THE STANDING SENATE COMMITTEE ON NATIONAL SECURITY, DEFENCE AND VETERANS AFFAIRS
EVIDENCE
OTTAWA, Monday, April 20, 2026
The Standing Senate Committee on National Security, Defence and Veterans Affairs met with videoconference this day at 4 p.m. [ET] to examine and report on defence procurement in the context of Canada’s commitment to increase defence spending.
[English]
Ericka Paajanen, Clerk of the Committee: Honourable senators, as clerk, it is my duty to inform you of the unavoidable absence of your chair and deputy chair and to preside over the election of an acting chair. I’m ready to receive a motion to that effect. Senator Youance?
[Translation]
Senator Youance: I nominate Senator Carignan.
Ms. Paajanen: Thank you.
[English]
Are there any other nominations?
It is moved by the Honourable Senator Youance that the Honourable Senator Carignan do take chair of this committee. Is it your pleasure, honourable senators, to adopt the motion?
Hon. Senators: Agreed.
[Translation]
Ms. Paajanen: I declare the motion carried. I invite the honourable Senator Carignan to take the chair.
Senator Claude Carignan (Acting Chair) in the chair.
The Acting Chair: Honourable senators, welcome to this meeting of the Standing Senate Committee on National Security, Defence and Veterans Affairs.
My name is Claude Carignan and I am a senator from Quebec. I am pleased to be the acting chair for the first part of this meeting. Senator Yussuff should be joining us later in the meeting.
Before we begin, I will ask my colleagues to introduce themselves.
[English]
Senator Kutcher: Usually, you go the other way.
The Acting Chair: In the Finance Committee, we go from the left side.
Senator Kutcher: I never knew you to be left-leaning, Senator Carignan.
The Acting Chair: That is my way of being on the left.
Senator Kutcher: Thank you. Senator Kutcher, from Nova Scotia.
Senator Ince: Welcome. Tony Ince, Nova Scotia.
Senator Osler: Senator Flordeliz (Gigi) Osler, Manitoba.
Senator Dasko: Senator Donna Dasko, Ontario.
Senator Cardozo: Senator Andrew Cardozo, Ontario.
Senator M. Deacon: Welcome. Senator Marty Deacon, Ontario.
Senator Hay: Senator Katherine Hay, Ontario.
Senator White: Senator Judy White, Newfoundland and Labrador.
[Translation]
Senator Youance: Suze Youance from Quebec.
The Acting Chair: Thank you very much.
For this first panel of witnesses, we are pleased to welcome Ms. June Winger, National President of the Union of National Defence Employees. We also welcome, via video conference, Mr. Travis Farrell, President, and Mr. Adam Slaunwhite, Business Agent from Unifor’s Local 1 of the Maritime Workers. We also welcome Mr. Brandon Dyck, International Representative of the International Brotherhood of Electrical Workers.
Thank you all for joining us today and for accepting our invitation. We invite you to deliver your opening statements, which will be followed by questions.
We will begin with Ms. June Winger, who has four to five minutes for her opening remarks.
The floor is yours.
[English]
June Winger, National President, Union of National Defence Employees: Thank you, Mr. Chair and members of the committee, for the opportunity to appear before you today. My name is June Winger, and I am here on behalf of the Union of National Defence Employees representing more than 22,000 civilian workers who support the Canadian Armed Forces, or CAF, across Canada and abroad.
Our members work in trades, logistics, engineering, administration, research, firefighting and many other roles that are essential to the CAF’s operational readiness. Put simply, the military cannot function without the civilian workforce that supports it.
Canada is at a critical moment right now. There is strong momentum to increase defence spending and accelerate procurement. But the question is not how much we want to spend; it is whether the system can actually deliver it. From what we see on the ground, there is a growing gap between funding and outcomes. Projects are delayed, costs are increased and, in too many cases, the expected capability simply isn’t delivered.
These are not isolated incidents. They point to deeper structural issues in how our procurement system operates.
Over time, the procurement system of the Department of National Defence, or DND, has become more complex, more fragmented and increasingly reliant on external contractors. We are often told that contracting out is more efficient. But my members see the opposite. We see higher costs where the contracting out can lead to markups of up to 35% compared to doing the same work in-house.
And yet we know that every $1 invested in the public service returns up to $1.77 to the Canadian economy.
We see weaker oversight and fewer reliable outcomes. At the same time, internal capacity is being eroded, making the system even more dependent on contractors over time.
A key driver of this trend is the growing role of Defence Construction Canada, or DCC. DCC was intended to support infrastructure delivery. However, today, its role has expanded significantly; contracting out has become the default approach.
The ArriveCAN situation showed us how quickly costs can escalate, oversight can weaken and accountability can become blurred when work is heavily outsourced. And in defence contexts, the risks are even greater because we are not just talking about money but also infrastructure, readiness and the safety of the CAF.
At CFB Wainwright, military families were eager for the $18-million construction of the new Military Family Resource Centre. Within months of opening, the building had to be shut down due to an improperly installed HVAC system, electrical failures and design flaws that made maintenance not only difficult but, at times, impossible. Daycare services were displaced into temporary facilities because mould was found in the walls and lead was discovered in the drinking water. Public service tradesmen had raised these issues before the building was accepted, but those concerns were not acted upon by DCC.
Now the taxpayer is on the hook for remediation costs to the vacant building exceeding $2 million, and it is not finished yet. This is not just a construction failure. It is a failure of oversight, accountability and quality control.
There is another issue that we need to address, and that is capacity. We have heard for decades that the public service cannot staff quickly enough and that contracting out is the only option. If staffing is a problem, the solution is not to bypass it; it is to fix it.
So we need the increase in defence spending. Investments in rebuilding internal capacity equip the CAF with the capabilities and support they need to protect Canadians.
The CFB Wainwright example shows what happens when the system fails, and this is just one example among many across the country.
From our perspective, three things are essential: We need to rebuild internal capacity within DND; reduce reliance on contractors and subcontracting; and strengthen transparency and accountability.
If we do not fix the system, its structure, its accountability and its capacity, we risk sending money out the door that does not achieve outcomes for our country.
The real question is whether we continue down this path or take the opportunity to course correct.
Thank you. I look forward to your questions.
The Acting Chair: Thank you.
Travis Farrell, President, Marine Workers Local 1, Unifor: Mr. Chair, Honourable Senators, thank you for the opportunity to appear before you today.
My name is Travis Farrell, and I am the President of Unifor MWF Local 1, representing the skilled shipbuilders at the Halifax Shipyard. Unifor MWF Local 1 represents over 1,000 members, tradespeople and office staff across Irving Shipyards, Marine Fabricators and ABCO Industries. Our local has remained steadfast since 1945.
I’ve been at the shipyard for 13 years and have seen first-hand the industrial capability that has been rebuilt in Halifax over the past decade. As you heard from the company, facilities and processes create capacity. People create capability, and I want to focus on the people, our members, behind that capability, and what the National Shipbuilding Strategy has meant for them.
For the first time in a generation, shipbuilding in Canada offers stability.
Before the National Shipbuilding Strategy, this was a boom-and-bust industry. Workers were hired for a project and laid off when it ended. Skilled tradespeople left the industry or left the region altogether because they could not count on steady work.
That is no longer the case.
The long-term commitment made by the Government of Canada has given our members something they did not have before: confidence in the future and confidence that if they enter the trades, they are investing in a career. That confidence changes behaviour.
It allows workers to commit to their trade and to the organization they’re part of. It’s not just a job. It allows apprentices to invest the time required to become highly skilled journey persons. And it allows experienced workers to stay in the industry, pass on their knowledge and continuously improve their craft.
We are now seeing a new generation enter the trades for that reason. Young people are choosing shipbuilding because they can see a future in it. They are learning from experienced workers and becoming the next generation of experts that Canada will depend on.
That is how expertise is built.
The National Shipbuilding Strategy has created thousands of good-paying jobs here in Nova Scotia and across the country. These are skilled trade positions that provide family-sustaining wages, benefits, and long-term stability. For many of our members, this is the difference between precarious work and the ability to build a life, buy a home and raise a family in the community.
The National Shipbuilding Strategy represents one of Canada’s most ambitious industrial programs and offers lessons for broader defence procurement. It shows how long-term procurement timelines and risk tolerance can advance manufacturing and develop skills capabilities.
The National Shipbuilding Strategy is a blueprint for the Defence Industrial Strategy.
Any Canadian industrial strategy should recognize that our labour is the cornerstone of economic development. The foundation of a reliable domestic supply chain for advanced manufacturing is the workers and the skills developed here in Canada. As such, the Defence Industrial Strategy should seek to expand our domestic production capabilities and worker skills.
Public procurement in the defence sector should support good union jobs that support decent compensation, training and health and safety necessary to attract and retain a highly skilled workforce.
The impact goes well beyond the shipyard.
Every job at the Halifax Shipyard supports additional jobs across the supply chain. Local businesses, suppliers and communities all benefit from the economic activity generated by this work.
From our perspective, continuity is not just an economic issue. It is a strategic one.
What has been built over the past decade in Halifax is not just infrastructure. It is a highly skilled workforce that Canada relies on to deliver its naval capabilities.
Sustaining that workforce requires the same thing that built it in the first place: long-term commitment and predictable work. When workers know the work is there, they invest in their careers. When they invest in their careers, Canada gains a deeper, more capable and more productive workforce.
That is the real return on the National Shipbuilding Strategy.
Thank you.
The Acting Chair: Thank you, Mr. Farrell. The next witness is Mr. Brandon Dyck. Sir, you have five minutes.
Brandon Dyck, International Representative, International Brotherhood of Electrical Workers: Thank you.
Honourable chair and senators of the committee, thank you for the opportunity to address you today. My name is Brandon Dyck, International Representative and Government Affairs Coodinator. I appear before you representing the International Brotherhood of Electrical Workers Canada, or IBEW Canada. We represent 70,000 highly skilled tradespeople, employed by the more than 8,000 businesses that power this nation — the workers who build, maintain and secure the critical infrastructure that keeps Canada running. This includes construction, manufacturing, public and private utilities, telecommunications, shipbuilding, paper mills, renewable energy and, of course, defence.
Today, this committee is examining the future of our national security and defence funding. I am here to submit that national defence is not solely about procurement, technology or geopolitical posturing. It is fundamentally about capacity. You cannot build a resilient defence network without a robust, highly trained and secure domestic workforce.
IBEW Canada strongly supports the Carney government’s recent and overdue commitments to bolstering our northern defences. The historic announcement of $32 billion directed specifically toward Arctic sovereignty, part of a broader generational strategy exceeding $40 billion, signals a critical and necessary shift in Ottawa. Prime Minister Carney’s mandate to move Canada “from reliance to resilience” in the North is the exact right posture in an increasingly volatile global landscape.
Funding is only the first step. Execution is where sovereignty is secured. Upgrading our forward operating locations in Yellowknife, Inuvik, Iqaluit and Goose Bay; establishing new Northern Operational Support Hubs; and fast-tracking the Taltson Hydro Expansion project are massive undertakings. These are not merely defence projects; they are highly complex energy and infrastructure megaprojects. Modern military hubs require immense electrical capacity, fortified grid security and advanced telecommunications networks to execute this vision on land. Canada will need the absolute best tradespeople on the ground. Beyond our land-based operations, this same principle applies to our maritime domain as we look toward the recapitalization of the Royal Canadian Navy and the Canadian Coast Guard — specifically the heavy polar icebreakers and Arctic offshore patrol ships required to project power in the High Arctic — we must recognize what a modern ship actually is.
