THE STANDING SENATE COMMITTEE ON NATIONAL SECURITY, DEFENCE AND VETERANS AFFAIRS
EVIDENCE
OTTAWA, Monday, September 28, 2026
The Standing Senate Committee on National Security, Defence and Veterans Affairs met with videoconference this day at 4 p.m. [ET] for the election of the Deputy Chair; and to study the subject matter of those elements contained in Division 16 of Part 4 of Bill C-31, A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025; and, in camera, for the consideration of a draft report.
Senator Marty Deacon (Chair) in the chair.
[English]
The Chair: Honourable senators, I am Marty Deacon, senator from Ontario and chair of the Standing Senate Committee on National Security, Defence and Veterans Affairs.
As we get started this evening, I would just like to make a special comment of note before we introduce our colleagues on the Security and Defence Committee. We have a face that we said goodbye to at the head table here. We are absolutely thrilled for Ericka Paajanen as she starts her new committee leadership as clerk, and we welcome Chantal Cardinal, who is very experienced and joining us as a clerk here this evening. Thank you and welcome, Ms. Cardinal.
I would also like to take a moment to recognize something that not everyone may be aware of, particularly our guests, that this is a unique Monday where we have this committee running for close to four hours, other committees running, other events happening, four esteemed colleagues being sworn in and legislation that is moving along. With that in mind, I want to recognize in this group we will have some senators who will be stepping in and out based on some of the other activities going on, but no disrespect to the intent and the integrity of the work that we’re doing this evening. So just to acknowledge that for all of you.
I would like to now begin by offering my colleagues the opportunity to introduce themselves.
[Translation]
Senator Youance: Suze Youance from Quebec.
[English]
Senator White: Judy White, senator from Newfoundland and Labrador.
Senator Patterson: Rebecca Patterson, from Ontario.
Senator Hay: Katherine Hay, Ontario.
Senator Anderson: Dawn Anderson, Northwest Territories.
Senator Cardozo: Andrew Cardozo, Ontario.
Senator McNair: John McNair, New Brunswick.
Senator Yussuff: Hassan Yussuff, Ontario.
Senator Ince: Tony Ince, Nova Scotia.
The Chair: Thank you. Before we begin, I would like to ask all senators and other in-person participants to consult the cards on the table for guidelines to prevent audio feedback events.
Please make sure to keep your earpiece away from all of the microphones at all times. Please don’t touch the microphone; it will be turned on and off by our console operator behind me. Please avoid handling your earpiece while your microphone is on; you may either keep it on your ear or place it on the designated sticker. Thank you for your cooperation.
We did have an audio surprise event in a meeting this afternoon, which just shows a reminder that we need to keep on top of that and be diligent. Thank you for your cooperation.
As we get started, one of our first orders of business is the election of a deputy chair for this committee.
Colleagues, with former senator, the Honourable Mohammad Al Zaibak’s departure, we have a vacancy in the deputy chair. Before we begin our meeting, we will proceed to the election of a new deputy chair. With that said, I am ready to receive a motion to that effect. Are there any nominations?
Senator Cardozo: I am pleased to nominate Senator Tony Ince to be deputy chair of the committee.
The Chair: Is it your pleasure, honourable senators, to adopt the motion?
Hon. Senators: Agreed.
The Chair: Thank you, agreed. Thank you very much. Welcome.
Today, we begin our consideration of the subject matter of those elements contained in Division 16 of Part 4 of Bill C-31, A second Act to implement certain provisions of the budget tabled in Parliament on November 4, 2025.
Today, we will hear three panels of witnesses.
For our first panel this evening, we are so pleased to welcome Wendy Hadwen, Senior Assistant Deputy Minister, Defence Investment Agency; and Kendal Hembroff, Associate Assistant Deputy Minister, Industry Sector, Innovation, Science and Economic Development Canada.
The Department of National Defence was invited to join our panels as well but could not make it work this evening. So it is with genuine, sincere thanks to our two witnesses for being here to answer our questions on this important division of the Budget Implementation Act, or BIA.
We will begin by inviting you to provide your opening remarks, to be followed by questions from our members. I remind you that you have five minutes for opening remarks.
We will begin with Ms. Hadwen. Welcome. Please proceed when you are ready.
Wendy Hadwen, Senior Assistant Deputy Minister, Defence Investment Agency: Thank you, Madam Chair and senators, for the opportunity to appear before you today to discuss Division 16 of Part 4 of this bill, which would establish the defence investment agency and modernize the Defence Production Act.
