving airfields in Canada’s Arctic. I think that if I had to question one recent announcement from the Canadian government, it’s the plan to build three Canadian Armed Forces bases in the Arctic. I would like to see a rapid reaction force that could deploy anywhere in the Arctic on short notice, landing on our many runways, and improve those runways.
We have C-17 transport aircraft that could deliver hundreds of soldiers and equipment in less than 24 hours.
My major concern with the government’s whole approach so far is that they are so focused on spending up to 5% that they are actually looking for places to spend money rather than asking what is necessary and what is unnecessary. How do you maximize the impact while protecting taxpayers from unnecessary bills?
This whole thing seems to be driven incorrectly, having the industrial strategy first while we still wait for a national security strategy, and it is all couched in this 5% demand from a very erratic and — I would say — dangerous American president.
Senator Kutcher: Thank you to all who are here. I have three questions, one for each of you. The first one is to Professor Byers. It is more a request than a question.
If you wouldn’t mind — and through the chair — to send us a little bit more detail on three things so we could put that into the record, hopefully. The first is more details on your concept of the Canadianization issue with some examples of how that has happened. The second one is the subsidiary of U.S. companies being deemed to be Canadian. I would like to know more about that. The third one is the urgent defence needs first, which I would agree with. We have to get to operational readiness. If all this procurement happens, and we don’t have operational readiness, we may as well just not waste our time.
If you could write something about that.
Then one question each for the other Michaels. First, for Mr. Jacobs: You talked about a dedicated set-aside being 5% of the spend. I would like to know how you got to 5%. What criteria did you use to come up with 5%? Why not 4%, and why not 6%? Why did you come up with 5%? I would like to hear those criteria.
Then for Mr. Mueller, you said, “Clear demand signals.” That was your phrase. What are the clear demand signals that we need to see?
Mr. Jacobs: The 5% comes from the current mandate of the federal government of the 5% Indigenous spend as a floor, and for that spend to try to attain 5% as the minimum, to try and go up.
It is voluntary in many defence contracts, so making that mandatory, like some of the voluntary ability to finance or to do some of the procurement, we’d like to make that mandatory to move some of those out of there.
The reality around the 5% came from the percentage of Indigenous participation. I think it was through the procurement strategy of Indigenous business is where the 5% was determined, and the mandate came out to have that spend. Defence Construction Canada and the Department of National Defence have, actually, done a fairly good job, as has my company. That’s where the 5% came from.
Accelerating it can be transformational and create generational wealth as well by really including Indigenous Peoples.
Meegwetch.
Mr. Mueller: Thank you for the question, senator.
I should also say, just on the Indigenous side, in the aerospace supply chain, there are multiple examples of Indigenous companies that are thriving, excelling and growing throughout, so it is very encouraging.
Senator, I would say, with respect to your question on that clear demand signal, again, it goes back to what are the national security requirements that are required as a country? Again, the national security policy would help send that signal and provide clear capability requirements that the Canadian Armed Forces, or CAF, need, along with procurement lists and procurement timelines, with the predictability piece built into it and then more engagement with industry on the discussion of these pieces. Again, there needs to be a cultural shift to have that discussion with industry to ensure that industry has the ability to respond to the security challenges that are there with a fully defined procurement list so discussions can happen on an earlier basis. Moving away from those changing requirements, which adds time to the procurement pieces, is absolutely critical. I would also say, depending on the procurement, perhaps having a tailored procurement approach. If it is a straightforward one, you can move forward in a more expeditious manner, depending on the risk profile that is there.
As an example, I had one company tell me about the requirements for procurement in Canada versus procurement in the U.S. They were similar procurements with a similar dollar figure. In the U.S., it was a binder. In Canada, he weighed the paper, and it was 60 pounds of paper. So there are ways to do it more quickly, and there are ways to do it with better value for taxpayers’ dollars. We can reduce the amount of back and forth that is there and maybe get away from paper on some of these pieces.
Again, we need more engagement with the industry, and providing that demand signal is absolutely critical. Thank you.
Mr. Byers: You have asked me to provide more detail in writing, and I’m very happy to do that. Again, these are serious challenges, but they are not new challenges. There are many reasons why we have procurements in this country that take more than two decades.
This leads to my point, which is that I don’t see the civil service improving the process in the next few years to enable us to deliver on many of these promises in the next 5, 10 or 15 years, while we are in the midst of a global crisis with a badly neglected Canadian Armed Forces. We need to decide on what we really need, prioritize that, make that happen, have a national security strategy and then figure out how to grow the Canadian defence industry.
The government has it backwards here. I say this with huge sympathy for all those entrepreneurs who want to participate in rearming this country, but some of these things need to happen so urgently that we might not have time for a complex strategy like this.
Senator Dasko: Thank you, witnesses. Actually, that’s the perfect introduction to the question that I am about to ask.
Professor Byers, what, in your view, are the urgent needs? List them because I want to understand what they are from your point of view. What should we be doing?
Secondly, are we likely to achieve any of these priorities in the process that we have now, given the current context with our spending?
Thirdly, whether you look at the 2% GDP goal or the 5% goal that is supposed to be achieved in the next decade, whichever way you look at it, that is a huge amount of money. It is absolutely enormous. Do you feel we’re spending too much? It is a lot of money.
Mr. Byers: My concern is not that we’re spending too much. My concern is that we are not identifying what the priorities are, and we’re also not questioning whether some of the money that has already been planned to go out of the door really needs to go out of the door. I don’t care whether we spend 3.5%, 5% or 2% as long as we have a capable, effective and deployable Canadian Armed Forces. That should be the goal; not a particular percentage of the GDP.
When I talked about questioning some long-term procurements, I mentioned the fact that our River-class destroyers — a procurement that is now well into its second decade without a ship being delivered — are essentially going to be obsolete by the time they are in the water because of advancements with regard to artificial intelligence and long-range underwater submersibles.
You can have a mixed fleet of drones and ships. That’s where our allies are going. We have decided we want 15 traditional surface combatants, and that number needs to be questioned. The savings of reducing that procurement would be enormous because we’re currently looking at $7 billion per ship.
There are other things I would like to see. I would like the government to finally make a decision on fighter jets. They are ragging the puck in making a choice between the F-35 and the Saab Gripen. They need to make a decision and move forward.
There are other decisions. For example, we don’t have an infantry force that can maintain more than a thousand soldiers abroad. We don’t have the equipment to commit to another NATO mission or perhaps to a United Nations peacekeeping mission. There are many things we lack.
While I’m on this topic, let me say that it is also important to realize that the government has reduced funding for overseas development assistance and diplomacy in order to prioritize defence spending, and that is completely wrong-headed. You need diplomats and foreign aid so that you can prevent wars from happening. You have to look at this as a package, and we have been driven into this frenzy of defence spending by the demands of Donald Trump. That’s not how we should be making national policy.
Senator Dasko: With regard to our decision to buy fighter jets and submarines, do you feel that we have made good choices in terms of the decision to buy those components?
Mr. Byers: We need some fighter jets. We’re in a transitional phase between crewed aircraft and uncrewed combat drones. So, yes, we need some fighter jets. I’m very skeptical about the F-35s because for computing purposes they are completely dependent on the United States, but that’s another conversation.
We have a fleet of four submarines that we should never have bought in the first place, which have been largely non-operational, and we have the longest coastline of any country in the world. So I’m okay with acquiring submarines. I’m very skeptical about reports that we might be acquiring two different models of submarines: one South Korean and the other German. That, to my mind, makes no sense whatsoever. It is a very Canadian compromise to avoid a decision by splitting the difference.
I am pleased that this government is taking defence seriously. We benefited from the peace dividend after the Cold War for a decade longer than our allies, so I’m glad that there is seriousness. I’m just worried now that there is such a rush and emphasis on economics that we might end up making some seriously bad decisions in our rush to get things done.
The Chair: Thank you.
Senator Ross: Thanks to all of you for being here. The Defence Investment Agency’s mandate is toward projects of $100 million or more, and that represents the biggest spending amount, but it only represents about 10% of the actual projects. The other 90% of spending will be under the old procurement. Do you think that it would make more sense to have some smaller projects and some smaller spending included in the new procurement?
Mr. Mueller: I can tackle that. If they get it right and reduce the complexity of the procurement process, then absolutely. However, we need to be realistic too that it takes time to stand up a new agency. It is going to take time to put in place some of the pieces underneath the strategy. Again, we need to move quickly on those pieces. That stepped approach makes sense from my perspective. Once it is fully up and running and things are moving quickly through the procurement process, and we have clear demand signals for industry, then, yes, I agree that we should have that Defence Investment Agency also take on some of the smaller pieces that are there.
Senator Ross: It seems that at least 90% of defence procurement is smaller projects, and $100 million is a big project. So it could still be a huge project, but there is still a great deal of opportunity for other projects to be run through this type of more expedient procurement process.
Mr. Mueller: I would also say, senator, that even on those large procurements, there are many opportunities throughout the supply chain. I think of Indigenous companies on Vancouver Island that are benefiting from some of these larger procurements across the board.
It is a massive challenge and a massive undertaking to shift the procurement process and also to have that cultural shift, which has been much needed, and we’re seeing signals of that. We have the political direction, and you are seeing the public service respond to that.
They need to move more quickly on many of these pieces, but it does take time when you are radically overhauling pieces. The government has our support, and we need that engagement with industry so that we can figure out those pieces so that we’re not just going through the motions, but we’re actually building the defence industrial base here in Canada.
Senator Ross: Mr. Jacobs, this question is for you. You talked about the 1,500 or so businesses in the Canadian Council for Indigenous Business. I wonder if you can help me to understand that organization, or that list of businesses, versus the government’s official list of accredited Indigenous suppliers, which I understand in February was sort of overhauled, and almost 2,000 businesses were removed from that list. Are these two different lists that we’re procuring from?
Mr. Jacobs: Yes. The Federal Procurement Strategy for Indigenous business, the Indigenous Business Directory, we went through that.
Just some prepared notes to that, CCIB’s directory is distinguished by independent, third-party audits, annual compliance monitoring, secure data protocols and strict 51% ownership verification.