Today’s naval vessels are not just hulls of steel; they are floating power grids and mobile data centres. They are incredibly complex networks of combat systems, propulsion and secure communications. The marine electricians and technicians of IBEW Canada are the ones wiring the nervous system of our naval fleet at shipyards across this country.
Yet our National Shipbuilding Strategy will falter if we do not aggressively invest in the domestic trades pipeline required to meet its demands. Sending billions of dollars to domestic shipyards is critical, but it is undermined if those yards are forced to rely on temporary foreign workers because we failed to align our procurement schedule with workforce training. We need ironclad commitments that naval procurement contracts are tied directly to domestic apprenticeship quotas and workforce development.
This brings me to our primary recommendation for this committee across all defence domains: We must ensure that this historic defence funding is inextricably linked to robust Canadian labour standards.
When the federal government injects billions into Arctic sovereignty and naval recapitalization, those taxpayer dollars must be leveraged to build our domestic workforce capacity. We strongly urge this committee to recommend that all major infrastructure projects funded under this Arctic defence plan be executed under comprehensive Project Labour Agreements, or PLAs.
PLAs guarantee that complex projects are completed on time, on budget and without costly work stoppages. More importantly, in the strict context of national security, they ensure a tightly vetted, highly skilled and reliable workforce. Our northern bases, radar arrays, power generation expansions and next-generation warships cannot be left to lowest-bidder contracting models that frequently cut corners on safety, security and quality.
Furthermore, we need to embed strict prevailing wage requirements into every tier of these defence contracts. By establishing a firm floor for wages and benefits, we protect the integrity of the local labour market and ensure that these critical defence investments actively uplift northern and Indigenous communities rather than exploit them.
National security infrastructure must be built by Canadians. IBEW Canada remains deeply concerned by the continued overuse of the Temporary Foreign Worker Program, or TFWP, in our domestic construction, marine and energy sectors. When it comes to securing our Arctic and building out sensitive military assets, relying on the TFWP is both a glaring security vulnerability and a massive missed economic opportunity. We must prioritize the training, apprenticeships and deployment of domestic workers, forging ironclad partnerships with Indigenous communities across the North to build lasting local capacity.
The Carney government has declared that Canada is finally taking full responsibility for defending our Arctic sovereignty. The workers of IBEW Canada are ready to build the infrastructure and the fleet that make that sovereignty a reality. Whether it is wiring the new Northern Operational Support Hubs, building out the power grid expansions necessary to heat and light these remote facilities or installing the complex combat systems on our next generation of icebreakers, our members are ready to deploy.
We ask this committee to ensure that the legislation and funding mechanisms passing through this chamber respect the workers who actually hold the tools, attach Project Labour Agreements to these massive expenditures, mandate prevailing wages and protect our domestic labour market from TFWP exploitation on national security projects. If we want a “true North, strong and free,” we must build it with Canadian hands, under Canadian standards and with the strongest labour protections in the world.
Thank you. I welcome your questions.
The Acting Chair: Thank you. We will start with questions from senators, who will each have four minutes. Please keep your questions succinct to accommodate for longer answers.
Senator Cardozo: I wish to thank the witnesses for being here. These are very important issues.
I want to ask about youth employment. I think this is a once-in-a-generation opportunity to employ young people.
Ms. Winger, I hear your message. In the last paragraph of your remarks, you mentioned you had three recommendations. I wonder if you could repeat those because I only heard one.
Mr. Dyck, I wonder if you could tell us more. In terms of TFWs, what percentage of workers are currently temporary foreign workers? What are we talking about there?
In a sense, Mr. Farrell, I don’t need an answer from you because you kind of answered the question with flying colours in terms of the youth employment that you are preparing in terms of apprenticeship, but you are welcome to add if there is time. I had an opportunity to visit the Halifax Shipyard and found it impressive.
Ms. Winger, I will ask you to go first and mention what your recommendations were and any comments you may have about youth employment.
Ms. Winger: Thank you for the question.
The three essential changes that we have identified are rebuilding internal capacity within National Defence; reducing reliance on contractors and subcontracting; and strengthening transparency and accountability.
Your reference to youth employment flows in with the rebuilding of internal capacity with National Defence. National Defence used to have a thriving apprenticeship program. It was a way to attract young workers. In fact, that was how they brought me in: by introducing women into the trades. We used to fund this before any other federal government department. We were the first with this apprenticeship program, and it was excellent. They had separate funding directly for that. Regardless of whether you were army, navy, air force or research, you would be able to tap into this amount. It wouldn’t come out of your salary wage envelope, or SWE, dollars and you’d be able to get the apprenticeship.
Since we have been cutting back on that internal capacity with all of the reductions from the 1990s onward, we really haven’t seen that any longer, and that would be an excellent initiative to bring back for the youth and feed into that.
Senator Cardozo: Thank you. Mr. Dyck, your thoughts?
Mr. Dyck: Certainly. It’s difficult to tell you exactly what percentage of TFWs are used on National Defence construction projects as of right now. With construction in general, organized labour is, at maximum, 30% market share.
The TFWP has been used to depress wages and take away the bargaining capacity of local unions across the country. Unfortunately, the Labour Market Impact Assessments are very opaque and difficult to track. I think Immigration, Refugees and Citizenship Canada can probably provide you with some more up-to-date data on that. There are definitely construction electricians and industrial electricians being brought in — you can search for them by National Occupational Classification, or NOC, code — for construction projects when we still have unemployment at many of our local unions.
We can meet any demand. I believe the IBEW can meet the demands and recruit workers into this industry without the need to resort to temporary foreign workers as a short-term fix.
Senator Cardozo: I see this as your central recommendation. Is it a 5% or a 40% problem? If it were 5%, it wouldn’t be such a big deal, I would suggest. If it were 40%, it’s a bigger issue.
Mr. Dyck: Even at 5%, it’s an issue because that gives employers the opportunity to apply for a lower-wage worker when there are already workers available here in Canada.
Again, it’s above 5%, but it’s on a project-by-project basis. The areas we’re seeing these applications for TFWs come in are typically rural, where the infrastructure is going to be built. We have workforces available and ready in urban areas, and we can train in the rural areas where these workers are needed.
I disagree that 5% is not a number to worry about, but I’m certain it’s higher than that.
Senator Cardozo: Thank you.
Senator Kutcher: Thank you all for being here virtually or in person.
My question is to Ms. Winger and to Mr. Dyck together. You mentioned concerns about contractors taking on particular jobs. You talked about a lack of responsibility and oversight. You gave the Wainwright example.
Could you help us better understand the scope of this problem? What percentage of contractors are we talking about? Give us some concrete examples of some of the problems that have happened because of what you have seen. That is my first question.
For both of you, the new DIA will be taking over some of the procurement. What very specific suggestions do you have to avoid these kinds of problems?
Ms. Winger: Thank you for the question.
Yes, we have many issues. As I said, Wainwright was just one example of many. Honestly, you could name a base, and I could tell you a significant problem we’ve experienced from a contractor there.
It wasn’t long ago when we had an explosion in Comox, where contractors were working on housing for the military. They didn’t do the appropriate checks, and their equipment hit a gas line and exploded, resulting in a number of injuries, though, fortunately, no deaths. There are challenges with that.
I’m from Suffield, Alberta, where I worked in the Counter Terrorism Technology Centre. We had an indoor training arena set up so we could use live chemical and biological agents. They didn’t put the appropriate filtration system into the arena, leaving it so we could not get approved by the Organisation for the Prohibition of Chemical Weapons to have live agent training, nor would we have met the environmental standards.
I can also pull from the fire hall in Suffield, Alberta, where they developed a brand-new fire hall, which was great because our previous one was filled with asbestos. There were a number of difficulties there. They built this fire hall, but they built it so that it was accessible.
When you think about firefighters, they are typically larger-than-average personnel, and they were working in a building that was purpose-built for an accessible firefighter when they would never pass the fitness test to become a firefighter. They built it for somebody who will never actually exist while ignoring the people who do.
I could go on and on. In Halifax, we have structures being built over entrances so that when parts of the building are decaying and falling on top, it provides protection for those walking in and out of the buildings. In Esquimalt, they had a big gate being built to get rid of the security where you would be able to just use passes and just go through this turnstile. However, they built it so small that people couldn’t manage to get through. It wasn’t accessible, and people wouldn’t be able to walk through with their rucksacks.
It’s just ongoing, and it’s every single day, all the time, that we have these issues. The challenge is that they’re not being built by the people who have to deal with the outcomes and care about whether it works. That’s what we need to do. That’s what we had when we had internal capacity within National Defence. When we had our thriving base maintenance offices, when we had all our tradesmen in there, we were able to fix things. We were able to work on things and get them repaired right away, but this immediate reliance on contractors has stopped all of that. It’s just become this massive money pit where nobody is happy at the end.
[Translation]
The Acting Chair: Thank you very much.
[English]
Senator M. Deacon: Thank you to our witnesses in person for joining us today as we carry on with this procurement study. I’m going to start by going back to something that we were reminded of last week, and that is part of this buying Canadian policy in our new Defence Investment Agency, or DIA.
We heard from other members of the industry last week that while the DIA will put a “buy Canadian” focus on contracts over $100 million, there are many procurement contracts that fall below this number. For these procurements, we heard that Canadian industry feel they’re not even known and not even getting a chance to get at the table much less building for the Canadian Armed Forces. I’ll open it to you first, Ms. Winger, and then our guests online. What are your thoughts on this? Do you agree with it? Do you disagree on it? Why do you think there’s this perception out there?
Ms. Winger: I do want a Canadian policy. I want to see Canada thrive, and I want to see the money stay in Canada and the workers really be able to thrive, but this has to be done with a very strategic, thoughtful approach. Right now, the race is on to get the money out the door, and I’m concerned with what that is going to look like in 10 years or 15 years — even in 5 years.
So when we look at those contracts that are under $100 million, it’s not always that newsworthy or interesting, but it really impacts the workers, it impacts the Canadian Armed Forces and it broadly impacts their families as well. When we go back to the Wainwright example, sure, we had all those problems. We have all these additional costs, but we had those children that were sitting in rooms with mould on the wall, and the CAF members were relying on the department to be able to provide a safe place for their children to be sitting. So now they have to wonder where the priority is here.
It’s really important that we take a strong look at what we’re doing, how we’re spending that money and making sure we’re doing it appropriately. I know I’m the union rep at the table, so you can probably predict what I’m going to say here. I’ve worked on too many trials where we just stop everything because the machinist has been laid off, and we don’t have a machinist anymore. So now we have to wait for somebody to go take something down to Medicine Hat and get our widget fixed or created or whatever. That’s going to take two or three weeks because we’re not the oil field companies and we’re not going to get the priority that they do.
It just continuously perpetuates the problem, and it compounds. When you look at the contracts under $100 million, it’s every day. It’s in everything that we do, and it’s avoidable. I’m so glad you’re doing this.
Senator M. Deacon: Can I grab my extra time to hear from any other guests today? I didn’t know if any of them had thoughts on this whole DIA piece.
The Acting Chair: For the other witnesses, do you have something to add?
Mr. Dyck: I could probably speak to this. With the $100‑million floor, I believe it could be lowered.
The IBEW represents workers with both the construction contractors and the DND employees themselves working in the shipyards. So we understand the issues with procurement. We think that it’s the type of contractors being hired to do project work. There could be higher standards set to make sure that the quality of tradespeople being brought in to complete these projects can be established through better checks on trades training and the apprenticeships and journey persons employed on these projects, as opposed to lowering the standards.