As you know, Canada is operating in a fundamentally different security environment than when the Defence Production Act was first developed. While the act has served Canada well, its procurement provisions have remained largely unchanged since the 1950s. Today’s geopolitical realities, evolving threats and growing demands on our defence industrial base require a more modern approach to defence procurement and production.
The proposed defence investment agency, or DIA, is a key component of the government’s defence procurement reform agenda. It would be established as a departmental agency under a minister and would bring together responsibility for defence production, procurement and investment activities in support of Canada’s national defence and national security objectives.
The agency would also play a central role in implementing Canada’s Defence Industrial Strategy, or DIS. The strategy recognizes that defence procurement is not only about acquiring equipment for the Canadian Armed Forces but also about strengthening Canada’s defence industrial base, fostering innovation, growing domestic industrial capacity and ensuring that Canada can reliably access and sustain critical capabilities when they are most needed.
By leveraging procurement, production and investment authorities in a more integrated way, the DIA will help build sovereign capabilities in key sectors, strengthen supply chains, improve interoperability with allies and maximize the economic benefits for Canadian industry. These efforts will together support Canadian businesses, create and sustain high-value jobs and position Canadian industry to participate in major defence programs alongside our allies and partners.
We believe the proposed changes will benefit all Canadians by delivering capability faster for the Canadian Armed Forces, strengthening Canada’s security and economic resilience, supporting a more innovative and competitive defence industrial base for Canada and helping to ensure that we can meet our defence needs in an increasingly uncertain global environment.
The proposal before you has been developed through close collaboration across the government, including with Public Services and Procurement Canada, or PSPC; the Department of National Defence; the Canadian Armed Forces; Innovation, Science and Economic Development Canada; the Treasury Board Secretariat and the Department of Finance. It reflects a shared commitment across all these departments to ensuring Canada’s defence procurement system is equipped to meet current and future needs.
To support the implementation, the government has committed dedicated funding to establish and operate the agency, with additional resources expected to be transferred from partner organizations as responsibilities become consolidated.
More broadly, these reforms support Canada’s commitment to strengthen its defence, enhance industrial capacity and ensure that the defence investments we make translate into tangible results for the Canadian Armed Forces, the Canadian economy and Canada’s long-term security and sovereignty. The creation of the defence investment agency and the modernization of the Defence Production Act are also important steps in supporting Canada’s defence spending commitments and strengthening its contribution to collective security with allies.
I look forward to answering your questions. Thank you very much.
The Chair: Thank you. Next we will hear from Ms. Hembroff. The floor is yours.
Kendal Hembroff, Associate Assistant Deputy Minister, Industry Sector, Innovation, Science and Economic Development Canada: Thank you, Madam Chair and members of the committee. I am pleased to be able to appear before you today to discuss Division 16 of Part 4 of Bill C-31.
Should Parliament adopt the legislation, Innovation, Science and Economic Development, or ISED for short, will have a close working relationship with the defence investment agency toward the shared goal of strengthening Canada’s defence industrial base. This includes leveraging Canada’s defence procurement for economic and industrial benefits, as well as identifying where investments through ISED programming, such as the Strategic Response Fund, Innovative Solutions Canada, the NRC’s Industrial Research Assistance Program and funding from the Business Development Bank of Canada, can support the agency’s objectives.
Innovation, Science and Economic Development’s role is to understand Canadian industry strengths and gaps, as well as propose opportunities to improve, through policies and programs, the competitiveness of our industrial sectors, including defence.
The DIA will be a key partner for us in this work.
[Translation]
As you know, earlier this year, the Government released Canada’s first Defence Industrial Strategy. The strategy recognizes that Canada is entering a period of significant defence investment and that these investments present an opportunity not only to strengthen our military capabilities, but also to grow Canada’s industrial capacity, support innovation and create economic opportunities for Canadians.
ISED and DND co-developed the strategy and we continue to support its implementation alongside DND, the DIA and other key partners.
[English]
If adopted, the legislation would provide the agency with new authorities aimed at accelerating procurement. Importantly, during the development of the strategy, Canadian industry was clear about a number of challenges facing the sector: Companies highlighted the need for faster and more predictable procurement, clearer demand signals, better pathways for innovative technologies to reach operational use, stronger support for growth and scale-up, and greater opportunities for Canadian firms to participate in defence supply chains.
The measures proposed in Bill C-31 would help address several of these challenges.
The legislation would also provide the government, through the defence investment agency, with new authorities for capability development and investment. From an industrial policy perspective, these tools have the potential to strengthen the connection between defence spending, innovation and industrial growth by adding to the suite of existing federal programs. The defence investment agency will ultimately be accountable for ensuring the government applies the Defence Industrial Strategy’s Build-Partner-Buy framework, which puts primary emphasis on building Canadian capabilities here at home, backed by a robust “buy Canadian” policy.