The 2025 Auditor General audit and recent delisting of 1,881 firms from the federal directory confirmed serious verification weakness and rendered certificate risks. Official recognition of CCIB’s directory would give PSPC and the Department of National Defence immediate confidence. So there is a definite difference between the two.
I belong to both. I’m a paid member of CCIB. I go through an audit process at CCIB. I go through an audit process at the Indigenous Business Directory as well.
The list — you know, some of the businesses of the 1,881 there were a lot of reasons why that happened. It had nothing to do with too much. There were some that were different. That procurement process, by having the two lists, you have limited capacity.
I talk about scope. Your first question was about scope. And, yes, if we had regional, smaller sections done right with Indigenous inclusion, we could be a lot more participative in those procurements.
When we talk about the two lists, they are two different lists. The CCIB manages a list of members of 1,800 certified Indigenous businesses, which means they’re verified, audited and controlled.
Senator Ross: Do you use the CCIB list rather than their list, which seemed to have less of a robust audit process?
Mr. Jacobs: Absolutely. Indigenous-led solution, right? You have an Indigenous board of directors. The majority of Indigenous boards of directors say what makes up Indigenous. Talking with communities directly, who is included in the indigeneity discussion in certain areas.
Certain areas of the Indigenous Business Directory are under question regarding whether it is Indigenous or not at all, and we have followed those in the past. The challenges are coming, and who will accept those challenges? Is it the federal government or is it the CCIB?
You have an organization that is set up and ready to do that and ready and has — we have the mechanism. We have a marketplace. We have everything that you could possibly want, so any other questions about this we love to answer.
If you want more depth or more information, our team is excited for that opportunity to get that into Indigenous-led hands. Thank you. Meegwetch.
The Chair: Colleagues, we are at the end of our time. This will bring us to an end of this panel. I want to thank Mr. Jacobs, Mr. Mueller and Dr. Byers for taking the time to meet with us today. We greatly appreciate your contribution and the time you have taken to share your knowledge with us.
Dr. Byers, I think there was some follow-up you will provide us with. We deeply appreciate it, and same for Mr. Jacobs, if you can, to the committee.
For those joining us live, we are meeting today to hear witnesses for our study on defence procurement in the context of Canada’s commitment to increase defence spending.
For this panel we are pleased to welcome, by video conference, from SAP, David Lincourt, Chief Expert, Global Defense and Security, Industries and Customer Advisory; and Ryan Wires, Managing Partner, Federal Government of Canada. Thank you for joining us today.
We will begin by inviting you to provide opening remarks to be followed by questions from our committee members. You will each have five minutes for opening remarks.
I understand, Dr. Wires, you’re making the opening comments on behalf of your group, so please, when you’re ready, you’re welcome to do so.
Ryan Wires, Managing Partner, Federal Government of Canada, SAP: Thank you, chair, and honourable senators for the opportunity to appear today. My name is Ryan Wires, and I’m the managing partner for the Government of Canada at SAP Canada Inc.
My remarks today will focus on one core idea: that Canada can both strengthen stewardship of public funds while also moving faster to deliver the capabilities our Armed Forces need by modernizing defence procurement with standardized and secure digital platforms.
SAP is an enterprise application software company supporting organizations to run integrated, AI-enabled business processes in the cloud.
SAP was incorporated in Canada more than 35 years ago as a wholly owned subsidiary of SAP SE, a German-based company. We employ roughly over 3,200 people, of which over 80% are focused on research and development in our SAP Canadian labs.
In the defence and security domain, our applications go beyond enterprise resource management; they can support readiness and operational enablement across strategic management, military force generation deployment, capability planning and weapon platform life-cycle management. These solutions, at varying degrees, are used by over 40% of the world’s militaries, 70% of NATO allies and all Five Eyes countries.
I am joined today by my colleague, David Lincourt, who is a chief expert in our Global Cross-Defence Industry Unit, and although we are both Canadian, we are pleased to join you virtually from Philadelphia, where we are attending the fifty‑fourth, biannual SAP Defence Interest Group Conference.
This group is comprised of seventeen member nations and NATO, who meet to share their adoption successes and challenges, and to further guide SAP’s road map for continuous innovation.
Canada faces a dual imperative: increase defence spending while demonstrating strong stewardship of public funds. Yet legacy procurement structures, with complex approvals, fragmented accountability and rigid compliance requirements, create systemic bottlenecks that slow the delivery of critical capabilities.
Efforts to prioritize made-in-Canada solutions add additional complexity, where procurement teams must balance industrial policy objectives with cost, capability and transparency expectations.
At the same time, geopolitical risks and accelerating technological changes compress timelines, making it harder to deploy allocated capital quickly and effectively. These same structural constraints also slow adoption of modern digital and cloud technologies, limiting the government’s ability to modernize procurement and respond with the speed and agility required to meet the need.
The reality we often hear is that the organizations tasked with procurement execution do not have the resource capacity to simultaneously redesign processes and drive transformation while meeting increasing operational demands. In our view, the best path forward is to pair disciplined stewardship with digital execution that is fast, auditable and secure.
Three capabilities are particularly relevant and can be implemented in a pragmatic and phased way. First, standardizing on a common digital platform creates a single source of truth — from budget appropriation through solicitation and award, and across delivery and sustainment.
Role-based workflows and real-time reporting make it clear who owns what, where process bottlenecks exist and how funds map to capabilities and outcomes, while also providing overall spend visibility and evidence for probity.
Shared data models and dashboards can help align DND, PSPC, ISED, and the Treasury Board of Canada Secretariat on status, ownership and the critical path.
Data standardization also facilitates interoperability, not only across central government departments, as I mentioned, but also with NATO and Canada’s allies.
Second, connecting sourcing, contracting, purchasing and payment reduces cycle times for compliant buys and makes it easier for small and medium enterprises to participate.
Modern capabilities, like guided buying, policy-as-code, automated approvals, e-invoicing and automated three-way matching provide benefits to both buyers and the supplier community.
Third, a connected-supplier-network approach would support defence industry vendor discovery onboarding and participation, helping Canadian suppliers engage faster with prequalification, risk profiles and standardized data.
Configurable rules and scoring models can codify Canadian content thresholds and Industrial and Technological Benefits Policy, or ITB obligations, as well as Indigenous procurement targets directly into solicitations, evaluations and contracts.
In closing, Canada is not alone in facing this new geopolitical reality. Middle powers are reshaping defence postures, and many are confronting the same procurement and modernization constraints. That gives Canada an opportunity to lead by rethinking defence procurement to be faster, more transparent and more digitally enabled, while still meeting the highest standards of oversight.
Initiatives within National Defence, like DEFENCEX, signal an ambition to accelerate innovation and adoption, and we see strong potential to connect that ambition to execution with the pace the moment demands.
In closing, the goal is straightforward: to deliver capability to the Canadian Armed Forces at the speed of need with transparency that earns trust. With common platforms, common data standards and governed cloud choices, Canada can reduce friction, expand supplier participation and translate these investments into readiness faster and with stronger oversight.
I’d like to thank you again for the opportunity to speak today, as we welcome the chance to support this committee’s work. We are happy to answer any questions that you may have. Thank you.
The Chair: Thank you, Mr. Wires. We will now proceed to questions. Mr. Lincourt and Mr. Wires will be with us until 6:10.
We will allow time for each member to ask their questions. Four minutes will be allotted for each question, including the answer, as always. I ask that you keep your question succinct and identify the person you are asking the question to.
Thank you for being here.
Our first question will go to our Deputy Chair, Senator Al Zaibak.
Senator Al Zaibak: I yield my time to my colleagues.
Senator Cardozo: I take, Mr. Wires, your comment at the end about delivering at the speed of need. I am thinking about the comments that were made in the previous panel.
Did you get a chance to hear the previous panel, by any chance?
Mr. Wires: I did, indeed. I certainly enjoyed the discussion, thank you.
Senator Cardozo: Indeed. Professor Byers was, somewhat, saying the opposite.
What he was suggesting were three steps: ensuring that Trump is satisfied with what we’re doing, that we are becoming more sovereign, and ensuring that we deal with defence procurement needs. In a sense, that last piece that you are saying is the driving piece in what he was saying is third, but we seem to be doing it the other way around.
I would suggest to you that it’s hard to say what the need is, given there is very real political pressure on us coming from President Trump and NATO to spend and spend fast.
The other point that Professor Byers made, which we have heard a lot before, is that our boats are rusted, our troops are not being paid enough — and we are dealing with that a bit better — and a lot of our equipment is old.
What would you say is the need when we can’t go too far off the fact that we have this enormous pressure on us? Isn’t that part of the need is to do stuff fast?
Mr. Wires: Let me begin the response, and then I’ll ask my colleague, David Lincourt, to provide his perspective from a global defence standpoint.
When we look at procurement and the complexity of procurement and the timeliness of procurement, the expectations, of course, that come with increasing spending, but it still needs to go through the process and execution of procurement.
One of the comments that Michael Byers had mentioned is around focusing on the needs of today because there are clearly needs that need to be executed from a source of supply, from a source of readiness standpoint, while you’re still contemplating the broader strategic goals of tomorrow.
I certainly understand those comments because we are not, ourselves, specifically involved in large defence capital equipment projects. But from a technology solution perspective, where we are focusing on is simplifying day-to-day operational procurement and providing automation wherever possible in order to free up capacity to focus on those types of strategic procurements, understand and assess that need further, and ensure that you’re putting the appropriate procurement mechanisms in order to source and supply that.
David Lincourt, Chief Expert, Global Defense and Security, Industries and Customer Advisory, SAP: Thank you for the question. It’s the speed of need and the speed of innovation that needs to work in conjunction with each other.
A few years ago, nobody was talking about AI, so the requirements did not include any artificial intelligence aspects in those documents, which means that now the need is there, and industry — like us — is capable of meeting that need, but because the requirements and the procurements were made without that, you need to re-compete, rather than go to your providers already. It’s to the point of standardization.
Start with what you have, expand as a first choice, and if it can’t meet that need, then go somewhere else, rather than go shop around. And that takes time.
You could shorten the procurement process by standardization. Standardization platform, you go first, as DND needs to innovate, we also innovate, so why not go to those first rather than just shop around?
Senator Cardozo: Thank you.
[Translation]
Senator Carignan: I’m going to stay on the topic of AI. This isn’t a trick question. I follow SAP’s stock. I don’t own any, but I keep track of it, as I do other stocks in the sector.