What we’re hearing from our members within DND is that they are not electricians that are installing solar panels at some of these sites, they’re not certified tradespeople, and that is what is impacting the quality of work. So if the “buy Canadian” mandate could be lowered because some of these projects are smaller projects — they’re installing maybe heat pumps or solar panels or upgrading plumbing — within that, we can set those labour standards as well.
Senator Ince: Thank you, everyone, for being here. My question is for anyone who would like to answer it.
What are some of the barriers to achieving the objectives outlined in Canada’s Defence Industrial Strategy to create 125,000 defence industry jobs throughout Canada within the next 10 years?
Mr. Dyck: I can probably also speak to that. You’re going to need training. Post-secondary institutions have done an okay job at providing skilled tradespeople, but industry-led union training centres also have the highest completion rates when it comes to training tradespeople. We are also equity-seeking groups because our collective agreements are designed to ensure that minority rights-seeking groups are included in the process as well. We have some of the highest participation rates from Indigenous membership in our public and private sector employers, so recruitment and training are going to be essential parts of meeting that goal.
The Acting Chair: Okay.
[Translation]
Would anyone like to add anything? No? Thank you.
[English]
Senator Ince: Ms. Winger really talked about it already, but what risks do procurement and in-service functions that rely heavily on contractors as opposed to public servants face? Can you speak to some of those risks? You already highlighted a few places in Wainwright and a few other places, but are there other risks?
Ms. Winger: Yes, we’ve certainly seen risks. We’ve seen challenges where we’re having difficulties with security clearances, so we know that there are contractors entering secure areas without adequate clearance because their company has been approved already for the clearance, and that becomes a problem when they have new employees. There’s a significant backlog in achieving these clearances, especially when we get to the higher levels, like top and super. That becomes very challenging.
There are all sorts of issues with just not being able to have the work that we need and the support that we need. While we talk about whether the contractors are doing the work properly, or whether it’s being fulfilled in its entirety, it’s the consequence of that, as you’re trying to point out.
So when I think about my training and we’re out doing some testing, that could leave five NATO allies sitting out in a field, waiting for a week while we’re waiting for the widget to come in from Joe’s machine shop downtown. So these just become constant burdens for us.
Then the result of that isn’t just that we’re sitting around but that work is not getting completed. We’re not getting the outcome of that trial. I’m sure you can see where that would go too.
Senator White: Most of my questions have been answered or asked through my respective colleagues. But I am curious, and I’m wondering if you could each provide practical steps that your respective unions are taking to ensure that we support local, hire locally and address our regional labour shortages. Could you provide that, please?
Adam Slaunwhite, Business Agent, Marine Workers Local 1, Unifor: I can answer that for Local 1 at the Halifax Shipyard. We invest in our people. Most of our people are Red Seal or apprentices. Like our colleagues, we’ve already been down to low employment, and the turnover rate was high, but now we’re on the higher end in our workplace, so we’re consistently going to high schools and junior high schools. We have a very active committee along with the employers, so we’re doing a lot of outreach. We’re getting a lot of buy-in from local people in the Halifax area.
We don’t really have an issue with that. We just have to keep training within and hiring.
Mr. Dyck: I could add to that. Our trade training schools across the country, in partnership with our local unions, have done a great job of meeting the demands on an ad hoc basis. Sometimes, if projects require special training to meet delivery, we can bring that into the training centre; for instance, when it comes to defence, there are special requirements for those workers to meet, like security clearances. We can actually, using our dispatch system, ensure that those workers have the clearances needed and dispatch them effectively, regardless of who the contractor is who wins that bid. We’re supplying that workforce as opposed to having to re-create it at every single turn.
Ms. Winger: Just as the previous speakers mentioned, we’re strongly advocating for the trades and apprenticeship programs being reinvigorated in National Defence, but we’re also challenging the department to take a look at the contracts they have with multinational companies and ask them to review those and do a true value assessment to determine whether that work would be better served in-house, or if it should be done by a contractor — then assess if the contractor they have is the right contractor as well. So that’s an ongoing issue that we’ve been dealing with for quite some time and will continue. Thank you.
Senator White: Thank you.
Senator Hay: I am thinking about the capacity gap that I’m hearing about, and I’m also thinking about the changing workforce of the future. I’m going down an AI path here. How do you see the impact of AI technology on the workforces that you all represent? With that — if it’s relevant, I suppose — what is the AI-skilling strategy for the training of a new workforce and the up-skilling of the existing workforce? In your opinion, will AI technology of the future help or hinder the capacity gap?
Mr. Slaunwhite: I’ll answer that as best I can. We currently have the best shipbuilders in the country, I think. My colleagues would probably think their members are the best, but I think ours are. Currently, AI can’t get into a double bottom and do some overhead welding, but our people sure can. We’ll have to deal with it when we get there, but right now I think we’re good in the shipbuilding industry in Halifax. We’ll have to see what challenges come up.
Senator Hay: Thank you.
Mr. Dyck: I would have to agree. AI won’t be doing the hard work that our membership does in building this infrastructure until there are physical robots capable of doing so, and I don’t see that happening any time soon.
Ms. Winger: While I appreciate the previous speakers each thinking their union is the best, I know mine is. But I can tell you with certainty, we also represent those employees’ communication and security establishments, so we are well versed in some of the security issues that are going on with AI and the work that is being done to overcome that. I know there’s a lot of nervousness around that, but I think there’s room for complementary work together so that we ensure that the information we’re gathering through AI is reliable and will assist the members in being able to get their work done.
Certainly, that is something that is going to be moving forward, but it’s not necessarily unique to us. We do that when we are looking in our labs; we use AI routinely, but under a very controlled environment.
Senator Hay: I suspect your workforces are using AI more than we all are, more than we know, but I’m hearing there’s not a worry about your workforce, job loss or jobs shifting because of AI. Thank you.
Senator Dasko: My question has to do with issues of procurement. One of the reasons we undertook the study was procurement has been an issue for a very long time, apparently, within DND. Now, as you said, Ms. Winger, the government has to get the money out the door even more so now than in the past because we’ve made a commitment to increase defence spending.
I’d like to ask all the witnesses about what they think in terms of improving procurement. What do you think are the two most important things that should be done in this environment to improve the situation, if possible, even though we’re trying to get a lot more out the door?
I ask everybody if they have an answer to this. Thank you.
Mr. Slaunwhite: I can speak to that on the shipbuilding, at least. It’s really important that we stick to our build sheet. We’re ready to build the new vessels, but I think we have to keep it as is for now. We need to get at least one or two ironed out before we start changing things. We saw that was a big problem in the past, when the navy or the coast guard changed the platform around, so I think that would be a very big benefit for us at the Halifax Shipyard for sure.
Ms. Winger: I think it’s a good question. Really, it comes back to this: We need to ensure we are strengthening that transparency and accountability. That has to happen. That’s what we learned from ArriveCAN and so on. It’s making sure that transparency and accountability exist. When people are rushing to get that money out the door, sometimes those are the first to go, because they seem to be a bit of a barrier to that speed. But there’s always a solid rationale for why that exists, and we have to make sure that we put the effort in so that continues.
Mr. Dyck: These issues of procurement aren’t necessarily unique to government, and in the utilities sector, we represent both the contractor, or the private side, and the public side as well. I think there’s a culture that needs to be fostered where the right contractors with well-qualified workers work in conjunction with the public sector and there is that communication and accountability between the two, as opposed to opposition. We’ve demonstrated in the past that this is probably one of the best models we have — those members working within the same local union — and I think that can probably be a model that is replicated within the federal government and defence as well.
The Acting Chair: Thank you very much.
Senator Osler: Thank you to all witnesses for being here today. Many of my questions were answered, but I’m curious about the training pipeline and the current skilled workforce Canada has. We’ve heard about restarting or increasing interest in trades and apprenticeship programs. Perhaps I’ll start with the witnesses from Unifor and then open it up to the others: What has the reception been to that advocacy to strengthen or restart the apprenticeship programs, and, generally, how long is that pipeline? Will we have these skilled workforces in time for when many of these defence projects get approved?
Mr. Slaunwhite: I’ll jump on that one first. As I said earlier, we’ve had some ups and downs, and in that time, we’ve been able to train our workforce. I believe we train the most apprenticeships of all trades, in Atlantic Canada. We’re the biggest employer for them, and they’re pretty successful. In the past 10 years, it’s got a lot better. I think our average worker is around 40 now. We’re growing more and more every year, so I think we’ll be ready to go when it’s time.
Mr. Dyck: Our IBEW locals on the West Coast, 213 and 230, which represent workers in Vancouver at the Victoria shipyards, have a great training program, working with the employer Seaspan, to meet the demand as they need it and deliver specialized training for marine electricians. We have a great partnership where they can come to us. We utilize federal funding, such as the Union Training and Innovation Program, or UTIP, not only to get those workers up-skilled from journey status to become a marine electrician but also to recruit those apprentice electricians who want to be shipbuilders and can now look forward to long-term careers in shipbuilding on the West Coast.
Ms. Winger: The department and the commanders of each element are quite interested, if I’m reading the room correctly when I’m with them. They are quite interested in the apprenticeship program. The challenge that they had through the years was having the funding available. Now we have all sorts of money, so we could easily fund this apprenticeship program. That would go a long way toward providing employment for our youth and training Canada to get rid of some of those gaps we have in the trades.
The lengths can vary on those apprenticeship programs, as you would expect. Will things be on time? I guess it depends on what it is that we’re forecasting. I don’t know that’s really a fair question, with all due respect, because we always have to be planning for tomorrow. That’s what the apprenticeship programs need to be doing and that’s the whole goal of them. If we don’t start today, we’ll never be ready for whatever tomorrow brings, so it always has to be happening. We’ll be ready when that apprenticeship is complete for whatever comes up.
[Translation]
Senator Youance: Could you tell us a little more about mobility — for example, the movement of certified electricians or skilled workers from one shipyard to another and from one province to another? Is this an issue in light of future major defence funding?
[English]
Mr. Dyck: That one is for me. The short answer is no. We’ve made a commitment to the Prime Minister, not just on defence projects but on all major projects, that we will enable mobility for our workers. That starts with standardizing safety practices, training across all provinces and setting a high watermark so that when a worker leaves Manitoba or Newfoundland for an Arctic project, they have the necessary qualifications, whether it be their Red Seal, a journey person status, or operating a lift and hoisting and rigging. We also enable that through our training programs across the country. We utilize the newest technology, such as virtual reality, for hoisting and rigging so they can practise in a safe environment and then put those skills to the test virtually before even testing them in the real world. I think our training programs help meet the mobility issue-and-mobility questions.
[Translation]
Senator Youance: My question is for Ms. Winger.
You spoke at length about design issues and concerns regarding the safety of workers and the people who will use the buildings. How could the procurement process be changed to strengthen internal oversight, reduce design errors, and ensure that work performed by subcontractors complies with various technical and operational standards? Or do you not want subcontractors? That could be the answer.
[English]
Ms. Winger: Thank you for that. I think it’s really important that when we have contractors — and I agree that contractors are required — we need them for surge capacity, and we need them for specialized skills that we wouldn’t otherwise be working with. When we have them, we need to make sure that we have the appropriate personnel who are qualified to review the work and make sure that it’s being done appropriately. For instance, when we think of DCC overseeing a contract, they’ll probably have an engineer’s degree, and they’ll be coming in and making sure the work is being done. But they don’t have the expertise that our brother here from IBEW probably has, where he can talk about exactly what the code is with electrical. When we look at welders, they’ll be able to say exactly what the challenges are with plumbers and such.