Innovation, Science and Economic Development welcome this, as the federal procurement of made-in-Canada solutions will be critical to create the conditions for Canadian firms to grow and compete in an increasingly complex global environment.
[Translation]
Success will ultimately depend on outcomes.
Together, the Defence Industrial Strategy and the proposed measures in Bill C-31 provide an important foundation for achieving those objectives.
Should Parliament adopt the legislation, ISED looks forward to working closely with the Defence Investment Agency and our federal partners to ensure these new authorities complement existing programs and investments and help maximize the benefits of defence spending for Canada.
[English]
Canada possesses the industrial capabilities, the talent and the innovations necessary for us to be able to meet our objectives of satisfying the needs of the Canadian Armed Forces and our allies. Bill C-31 has the objective of meeting these goals.
Thank you, and I look forward to your questions.
The Chair: Thank you, Ms. Hembroff.
We will now proceed to questions. Our guests will be with us until 5 p.m. today. We’ll do our best to allow time for each member to ask questions during this time. With that in mind, four minutes will be allotted for each question, including the answer. I ask you to keep your questions succinct in an effort to allow for as many interventions as possible.
I would like to offer the first question to our deputy chair.
Senator Ince: Thank you all for coming and participating in this. I am looking forward to the responses.
The definition of “associated government.” Clause 307 broadens that definition to include NATO, recognized partner organizations, and the European Union and its member states.
What impacts do you expect this change to have on Canadian companies competing for procurement opportunities? Will it strengthen or weaken the government’s ability to prioritize Canadian suppliers and support a buy-Canadian approach in defence procurement?
That question is open to anyone.
Ms. Hadwen: Thank you, senator. I will start, and I suspect Ms. Hembroff will wish to complement my response.
My advice is that it should improve the situation for Canadian businesses. Some of the NATO partners include Australia, the Republic of Korea, New Zealand, Japan, Ukraine and the United Arab Emirates. In all of those countries, Canada has recently signed or already has a defence cooperation agreement.
This bill, with that expansion, would create the conditions for more access to markets for Canadian businesses.
Senator Ince: Thank you.
Several witnesses who have appeared before this committee have shared concerns that Canadian companies often find it easier to sell their products internationally than to the government. Some also expressed concerns that Canada continues to procure foreign products despite the existence of competitive Canadian alternatives.
In our view, does this clause help or address those concerns?
Ms. Hembroff: Thank you.
The Defence Industrial Strategy includes a very clear framework of Build-Partner-Buy. That means, first and foremost, that preference will be given to Canadian suppliers for defence procurement, and that is a really critical part of how we are seeking to build up our defence industrial base.
However, the Defence Industrial Strategy also recognizes that there will be situations in which Canada cannot do it alone and where we will need to work with key partners and allies. That is also an opportunity for Canadian companies to be able to partner with companies from other countries. As a recent example, Canada is now in discussions with Saab as parts of a surveillance aircraft that it is looking for. That is a really good example of a partnership between, in this case, Saab, a Swedish company, and Bombardier, a Canadian company.
Those are examples where partnering with other countries and companies of other jurisdictions can have a clear benefit for Canadian companies as we seek to build up a defence industrial base.
Senator Cardozo: I have a few questions and a quick comment on Senator Ince’s question.
With respect, Ms. Hembroff, you suggested that one way for Canadian companies to be part of contracts is to be part of other contracts from other countries. I think what we’re really saying is that it needs to be the other way around. We have heard from a number of small Canadian companies that can sell abroad but can’t get in the door in Canada. That is really something that needs to be attended to.
I have two questions; one is with regard to the role of the agency. I look at clause 13 of the bill, and the minister has very direct powers as to making those decisions. My question, then, is this: Why do we need a separate agency when the Minister of Defence is the one who will be signing those contracts anyway? Why don’t you just exist within DND?
My other question is this: How flexible will you be going forward? I’m looking at how rapidly the “means of war,” if I can use that term, have changed drastically in the past two years, with the huge growth of drones, as we have seen in the response to the Russian invasion of Ukraine. I’m thinking some of these billion- and multi-billion-dollar ships and frigates can be taken out by a few hundred-dollar drones.
Are you going to be flexible enough? If we find out two years down the road that these big frigates are not cutting it and are getting flown blown out of the water by these cheap drones, should we not change how we do things? How flexible can you be in the future?
Ms. Hadwen: Thank you for the question. Senator, you quite rightly observe that there is an evolution in the nature of warfare that does currently favour in the European theatre, especially autonomous systems. The Defence Industrial Strategy outlines autonomous systems as one of the top 10 industrial capabilities.