Right now, fears around advancing AI and the impact it could have on your industry and your company in particular are really affecting your stock price. It’s rather shocking, considering how tough the market is on certain software titles, and yours is feeling quite the impact.
You talked about this, but I’d like more clarification. What is the right way to manage AI or technological advancements in procurement?
We’re talking about AI in your case, because I believe it affects your product, positively or negatively. I think it’s starting to have a positive impact. Earlier, we talked about other technological advancements, including drones. Since underwater and aerial drones can now meet some of our surveillance requirements, do we need the same number of jets and submarines?
No matter how fast the procurement process moves, technology moves even faster. Think about how long it took before and the delays. Now, we’re trying to get better and buy equipment faster, but even if we do that, the technology still moves faster.
I’d like you to give us a piece of advice that we could include in a report to the government. How should procurement take into account the extremely fast pace of technological change and the impact on our equipment needs?
Mr. Lincourt: If I may, I’d like to answer your question with my colleague. The idea is to support experimentation, to have a way for people to get a feel for and taste of the technology in their field within a secure space.
I’ll give you an example. Our military clients around the world meet regularly to test developments in the field of AI. We met in Oslo in January and are planning to meet again in June, in our labs in Montreal. People bring their case studies and data, and we provide the infrastructure for them to test things out. They don’t have to pay. They conduct trials. Different colleagues in the field and different countries share findings. They are allies. They take those results back home with them, knowing how the technology can be used to meet their needs more quickly. They can show those results to their chain of command or leadership.
We provide opportunities for fast experimentation, unhindered trials, all so that people can do those kinds of experiments.
Senator Carignan: I’m sure you’re familiar with SOF Week in Tampa. Do you attend that conference? Do you know it well? Can you tell us about it? We were supposed to have another witness whom I was going to ask about this. I think it’s interesting how SOF Week works, so can you tell us about it?
Mr. Lincourt: Personally, I’m not familiar with that event. That doesn’t mean others in our company couldn’t answer your question.
[English]
Mr. Wires, do you know the answer?
Mr. Wires: No, I’m not aware of that particular event. Certainly, in Canada, from an AI conference standpoint, our labs in Montreal participate as part of Canada’s AI participation in conferences. I’m not certain of that particular one.
[Translation]
Mr. Lincourt: I suggest we get back to you with a proper answer, with the help of my colleagues who are not here. We can get back to you with an answer to your question, if that’s okay.
Senator Carignan: It’s a place where industry and military meet, where industry players put their services on offer, and the purchase orders come in pretty quickly. The event takes place in Tampa Bay, and, as I understand the process, it gives purchasers an agile way of addressing their procurement needs. I wanted to see whether you were part of that.
Thank you.
[English]
Senator Kutcher: Thank you for being with us today. I have one question that has three parts. I will read the whole thing, and then you can comment on the parts.
The culture of our procurement process has not served Canadians well. I think that’s pretty clear to all of us. First part, what has to change within that culture to allow us to be more efficient, timely and on target? Second part, what does the new Defence Investment Agency, or DIA, have to do to make sure it doesn’t get caught up in that culture? Third part, you have made three suggestions, Mr. Wires, about the kind of technology you have that could be used to improve the procurement process. With whom, besides this committee, are you sharing that information?
Mr. Wires: Thank you very much for the question. I will try to address each question in order. Culture is certainly very significant. One of the greatest constants in life is change, although change can be one of the hardest things to take on, especially from a cultural perspective.
If I were to look at it from a procurement perspective, one of the key aspects is to build the capacity and capability from a strategic procurement standpoint, by elevating the role of procurement, by leveraging technology to simplify the process standpoints, to provide that auditability and control on it. Then you can free up the capacity to focus on the strategic part. To that end, we have always provided our comments back to the government on embracing and participating with industry. One of the natural reflections of procurement, given that it needs to have probity, is to withdraw itself from industry, to protect itself and create a gap between themselves and industry. In my view, that’s an area where the government could benefit from taking an active and participating role to engage with industry, to understand how technology is changing, to understand that technology, to understand how different businesses are going to market and to then bring that awareness back into their organizations in order to set different strategic objectives from a procurement standpoint.
In terms of the DIA, I have not had any direct involvement with DIA. I would be remiss to comment on how they will be transforming their organization from a cultural perspective, but certainly those comments would apply.
We certainly brought this perspective to Shared Services Canada and Public Services and Procurement Canada, as well as to the Treasury Board of Canada Secretariat, in previous years in terms of our position on procurement modernization from a technology perspective.
Mr. Lincourt: If I may, we also brought the majority of these points to the parliamentary committee on defence and defence procurement a couple of years ago, where I testified with one of my colleagues. This should not be new to the parliamentarians and hopefully not to you.
The Chair: Thank you.
Senator White: Thank you for the presentation. This will be a more general question because I really need to understand the key characteristics of a viable, profitable, domestic defence industry. I need to understand that. Based off of that answer, what is Canada doing right with this new defence strategy, and what needs more work?
Mr. Wires: I appreciate the question, but I’m not certain that I’m in a strong position to make particular comments on that.
Mr. Lincourt, I will seek your guidance from a more defence-specific perspective and from a global perspective.
Mr. Lincourt: Globally, most other nations or a lot of other nations are in similar situations. Prime Minister Carney said that very eloquently when he was in Davos. So it goes back to first principles. The professor kind of tied that up. You need to be able to deliver. The Department of National Defence and the Canadian Armed Forces need to deliver certain capabilities in a certain time frame at a certain location in order to meet the government’s objectives.
Our role as a business system is to provide information to those decision makers so they can make readiness-based decisions and evaluate alternatives and options.
I learned this early in my military career. I’m an ex-military member; I served 20 years in the Canadian Armed Forces. I have always been told that the quality of your decision is based on the quality of your options. Those are the kinds of things that we need to put in the hands of decision makers at all levels, be it a corporal, a sergeant, a civil servant, a general or an assistant deputy minister.
All that to say, you need to be able to make those readiness-based decisions but not at any cost. You need to understand the impact from a cost perspective when those particular decisions are made, in order to make sure you are spending people’s money in a wise way. In essence, it goes back to what is needed: What do you think you will need in the future? How can you innovate quickly in order to keep up with the adversary’s capabilities but also take advantage of the investment by industry to innovate as well? That’s our general position here in Canada and elsewhere around the world.
Senator White: Thank you, and thank you for your service.
Senator Hay: Thanks to both of you for such interesting testimony.
I need a bit of clarity and more detail. I recall you saying, Mr. Wires, that what is required is the digitization on a common platform around procurement. So who builds it? Who owns it? It is likely steeped in AI, as you envision it, if I have this right. Then my follow-up questions will be around what kind of data is in that platform. Where is it stored? How does that data travel? Where is the data sovereignty for Canada in there around security and safety? If you can just answer that, that would be awesome.
Mr. Wires: Indeed, I will certainly do my best. I appreciate the question. Certainly, Mr. Lincourt, you can provide perspective from the defence perspective because it is a very fair question from a technology standpoint.
Let me first address the platform aspect. In many cases in the past, from a legacy acquisition of technology, the government went through a process to select unique components in order to address one part of an overall, end-to-end process. At SAP, we are very proud to have a significant legacy with the Government of Canada around financial and materiel management solutions. Some of those aspects have been expanded from a procurement standpoint as well. But when you think of an end-to-end procurement process, it involves everything from first determining your needs, developing your requirements, and turning those into a solicitation of some variety. Then going out and competing for that, awarding a contract, receiving invoices, and paying your suppliers. So, from “procure to pay” and, of course, from “source to contract.”
Having a common platform that underpins the entire end-to-end process. From a digitization standpoint, we now have technology that was not available a decade ago. The documents that are used to state the requirements then turn into an RFP. That’s a PDF that then is reviewed against solicitation responses to confirm compliance. That then turns into a contract to go and then amend. A common platform that stitches all of that together with a common data structure underpinning it then opens up the opportunity for technology such as AI to more seamlessly do those reviews of the initial requirements, the vendor responses and the ultimate contract terms, as well as to tie all those different components together.
We do so, certainly, in a modern and cloud-delivered way, as you would expect with a vendor such as SAP, that delivers solutions that underpin nations and defence forces, as well as the aerospace and defence industry because we have different cloud solutions, including sovereign solutions in Canada, to address particular needs.
Our feedback has always been — and it becomes a little complex here. This is a statement that I have said many times to customers — one of the greatest things about SAP is that we have a lot of options, and one of the greatest challenges about SAP is that we have a lot of options. The reason we have those options is because it depends on what the needs and requirements are. We quite often need to consider commercial cloud services that have data residency in Canada that are still highly secure and performant but may not meet the stringent sovereignty requirements in terms of who is operating those systems or where the management is and what is called telemetry data, which is not customer data. It’s the data about how the systems are running and being managed.
In many cases, those are elements that weren’t taken into consideration when looking at cloud services three or four years ago with a desire to make it as open as possible for what the industry was bringing forward. Certainly, within the last six months to a year, we have had some enlightening discussions with the government in terms of the options, as well as in trying to help the government tell SAP what its requirements are from a cloud standpoint. Those are key questions that should be asked, especially considering cloud solutions in the defence context.
Senator White: Just a quick yes, no, maybe. Is Canada ready for this end-to-end common platform?
Mr. Wires: Maybe. I’d say yes to the degree that it needs to be ready for a transformation.
Mr. Lincourt: Do I have time to add a few comments to the question that was asked?
The Chair: Go ahead if you have a short answer.
Mr. Lincourt: Let me give you a very simple example. The RCMP needs tents to support a particular activity somewhere. Ask yourself: How does the RCMP ask the Department of National Defence for those tents? It is certainly not through a digital relationship with an order in their system that is received as an order in DND’s system. It is done through non-digital relationships. That’s what we’re talking about. Whether it is government departments, allies or industry, the vast majority of digital relationships exist outside, the way it should be — through a hub of some sort, to allow the exchange of zeros and ones rather than emails, telephone calls or whatever. That is an example of what we mean.