Being able to coordinate that together would go a long way in making sure that those who are going to be caring and maintaining the facility afterward fully appreciate how it’s been built. They’re able to have confidence that it’s being done appropriately, rather than just having somebody who is doing their very best but simply doesn’t have that knowledge to be able to make those recommendations.
Does that answer your question?
[Translation]
Senator Youance: Yes. Thank you.
The Acting Chair: Earlier, you mentioned the delays in obtaining security clearances. That seems to be an issue. Could you first tell us what kind of security clearances you’re referring to? Are these clearances based on criminal background checks, or do they extend to highly classified security clearances? Is that the type of security clearance we’re discussing? And, depending on the different types, what are the current processing times and backlogs for obtaining these security clearances, to your knowledge? We’ve heard this a few times regarding companies that want to supply equipment, where they have to get clearances for people in their factory. There seem to be delays in this regard. In your case, what have you observed?
[English]
Ms. Winger: Security clearances have been an ongoing issue with National Defence since before COVID. Then, once the COVID restrictions came up, they really compounded because those people, of course, weren’t able to complete their work from home, nor were they able to go to the office for a period of time. That really bogged down the system.
National Defence recently implemented new processes with new software to try to expedite this process of getting those clearances, but there are still challenges, and there’s still quite a backlog. I was speaking with some people from HR who were telling me that they had over 100 people in one section alone who they were waiting to hire but couldn’t get through the security process quickly enough to be able to expedite that.
In order to have enhanced reliability, which is our lowest standard, it will take at least a month. They like to project that the benchmark is two weeks, but it has been at least a month. We have seen top secret security clearances taking a couple of years. That is significantly different from when I first started, but it is something that the department is grappling with and trying to address.
When I mentioned contractors going into secured areas without their clearance, that is not an uncommon occurrence. Unfortunately, when it comes to some of those lower-valued contracts with cleaners, food services and that sort of thing, they are continuously rotating staff, and they are not able to maintain that security clearance, but they will tell people to go in, do the work and stay within certain confines. However, it is still outside of that parameter.
Our members do recognize this, and they bring it to their command structure as early as possible. All of that is to say that it does still happen and is still a challenge.
[Translation]
The Acting Chair: You’re saying there is a two-year delay for top secret clearance. Is that an average? Is this anecdotal or has it happened several times, but it’s not the rule, the rule being a shorter average than that?
[English]
Ms. Winger: Top secret is a bit of a challenge to get sometimes. It depends on how complicated the file is. I would say that probably the best-case scenario would be around the nine-month point, but for anyone who has lived a little or done a few things, it might take longer.
[Translation]
The Acting Chair: That brings us to the end of our time with this panel. We will resume with the second panel.
Thank you very much for accepting our invitation. It was very informative. Your participation is always important. Your testimony was extremely relevant. Thank you very much.
[English]
Senator Hassan Yussuff (Chair) in the chair.
First, let me express my sincere thanks to my colleague Senator Carignan for chairing for me. I am Hassan Yussuff, senator from Ontario. Thank you. Welcome. I chair this committee.
For our next panel, we’re pleased to welcome Andrew Hayes, Deputy Auditor General, Office of the Auditor General of Canada; as well as Isabelle Marsolais, Director, Office of the Auditor General of Canada; and Alexander Jeglic, Procurement Ombud, Office of the Procurement Ombud.
We thank you for joining us today. We will begin by inviting you to provide opening remarks followed by questions from senators. You each have five minutes. We will start with Ombudsman Jeglic. You may begin.
Alexander Jeglic, Procurement Ombud, Office of the Procurement Ombud: Thank you, chair.
I would like to begin by acknowledging that the land on which we gather is the traditional, unceded territory of the Algonquin Anishinaabe people.
Thank you, chair and honourable members of the committee, for inviting me to appear before you. My name is Alexander Jeglic, and I have served as the Procurement Ombud since 2018.
I am pleased to appear alongside members of the Office of the Auditor General to discuss defence procurement, an issue that is increasingly vital as Canada undertakes significant investments to strengthen its defence capabilities.
[Translation]
I previously appeared before this committee in June 2024, but I would like to take a moment to briefly reintroduce my office.
It was established in 2008 as a neutral and independent organization to help address procurement issues between Canadian suppliers and the federal government.
[English]
We review supplier complaints, provide mediation services to help resolve contract disputes and conduct systemic reviews of procurement practices across roughly 90 federal departments and agencies.
We operate at arm’s length from all federal organizations, including Public Services and Procurement Canada. While I report to the Minister of Public Works and Procurement, who is required to table my annual report in Parliament, the minister has no involvement in day-to-day operations or the content of my reports.
Defence procurement represents one of the most complex and high-value areas of federal procurement, and it is critical that it be carried out in a manner that is fair, open and transparent, and also timely and effective.
It is widely known that the Government of Canada is undertaking significant reforms related to defence procurement, such as establishing the Defence Investment Agency to streamline major procurement processes and adopting a new Defence Industrial Strategy to bolster Canada’s sovereignty and resilience.
While these changes show great promise for improving the system, they remain in the early stages of implementation. Significant work remains to fully transform defence procurement into a system that consistently and reliably delivers the capabilities Canada requires and that strengthens domestic supply capacity.
[Translation]
I previously appeared before the House Standing Committee on National Defence in 2023 on the topic of defence procurement, and shared some suggestions on potential areas for improvement. While my office has not yet conducted a systemic review exclusively on defence procurement, we hope to do so in the near to medium term, subject to available funding.
[English]
At this time, we are nearing completion of a knowledge-deepening and sharing research study examining Canada’s defence procurement system for major projects, expected to be released in May of this year. This work is intended to provide timely, meaningful insights as Canada transitions from its legacy procurement model to a more efficient and accountable system.
Beyond the defence context, my office has identified five foundational changes needed to improve the federal procurement system as a whole. These were developed in consultation with industry leaders, procurement experts and key stakeholders within government.
First is the creation of a Chief Procurement Officer at the federal level to provide centralized leadership and accountability.
Second is the creation of a government-wide vendor performance management program to ensure supplier performance is meaningfully considered in future contracting decisions.
Third is the development of a single, universally applicable set of federal procurement rules to simplify processes and reduce fragmentation.
[Translation]
Fourth, we must adopt artificial intelligence advancements to modernize federal procurement tools and systems. Finally, we must establish a framework for procurement data collection to increase the transparency of federal procurements and support informed planning and decision-making.
[English]
Since the identification of the five foundational changes, we have seen great enthusiasm for these ideas and some concrete steps toward their implementation. These developments suggest positive momentum and provide a basis for cautious optimism in these five crucial areas.
We will continue to push for the implementation of these five changes, as Band-Aid solutions are no longer acceptable. They will also serve defence procurement well as it navigates this new era.
[Translation]
Before I close, I want to emphasize that, as the Procurement Ombud, my office has a unique role. We exist solely to focus on federal procurement, and we have a government-wide lens that allows us to see the full picture.
We hear directly from both Canadian suppliers and federal buyers. This unique perspective gives us valuable insight into both the challenges and opportunities that the procurement system faces.
[English]
As Canada increases its defence spending, ensuring that procurement processes remain efficient, accountable and transparent will be critical not only for value for money but for maintaining trust in public institutions.
My office remains committed to supporting all stakeholders in strengthening these systems and to continuing our efforts to make federal procurement more fair, open and transparent, as well as timely and effective.
Lastly, I encourage this committee to further explore a blind spot for our office that is critical to the success of defence procurement. Crown corporations sit outside my formal mandate but have grown in significance in the defence space. I would strongly encourage the committee to look at how the existing cadre of Crowns can be further leveraged to deliver on Canada’s defence agenda. In addition to the new DIA, the committee should explore how Defence Construction Canada, the Canadian Commercial Corporation, Export Development Canada and the Business Development Bank of Canada can be further leveraged.
[Translation]
This committee plays a critical role in promoting transparency and accountability, and I appreciate the opportunity to be before you today.
Thank you.
[English]
The Chair: Thank you, Mr. Jeglic.
Andrew Hayes, Deputy Auditor General, Office of the Auditor General of Canada: Mr. Chair, thank you for the opportunity to appear before the committee as part of its study on defence procurement in the context of Canada’s commitment to increase military spending.
I would like to acknowledge that this hearing is taking place on the traditional unceded territory of the Algonquin Anishinaabe people.
Joining me today is Isabelle Marsolais, a director of our audit of future fighter jet capability, which was tabled in June 2025.
I will focus my remarks on three themes that have emerged from our audits of defence procurement and that are relevant in the current global context. These themes are: delays and changes in scope when renewing equipment and its fleet, the availability of skilled personnel and weaknesses in inventory management.
First, delays in renewing equipment and the fleet have real operational consequences. When new aircraft or ships are not delivered on time, older equipment must remain in service longer than planned or be retired before replacements are ready. This increases operating and maintenance costs and can limit operational capability.
We have seen this pattern across several audits. For example, in 2021, we audited the National Shipbuilding Strategy, which aims to deliver more than 50 science and defence vessels over the next 30 years. We found significant delays that were linked to design and construction challenges affecting many ships.
We also found delays in our 2022 audit of Arctic waters surveillance. Those delays increased the risks of gaps in surveillance, patrol and presence, as aging satellites and patrol aircraft may reach the end of their service lives before replacements are operational.
The replacement of Canada’s fighter jets provides another example of delays affecting readiness. Canada purchased its CF-18s in the early 1980s, and they remain in service more than 20 years past their planned service life.
While the government committed in late 2022 to acquiring 88 F-35A fighter aircraft from the United States, our 2025 audit of the Future Fighter Capability Project found that cost estimates had significantly increased since 2022 and did not account for all the elements needed to achieve full operational capability. Key infrastructure projects were more than three years behind schedule, requiring interim solutions that will further increase costs.
[Translation]
This leads me to our second theme: having enough skilled personnel is essential to support operational readiness. In the case of fighter jets, National Defence expected to spend almost $3 billion to buy and operate Australian aircraft to extend the life of its fleet, but it did not have a plan to address the shortage of experienced pilots. Buying additional aircraft alone was not enough to meet both NORAD and NATO requirements.
Subsequently, our 2025 audit of the Future Fighter Capability Project found that the planned pilot training program for the F-35s would fall short of producing enough pilots by 2032–33 to meet operational requirements. More recently, in our October 2025 report on Canadian Armed Forces recruitment, we found that recruitment and training remain a challenge for Canada’s military. In particular, the Canadian Armed Forces did not recruit and train enough people to meet its needs — especially for highly skilled occupations, like pilots and ammunition technicians.
The final theme I want to discuss is inventory management. We have raised concerns in this area through our financial audits for about 20 years. In addition, our 2020 performance audit of the military supply chain found that units received essential items, such as spare parts, uniforms and rations, late 50% of the time. These delays, often caused by stock shortages, hindered National Defence’s ability to operate efficiently. Taken together, these audits underscore the importance of timely equipment and fleet renewal, reliable supply chains, and having enough skilled personnel. Weaknesses in any of these areas increase the risk of capability gaps that can undermine Canada’s ability to meet its domestic and international commitments or, in a crisis, impede a rapid military response.
Mr. Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have.
Thank you.
[English]
The Chair: Thank you for your opening remarks.
Now we will proceed to questions. Our friends will be here until 6:10 p.m. We will do our best to allow time for each member to ask their questions. Four minutes will be allocated for each question, including answers. As always, I ask you to keep your questions succinct and identify the witnesses you are asking the question to.
Senator Cardozo: Thank you. I would like to get an understanding of the different roles that you play, both as the ombud and as the Auditor General.