In so identifying, the opportunity is to rely on Canadian production first, which is why the government recently exercised a new defence drone initiative, which maybe you got a chance to see. It was the most extremely rapid demonstration of going from procurement to contract — from idea — the Canadian Armed Forces elaborated use cases, and then we went to the market, we created a supply arrangement and then to contracts in 60 days.
This was led by the Defence Investment Agency. Even in its current form as part of Public Works, the intention for the new agency is absolutely to meet the moment with the agility that you suggest. Part of that comes from separating a little bit from the big departments and striking out a new culture with a tolerance for risk and an ability to learn quickly from experience and to adapt.
I wonder if Ms. Hembroff might like to speak to the question of ships, only because Canada has a very significant investment in a shipbuilding program. As those ships get built, they will be responding to the pressures that the Canadian Armed Forces ask them to in terms of their resilience.
At the end of the day, Canada has the largest coastline in the entire world, as you know, so it is also going to be a maritime challenge for us. The ships will be an important part of how the Canadian Armed Forces defend.
Senator Cardozo: What is the benefit if DIA if it is the Minister of DND who signs the contract?
Ms. Hadwen: It is not always the Minister of Defence who signs. What this positions the Defence Investment Agency to do is bring together a number of tools in support of procurement, namely investment and production. This is section 12 with research and development and intellectual property.
Regardless of who signs, the entire premise here is that the agency will help the government respond to the needs of the Canadian Armed Forces in the most nimble and agile way possible.
The Chair: Thank you.
Senator Patterson: Thank you for being here. I can tell you, 34 years of going through the old process, who knew that a widget could be a two-year process because everyone needs to have a say. I say that with a bit of sarcasm, as this is long overdue. As my colleague Senator Cardozo pointed out, the adversary is nimble, and to properly defend, we must be as nimble.
Obviously, I am in support of the standup of DIA as an independent ministry. But I have questions, as many folks do. I recognize you are in the process of ironing out some of the challenges. I have one very simple question, and I will add a bit more about the exclusive authority.
When we talk about the different agencies, like PSPC in particular, and we talk about defence and defence production, does that include everything that defence needs, whether it is boots, drones, ships or a general supply train to feed soldiers, sailors and aviators? That is my first question.
Ms. Hadwen: Thank you for the question. The way the law is set out, the Defence Production Act also has requirements for the Minister of Public Works and government services to be able to do these same exercises of the authorities.
It would then fall to the government to create administrative differences between how one operates than the other. The agency, being new, will start with a threshold of $100 million and above, as you would start small in order to prove your worth.
Senator Patterson: Thank you, because that will be something that we watch because supply chains are just that. It starts with maybe the shelving; you put the boots on right through to the soldier, sailor, and aviator wearing the boots. Thank you.
And the next thing is looking at exclusive authority and reflecting back on what currently exists. We know during the Afghanistan years, while the threshold was much lower than what is set for DIA, for urgent operational requirements, that power existed within the department — you can correct me — rather than going back through PSPC. How will this bill help improve on that? Apart from the threshold of cash, how do you see this bill and this particular provision helping expedite the process?
Ms. Hadwen: Thank you for the question. The lesson having been learned that we were not optimal in the current structures. The creation of this agency does have a way for the minister to direct, as required, in addition to all of the mandates outlined.
Sorry, can you just repeat that piece?
Senator Patterson: It’s looking at how defence was able to navigate around PSPC, which has competitive processes and that there are safeguards that are concerns in this bill, versus now. What will DIA bring to the table that will improve on that? It can be anything from your thoughts.
Ms. Hadwen: As a stand-alone agency with its own minister, we would be getting closer to the operator and closer to the direction, whichever minister the government would choose to name. We still have some very reasonable value-for-money and other contractual expectations that anyone would expect.
I think the opportunity is to bring in these multiple pieces of the mandate outlined in section 12 and really intersect not only on a procurement basis, but also with Canada’s industrial ecosystem to try and get small- and medium-size businesses to become part of that bigger story.
The Chair: Thank you.
Senator Anderson: Thank you both for your testimony. My question is for Wendy Hadwen. Given that Bill C-31, subclause 16(e) gives the minister broad authority to acquire or dispose of real property or interest in property, and clause 16.1 appears to allow the property works and other assets acquired under the part to subsequently be dealt with “for any purpose.” How will the government ensure these powers are exercised consistently with section 35 of the Constitution Act, 1982 and with the specific obligations contained in applicable modern and historic treaties, particularly where the acquisition, use or disposal of the land could affect Indigenous lands, harvesting rights, access or other treaty-protected rights?