Senator M. Deacon: Thank you to our guests for being here today. This procurement does keep us awake at night, and it is something that we are, I think, desperate to make better and to do so from other angles. I will carry on with the technology conversation. We didn’t rehearse this at all. I’m looking at drilling down a bit deeper on Canada’s budding quantum sector.
We looked at Budget 2025, and there was $224 million earmarked for quantum research and $112 million for industry-oriented measures. We are having so many conversations on quantum and defence at this moment. This funding will flow under the new Defence Industrial Strategy. I’m in Waterloo. I know how anxious the industry has been to get this funding. It needs to both make their breakthroughs and attract and retain the top talent.
My question is: Do you think this funding is efficient and how big of a role do you see quantum and associated industries — we have talked about it already with AI this afternoon — playing in the reinvention of Canada’s defence strategy? It is a bit of a niche question, but I know that SAP is investing in the sector, so I’m hoping that you will be able to give me some insight.
Mr. Wires: Thank you very much for the question. I would certainly like to follow up with an official response. This is not an area of any expertise on my side. I know that SAP, globally, is having a number of discussions and is focusing on this area, but I would like to follow that up with a written response if I may.
Senator M. Deacon: For both of you, I know that AI and quantum are the terms being used, sometimes even interchangeably for some, but it seems like quantum is a big part of where we can make some gains. As you are writing your report, if you could reflect on that comment and that assessment, that would be really helpful.
Mr. Wires: I absolutely will. Certainly, if I might, on the artificial intelligence standpoint, SAP’s strategy has been to provide and connect within the ecosystem of AI large language model providers. I would note that SAP most recently has signed a significant strategic agreement and a memorandum of understanding with Cohere, given Cohere’s unique capabilities from a sovereign standpoint. We’ve signed a global partnership with Cohere, and I can provide additional details on that as well because I’m more aware of our partnerships from an AI standpoint. I will add that, as well as our quantum perspective.
Senator M. Deacon: Thank you so much.
I want to ask about this again because we probably have folks who are doing submissions who can’t be here. When we look at the industry piece, we see the perception that a lot of great Canadian products and great Canadian work have not been embraced by Canada, and they have had to go elsewhere around the world. I’m wondering, from your perspective, do you have a sense if — when — we get this right — not if, but when — when Canada can really say that we’re on the right track, we’re respecting industry, we are really looking at this much better than we have in the past and we are streamlining processes? Do you have a sense — I might be dreaming — of when we may be able to step back and see that? We know, for equipment manufacturers, some of that will take years, but what about that culture and that mindset?
Mr. Wires: It is a great question. I’m not sure exactly how we would see that materialize. Certainly, when it comes to the ability to have probity within the execution of contracting, I think there are ways that we could look at key performance indicators, or KPIs, to see the number of additional new vendors that are doing business with the Government of Canada, especially ones that are Canadian companies. Those could certainly be some of the KPIs, as well as the number of new participants, the size of contracts and the engagements that they have had through procurement activities. I think there is probably a number of those types of KPIs that could determine whether we are effecting the outcomes that such a policy is looking to achieve.
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Senator Youance: Thank you for the excellent information you’re giving us.
I’m listening to the discussion, and the question that comes to mind is how Canada can retain effective control in implementing a system that uses AI. For instance, given what we’ve learned from recent conflicts where the use of AI has given way to concerns over potential abuse, what principle or governance mechanism should Canada prioritize to make sure effective control over data remains in human hands? Also, more broadly, what about Canada’s responsibility in relation to the decisions it makes?
Mr. Lincourt: That’s an incredibly important question.
The goal is to make sure that the department, people, the military play an active role, that decision making is not delegated to AI. That control cannot be given up. They mustn’t be afraid to say, “No, what the AI system is telling us is wrong; it’s making things up.”
People might be dreadfully afraid of saying the AI is wrong. It’s important to keep making sure that members of the Canadian Armed Forces and people in the department maintain their skills and training, so they can say with certainty that the answer coming from the AI system is the right one. That is essential. Otherwise, giving up that ability means losing control.
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Mr. Wires: I would add that SAP’s focus around artificial intelligence is really around three Rs: responsibility, reliability in terms of ensuring that the response that is received is reliable and relevant. So it needs to ensure that it has the appropriate context. In our case, that’s the business systems and business context, whether it is finance, materiel, supply chain, et cetera. Therefore, as Mr. Lincourt spoke to, in order to ensure the response you are receiving from AI, you need to have the ability to trust the information, but trust and verify. The “verify” is probably one of the most important aspects to assure ongoing trust. It is a key component of one of the reasons through our global partnership with Cohere. With Cohere’s platform that SAP is now bringing across our customers, we are now investing in developing tighter integration between their Cohere North platform and SAP’s applications.
One of the key aspects of Cohere is to be able to show exactly how the AI came up with the result so that you then can check and verify and be able to then determine, as you then use those AI agents or use that AI technology, that you understand what data it found, how it analyzed and used that data, and how it then came up with a particular result.
We certainly appreciate that question, and it is certainly something that we have discussions with every one of our customers to ensure that it is top of mind as they start to experiment with it.
That’s one thing Mr. Lincourt had spoken to before. We’re into a time of great experimentation, and part of that is learning how the technology can be used and where it can be appropriately used, and ensuring that you have that visibility into how it is being analyzed across your data.
Mr. Lincourt: If I may add to that, if I have time, please.
The Chair: Yes, very briefly.
Mr. Lincourt: I used to be a member of the Faculty of Engineering and Department of Management at the Royal Military College of Canada in my military career, and I always taught the students: Show me how you got to the answer. The answer is really irrelevant. What is more important is: How did you get there?
We need to get the AI to behave in that same way. We built a prototype as part of this hackathon with the different nations around how to store ammunition safely, and we train the AI to not just give a “yes/no, you can put it there,” but give the “why.” That gives the ability to those who are true experts to verify the answer, but, at the same time, train those who don’t have the knowledge to become more knowledgeable.
This is vital. It is not just a yes/no, or to provide an answer whatever the answer is. It is: How did you get there? How did you come up with that answer? The AI absolutely needs to provide that.
Senator Cardozo: My question builds on the last piece you were speaking about. I have been asking questions through these hearings on the issues of youth employment and skills development.
Could you talk to us a bit about how we use this opportunity to engage more young people in this fairly professional, well-educated field? How do we go about hiring and training more young people? And add to that the technology discussion we have just been having on AI.
Mr. Wires: Yes, an incredibly great thing to focus on as a question.
First off, from SAP’s perspective, there are many different ways that we are engaging youth and new entrants into the employment market in terms of providing free training and making that available, in terms of starting to use some of these technologies. We don’t charge for the use of some of our digitization technologies in order to get some experience with SAP technologies.
In addition to that, we have partnerships across Canada, which we call university alliances. HEC Montréal is a notable one, as well as Algonquin College, but there are many others. I believe Dalhousie University as well. We can follow up with the specific university alliances we have.
We have been focused on how we ensure that we can help support them with the content and the supporting mechanisms so that those professors and teachers can help train their students in the use of our technology so that they are ready for an active workforce when they graduate.
Mr. Lincourt, I know that you have some specific experiences with university alliances. Maybe that would be relevant to bring up and highlight.
Mr. Lincourt: The only thing I would add is I would love to see our military colleges in Canada become part of our university alliance program so that our young officers get trained and familiar and fluent with SAP technology because they will be using it in their day-to-day jobs.
Senator Cardozo: Whether it is SAP technology or all the other technology that we are dealing with and the various equipment, this is a once-in-a-generation opportunity to up-skill a lot of people in Canada, especially a lot of young people. As you probably know, the unemployment rate for youth is double that of the population at large. I do encourage you to keep a focus on that, on young people. Young people are also the long term of these industries in Canada.
Mr. Lincourt: Yes.
Mr. Wires: Yes, very much so. We participate through a number of internships. We can follow up with those specific details as well.
When we are an organization of the size that we have across Canada from a research and development perspective, we have been noted in terms of our overall internship program to give young people the opportunity to gain relevant experience that they can then use to become more employable.
Certainly, there is a large ecosystem of SAP partners and other consulting firms and so on. We certainly feel that the internship program is a key focus of ours to give those opportunities of experience.
Senator Cardozo: Thank you.
Senator Hay: I wonder if you could give advice to this committee and even other committees, actually, on how to build in safeguards — it is following up on Senator Youance’s questions around AI — for the future, whether it is within procurement or otherwise.
I have been thinking about this example south of the border — as we have been talking — with the company Anthropic, which had quite a dust-up with the president and that government about a week or so before the Iran war broke out. The dust-up was that the government wanted Anthropic to hand over the technology or drop the guardrails that were in place that would enable the government to then be able to train the weaponry in a different way. So it was for weaponry and also for citizen surveillance in the U.S., in this particular case.
The advice I’m looking for — and you may not be able to provide it — is this: What do we as a committee do, as we’re thinking about procurement in defence building in safeguards so that doesn’t happen in our future? By the way, we know the government won that battle.
Mr. Wires: We ourselves as a company are not competitors within the LLM or AI space. We are more an enabler of connecting large language models and AI companies such as Cohere into our technology platform to ensure that the data relevance and the business context can be fully understood by the technology to make sure that it comes up with reliable results.
Beyond that, I don’t think I’m in a position to be able to add further comment.
Senator Hay: Do you see a role of procurement to build in rules and regulations? That’s more about legislation and lawmaking, I suppose.
Mr. Wires: Yes, I think it goes back to my previous point of making the connection between procurement and having procurement to be able to focus on understanding things that are happening within the industry.
Quite often, in order to do that, they need to go out and engage with the industry. Obviously, not during any procurement activity, but, in fact, in advance of a procurement activity to get that better understanding and to give better information to procurement to ensure that it addresses all those types of questions and needs.
Senator Hay: Thank you.
The Chair: This brings an end to this panel. I want to thank Mr. Lincourt and Mr. Wires for taking the time to meet with us today. We greatly appreciate the time and knowledge you have shared with us.
Mr. Wires, you indicated that you might send us some additional information to the committee.
Mr. Wires: Indeed.
The Chair: If you could send that to the clerk, we would appreciate it for our report.
For this panel, we are pleased to welcome from General Dynamics Land Systems-Canada, Doug Wilson-Hodge, Director, Strategy and International Business Development, and from Irving Shipbuilding Inc., Dirk Lesko, President.