We have a situation where the government has decided to move fast with this enormous amount of procurement for reasons that the U.S. and NATO are pressing us on. We are not debating that part. What is your advice about how they should make this large procurement at a high speed and do so in a way that doesn’t run into trouble?
Mr. Jeglic: I can start with an answer. Would you like context on the background of my office first, or would you like me to directly answer your question?
Senator Cardozo: The difference between the two, please.
Mr. Jeglic: In terms of differences, the way I see the office, we have a mandate by way of legislation. In simple terms, I am still an ombud, so I am here to help and to make the federal procurement system work better. More specifically, I review complaints, provide mediation services and do systemic reviews. Where there are similarities to the OAG, we provide systemic reviews, which are quite similar in nature but somewhat different to the audits performed by the Office of the Auditor General.
I can directly answer your question. I have a fair bit of guidance that I could provide the committee.
As I mentioned in my opening remarks, we are producing a paper that we are going to publish in May, specifically on the topic of considerations as to how improvements could be made, particularly on large projects. I also noted in my opening remarks that the establishment of a Crown corporation with the exclusive responsibility of defence procurement at the highest levels and most sophisticated, complex projects is a step in the right direction.
I know your question regards what trappings they should avoid. I will simply say that there has been a lot of focus on the acquisition side. I would also encourage an equal amount of thought or more thought to be put toward the contract management side because I think that is the tail of the contract. Once you award the contract, there is a lifeline that can be 20 to 30 years, so we want to ensure that the value is delivered, and there are a lot of considerations there.
One of the things I mentioned was the creation of a vendor performance management framework. I’m not sure if the committee is aware, but that is currently lacking in the federal system. That’s why that is a foundational change.
But when I specifically think of the defence space, as we have elements where we want to see contributions to the Canadian economy, I think it is critical that we track those in a systemic way. A vendor performance management framework would enable that to happen.
I have a lot more to say, if I’m allowed, but I want to turn the mic over to my colleague, and if I have additional time, I will return to the question. Thank you.
Mr. Hayes: Thank you. The Office of the Auditor General has broad audit powers. We are established by legislation, the Auditor General Act, but we also have powers in the Financial Administration Act related to Crown corporations. In essence, we have the ability to audit any government organization, including Crown corporations. We do annual financial audits of Crown corporations and special exams periodically. When it comes to the federal government, we typically have a presence in the defence space at least once every year, sometimes twice every year.
In terms of what our audits have told us, again, our audits are based on auditing standards, so the rigour and effort that goes into those audit reports are stringent, and you can rely on the information that we present to you.
There are two or three things that I will say.
Define needs clearly and early so that when you’re moving forward with a procurement process and dealing with suppliers, you know exactly what you’re looking for. Sometimes you have to be prepared to be flexible, but if you have a clear picture of what you want and you can define that early, it will make everything move faster and more efficiently.
Second, not every procurement process needs to be complicated. Even if it is for a big purchase, particularly things that you might often be procuring, there are ways to be more flexible and simple.
And finally, use current information to make decisions. We will use the F-35 report, the recent one we tabled in 2025, as an example. Having up-to-date cost estimates that take into account all the essential elements that you need to obtain in order to make those jets ready for combat, using all of that information in a timely way will set the government up for success.
[Translation]
Senator Carignan: My question is for the Office of the Auditor General.
You mentioned the studies you conducted on the F-35s to assess Canada’s ability to meet its obligations under NORAD and NATO. I was looking at the figure of 88 F-35 jets. This is a figure that has been established and discussed for quite some time. It’s been about 10 years, in a geopolitical context that was completely different from today’s. Have you examined whether the capability and the number of 88 should be increased to respond to the new geopolitical reality?
Especially since, when I compare this figure — apart from Brazil with just over one jet per 100,000 square kilometres — there isn’t a single G20 country that uses one jet to cover 100,000 square kilometres. We’re very far from those figures. Have you looked into these points?
Mr. Hayes: No, we haven’t looked into that. It’s really a political decision. We reviewed the procurement process and identified areas where there were gaps and delays. The government was responsible for making the decision to purchase 88 of them.
Senator Carignan: So, when you say you assessed their ability to meet their obligations, it was regarding the provision of 88 jets, the verification that they are operational and that they have the necessary equipment and personnel?
Mr. Hayes: That’s correct. We also assessed the costs.
The other Arctic surveillance audit was an example of an audit that addresses the armed forces’ capabilities to protect our country. Now, there are gaps in this regard. I believe there was a recent announcement stating that a drone would be used for surveillance. It is up to the government to assess and identify the ways in which they will operate to protect the country.
Senator Carignan: Thank you.
My next question is for the ombud.
It’s always a pleasure to see you. Did the government consult you when it decided to create the agency? If so, what input did you provide that is not reflected in the agency’s terms and conditions?
Mr. Jeglic: Thank you for your question.
First of all, it wasn’t a formal consultation. It was when we made an announcement about the fundamental changes. It concerns the five elements I just mentioned here. We spoke with the minister before the agency was created. We discussed what we were hearing about defence in general.
It is important to look at other organizations involved in defence or procurement. I believe they will serve as a solid foundation on which to start the process of establishing the new agency. I think they have begun consultations with the other Crown corporations.
Senator Carignan: So, the CCC will serve as inspiration?
Mr. Jeglic: I hope so.
I’d like to mention one positive aspect: Defence Construction Canada, or DCC, is doing a truly excellent job of contract management. I just mentioned contract management. We didn’t conduct a review ourselves. However, we did consult with DCC. I believe this is a valuable experience we can draw on to determine how to manage these 20- and 30-year contracts.
[English]
Senator Osler: Thank you to all the witnesses for being here today. My question is for all the witnesses but perhaps starting with our Procurement Ombud. How can Canada improve fairness in and increase accessibility to defence procurement processes, particularly for small- and medium-sized enterprises seeking to enter the defence supply chain?
Mr. Jeglic: It’s a great question for us because we deal with a lot of small- and medium-sized suppliers, and we hear their stories. I think they’re asking for simplification across the board. So the lack of simplification to defence in general was considered a barrier, and simplification is part of the movement in procurement in general always. So I can talk about simplification regardless of what your question was, but specifically for small- and medium-sized businesses, that’s a big part of it.
Senator Osler: What are you hearing from SMEs — simplifying which part of the process?
Mr. Jeglic: I say this respectfully, as someone with a legal background, when you actually review the documentation, it’s particularly cumbersome. If that’s your entry point to figure out if you want to participate in a process or not, the realities are that becomes a systemic barrier. Many small- and medium-sized suppliers are often not going to be the prime. As a result, they’re not bidding on the contracts themselves, and they are trying to figure out how to fit into the supply chain elsewhere.
That becomes an odd piece of advice for the federal government to give, because it’s how you can engage with primes, so there’s a networking component to that. But there are certain policies that the Canadian government is looking to implement that are designed to ensure that Canadian companies form part of that supply chain in a robust way. Again, time will tell if that will happen, but certainly, the intentionality is there now.
If I may, on the transparency piece, I think that’s a critical element because defence procurement can sometimes lack transparency; therefore, it’s really important that, as the process moves forward, that becomes one of the seminal tenets. So if the invocation of the national security exception becomes the rule rather than the exception, then I think transparency is something that shouldn’t be lost. That will also encourage people to trust in the system, and that applies not just to small- and medium-sized suppliers, but to all suppliers.
Mr. Hayes: I would simply add that having a forward-looking approach to the needs that the Canadian Armed Forces face will be a critical element of that. If you’re putting together a procurement process at a late stage, and you are trying to achieve too much in a procurement process, it will make it cumbersome and difficult for small- and medium-sized organizations to bid on government contracts.
Couple that with the comment I made earlier about flexible approaches and being clear about the needs for your procurement, those will help to make it more attractive to small and medium organizations.
I think that, in some cases, there are some disincentives in large procurements.
For example, I’ll use our Industrial Technological Benefits Policy audit to say that there were some suppliers that we encountered who said they didn’t propose a bid on some of these contracts because of what might be complicated reporting and participation requirements.
Having a look at who your potential suppliers are and structuring your procurement with that in mind will be a way to increase participation.
Senator Osler: Thank you.
Senator Kutcher: Thank you all for being here. Chair, I have a request of Mr. Jeglic, which I would appreciate not being taken off my time.
Sir, would you be able to send this committee a copy of the paper you’re going to publish? Mr. Chair, would you allow it to be admitted into evidence, please?
The Chair: Yes.
Senator Kutcher: Thank you.
We’re hearing about serious problems, and these are not to be taken lightly. This impacts our ability to defend our sovereignty, and it also puts our CAF members in harm’s way.
Mr. Jeglic, you mentioned that procurement needs to be timely and effective, but what we’ve heard over and over from witnesses, including from the office of the ombud, is that it’s neither timely nor effective. There’s been a failure of responsibility and oversight. Who is responsible? Why do we have this failure of responsibility and oversight? If we don’t know why this has happened and who is responsible, how are we ever going to fix it?
Can you help us understand the answer to that question? Where is the responsibility?
Mr. Jeglic: That’s a very fair question. I think accountability is central to what I would describe as the ongoing problem in procurement. Ultimately, you need accountability. I’m not going to get into the foundational changes, but I am advocating for the creation of a Chief Procurement Officer. The reason for that is to create singular accountability to add some clarity to what is a very cumbersome governance of federal procurement.
In terms of the failure, I will simply say that the creation of a new agency is meant to address some of the governance failures. You have many actors who are currently implicated in the governance model for defence procurement, and each one plays a critical role, but they’re not always pointed in the same direction. Each one of them has slightly different motivations within their respective mandates, so pulling everyone together in one organization, I think, is a critical step forward.
In terms of the failure of the oversight, I’m happy to take accountability when it’s due, but I will certainly say this: I’ve been the ombud since 2018, and I have been making recommendations around federal procurement diligently. I have been following up, to the greatest extent possible, with parliamentarians, bureaucrats, members of industry and members of the public. My role is certainly to bring accountability and make sure that the recommendations that we make are, in fact, implemented. We do follow-up reviews and assess implementation on all of the recommendations, and we publicly and transparently publish that on our website.
I will say that one of the failure points is accountability, and I think that is being addressed by the creation of the new agency. The rules are also sometimes cumbersome, and I think there have been steps taken to help streamline some of them. The processes, as my colleagues have mentioned, are cumbersome in nature, so there is work under way.
I can’t speak to this. This is an optimistic viewpoint, but I think what this committee should do is bring accountability. In the new strategy, there are timelines identified as to what should happen and when. I suggest that those be included in the report of the committee and that you hold those same people accountable for what they say in the strategy. That’s where this starts. If we want to have a successful movement toward the goal, then you have to take the steps necessary.
I would simply say that we’re taking the right steps, but we have to be accountable for what we say.
Senator M. Deacon: Thank you to the three of you for being here. It’s not easy. I really enjoy that we have the Procurement Ombud and the Office of the Auditor General represented at the same table and in the same moment. You might not like it, but I certainly do.
My first question is to Mr. Hayes, if you don’t mind. In October of last year, your office released a concerning report on the state of military housing. I want to dig into this one a little bit. Fast-forward to February of this year, and the Minister of Defence announced the second phase of Canada’s national housing construction program and a major expansion of military housing that plans to deliver 7,000 or 8,000 new residential houses across Canada.
Does this action, this phase two plan, respond to your concerns from October? Does it make things all good from October? Will it make up for the housing shortage, or is it a drop in the bucket?
Mr. Hayes: Thank you.