Ms. Hadwen: Thank you for the question. You rightly point out, a very important element of how this has to work in the implementation, which will be engagement and consultation above all.
I think you might be referring to the proposed amendments to the Defence Production Act as opposed to the proposed defence investment agency act in that provision about infrastructure and real estate.
The Department of National Defence has a robust Indigenous engagement team in the group that does infrastructure. They are working hand in hand with territorial governments, with communities and with other organizations, like the federal department, CanNor, and the Inuit-Crown Partnership Committee, to ensure that the investments that come from National Defence are appropriately consulted with communities and respect the needs so that there are no repeats of mistakes from the past, for example.
Senator Anderson: Would the government support adding an express provision to clause 16(e) stating that the minister’s authority is subject to section 35 of the Constitution Act, 1982 and to applicable Aboriginal treaty rights, as it does in Bill C-5, the Building Canada Act, where it is stated both in the preamble and the body of the bill if not, why not?
Ms. Hadwen: Thank you so much, Madam Chair. I don’t have the expertise to answer that definitively, but I will gladly take it back to the drafters for consideration.
Senator Anderson: There is the federal Interpretation Act, and it should apply to all legislation. That is also not referenced, and I just want to point that out that, in all discussions that pertain to legislation, the federal Interpretation Act should become part and parcel of the language that is used. Thank you.
Senator Yussuff: Good to see you all back on this Monday evening, and congratulations to Senator Ince for being the deputy chair.
There are proposed changes in this legislation departing from what our tradition has been in regard to procurement or practices in the government. Specifically, the bill allowed the minister to bypass competitive procurement processes in a situation where certain exceptions apply: capabilities, interoperability and interchangeable existing Canadian capabilities to those associated with government. What criteria oversight mechanism would be put in place to ensure that non-competitive procurement does not become the norm as to how we operate government? I ask because, at the end of the day, we want to make sure we’re getting value for money, and the government needs to assure Canadians their tax dollars have been spent appropriately.
Ms. Hembroff: Madam Chair, I can start by attempting to respond to the question. There was a very clear commitment in the Defence Industrial Strategy, as well as in the intent for the creation of the Defence Investment Agency, to make use of the different flexibilities that exist for defence procurement. That can include taking a procurement approach such as a sole-source contract where that is merited. There are a number of different considerations that the government utilizes when it’s considering the appropriate procurement approach. I will let my colleague, Ms. Hadwen, respond in terms of how this will be managed within the Defence Investment Agency, which is now centralizing procurement decision making. So we are moving into a new way of decision making.
Ms. Hadwen: Thank you, Madam Chair. The Build-Partner-Buy is a hierarchy, and the Defence Investment Agency will be called to prioritize building in Canada and to prioritize Canadian industry. That may call for thinking differently about everything from requirements through to procurement decision making so that we can give an advantage to Canadian industry — small, medium and large.
Senator Yussuff: With all due respect, I don’t think you’re giving me an answer. The minister has very broad powers. Taxpayers need to be assured that there is some process, and this may be an exception. But how does this not become the norm, and the minister will say, I’m sorry, I have the power under the legislation, and completely ignore the competitive process? We have more than one company competing in the same sector of the Defence Industrial Strategy. It’s not that we are relying on just one company. How can we assure that the minister will not say, I have that authority, and I don’t have to assure Parliament or anybody else in regard to that decision? My point is that there may be questions, and I would agree that there will be exceptions, but the question that we need to satisfy is this: How does the exception not become the norm?
Ms. Hadwen: Just this afternoon, my procurement colleagues reminded me that the fundamental laws of procurement are fairness, transparency and value for money. The animating ethos of procurement will not change. This is trying to give the minister some flexibility to allow the agency to act in order to respond to the evolving situation that Canada is facing in respect of the Department of National Defence and the things that the department needs to do its job.
Absolutely, we will be held to account by all of the normal mechanisms, including Parliament, but also the Auditor General. I don’t see any intention here that giving the minister that power is undermining the commitment to value for money.
Senator McNair: I’m going to pick up on Senator Yussuff’s questions. Clause 327 of the bill, as I understand it, amends section 45.2 of the Defence Production Act, which relates to offences under the statute. It would specify that contraventions of proposed section 27 do not constitute an offence under the statute. Section 27, as you know, requires that a competitive procurement process be conducted.
What is the rationale for excluding contraventions of proposed section 27 from the offence provisions? If a failure to conduct a competitive procurement process would not constitute an offence under the Defence Production Act, what mechanisms exist to ensure compliance with proposed section 27?