Thank you for joining us today. We will begin by inviting you to provide opening remarks to be followed by questions from our committee members. I remind you that each of you has five minutes for opening remarks.
We will begin with Doug Wilson-Hodge. Welcome, and please proceed if you are ready.
Doug Wilson-Hodge, Director, Strategy and International Business Development, General Dynamics Land Systems —Canada: Chair, honourable senators, thank you for the opportunity to appear before you today.
At a time when Canada is increasing its defence spending and re-examining how we procure and sustain military capability, our message is straightforward: Delivering sovereign capability for Canada is a responsibility General Dynamics Land Systems-Canada has proudly carried for nearly 50 years, and it is one that we are committed to for decades to come.
Let me begin with the reality of today’s battlefield. Modern conflict is defined by what military leaders call the fight for information. Canada’s next generation of armoured vehicles will be designed with that reality in mind. Built on open digital architecture and equipped with advanced sensors, these vehicles integrate data from uncrewed systems, enabling commanders to identify threats, share information and maintain superior situational awareness in the most complex environments.
But technology alone is not enough. What matters equally is where and how that capability is developed. For nearly five decades, General Dynamics Land Systems-Canada, or GDLS‑Canada, has provided the Canadian Army with a sovereign, advanced manufacturing capability to produce armoured combat vehicles. Since 1977, we have delivered more than 11,000 light-armoured vehicles, or LAVs, to Canada and allied nations.
This capability exists because Canada made a deliberate choice to invest in it by purchasing Canadian-designed and Canadian-built products. Today we proudly developed armoured combat vehicle solutions in Canada by Canadians for Canadians.
GDLS-Canada, based in London, Ontario, works with more than 600 Canadian suppliers and partners, with universities and with innovation programs across the country. This defence ecosystem sustains thousands of high-value manufacturing and technology jobs, and it also ensures that Canada retains the expertise, supply chains and industrial capacity required to design, build and support its own military vehicles.
Sovereign capability means control. When armoured vehicles are developed and built in Canada, Canada decides when and how they are upgraded, repaired or modified. There is no reliance on foreign approvals for critical changes to the end item, and the systems are tailored to Canadian missions, terrain and operational requirements. Sovereign capability delivers speed, flexibility and operational advantage. It also strengthens Canada’s position with our allies.
Our export success is not incidental. It is a direct result of producing a world-leading platform. Over the past five decades, export contracts with allied nations have allowed us to continually design, test, develop and evolve the only made-in-Canada armoured combat family of vehicles. In practical terms, export programs help underwrite innovation and sustain the workforce that ultimately benefits the Canadian Army first.
Looking ahead, the Canadian Army has been clear: Land power remains essential. Ensuring Canadian soldiers have the right equipment delivered at speed and sustained over time must remain a national priority. Canada’s recently released Defence Industrial Strategy calls for stronger domestic production capacity, faster delivery of capability and long-term sustainment of a combat-credible force. The critical enabler of all that will be a risk-managed, outcomes-based procurement system.
As we approach 50 years of service to the Canadian Armed Forces, this partnership between government, industry and the military stands as a model of what can be achieved through sustained collaboration.
Chair, honourable senators, the choices Canada makes today on defence procurement will shape our readiness for decades. Sovereign capability is not simply an industrial objective. It’s a strategic imperative. It ensures that Canada can respond quickly, adapt continuously and support its soldiers, sailors and aircrew without constraint.
We remain committed to working with the Government of Canada and the Canadian Armed Forces to accelerate innovation, strengthen our defence industrial base and deliver the capabilities our soldiers need, because, ultimately, providing a sovereign capability for Canada is not just what we do; it’s a responsibility we are proud to carry now and in the future.
Thank you.
The Chair: Thank you, kindly.
Next, we’ll hear from Mr. Dirk Lesko. The floor is yours, sir, for five minutes.
Dirk Lesko, President, Irving Shipbuilding Inc.: Mr. Chair, honourable senators, thank you for the opportunity to appear before you today.
Irving Shipbuilding is proud to serve as Canada’s national combatant shipbuilder. Since being selected in 2011 to deliver the combat vessel package under the National Shipbuilding Strategy, our mandate has been clear: Rebuild sovereign naval construction and sustainment capability and deliver modern ships to the Royal Canadian Navy and the Canadian Coast Guard.
Fifteen years ago, Canada faced a significant gap in shipbuilding capability and capacity. Facilities required modernization, technical and program management capabilities had atrophied, and the skilled trades and supply chain capacity had declined. Over the past decade, working in close partnership with the Government of Canada and industry partners across the country, we have helped rebuild that capability from the ground up.
Since 2013, the work at Irving Shipbuilding has contributed nearly $17 billion to Canada’s gross domestic product and an additional $6.3 billion to revenues across all levels of government. Canada’s new Defence Industrial Strategy underscores the importance of maintaining sovereign capability in areas critical to operational readiness. Naval combatant construction is one of the most complex and strategically significant of these capabilities, and Canada now has a modern combatant shipbuilding capability supported by a high-performing workforce and a resilient national supply chain.
Workforce development has been central to this effort. Through sustained investment in training, apprenticeships and knowledge transfer, we have helped rebuild specialized expertise that had largely disappeared from the country.
Over $200 million has been invested to develop our workforce. We have also constructed world-class shipbuilding infrastructure and implemented advanced industrial processes designed to support long-term fleet recapitalization. These investments were not made for a single program. They were made to create a durable, strategic capability that enables Canada to rebuild, rearm and reinvest in maritime defence.
Irving Shipbuilding has earned the trust of the government and our Royal Canadian Navy and Canadian Coast Guard customers through demonstrated performance. We have successfully delivered six Arctic and offshore patrol ships and provided approximately 450 skilled workers each year, supporting the sustainment and repair of Canada’s Halifax-class patrol frigates, helping ensure fleet readiness while new ships are under construction.
We are also managing complex prime contractor relationships with global defence leaders such as Lockheed Martin and BAE Systems, maintaining Canadian control over design, construction, integration and delivery.
Most significantly, we have now begun construction of a multi-mission guided missile destroyer, the first new Canadian combatant started in more than 30 years. It is an important milestone in restoring sovereign capability and building confidence in Canada’s ability to deliver complex defence programs.
The industrial platform that has been developed provides Canada with scalable capacity. It enables the efficient use of internal resources and the coordination of external suppliers across the country. Irving is not simply a shipyard. We are an integrated solutions provider that combines infrastructure, workforce capability, supply chain leadership and program management expertise to deliver national defence outcomes.
Shipbuilding in Halifax is generating nearly $15 billion in spending commitments to more than 680 Canadian organizations sustaining 10,600 full-time Canadian jobs.
This directly supports one of the central objectives of the Defence Industrial Strategy, which is sustaining highly specialized skills in strategic sectors.
Irving Shipbuilding is Canada’s national champion in combatant ship design, construction and sustainment. What has been created is an enduring strategic capability that Canada can rely on today and into the future.
Thank you. I look forward to your questions.
The Chair: Thank you, Mr. Lesko. We will now proceed to questions.
Colleagues, this panel will be with us until 7:10. In that time, we will do our best to allow each member to ask their questions. Four minutes is allotted for each question, including the answer.
Thank you again. Our first question goes to our deputy chair, Senator Al Zaibak.
Senator Al Zaibak: My first question goes to Mr. Wilson-Hodge. I’m intrigued by your commitment to sovereign capabilities for Canada. Could you elaborate a little more about the ownership of GDLS-Canada, and if there are any kinds of constraints on your commitment that are provided by the ownership?
Could you elaborate on the Canadian content of GDLS products, and whether there’s any impact from the tariffs newly imposed by the U.S. on your competitiveness in the local market as well as on exporting your products internationally?
Mr. Wilson-Hodge: Thank you for the question. There is a lot in that question. The short answer is GDLS-Canada is owned by General Dynamics. It is part of a multinational, U.S.‑headquartered company. That is the short answer.
The longer answer is very good news, and I will describe it to you. General Dynamics Land Systems-Canada has been operating in Canada for almost 50 years. We employ about 1,700 people in our London, Ontario facility, and we sustain about 600 suppliers across the country, including Indigenous suppliers.
We have a tremendous capability. In fact, we have about 480 Unifor workers and just under 500 engineers, so you can imagine the intellectual property that is developed. If you were to use a person year, about 1,750 hours times about 500 engineers, you’ve got close to 900,000 engineering hours a year that are being generated. So there is a tremendous amount of intellectual property being developed in London, Ontario. That is Canadian engineers working for Canada with those hours.
The question that you had regarding the Canadian content of our product. The product that we make is designed, built and produced in London, Ontario. The foreign content on our product is dependent upon requirements. It might be a mission package; it might be customer-required content on the vehicle that is not able to be sourced in Canada, and that would contribute to non‑Canadian content.
It depends on the technology that is on the vehicle, but it could be about 40% of the platform being non-Canadian content. Something that we are certainly looking to do is continue our support of Canadian suppliers, as we have done for 50 years.
Your question regarding tariffs and the competitiveness of GDLS-Canada on tariffs is interesting. There are remission orders; there are tariff reliefs in place for us. Some of those tariffs have expired. If they do not extend past July, we expect there would be potential for tariff impact on our platforms, yes. It is a very real concern for us, and particularly as we deal in the export market, selling products internationally, there is potential for tariffs to impact our competitiveness.
So it is a very real concern for us, and we have raised that issue with the appropriate officials in the Government of Canada. Thank you for the question, sir.
Senator Al Zaibak: Thank you.
Senator Cardozo: Thank you, witnesses, for being here. Mr. Lesko, I have a question for you to start with. First, I want to thank you and your officials for a tour of your shipyards that I had last September. It was truly impressive in many ways, but two things that stuck out to me. One was the scale of the project. These are huge destroyers that are being built right there in Halifax, and it’s really wonderful to see that.
The other was about human resource planning and the workforce development that you talked about. At that point, you mentioned that you didn’t have a shortage of workers because you had been developing people for over a decade. A lot of our industry has something to learn from that. Congratulations for that.
My question is about the latest technology, which probably wasn’t such a big deal even six months ago when we met, which is drones — highly effective, but also devastating.