I would say that it’s a step in the right direction, but part of our findings in that report related to the importance of maintaining housing. You can make an investment in housing, but if you don’t maintain those buildings, over time, they’ll have problems and, eventually, they might not be usable.
It’s great to build, but I guess I would put it like this: An ounce of prevention is worth a pound of cure. If you maintain your assets, they’re going to be useful for a lot longer. With the government’s announcement of additional funding to increase recruitment and with the importance of our military folks getting properly trained in various places, the importance of housing is interconnected. What the military can do to maintain the status of its current stock of housing is as important as building new housing.
Senator M. Deacon: Thank you very much. I appreciate that.
Mr. Jeglic, my question is pretty straightforward, I think. As you reflect on your team at this moment, is your office sufficiently staffed and resourced for the historic amount of military procurement that you are about to or planning to take on?
Mr. Jeglic: I think that’s a fair question.
In terms of what we’re going to take on in our specific capacity, our mandate is clear. The review that we’re doing right now is part of our knowledge-deepening and sharing exercise. Part of that is building community knowledge, and the piece will actually do two things. It will talk about how the system worked historically and then what the system should consider as it undergoes all of these changes, which I think is very aligned with this committee’s work. I’m happy to provide the committee an embargoed copy once it’s complete.
In terms of if we have sufficient resources, if you’re not sure, I’m not sure. We’ve been asking for additional resources for some time now. We did receive a small increase to our budget, but I would argue that it’s not commensurate with the request that we made. Do we have sufficient resources to pursue all of the procurement needs that we would like to look at? The answer is no.
Senator M. Deacon: Could you clarify that? Could you be more specific? What do you need to do the job right and well?
Mr. Jeglic: We asked for an additional $3.5 million and received an additional $1 million.
Senator M. Deacon: Thank you very much.
Senator Ince: Thank you all very much for presenting to us today. It’s been very interesting.
A couple weeks ago, we had a number of small businesses in the defence industry appear before us. They had indicated to us that there’s very little knowledge of them and that they are quite successful in the U.S. and internationally in doing business.
What do they need to do to make sure they’re connected in these procurement processes?
Mr. Jeglic: Thank you for the question. I can borrow a bit from my previous experience.
I did work in the United States previously, so I have seen what other countries do for some of their suppliers internationally. I would suggest, if you’ll allow the analogy, they’re better at putting their arm around their businesses abroad than we are.
I will also say many of the mechanisms to acquire defence-related equipment and goods are much easier in other countries. I have heard that frustration from Canadian suppliers. One of the first questions a foreign government asks is, “Have you sold to your home country?” And when you answer no to that question, it’s quizzical; they ask, “Then why do you expect to sell internationally?” Yet they’re still successful internationally, so it’s almost overcoming two hurdles in one. Then the question becomes this: What can Canada do to help the small- and medium-sized suppliers? I would say by leveraging the existing policy that has recently been implemented about buying Canadian, that’s a step in the right direction, encouraging diversification of the federal supply chain to encourage foreign contractors to increase their Canadian footprint.
Networking never stops for small- and medium-sized businesses. The goal is for them to grow organically and to become a larger player so that they, too, can become primes. But some organizations are never destined to be primes, and they truly are subcontractors into the process. That’s fine, too. It’s understanding how to navigate that somewhat complex and sometimes closed supply chain. As a government, we have to do all we can to ensure the supply chain, particularly the foreign supply chain, remains open to Canadian suppliers.
Senator Ince: Thank you.
Senator Dasko: Thank you, witnesses, for being here. Mr. Hayes, I note that of your three issues that you identified, two of them involved delays of some sort. This theme is quite dominant in this area. You did say, however, that defining needs is an important activity for government. I wanted to try to understand how that happens, then how that drills down to procurement. Let’s say we have a need to better defend the Arctic. How does that flow down into actual procurement decisions? We need a certain number of Arctic-ready ships, for example. Then it flows down from there to the specs for the ships and then the specs within the ships. There’s a whole hierarchy of needs.
Can you describe that and help us understand how that should operate? How does it operate right now?
Mr. Hayes: Thank you. You’re absolutely right that there will be some policy frameworks that identify how the government, or the Canadian Armed Forces, will want to have a presence in a particular space. You used the Arctic as an example, and it’s a great example.
At some point, using surveillance as an example, you will want to have some boots on the ground. That could be through the Canadian Rangers, you’d want to have some ships in the water, submarines or naval ships, and you’ll probably want some airplanes. Those could be drones or they could be airplanes. Also, you’ll want satellites.
Let’s leave the Rangers to the side for now. I’ll come back to them in a minute. Acquiring, for example, satellites is done by looking at what you have now, forecasting when you’re going to need to replace them, and what kinds of specifications is what I would key in on here. You need the specifications so that a bidder knows exactly what they need to respond to when they’re going to be bidding on that contract.
That is absolutely critical. I’ll use fighter jets, for example, to illustrate a different problem. If you identify your specifications and then change them, then that is going to automatically put some delay into the system.
Senator Dasko: And cost.
Mr. Hayes: It could result in cost increases. Sometimes you’re going to reduce your ask, but, most of the time, we increase our ask, so yes, the costs will increase. But you almost start all over again when you introduce a major change. And that is going to then run into the capability that you have to operate. And if you have, as we do with the CF-18s, planes that are hitting the end of their useful lives and can’t be maintained past a certain point, you have a period where you have a capability gap.
That’s what we’ve been encouraging the government to be thinking about, and identifying, so that there can be a refresh of their equipment. I’m going to be very careful not to comment on policy here or on policy-makers, but, I think everyone around Parliament, in senior levels of government, wants our Canadian Armed Forces to be well equipped and to be well supported. In my view, there’s a common interest in making sure that we get consensus. The problem is that hasn’t happened all the time in the past. If consensus can be achieved on what needs to be procured for our forces, that will be a big step forward.
I remember when the Auditor General and I appeared at a House committee on procurement for defence, and one of the questions concerned why Poland can obtain tanks so quickly. The answer was it’s urgent and everybody is on the same page.
Thank you.
The Chair: Thank you. We’ll come back if we have more time.
[Translation]
Senator Youance: My question is for Mr. Jeglic.
Among the five fundamental changes you propose — including the development of a single set of rules and the creation of a national data collection framework — do you have a proposed order of priority? Which of these are the most urgent for improving the efficiency and transparency of defence procurement, and why?
Mr. Jeglic: Yes, there is a hierarchy. I would like to respond in English, if I may.
[English]
There is a hierarchy in the five foundational changes. In my previous answer, I talked about accountability, and I think that accountability is missing in federal procurement. The creation of the Chief Procurement Officer is absolutely critical. One could argue that, in the defence space, that has been done to a certain extent with the creation of the new agency. So the de facto Chief Procurement Officer in the defence space may be considered the CEO of the new agency. That being said, I would still argue we need an apex to the triangle, which is the Chief Procurement Officer, but I think we’ve taken a step in that direction.
We talked about simplification; we talked about the need for small- and medium-sized businesses to have an access point. The rules are particularly cumbersome. That is not unique to defence procurement, but a problem in federal procurement general. There is work under way to bring the rules into an amalgamated form.
I would suggest we’re one of the only jurisdictions to have this complex web of rules that applies to federal procurement, and we’ve done it to ourselves. It’s absolutely fixable, and anyone who tells you we can’t because these are free trade obligations, that’s not true. This work can be done, and it is being done, and that step toward amalgamation is absolutely critical.
The third thing is the data set. In all areas that we work, one of the first questions we ask is to find baseline data. How much work is being done by small- and medium-sized businesses in the defence space? Sometimes, it’s shocking that you can’t get what I would describe as basic data. The data sets don’t speak to one another, so one department is doing something, whereas another is doing something else, and you can’t get an amalgamation of data. In terms of hierarchy, there absolutely is one. I think there are procedural steps one must take. Data is critical when it comes to defence procurement, because now we’re starting anew and there is an opportunity for a new data set to be created and to bring accountability to the Defence Investment Agency and make sure that the timelines they’re stipulating are tracked. I think a fairly basic question was asked: Why does the technical side of the creation of the requirement take so long? How long does it take?
I think that tracking is missing, so you’d want to know how long each step of the process takes so that you can understand what the repetitive issue is. The tracking is done slightly differently across agencies or departments and sometimes not at all. That baseline data is so critical. Defence Construction Canada does have a data set. They do have contract management skills, and that data set is particularly useful. I would encourage the new agency to look carefully at that data set and see what some of those lessons learned were and learn from them prior to stepping into that contract management space.
Senator Hay: Thank you for being here. This might be quick because I’m picking up on a couple of questions.
I heard you speak about a universal set of procurement rules. What I heard in my head was this: Is this a one-size-fits-all situation? But your clarification here is more a rule set that is less cumbersome that will enable better local and Indigenous participation through SMEs. Is that correct?
Mr. Jeglic: At the highest level, I would suggest there are many authoritative rules. No one is necessarily clear on which set of applicable rules applies in any given circumstance because the hierarchy lies in a variety of different authoritative spaces.
You have free trade obligations that have specific carve-outs that are somewhat unique to defence. Then you have very limited legislation in procurement. Then you have a regulation that basically says competition by default. Then you have directives, guidelines and then a cascading litany of rules that are somewhat specific to departments and agencies. What we’re suggesting is to make that universally applicable set of rules at the highest level, then allow it to cascade down and create shells as necessary.
Again, I’m not suggesting that the U.S. model is perfect. But they have the DFARS, or Defence Federal Acquisition Regulation, and the FAR, or Federal Acquisition Regulation. It is overly prescriptive. I’m sure that most people who work in that space will say that, but at least it is authoritative and clear.
In the Canadian space, we lack some of that authoritative nature and clarity. Does that trickle down to the suppliers? Absolutely. But it trickles down, usually, in the actual language of the solicitation process. That is sometimes a point of issue.
The beauty of creating a new agency is I think they can consider what rule sets should apply to this agency. I would suggest thinking long and hard before you make that final determination to ensure they have the leverage they need to deliver successfully. But I think that is a critical step in making sure that a decision about what the rule set applies is made with eyes wide open.
Senator Hay: Thank you.
Senator Anderson: I want to apologize for stepping in late. I just got off a plane. My name is Senator Anderson. I’m from the Northwest Territories.
My question for you is this: There are a number of southern-based businesses, national and international, that have taken a huge interest in the Northwest Territories given the investment in Arctic defence, security and sovereignty in the Building Canada Act, specifically the MacKenzie Valley Highway, the Taltson Hydro Expansion and the Arctic Economic and Security Corridor. Posing challenges to Indigenous procurement, if not applied properly by the PSIB, and given the ombud’s review of Indigenous procurement, what should Indigenous businesses take away from the review and recommendations?
Second, is the ombud report shared directly with Inuit, First Nations and Métis so that the report does not just stay in Ottawa and creates some transparency?
Mr. Jeglic: Absolutely. Thank you for the question. I will start with the last part of the question.
The goal of the dissemination of the report is absolutely as broad as possible. The intentions are for us to make it known throughout Canada, and we are taking steps to do that. We are attending conferences throughout Canada, which would be focused on Indigenous suppliers. This is not intended to discourage Indigenous participation. It is an awareness-building process.
Again, I want to be clear about this: I see no problem in the strategy itself. It is in the implementation of the strategy where we found problems. The problems do not lie with legitimate Indigenous businesses. It is how the total value of the Indigenous contribution is calculated.
What I would encourage Indigenous suppliers to continue to do is to push to ensure implementation is encouraging more Indigenous participation and ensuring those numbers are correctly tracked, making sure that the criteria from the PSIB policy are, in fact, implemented, meaning the 33% requirement — the 33% value of the contract be delivered by an Indigenous company. That is one of the things we found in our report that wasn’t happening.