Ms. Hadwen: Madam Chair, I’ll just need a minute to refer to the legislation in more detail. Would you mind repeating the question?
Senator McNair: The question was about amending section 45.2 of the Defence Production Act — clause 327 of the bill — and it specifies specifically that contraventions of the proposed section 27 do not constitute an offence under the statute.
Ms. Hadwen: I’m sorry, Madam Chair. I wish to come back to this question after consulting some experts.
The Chair: Does that suffice, Senator McNair?
Senator McNair: We can also take something in writing.
This committee heard from members of the defence industry who have had challenges getting involved in the procurement process and actually submitting a bid. One that comes to mind is an industry player like Roshel. Do you anticipate that the implementation of the DIA will make it easier for defence manufacturing to become involved in the process? If so, how and why?
Ms. Hadwen: Thank you for the question, Madam Chair. Absolutely. As I understand it, the intention behind the creation of the Defence Investment Agency is precisely to offer industry a better way of interacting with government, and that includes our commitment in the Defence Industrial Strategy to have a new forum — the defence advisory forum — but also to be developing ourselves into a single point of contact for Canadian industry.
I would only say that you see the beginning of it with the defence drone initiative, which was a very wide-open process for any industry, whether or not strictly in the business of making drones, to be invited to participate. We did open sessions with industry in advance of opening the request for supply arrangements in order to try and capture as many possible actors as we could. That is only the beginning of how we intend to proceed because we also hear from industry that they have an appetite to understand better how to become part of this extraordinary investment in the Canadian defence industry.
Senator Hay: Thank you both for being here. I am going to pick up on something Senator Cardozo spoke about and plug it into a question about how the Defence Industrial Strategy actually fits into the AI for All strategy framework. In particular, how do we protect tier-one data, end to end, as you’re looking at procurement? Senator Cardozo spoke about drones and being able to take out a frigate for a couple of hundred dollars. I would suggest a cyberattack on a frigate can easily be taken out by a malicious actor with access to our data and whatnot. I would like you to talk about that.
I don’t know if it makes sense to speak about the 10 sovereign capabilities within the Defence Industrial Strategy. Is AI treated as one of those sovereign capabilities? I would be interested to know about that. Then, I have a follow-up question.
Ms. Hembroff: I can start. The list of sovereign capabilities in the Defence Industrial Strategy is a good place to start.
There was a recognition when we were developing that list that there are a number of dual-use technologies, including artificial intelligence, that will play a really fundamental role as we build up our defence industrial base. My department, which led on the AI strategy but also co-led on the Defence Industrial Strategy, is keenly aware of that intersection between the two.
I will let my colleague speak to some of the specific considerations that have been in mind, particularly within the Department of National Defence, as we think about the changing nature of warfare and the role that AI might play. However, from a programming standpoint, when ISED is looking at funding a variety of different dual-use technologies, artificial intelligence has been at the very top of that list.
Senator Hay: In your procurement criteria, are you looking at “Canada first” as it relates to data, data storage and data centres? Being on Canadian soil alone doesn’t give Canada any sovereignty protection.
Ms. Hembroff: Again, that issue of sovereignty has certainly been one that we have taken a very careful look at in the context of our work on artificial intelligence. The principle of sovereignty is really a fundamental underpinning of all of the work we’ve done with the Defence Industrial Strategy, as we have looked at the types of capabilities we need to be able to build and maintain here at home.
Ms. Hadwen: Thank you.
The 10 sovereign industrial capabilities do include AI. When we developed them, we actually went back to some work done by another great Canadian in the Jenkins report from 2013, which identified key industrial capabilities for Canada.
The principle here, though, is that we have industrial advantages in some specific sectors, of which AI is one. We also have a military operational use case. We want to bring those together and use tools like the Defence Investment Agency to help get Canada into the lead and, perhaps, win.
“Digital systems” is the one that captures secure clouds; quantum computing and communications; integrated command, control and communications; high-assurance communications equipment; and artificial intelligence. That is laid out on page 17 of the Defence Industrial Strategy.
Specifically, yes, we are working with the Canadian Centre for Cybersecurity to identify ways in which our procurement work can take advantage of the best of Canada’s emerging industrial ecosystems in cybersecurity and to require the best protections, whether from an industrial partner or, potentially, whether there are ways for government to provide that.
Senator Hay: I have a follow-up. I recall Minister Solomon emphatically saying that tier-one defence data would be stored on Canadian soil by a Canadian company, which would protect it, for example, from the U.S. CLOUD Act.