If you take a big destroyer of yours that’s out at sea and an enemy party sends a whole lot of drones our way, both in the air and underwater, how do you deal with that?
Mr. Lesko: First, thank you for your questions and your kind comments about the work that we’ve accomplished in Halifax.
As it relates to any defensive capability on these ships, you design in order to conduct different missions — self-defence, aerial drones or even underwater drones. There are sensors on ships, platforms that are capable of dealing with those threats, and those are choices that the Navy makes in terms of what they will add or what they will have us design into the platform.
I would say that drones are certainly a threat, but there are a number of others that are of equal or greater concern, and I’m not sure at the moment that anything we’re doing precludes adding capability to deal with drones, but it’s not the greatest issue that the navy has us focused on with respect to capability for the ship. It doesn’t mean it’s not a concern, but it is among a number of concerns that the platform will have the ability to deal with it.
Senator Cardozo: I wasn’t expecting you to have the answers today just because it’s such a new technology, but if you were to think of one drone, and if you run a drone with a camera on it, that’s one thing. What we’re seeing now is the idea that you could have 100 drones coming in your direction, so the golden dome kind of approach might be quite difficult, no?
Mr. Lesko: The point that you’re making, I think the best way for me to answer that is: With a surface combatant, which is a platform that will be around for decades, 30 or 40 years, even before you deliver the ship, the technology on that ship will continue to evolve and change as the threats evolve and change, as the missions evolve and change.
What we’re focused on is providing space, weight, power and cooling for those systems that over time will consume more of the margin in that ship so that you can deal with whatever that evolving threat is. It’s really when those threats require so much of that space, weight, power or cooling that the ship’s envelope is constrained in some way that you have to go back and redesign the ship to add that capability. The capability I’m talking about is not a single thing. It is the ability to detect each of those things, engage and then defend against them.
Senator Cardozo: Building for the unknown is —
Mr. Lesko: Building a ship with margin so you have the ability to deal with future requirements or needs is all about the balance that we and the navy look at as we think about the ship that we are going to deliver next, and then the ship we will deliver after that. Those are constantly evolving requirements for exactly the reason that you described.
Senator Cardozo: Thank you.
Senator White: Thank you. I have two questions. They are for Mr. Lesko. It is about ships, obviously. I want to hear about Canada’s shipbuilding capacity and its ability to meet the Arctic security challenges as it relates to ice-capable vessels and sustained northern presence. I would like to hear about that.
My second question is how can investments in Canadian shipbuilding, including the work by Irving Shipbuilding, simultaneously advance Arctic security and still meet other domestic security and economic priorities? No easy questions.
Mr. Lesko: Those are tough questions for a simple shipbuilder to answer. Let me start with the first because it is around ship capability. Our focus today is on finishing the delivery of the Arctic and offshore patrol ships. We have delivered six to the Royal Canadian Navy, and we have two more to deliver to the Coast Guard. Those ships are quite unique in that they have ice-breaking capability, and they are mission platforms that support both services in some way in the Arctic.
Beyond that, the River-class destroyer is not necessarily a ship designed for the Arctic. To the extent that Canada has requirements for a combatant that would operate in the Arctic and we knew what those were, we would be able to provide a solution for that.
The design capability to do what you are describing exists in the world, and once those ships are designed, we can build them very effectively. I’m not sure the Arctic presents a particularly unique challenge, but it is unique in that today, people are rushing to that because it wasn’t a requirement in the past.
What Canada has asked us to focus on was initially the Arctic and Offshore Patrol Ships, or AOPS; they have Arctic capabilities. The River-class destroyers that we are building today are not necessarily similar in that capability. However, we have the ability to produce ships like that if we needed to, whether it was a Corvette or some other design that is unique in its polar capability. We can do that. Canada has the ability to do that.
Really, what we have developed is a capability, and there is a big difference between capability and capacity. There is a lot of shipbuilding capacity in Canada. Canada was a shipbuilding nation. That capacity has been idle, and what we have done — as it relates to the surface combatant component of that — through the National Ship Building Strategy is to regain the capability to use that capacity effectively. How Canada chooses to take advantage of the capability that we have to energize or exercise other capacities in Canada, I think, is a discussion around industrial policy that we’re anxious to have. I don’t really know the answer to that yet. In my excitement to answer that, I lost track of the second question. I apologize.
Senator White: That’s a very thoughtful answer. I appreciate your response.
My second question is more about investments in Canadian shipbuilding and how that can advance or meet other security and economic needs in the Arctic.
Mr. Lesko: That is a bit out of my swim lane. I will try. What Canada has done, in my opinion, is a very good job working with us to ensure that the facilities’ capacity and our ability to invest in the workforce development that I described are a robust and sustainable model. I think that model applies to many things, as Canada thinks through what additional investments it wants to make in sovereign defence capability.
As we have struggled, gained ground and progressed, we have learned — and so has Canada in working with us — how to do that, and I think those are lessons that are not just unique to us but could be applied to any number of other industries that go through that same learning curve.
Senator White: Thank you.
Mr. Lesko: Thank you for your question.
Senator M. Deacon: Thank you and your support cast for being here today. It is just wonderful. Procurement is something that I think we have talked about around this table and the National Finance table for a long time. I’m glad we’re back at the table again.
I am thinking about both of you because you come from companies who are established but also happen to be agile and pivot in the work you are doing. If you were sitting at the Defence Industrial Strategy table, what would be your best advice to move this to action — the procurement that we desperately need to have and to see?
Mr. Wilson-Hodge: My advice would be to shore up those companies, those successes that we already have, build upon that, and then move into areas where we might not necessarily have that same sort of depth. I’ll use General Dynamics Land Systems-Canada as a case in point. I think we like to see ourselves as a public policy delivery engine for the Government of Canada. Pick whatever it is; ITBs, we always exceed our ITBs; Indigenous suppliers, we’re delivering on Indigenous suppliers in terms of economic reconciliation and incorporating Indigenous suppliers into our supply chain. If it is jobs, 1,700 jobs; if it is skilled trades, we employ skilled trades.
For those, for us, it is the ability to be able to have certainty by continuing to contract with the Government of Canada that enables us to remain here. It is that certainty with contracts that enables us to then have the stable base to then go off and export. So those are all the things that are being contemplated in the Defence Industrial Strategy, and all the things that I would say are strengths.
We have a robust export business; 82% of our business is export-based. It has been able, through that export business, to enable us to remain very strong and present in Canada. So being able to give Canadian industry and successful Canadian industry the ability to have certainty with the Government of Canada through contracts enables us to carry on in that capacity and then go and pursue, with the Government of Canada and a whole-of-government approach, the export business, which is so challenging to prosecute.
Senator M. Deacon: Going back specifically to your work with that, and this was touched on earlier, but I will come back to it, and that is Canadian content in the defence strategy. The company you come from is General Dynamics Land Systems Canada in London, Ontario. What is it that you understand Canadian content to mean in your business? What messaging have you received from the government on how this should look as you look to bid on defence contracts in a new era of defence spending?
Mr. Wilson-Hodge: I think Canadian content for us reflects a couple of things. It is the work being done here. Is it the touch labour that’s being done on the sustainment side of the business? Is it the intellectual property that goes into developing the cameras, for example, from the L3Harris’ WESCAM that might be on our platform? Is it the tires that are produced in Nova Scotia? Do you have a Canadian supplier with a Canadian postal code? Do you have the work that is actually being done as Canadian work? Those are all things that get measured by our friends at Innovation, Science and Economic Development Canada, or ISED.
Senator M. Deacon: Is there anything you wanted to add based on my first question and the second one?
Mr. Lesko: Sure, a couple of things.
On industrial policy and the Defence Industrial Strategy, we are very interested in what our understanding — what is meant by “Canadian champions.” We feel very much that we are, from a shipbuilding standpoint, and we’re anxious to engage around that.
If I could offer advice on that. When you have a champion, they are most useful when you engage them and bring them problems to solve, as opposed to the government’s view of what the solution should look like.
We are pretty good at solving problems if we have an opportunity. Even with constraints or concerns that we’re self-interested, share those things and give us a chance to deal with them rather than coming up with a point solution that then constrains our ability to solve our problem.
The second, as it relates to Canadian content, if I look program by program, the AOPS program, at this point, is nearing completion. We’ll deliver the eighth ship next year.
That program has — if you measure Canadian content and Canadian vendors — about 80%. We have achieved more than 100% of the ITB requirements.
If you look at actual Canadian touch labour, that 80% is more like 70%.
The River-class destroyer is a bit different because the combat system comes from the U.S., but fundamentally, that same 20% wedge is something that you can’t find easily in Canada, but is common between the two for Canadian vendors.
Now, with time and redesign, you can add those capabilities to the platform. Some of them exist today, and we could have added them on the first three ships, but it would have taken longer to get the design into production, and you would have put more Canadian shipbuilders out of work than you added other Canadian companies.
The message we are receiving from the government is: Where that makes sense — and “makes sense” is different in each case — pursue that if there is a long-term opportunity and there’s a Canadian capability. We’re very much doing that.
I’m sure my counterpart, Lee, is dissatisfied with my answer to that question and would love to tell you more, but that is a big focus for us; it has always been.
The real opportunity to do that is when you’re in the ship-design phase. As I described, on that surface combatant that is an almost endless process.
The Chair: Thank you.
Senator Kutcher: Thank you both for being here today. Both of you come from very well-established companies with long, successful histories.
Mr. Wilson-Hodge, your LAVs are the backbone — your 6.0s now are the backbone of our military capability in that area. And I notice that — along with the Roshel Senator Armored Personnel Carrier — we’re now going to Ukraine, which is great.
Mr. Lesko, when I look out my window from Dartmouth over to Halifax, I see this great big, white building with “Irving” written across it, but I remember when it wasn’t there.
The question — and I did tour the HMCS Frédérick Rolette, and sat for two and a half hours learning how to figure out the electronic systems on the ship; left after two and a half hours and forgot it all within minutes. Very impressive. Incredibly impressive.
The question that I have to ask both of you, as well-established purveyors, how can we be sure that we don’t go through boom‑bust cycles where we lose the capability to continuously produce high-quality armaments, ships and combatant vehicles? Because there was a time when Canada couldn’t do this. How do we, going forward, ensure that it doesn’t happen again?