I’m encouraging any Indigenous supplier who is involved in the PSIB set aside, if they are experiencing problems — I know that you know this, but we highlighted that we cannot hear complaints about that — I still want them to come forward to our office because we will advocate their concerns forward.
They are not to be left alone. We are absolutely engaging. We want to make sure that it reaches as many Indigenous communities as possible, and we don’t shy away from the fact that this problem needs to be rectified in short order and treated as a priority.
Senator Anderson: Thank you for that.
You talk about going out to Indigenous businesses. I’m from the Northwest Territories. There are a number of Indigenous businesses throughout the N.W.T. I don’t believe that the knowledge is out there.
When you talk about going to Indigenous businesses, my experience has been dealing with groups and organizations who say that they are national and Canadian. They come into my office. Over 90% do not have connections to the Yukon, Northwest Territories and Nunavut.
My concern here lies with the fact that it is actually the Northwest Territories and Nunavut that are specifically targeted for these nation-building opportunities and Arctic defence and security. I believe that it is those two territories that should have attention focused directly on them because I do not believe that Indigenous businesses within those territories have this knowledge that you are speaking of. Thank you.
Mr. Jeglic: That’s an absolutely fair criticism. What I will say is — and it is not an excuse — that I will certainly look at our outreach strategy and will identify and report back to the committee where we have been and where we hope to go in the short-term future. And if that doesn’t align with the needs of your constituents, we’ll certainly look at your concern and try to address it directly.
The Chair: Mr. Jeglic, I’d like to pursue a couple points that my colleagues have just raised. Given that the three territories are predominantly Indigenous, and given the national government’s desire to have more Indigenous participation in these historic contracts around the development in the North, but also that lead to the broader development of the business opportunity for Indigenous people, I’m asking you to respond — wouldn’t it make sense for the government to have an office in the North that would specifically give outreach that would better serve their needs so that they do not have to come down south to seek guidance?
I’m raising this because the minister will eventually be here, and I want to ask him the question. It seems to me that we consistently hear the criticism and what is not happening. Then, of course, the default is that we are going to do the best we can. Well, if you are in downtown Ottawa, I do not expect you to do the best that you can if you are not in the North, but if you are in the North, then I think that you can do better because access for those small SMEs, companies and others trying to get into the procurement process would be better served if they knew what they could actually do to access those contracts in the first place.
Mr. Jeglic: The answer to your question is absolutely presence matters. If you are speaking of my office specifically or more generally —
The Chair: No, more generally.
Mr. Jeglic: Absolutely. Presence matters. If you are just doing things by remote access and hosting webinars, you are not reaching the communities and you do not understand the significance of the gap.
Again, I know we do host a number of webinars where we do target some of the territories. I understand that is not the answer. Sometimes, it is financial limitations. That is not a good answer either. If the strategy is to encourage Indigenous participation, you must have a presence and understand the community. It can’t be words on paper.
The Chair: Before I get to you, Mr. Hayes, one more quick thing while I have you on the hot seat: Given your comprehensive understanding of the procurement process, many of the SMEs that have come before this committee and will continue to be here until we finish our study have expressed frustration with their understanding of the system. You have, I think properly, addressed the complexity of it.
You seem to have a clear understanding as to how they could help and be provided with the knowledge that will help them access the procurement process much better than currently.
Is there anything that would prevent you from doing a roadshow to explain this to SMEs across the country? This is probably historic in the context of Canada’s spending in the military.
Mr. Jeglic: Absolutely. I do try, believe me.
Our office has 30 people, so I don’t want to overstate our footprint. We are 30 people, but I do understand the importance and that just doing work in Ottawa is useless. It has to involve speaking to the constituencies that you are intended to serve, so our mandate is national in nature. Believe me, part of the funding ask was absolutely that — to have the ability to have a presence throughout Canada because those are the constituents we serve. I do my best to go to as many places as possible with our office staff and myself personally to ensure that the message is out there.
I’m sure this will frustrate you because it frustrates me. One of the blind spots is that I cannot review complaints about the award of contracts set aside for Indigenous suppliers. This is something I recently highlighted to the House of Commons committee. I said that it’s an ongoing frustration for our office. It’s a bit disingenuous for me to go before an Indigenous community and tell them I’m there to help them, but then, as they have a concern, I have to tell them that one part of my formal mandate prevents me from helping them. I take the tact that I will still informally assist, but it’s something that needs to be rectified in short order.
Absolutely, there is a shortage of need. Presence and ongoing engagement are key. If you are going to invest in Indigenous communities, then that advocacy work for importance has to happen now? Because, once the opportunities are live, it’s too late. That work has to be happening now — or yesterday.
The Chair: Mr. Hayes, the last word is to you. Thank you, sir.
Mr. Hayes: Thank you.
Back to your question about outreach in the territories, the Office of the Auditor General is in a privileged position because we are the Auditor General of each of the territories as well. In that capacity, we engage with the members of the legislative assemblies in each of those territories, and we visit communities as part of our audit work.
One of the things that has been raised recently with us — I’m just sharing it for the committee to consider as you move forward with your study — is the nation-building and big investments that are likely to happen in the North will also have an impact on some of the community services and resources. Take, for example, water treatment plants. When you increase the number of people — say, if you are building a military base near Iqaluit and you are going to have a drain on the water supply — that has to be considered. It’s not just a case of building what you need; you have to think about the broader impacts on the communities. Thank you.
The Chair: Colleagues, that brings us to the end of this panel.
I wish to thank Mr. Hayes, Ms. Marsolais and Mr. Jeglic for taking the time today to meet with us. We greatly appreciate your work. We will have other officials here, and we will be pursuing some of the points that you have raised. Again, thank you for sharing your knowledge here today.
For this panel, we are pleased to welcome Richard Foster, Vice President, L3Harris Technologies Canada — thank you, sir, for being here — and Michael Clark, Business Development Manager, Government, Defence and Space, FELLFAB Limited. Thank you for joining us today. We will 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.
[Translation]
Richard Foster, Vice President, L3Harris Technologies Canada: Distinguished senators, it is an honour to be here today.
[English]
As noted by previous speakers, it is heartening that many of this Senate committee’s recommendations on getting to 2% and beyond are happening, although perhaps disheartening in the context of the current global trends that have made this demand more imperative.
It is also heartening to see key building blocks put in place, such as the Defence Industrial Strategy, the Defence Investment Agency and the Export Strategy for Defence Procurement, all focused on the Canadian defence industry and economic value for Canada, while ensuring that our forces achieve and maintain operational advantage.
I hope that, in our haste to bring economic value to Canada, we do not forget this maxim of operational advantage.
L3Harris is a U.S.-based defence company employing 47,000 people across 100 countries globally. There are three major L3Harris Canadian subsidiaries that employ 3,000 people in high-tech jobs.
WESCAM in Waterdown, Ontario, is a global leader in the manufacturing of electro-optical infrared cameras that have been a part of Canada’s ongoing donations to Ukraine since 2022.
MAPPS in Montreal develops integrated control systems for naval vessels like the River Class destroyer and hopefully the Canadian Patrol Submarine Project.
Finally, MAS, located in Mirabel, Quebec, is the original Canadair that became Bombardier Defense and eventually L3Harris MAS. We are still very much Canadian.
WESCAM is working with Roshel to develop a Canadian-made counter-UAS system using L3Harris’s VAMPIRE system. Fielded in Ukraine, VAMPIRE is credited with destroying over 300 Shahed drones.
MAPPS, as part of L3Harris’ investment in the River Class destroyer, is developing an integrated communication system that is non-ITAR and Canadian exportable. Since 2017, we have grown our business in Ottawa from 2 engineers to 70 working on this capability. This is Canadian IP that will stay in Canada.
In November 2024, MAS was identified as a strategic partner by the Government of Canada to evaluate standing up an F-35 regional air vehicle depot. This facility will service not only Canadian F-35s but also provide an overflow for U.S. F-35s operating in the North American region.
The U.S. ambassador is very supportive, as this would give Canada sovereignty over the operational readiness of its fighters and contribute to NORAD.
Tomorrow, Lockheed Martin will be at our facility to announce our commitment to work together to make this regional depot a reality.
As a strategic partner, we stand ready to work with the Canadian government beyond a single platform. Not only are we helping to transition from the CF-18 to the F-35, but we are looking at other areas to improve operational advantage while creating jobs in Canada, such as the idea of aluminum runways for Canada’s Arctic, a dual-use capability for the military and northern communities using Canadian aluminum.
Like shipbuilding, Canada’s aerospace strategic partners should be engaged in longer-term projects and R&D, such as helping Canada partner on a sixth-generation capability like the Global Combat Air Programme, or GCAP.
L3Harris is a world leader in business jet modification with over 100 modified aircraft to date, including Air Force One, the U.S. Air Force Compass Call and Australia’s Peregrine ISR aircraft.
We recently won the South Korean Airborne Early Warning and Control, or AEW&C, program, and will bid on Canada’s AEW&C program with our AERIS X capability.
The demand for missionized business jets is growing, with 80 to 100 aircraft likely to be procured globally in the next three to five years alone. As a result, L3Harris has identified MAS in Mirabel as a business jet missionization hub to export missionized Bombardier Global 6500 platforms from Canada not only for airborne early warning capabilities but also for intelligence, surveillance and reconnaissance and electronic attack platforms.
IP and licensing are in the process of being transferred to our Canadian subsidiary. We are planning tooling and infrastructure requirements. We are conducting initial meetings with Polish companies with the help of Global Affairs Canada as a potential first opportunity for export from Canada, by a Canadian entity. This is a great example of Canada’s Defence Export Strategy in action.
As a Canadian entity and U.S. subsidiary, these are examples of how an integrated North American defence industrial base benefits Canadians. These are examples of how Canada’s increased defence spending and strategies will create future work.
The IP we develop will be Canadian. The jobs that we will develop will be Canadian. The operational advantage that we will provide our Canadian Armed Forces will be the best.
Now is the time to build by investing and promoting these homegrown Canadian subsidiaries while preserving the IP and jobs.
Thank you.
The Chair: Thank you, Mr. Foster.
Michael Clark, Business Development Manager, Government, Defence and Space: Good afternoon, Mr. Chair and committee members. Thank you for the opportunity to appear before you today.
My name is Michael Clark with FELLFAB Limited. I take care of the government’s defence and space sector.
FELLFAB is a 74-year-old family-owned business based in Hamilton, Ontario. We specialize in innovative textile solutions. What I mean by that is we don’t weave textiles. We take the textile. We purchase it. We turn it into something.
We operate in a number of different industries. We operate in commercial aerospace, the rail and transit industry, nuclear, industrial and space.
Probably one of our most recognizable products is, if you look at the Canadarm and that white textile material that’s covering it, that was made in our Hamilton facility in our clean room. Today, we still do repair and overhaul panels for the support of the space station.
In over 40 years of working in the defence sector, we have provided products such as tent systems for DND, vehicle covers, vehicle seating systems, rucksacks of all manner, pouches and protective vests.
More recently, FELLFAB was awarded the contract to supply our Arctic-rated sleeping bags to DND. These are sleeping bags that are rated for -40 Celsius. They have been tested over the past number of years. They have actually been used by DND in smaller amounts for the last 25 to 30 years.
We sell directly to DND. We also do a lot of work at the tier 1, tier 2 and tier 3 levels.
For example, we could be a vendor to L3 WESCAM or L3 MAPPS. It is rather interesting. I have sold to all three of those companies at some point in time.