In your procurement criteria and protocols, are you putting that forward for tier-one data? A Canadian-based company could be owned by a U.S. parent company and still —
The Chair: It is a great question. I wonder if we can just give some time —
Senator Hay: I forget this is not all about my questions.
The Chair: No, but it is a great question, and I hope witnesses can get to answer in the next round of questions and answers.
I would like to take the liberty of doing a probe on one of the comments made earlier, and then we will move on to more questions.
I have a quick follow-up regarding the comments about the drone initiative. It has only been about two weeks since those companies that are very excited to be successful — and it feels like it was round one of really fast-tracking and doing some incredible work. There is another round where there is another opportunity, if it’s not already past the due date for the application.
What are the quick lessons on that? Have there been things you have noted that you really worked hard and came up with something tangible, listening to all the procurement feedback? Are there any lessons?
Ms. Hadwen: Thank you for the question and the recognition. We worked really hard on that. I don’t mind admitting that it disrupted just about everything in terms of how we think about the norms of how we want to work.
In so doing, we have learned some lessons. Some of them pertain to how we ask for information of industry in a standardized way. Coming to security. It is how we verify the supply chain and ownership, and how we ask the industry to prove security credentials. We don’t want to be too demanding.
[Translation]
We also don’t want to ask for too much detail and prevent small businesses from accessing the process.
[English]
That is one of the principal lessons.
The gate will open, the request for supply arrangement will take on another intake in October — so it has not been missed — and there are opportunities again in 2027. Again, one of the lessons there is that it can’t be “one and done.” It’s not like a still photograph; it’s more like a film.
The Chair: Colleagues, two or three of those companies have been witnesses here at our table, so it has been interesting to watch and listen to the concerns they have had from a witness point of view to the action related to this project.
Thank you for sharing that.
Senator Patterson: Thank you for your responses. I have a few areas I have to narrow down. I really want to go back to the associated governments — whichever one it is there — but look at Build-Partner-Buy, as that is a concept. It will probably hit both of you.
One of the challenges in Canada — because we do meet with defence industries as they’re small, and we’re also asking things like, for example, of the people who produce 150-millimetre shells to have a certain number of days of supply. I realize you are still building, but I wonder if you can project ahead as to how the “investment” part of “DIA” is going to help such small companies be able to build to scale. Because that is where we are losing out to the great companies elsewhere in the world.
That is part one. Go ahead.
Ms. Hadwen: Thank you so much for the question.
We spend a lot of time thinking about that. Our team is small. I have only been only eight weeks in this job, but this is job one. There are two aspects. The first is establishing a repeatable approach and something we can share with the public about how Build-Partner-Buy takes shape, where we can expect to have access and how those decisions get made.
Ms. Hembroff, perhaps you have something to add.
Ms. Hembroff: Sure, I can continue.
I see the agency playing a really critical role in filling in some of the gaps that exist right now in terms of supports that are available for Canadian companies. At the moment, we have a fairly broad ecosystem of federal supports that includes everything from early-stage R&D support to later-stage commercialization, including for very large firms, in some cases.
That sounds comprehensive, but there are actually some really important ways that the Defence Investment Agency can play a really critical role. That could include, for example, potentially taking equity stakes in Canadian companies. It could also include pursuing more co-development opportunities, which is not something that Canada has traditionally done a lot of in the defence area. We have examples, like the funding of the Canadarm, which was a decades-long co-development initiative. That is an area where we see a lot of opportunities for the agency to be able to complement the suite of federal supports that currently exist to support Canadian companies.
Senator Patterson: We have international partners through Europe, through NATO as well as Canada being a member of SAFE within our industry within that. We’ve heard complaints coming in from countries that unless you let us in, we’re not letting you in. I know this is early days yet, but can you also comment on how you see this moving forward, whether this legislation facilitates that or it’s the messaging that needs to be enhanced?
Ms. Hadwen: Thank you, Madam Chair. What is interesting in this legislation is section 12(d), these are the mandates. There you have your co-production, your partnership and the specific associated governments that you asked about earlier. We are not alone as a country, trying to preference our own industry, but also recognizing we need to partner.
Recently, there was a big trade show in Poland, and the minister signed a defence cooperation agreement. This is a partnership that, in some cases, needs to start with building trust. So if this legislation were enacted, we would be putting an emphasis on building those partnerships into a place of trust.
Senator Yussuff: The proposed amendment to the Defence Production Act also allows sole-source procurement to support sectors of the Canadian economy. Considering the importance of national defence or economic security, this is an objective that I think many of us on this committee would agree with. With that said, how could the government determine which sectors qualify? How will they balance the objective against value for money and fair competition?