Mr. Lesko: I’ll try first. I think that’s an excellent question. It’s one that we spend a great deal of time thinking about because — believe it or not — it takes, in some cases, up to a decade of planning upfront to pivot to do something different.
When you build a workforce like ours, for example, stability and their view of that as a career opportunity contribute significantly to whether or not you have attrition.
If you build up and then draw down, the message that sends to the workforce is that the situation is unstable. This is not something you want to bet your career on. We have had very good luck working through the last decade and planning for that, but we’ve reached a point where we really need to engage in a policy discussion of what that looks like.
As Canada talks about a big build-up and then potentially drawing down, our focus is really around how you avoid the situation you have today, where — because you stopped a continuous build capability — you spend more on maintenance than it would take to build a whole new ship, which is the case today on the Halifax class.
I think it involves dedicated industrial policy, planning and discussion. I’m excited about the fact that there is an industrial policy. We are pushing our way into those discussions because that’s exactly what we feel we need to focus on.
We are good at what we do. We get better — we’re focused on continuous improvements. Every part of our organization has measures that demonstrate, from one year to the next, we perform better; safety, quality, schedule and cost. But in order to continue that, we really need to understand what that demand signal will be long term, so we can think through the resourcing of that and how we exercise the supply chain outside the four walls of Irving shipbuilding.
I can go on all afternoon. I will stop if you would like to add?
Mr. Wilson-Hodge: It is very similar, I think, for us, the biggest thing that would secure the business longer term. And I just add very similar points to my colleague. For us, you can’t hire an engineer that understands the mechatronics of a light-armoured vehicle; you can’t hire a survivability engineer; you can’t hire a ballistic welder. These are all skills that are required to be developed and then retained over a period of time. When they go away, because of the boom-bust cycle of our business, it is extremely challenging to reconstitute those skills.
For us, it is in everybody’s interest — Canada’s national interest, GDLS-Canada’s business interest — to ensure that the demand is level, if you will, so we don’t go through tremendous cycles.
A way to do that, really, is around understanding demand and working the procurement system to ensure that we have the army’s requirements, the procurement system, the budgets, and all the things that enable the demand that comes from the army to be satisfied, to ensure that we have the ability to level those out in somewhat predictable ways.
I think there are certainly some discussions around that right now. We’re not asking for Canada to be the sole provider of our business base. What helps with that is the ability for us to export as well. So that also helps to retain some business base for us too.
Having Canada very engaged in supporting an export business enables us to have the demand, if you will, a little more predictable, or to prevent dramatic peaks or dramatic valleys in the business, because you’ve got more customers, if you will, from whom to source the business.
Senator Kutcher: With the procurement strategy, as we are thinking about this problem, we have to ensure that we’re not just responding in a knee-jerk manner to this, this, or this, but we are thinking about how to smooth out the peaks and valleys, because there will be peaks and valleys.
Mr. Lesko: The most important thing to focus on in all of that: If you build a building or you buy equipment, that’s enduring. It does not go anywhere. But the human capital side of that, as he described very eloquently, does go somewhere if you don’t use it and don’t have a plan for it.
This is not theatre, but if you look behind me, this group of people is a product of the last 10 or 15 years. Many of them started their careers in ship building in Canada in Halifax, and today all of them are part of the senior leadership team because of what they learned in those last 15 years. If that demand signal goes away, overnight they will disappear, and you won’t get them back. That’s the difference between capability and capacity.
The Chair: Thank you very much.
Senator Ross: My question is for Mr. Lesko. On March 11, we had testimony from Minister of Transport, Steven MacKinnon, at the Standing Senate Committee on National Finance, where he said:
The dilemma is that we don’t manufacture high-speed locomotives in Canada, and much to my chagrin — I didn’t know this before becoming transport minister — we no longer manufacturer rail steel in Canada.
He went on to talk about other Canadian content, like labour and engineering and other components, and this was for high-speed rail. You have talked about Canadian content. What are the gaps in the Canadian industry or Canadian businesses or Canadian suppliers and Canadian colleges that could be filled? We have got a generational window. These aren’t going to be completed until 2050. What are the gaps that we could fill that are not currently being Canadian filled?
Mr. Lesko: The popular topic is steel, and you mentioned that. I have toured Algoma. They have a magnificent manufacturing facility and process and very modern equipment, and they have the technical capability to produce ship steel. Even when we went to procure steel for the three River-class destroyers, they did not bid on them because, relative to their overall throughput, three ship sets’ worth of steel wasn’t very much when what they were focused on was the auto industry.
We are working with them today because, even though it would not reflect a whole lot of their output, it is still output for them, and they have the capability to produce that steel. I believe we will get to the point where things like that can be produced here in Canada.
There are other components, complicated components. The reduction gear, for example, on the River-class destroyer is common to the type 26 platform, which is the parent craft designed in the U.K. for this program. The reduction gear is made by a U.K. manufacturing firm, David Brown Santasalo. That’s something that, probably, with time and investment could be built in Canada. Then the question you have to think about it does that make sense? Is there enough of a market that you could break into that would be worth investing in? Or does it make sense, based on the technology or other constraints that you would have to overcome, to continue to buy that from somewhere else?
In that 20% measured by Canadian firms, we think there are 36 additional vendors in that group where there is a capability today in Canada that, with either some redesign or qualification of their components, could be brought into that program and will go look for that. Our contracts require that. There are incentives around that drive us to do it. The balance is always how long does that take and how much it cost, because if it slows down our ability to deliver, that frustrates the navy. I think everyone recognizes that where this is something that Canada has the capability to produce it, we should look for a way to get that to come to the ship. And where we can’t, we focus on ITB content, and we’re very successful with that.
Senator Ross: You talked a bit about that rapid evolution of C drones and that sort of thing. I was very pleased to hear that you are able to be nimble and flexible in terms of innovation. The shape of the ship will stay the same, but the components that are part of it will change over time. How much do you expect to see change from the time of the first ship being delivered in 2030 until the final one in 2050? What percentage of those components do you think will change?
Mr. Lesko: The only way to answer that question is to draw on the 32 years of experience I had in U.S. ship building and focus on the Arleight Burke-class destroyer programs and the DDG 51s. If you look at that ship and certain combat capabilities, from the ship that was delivered in 1990 — the lead ship — and the ships they are building today, many of those capabilities are 50 or 60 times on a comparable basis as capable as they would have been in 1990. The threats have evolved to challenge those things. Again, what the ship contributes to all of that, other than the fact that it carries all of the different innovations in combat-system technology or war-fight technology, is space and weight and a stable platform and power and cooling. You keep evolving the ship in order to meet the demands of those systems that provide that military capability. I think those will continue to evolve at that same rate, if not faster, which challenges the whole ship design concept and then the people making those systems that generate power. Or the design of the ship for how it uses power. Technology exists today where you generate power not just for propulsion or combat systems, but common power generation, and then systems split that for propulsion and combat systems. There are a number of innovations that exist in order to take advantage or optimize the use of those limited constraints that you have on any platform. Over the life of these ships, which is likely to be 30 or 40 years, practically speaking, they will provide a basis to host those different systems I think effectively or as effectively as anyone can predict today. History says it will work.
Senator Ross: One last thing. Being from New Brunswick and there are a few of us here from Atlantic Canada, I can’t help but say, “A rising tide lifts all boats,” and I want to know what is the impact on the Atlantic region and the financial impact.
Mr. Lesko: So the work at Irving Shipbuilding drives across Canada, about 10,600 jobs overall. Over 4,000 of those jobs are in Nova Scotia alone, and others continue to spread. We’re talking about how to do pipe manufacturing in New Brunswick, for example.
I think what you will see is, as the demand for our capacity increases, you don’t have to do all of that work yourself. We have built that capability over the last 15 years. Now what we look to do is exercise other capacities using that capability that we have. To your point, the closer this is to the shipyard, the easier it is to take advantage of.
It is not a direct answer to your question, but as I said, this is my 36th year in ship building. I have seen the videos of the Saint John shipyard where they dismantled the cranes, and it actually makes me emotional. When you close a shipyard, that has a tremendous effect, and generally speaking, it does not return. There is a drywall plant there today, which is a wonderful facility and does a world-class job, but it is not a shipyard. This is a capability that Canada has built and done it faster than I think anyone would have bet on. The results of it today are something to be extremely proud of and extremely guarded about protecting.
Senator Ross: Thank you.
Senator Dasko: Thank you, witnesses. I also toured Irving Shipbuilding about three years ago, and it was very impressive, and I spent 24 hours on the HMCS Harry DeWolf, so I was able to see how that worked. That was quite wonderful.
Procurement is the subject of our investigation, and procurement problems are legendary in DND. I wanted to ask you both about your experiences with procurement and whether the government sought your advice on procurement issues, especially the issues that you had and your experiences with, and whether you have any recommendations for the process and how to make it better? Also, we now have a new procurement agency, but we also have a lot more money, so to me, this actually spells trouble because it suggests that the government wants to cut corners as they go forward. They have money to spend. It doesn’t fit together in my mind very well that there’s a new process, and yet they have to put a lot of money through it.
I’m very concerned about value for money, and I’m concerned about taxpayers and whether we’re going to have the accountability that we need, given all of the new contingencies. There are new opportunities, obviously, but the issues of procurement have been so entrenched. Can you tell us your experiences and reflections and thoughts about this process and about how we go forward, given the new context that we’re in?
Mr. Lesko: Part of the point you’re making we talk a lot about. Actually, spending more money isn’t that hard. Ensuring that you get value for that requires a good deal of planning.
Senator Dasko: That’s the point, yes.
Mr. Lesko: I made a point earlier about engaging and describing. The government describes problems they need to have solved. Industry can help with the solutions to those things. Those are important, and I’m seeing promising signs.
Deputy Minister Reza recently wrote to us asking for help to find opportunities in each of our programs that would deliver greater value. Those are all things that we have for each of our three programs. On the ship repair side, we’re looking, literally, to create opportunities to reduce the amount of time and money that we spend on those things by 50%. We have ideas that will bring that kind of transformational change to that process. We have, over the last three years, looked for opportunities to engage with Canada on that.