More recently, and through an acquisition last year, FELLFAB has become one of the key vendors of parachute systems for the Department of National Defence.
In the next few months, we are going to be building one of the largest parachutes imaginable. It is a 100-foot-diameter cargo parachute.
You’ve probably worn some of our stuff.
In our Hamilton facility, we employ approximately 150 people, and, under the rules of Innovation, Science and Economic Development Canada, or ISED, that puts us into the small- and medium-sized enterprise area, and with that, we try to leverage the Industrial and Technological Benefits Policy, or ITB Policy, which has been put in place by ISED.
The ITB Policy gets you a seat at the table or — as I call it — a ticket to the dance, but you have to produce quality products and be competitive to be successful. The ITB Policy is not a birthright for business in Canada.
There was a report put out by ISED in 2022 that said that firms with fewer than 250 employees represent 90% of the vendor base for the Department of National Defence. Like FELLFAB, very few of these companies can survive solely on defence sector business. Much like us, they’re diversified across a number of different markets.
There have been a couple things stated as of late that talk about speeding things up in the defence sector. There are a lot of small- and medium-sized enterprises who have heard about the increase in defence spending, and a lot of these people want to get a piece of the pie, as they say.
One of the things, though, within the defence sector is that it is complex. It is heavily regulated, and you can’t just throw out your shingle and decide to be a vendor in the defence sector. You have to have your Controlled Goods Program. You also have to take care of cybersecurity. All of this work takes time, which smaller companies don’t necessarily have the emphasis or the ability to do.
The world in defence is always changing. Some of the things that we’ve always had to tackle have been Canadian content and speed. Now we have the Defence Industrial Strategy. One of the key things in the first pages is “Build-Partner-Buy.” I like the part about building.
Thank you very much.
The Chair: Thank you, Mr. Clark.
We’ll proceed to questions. Colleagues, the panel will be with us until 7:20 p.m. In that time, of course, we’ll do our best to allow each member to ask their questions. Four minutes will be allotted to each member, including the answer.
[Translation]
Senator Carignan: Mr. Foster, we saw an announcement involving Lockheed Martin, and you discussed the importance of the Mirabel plant becoming a regional hub for the F-35s — not only for Canadian F-35s, but for those across the entire North American region.
Can you provide details on the investments that will be made, the projected economic spinoffs and the number of jobs that will be created? Why is it important to have this North American regional hub? What consequences would this have?
Mr. Foster: It is important to note that, without a regional depot, it would not make sense to proceed with this project, because there would not be enough Canadian F-35s. Normally, with a depot like the one in Mirabel, we would only have five of the 88 aircraft at our facility at any given time. So, we believe it would be better to also have the U.S. F-35s at our facilities at the same time.
Ultimately, we expect to have 24 F-35 aircraft at our depots. This will generate around 600 direct jobs in Mirabel alone per year for the next 15 to 20 years once we have 24 aircraft at our facilities.
I believe this is very important for the region. This does not include all the other jobs that would be created in the supply chain linked to these 600 jobs.
The investment would amount to over $200 million to put the infrastructure in place. We are in discussions with Investissement Québec and the Government of Canada to develop a plan to carry out this project.
Senator Carignan: How much public and private investment is included in your business plan?
Mr. Foster: Approximately $200 million.
Senator Carignan: Are we talking about $200 million for L3Harris alone, or for all governments and L3Harris combined?
Mr. Foster: That’s $200 million split between the provincial and federal governments. We’re also in talks with other investors. These discussions have only just begun.
Senator Carignan: We’re talking about 88 F-35 aircraft and a decision by the federal government. Is that a problem? Things are often called into question. This leads to delays. The F-35s are a good example: The decision was cancelled, revisited and reworded.
In your industry, what is the impact of delays caused by a government’s postponement of a purchasing decision? Since we’re taking it step by step here, and I think the first step is step 12. How do government delays in decision-making harm your industry?
Mr. Foster: These delays are causing uncertainty. The United States is watching us. They’re hesitating now because they doubt that Canada will move forward with this project. They support us. If we move forward with the purchase of the F-35s, I think we’ll be able to establish the depot.
What’s interesting is that, given the delays with the F-35s in Canada, the first F-35 will not arrive at our facilities until around 2031, but we would like to have the U.S. F-35s before then — in early 2028 or 2029 — to keep jobs here. With the F-18s being phased out, we would not be able to retain all these jobs without the arrival of the U.S. F-35s.
[English]
Senator Cardozo: Thank you to the witnesses for being here.
Mr. Foster, I wonder if I could ask you — near the end, you talked about keeping intellectual property, or IP, and jobs in Canada. I wonder if you could expand on that a little, because that’s really important if we’re going to be spending these large sums of money.
I’d also like to hear from both of you in terms of youth employment and what the prospects are in terms of some of the work that you will be taking on or increasing.
Mr. Foster, I’d also like to hear your thoughts about drone technology and how that is changing warfare and the future of warfare. If small, cheap and easily produced drones can destroy billion-dollar equipment, what does that mean for the future of warfare?
Mr. Foster: On the first question on IP, a lot of the IP that has been developed in Canada stayed in Canada. For instance, in WESCAM, the camera technology that we have and that we produce is Canadian-made. There are some models that have some U.S. capabilities, and those are sold under the MX-Series with the relevant U.S. export-import licences. However, WESCAM sells a completely made, very capable Canadian camera, and we keep that IP.
MAPPS has developed the Integrated Platform Management System that went originally on the Halifax-class frigates, and that was developed out of long-term research and development that Canada undertook many years ago that is now coming to fruition.
WESCAM was the same. A lot of the technology in WESCAM was developed with Defence Research and Development Canada, or DRDC, in the 1950s. Similar with MAPPS, lot of technology that went into the Halifax-class Integrated Platform Management System — basically, the control system that allows you to manage the engines and all the pumps and systems in the ship — was developed in Canada, and that IP resides and will stay in Canada.
When we talk about developing a strategic partnership with Canada and looking at other research and development capabilities on future fighter capabilities, that foreground capability would stay in Canada. Sometimes, people forget that the company that has developed the core IP is not just going to hand it over. Even if you did acquire it, you might not even be able to use it. But when you partner together and you work in a country and develop further capabilities — we call that foreground IP — that will stay in Canada and reside in Canada.
I think when we develop this missionization capability, we’re talking to radar companies about bringing and developing subsidiaries in Canada that would develop the kind of capability that could be used in the future. There are ways — and I think it’s important, as Canada does this build, that they examine the IP and put those hooks into those companies to make sure that the IP that gets developed stays in Canada.
On the question of young people, we started up a program called the Canadian Industrial Leadership Award with five other companies: Babcock, Thales, CAE, L3Harris and General Dynamics Mission Systems, or GDMS. We bring in and give an award to — at the moment, we’re focused on young women in STEM in third year. We basically give them a co-op program, a $6,000 award and mentor them within our company, giving them full access to executive decisions, whether it’s finance or HR, to show them how a company produces, from A to Z, a product then gets it out the door while they’re working on their specific research and development program, with the intent that they go back and finish their fourth year. Then we hope that they will come back to the company and work for us after they graduate. We’ve probably awarded over 50 now among the five companies.
We get together once a year and share what each company is working on in R&D. What is interesting is that most of these young ladies aren’t necessarily interested in staying in the company for their whole career as we might have grown up doing. They’re interested in sharing, working with other companies and moving around. Actually, what’s interesting is they stay connected even though they’ve been working with different companies.
To your last question, I’m not necessarily an expert on UAVs. I know we’re spending a lot of time developing counter-UAS programs. As I talked about, WESCAM has developed the vampire capability, which uses rockets. It is a problem. It’s going to develop risk for some of our other capabilities. We saw the demonstration when Ukraine destroyed many Russian bombers on several of their facilities, and we’ll have to develop counter capabilities, but I think we will.
Mr. Clark: We’re not quite the same magnitude, but we do operate using co-op students and programs. Quite often, we bring in engineering students and IT people. For the factory work, it’s mostly done by people coming in. We hire them and do in-house training for sewing and in-house use for 3D printing, and with some of the tent systems, we actually use high-frequency welding equipment, which basically bonds it together. We do on-hand training for that type of work, but basically co-op through local universities and local colleges, yes.
Senator Osler: Thank you to both witnesses for being here today.
My question is for Mr. Clark and FELLFAB. How can Canada improve collaboration between prime contractors and smaller domestic suppliers to ensure a more integrated and resilient supply chain?
Mr. Clark: I think Canada has done a pretty good job already in that area. By instituting the ITB Policy, which prior to that was the IRB policy — as I recall, the first time it was instituted was on the CTF, on the Halifax-class frigates.
They’ve also done a great job in creating the RDAs, your regional defence support companies. We work a lot with the FedDev gang. They are tremendous people to work with, in helping us connect with the larger primes. As I mentioned, the ITB Policy gets you a ticket to the dance. You still have to do your work. You still have to have a credible product, and you have to produce quality, but it’s a great tool that gets us in contact with the primes, absolutely.
Senator Osler: Thank you.
Senator Hay: Thank you both for being here.
I may go down a rabbit hole, so I apologize up front. I want to talk a little bit about data.
Mr. Foster, I’m going to ask you specifically. There must be an enormous amount of data that is being generated, certainly by your engineers and whatnot, but also the systems that are in play across Canada in our frigates and whatnot. My question will be around the data itself and storage. I’m assuming it would be stored in a cloud of a parent company, so it wouldn’t be Canadian sovereign data storage. I’m curious about that.
My follow-up to that will be around the U.S. CLOUD Act and how at risk our data might be because of that, if it’s stored on a foreign cloud.
Mr. Foster: It’s interesting. We’ve been working with all three companies on exactly that with the rollout of Microsoft Office 365 and exactly where the data is located on servers. We’ve even worked with Global Affairs Canada to understand what export requirements might be required if data is being transferred out of the country elsewhere. My understanding is that the data that is Canadian resides in Canada and doesn’t transfer over to the United States.
Senator Hay: The U.S. CLOUD Act states that a U.S. company will be required, wherever they might do business, if asked by the U.S. government, to give that data to the U.S. government. That’s in the U.S. CLOUD Act.
For example, AWS, which is Amazon, has their data centres in, let’s say, Montreal, which is Canadian soil and Canadian data. But because it’s a U.S.-based company, they are obligated, if asked — though it hasn’t happened — to give that data to the U.S. government, as would Microsoft and as would any company.
You may not be able to answer it today, but I would be very interested to know where the data from your systems and whatnot travels and lands. It would be important for Canadian sovereignty around data.
Mr. Foster: I agree. I’m not as expert as you’re suggesting, so I will go back and check.
My understanding at this time is that our Canadian data resides in Canada. I know that there are ways, using controlled goods and export rules, where we can share data, but the data that is created in Canada resides in Canada, as far as I know.
Senator Hay: I would appreciate you following up.
Mr. Foster: I will.
Senator Hay: It would have to be at a Canadian data centre on a Canadian cloud for it to be fully sovereign, but thank you.
The Chair: On behalf of the committee, I want to thank both of you for taking the time to be here and for sharing your expertise and the work that you’re doing. Again, thank you very much.
If there are any written submissions, Mr. Foster and Mr. Clark, that you want to submit, we would ask you to do so. Our study is ongoing. We have some time before we get to the conclusion, so any submissions will be incorporated into the final study at that point in time. I would ask to consider that as a follow-up to my colleague here tonight.
This concludes our agenda for tonight. Our next meeting is Monday, April 27, at 4 p.m. in this same room. I wish you a good evening and thank you for being here.
(The committee adjourned.)