On the River-class program, Canada cannot get us to deliver those ships fast enough. It’s interesting; we talk about capability and selling outside. I’m often asked if we could sell our products outside Canada. My answer to that was, “Not if Vice-Admiral Topshee found out we were doing it.” Right? He’s anxious for us to produce for him fastest. But that says, how do we go faster with all of those things? We have solutions for that.
Deputy Minister Reza’s most recent request of us is really the first formal opportunity we’ve had to feed that back. I think she is sincerely looking for that feedback. Over the last year, we’ve had better traction around taking those ideas and finding a willing audience.
You would find that encouraging because it suggests, for people who now feel like they have resources who didn’t necessarily feel that way a year or two ago, they are leaning forward and thinking about how to use those more effectively and seeking that feedback from us.
Mr. Wilson-Hodge: Thank you for the question, senator. From my perspective, the Defence Investment Agency is a very positive sign that the government is trying to do something to address the issues relative to procurement and the procurement processes.
We have certainly offered inputs into Senior ADM Siobhan Harty’s defence procurement reform initiative, for which she was responsible prior to taking on her current portfolio. We have offered up a number of ideas around that. Because we deal with militaries around the world, we do have some international experience and exposure relative to different contracting methods. We’ve offered up some of those suggestions.
You also had a question regarding volume and value for money. From my perspective, one of the things that is important to heed is, “What is measured gets done.” If you’re measuring for no risk, that is a measure. If you’re measuring for capability output, I would suggest that’s the measure that we might be looking for currently. When you’re measuring for capability outputs in a procurement system, there will be some risk. Officials need to be empowered and delegated to have the appropriate authorities to move as expeditiously as they can.
Mr. Lesko: In understanding the role, in most of these things, the result is not delivered exclusively by industry. There’s a partnership between government and industry. Industry’s tendency is to measure everything they do and focus on how to improve that and how it contributes. The government struggles with that. They view themselves often as an oversight body. In reality, they have a contribution equal to or greater than our own in that process but seldom have the same ability to measure. It’s difficult for industry to push on that because then you become kind of an irritant.
Those are suggestions we will make as well as we look at program performance. The River-class program has a unique contract architecture. A significant portion of our profitability depends on performance. That performance is defined as the performance of the whole system, which seeks to pull in the government component of that. When we work well as a team, the outcome is significantly different than it is when we just work in our parallel paths.
The Chair: I have a question for both of you on defence spending and what the country gets out of this, but two of my colleagues will ask their questions first.
Senator Al Zaibak: My question to Mr. Lesko relates to your export base, past and potential. Percentage-wise, could you compare that to government procurement and the impact of the Canadian government’s procurement on the volume of your export? That’s one question.
The other question relates to whether you receive any preferential treatment in the U.S. with respect to their procurement.
Mr. Lesko: I’ll answer your second question first. We directly procure very little from the U.S. The combat system is a government-to-government sale, so the government of the U.S. provides that to the Government of Canada, and then we integrate that into the ship.
Senator Al Zaibak: What about procurement of your products?
Mr. Lesko: We sell very few products into the U.S. As I said, the vast majority or 100% of what we produce today is either for Canada’s existing navy, the Canadian Coast Guard or for the new program. One hundred per cent.
Senator Al Zaibak: And the first question?
Mr. Lesko: First question, I think, was what percentage of our output is for export, and today that is none.
Senator Al Zaibak: Potentially?
Mr. Lesko: The potential is there, but, again, it will be some time before there is an opportunity that goes beyond Canada’s own internal demand signal.
Senator Al Zaibak: Thank you.
Senator Cardozo: Quickly, any comments on skills development and youth employment in your industries?
Mr. Wilson-Hodge: We are very interested in skills development and employing youth, particularly university students, college students and those who have recently graduated.
We have internship programs. We have programs that bring in engineers from university and give them some experience doing software development or mechanical engineering, whatever it might be, and even some in my area, in the business development area.
We hope that, once they graduate from university, their experience will bring them back into General Dynamics. We have found that, in fact, to be the case. Once they come and work for us, they do want to come and have a career with us, and we have been very fortunate in that. We usually see employees who come and start to work with us will stay with us.
Mr. Lesko: I would echo everything he just said. We have had great luck with our apprenticeship programs. We have one of the largest apprenticeship programs in Canada and certainly the largest in Atlantic Canada. Our production workforce doubled between 2020 and 2024. Much of that was through apprenticeships, and our safety quality schedule and cost performance over that same period of time actually improved dramatically. We’ve had fantastic luck focusing on the newer end of our workforce through apprenticeships and production.
We find that those people also have very low attrition. They view what we have as a long-term offering, and it’s a career opportunity for them. Our attrition is less than half of what the Canadian manufacturing average would be and maybe 20% of what the U.S. average is today.
The Chair: Gentlemen, I have a question. As the government ramps up this military spending, we are in a relatively stable political space where people are not questioning the government about the direction and what needs to be done. That’s for a variety of reasons. They are looking around the world and not feeling so secure. They are looking to our friends to the south and not feeling as neighbourly as they used to feel. Of course, over time, all of this will change and will evolve based on how the country sees this challenge.
Both of your companies are unionized, so your workforce is highly paid. In the context of military spending, Canadians don’t hear very much about the people who benefit from that, the people who are producing the ships and those who are manufacturing the vehicles you are producing in London, Ontario.
How will you incorporate that conversation in what you’re telling parliamentarians about what you do? All they hear about is the sophistication of the ship we are building. They are not hearing about all the skills that are going into it and the people who live in those communities who spend that money in those communities, which gives incredible value to ensure those communities will be sustainable for a long period of time. But it also comes back to the last point you made, which is that you’re incorporating apprenticeships and creating the next generation of those who will work in the industry.
How do you tell that story so that Canadians are able to appreciate that this is not just about buying ships; it’s also about the kind of workforce and the kind of country we want to have people grow up and live in because we are highly sophisticated in the skilled industry. They need to hear that more so than they hear about the wonderful ships you’re building and also the wonderful labs you are producing. I know all about it, and I know the two unions that represent your workforce. How do you tell that story so that they have more appreciation for military spending and don’t see it simply about purchasing equipment and seeing that our neighbours’ jobs are dependent on the fact that we are spending this money?
Mr. Lesko: We have not cracked the code on that. Over the last three or four years, as our performance has been something that is really quite good, we have struggled with how to describe that.
Internally, we’ve done pretty well because we’ve gone from a struggle for resources where we had turnover to what I described, which is very low attrition. Word is out in Halifax that this is a good place to come and work, so that’s a victory.
However, taking that story, whether it’s through social media, advertising or other things, not just about our workforce, but the supply chain as a part of that — those 700 vendors — and figuring out how to share that success so that people share in the pride of all of that is something that we recognize that we need to do better.
We are actively pursuing opportunities to do that today, but I don’t think we can declare success, and it’s really important.
We have a very good relationship with our union leadership, and one of the things we talk about is this: How do we convince Canadians that what they are spending — because, as you said, the jobs that we have pay very well — adds value? How do you behave and hold yourself to a standard that demonstrates that you recognize that and that you are earning their trust and confidence?
We joke about taxpayers being reluctant investors in what we do. I think that’s accurate. We recognize that performance is an important component of that, and part of what you see us out describing in terms of what we’ve accomplished is to try and demonstrate that performance so that there is confidence overall in Canada in the products that we produce.
Certainly, for us, there is more work to be done.
Mr. Wilson-Hodge: For my portion of the answer, I would encourage you to go to defendcanadasfuture.com, which is a microsite we have developed that underscores the impact that General Dynamics Land Systems-Canada has to Canada. A very brief description is that it’s 13,400 jobs across the country in 100 communities with 600 suppliers and 1,700 direct workers in London, Ontario. We’re about 5% of the London economy, so it’s a tremendous impact.
How do we tell that story? I mentioned the microsite defendcanadasfuture.com. That’s one way. We try to push that out on social media. We had it up in bus shelters in the parliamentary precinct, and we help anybody that comes through our plant understand the challenge that is the defence business in terms of retaining skilled trades and the importance of skilled trades to producing such complex products. We characterize this as a fighter plane on the ground.
We try to ensure that our local community, as well as everyone across the country, understands the impact these jobs have on the community in terms of the complexity of the engineering resources that are required to design the product, our suppliers and the fact that the components they design, produce and build have a real impact on their communities as well.
We describe all this in great detail to those who come to visit our plant, and we also ensure, as best we can, that we communicate that to parliamentarians so that they are aware as well.
Could we do better? Absolutely, but it is extremely important for Canadians to understand that producing vehicles like the light armoured vehicles that we manufacture or ships is a complex endeavour, which is a complex thing to project manage, design, build, deliver and sustain. We’re happy to be able to do that, and we are very privileged to be in that position.
The Chair: This brings us to the end of our time. I want to thank you both for being here and sharing your experience, thoughts and vision for the industry and the work we need to do as we go forward.
We greatly appreciate it. If there is anything you can add to the committee’s study that you want to put in writing, please do so. We have some time before we will finish our report.
We greatly appreciate you taking the time to be here with your delegation, as such. Thank you so much for being here.
We have one item to consider in relation to the Subcommittee on Veterans Affairs. As you may have seen, the subcommittee will resume their study on veterans’ homelessness and have requested that papers and evidence gathered during the previous session relating to their study be referred to the committee. A motion was adopted in the chamber before the break week regarding those papers and evidence. In order for the subcommittee to be authorized to use this information, a motion must be adopted in committee.
I will read you the motion quickly.
Therefore, is it agreed:
That the papers and evidence received and taken and the work accomplished by the Subcommittee on Veterans Affairs during the first session of the Forty-fourth Parliament under the order of reference relating to:
(a) services and benefits provided to members of the Canadian Armed Forces, to veterans who have served honourably in the Canadian Armed Forces in the past, to members and former members of the Royal Canadian Mounted Police and its antecedents, and all of their families;
(b) commemorative activities undertaken by the Department of Veterans Affairs Canada to keep alive for all Canadians the memory of Canadian veterans’ achievements and sacrifices; and
(c) continuing implementation of the Veterans Well-being Act;
Be referred to the Subcommittee on Veterans Affairs?
Is it agreed to adopt that motion?
Hon. Senators: Agreed.
The Chair: Thank you, colleagues.
(The committee continued in camera.)