Ms. Hadwen: Thank you for the question, Madam Chair. My suggestion is that the 10 sovereign capabilities are the government’s description of the sectors of particular importance, where Canada has an industrial advantage and an operational need which can be aligned. That is not to say that everything in those sectors would necessarily be sole source, but it is an indication of where the government is looking to build the industrial capability in Canada, which then would call on the government to use the tools in the legislation.
Senator Ince: Thank you very much. This has been very informative. Thank you, Senator Yussuff, for a nice segue to mine.
Clause 322 establishes the requirement for competitive procurement. Clause 28 contains several exceptions. Has the government conducted an equity analysis of these procurement exceptions, specifically their potential impacts on small- and medium-sized businesses, Indigenous, racialized and other diverse businesses and those that are not yet established suppliers to the government, who may have fewer resources to compete for sole-source opportunities?
Ms. Hadwen: Thank you so much for the question. I cannot comment on whether such an analysis has been done. I would be happy to reply in writing.
Senator Ince: Thank you so much. Please forward that on because that’s very important. Thank you.
Senator Anderson: In June, in the Senate, I raised concerns about the NORAD northern basing infrastructure procurement, where the successful proponent or the contractor was required to develop an Indigenous business plan, not Canada, who is responsible for treaty rights. My concern was that Indigenous rights holders should be working directly with the Crown before a successful proponent is selected, rather than being brought into a contractor-led process after the procurement decision has been made.
I now look at clauses 27 and 28 of Bill C-31. Clause 27 requires a competitive process, but clause 28 gives the minister broad discretion to dispense with that process in several circumstances.
Can you explain, from the Department of National Defence’s perspective, at what point Indigenous rights holders and applicable modern treaty obligations are identified and incorporated into that procurement process? Where clause 28 is used to dispense with competition, what process ensures that Indigenous rights holders are engaged by the Crown before the contract is awarded, including in the development of any Indigenous benefits plan?
Ms. Hadwen: Thank you, Madam Chair, for the question. I would only offer that I’m here on behalf of the Defence Investment Agency, and we are small, and we hope this legislation becomes something. I can make sure that we look at how Indigenous rights holders are embedded in our approaches insofar as we are developing policy. I will be happy to talk to my colleagues about that also.
Senator Anderson: Thank you.
Senator Cardozo: This is not a question. I’m wondering where our time frame is when we are doing clause-by-clause? Can we ask for the questions from these officials in the next few days so we get the answers well before? I say that because, in past instances, there have been committees where we get the answers weeks or months later. We probably need this in a few days. I include that answer to the question that Senator Anderson just posed, and perhaps some more information on that.
The Chair: In this situation, we don’t do clause-by-clause; we will be looking at recommendations. However, the urgency and getting these responses back as soon as we can are important. They’re very important to our work, but I just wanted to clarify the process.
Senator Cardozo: Can we have the information this week?
The Chair: Absolutely. Possible, probable action. Great. Thank you very much. With that going around, I believe we have finished our questions for this evening, and it brings us to the end of our time for this panel.
Thank you, Wendy Hadwen and Kendal Hembroff, for taking the time to meet with us today. We really appreciate it.
For this next hour, we have the pleasure of welcoming Nicolas Todd, Vice President, Government Relations and Communications, Canadian Association of Defence and Security Industries, or CADSI; Richard Foster, Vice President, L3Harris Technologies Canada; and Hugh Kolias, Chief Executive Officer of the Canada Rocket Company.
Welcome to all three of you. We will begin by inviting you to provide your opening remarks to be followed by questions from our members. I remind you that you have five minutes for opening remarks. We will begin with Mr. Todd. Please proceed when you are ready.
[Translation]
Nicolas Todd, Vice President, Government Relations and Communications, Canadian Association of Defence and Security Industries: Thank you for the invitation to speak to you about the provisions of Bill C-31 relating to the Defence Investment Agency and the amendments to the Defence Production Act.
[English]
I commend the government for taking significant steps to reform defence procurement and linking it to an ambitious, domestic defence industrial-growth agenda through the Defence Industrial Strategy, or DIS.
Making the DIA responsible for defence procurement and central to the execution of the DIS is a highly complex machinery of government reform. We’ve seen nothing like it in more than half a century.
Provisions in Bill C-31 for the new Defence Advisory Forum, DAF, and private sector advisers to the DIA are essential to improving government and Canadian Armed Forces literacy about our industry. This is essential to delivering on jobs, R&D and growth targets set out in the DIS. The forum should also help build needed trust between government and industry and change engrained cultures.
We welcome the Defence Production Act, or DPA, amendments that allow investments in the defence industrial base and to exempt procurement from competitive bidding to buy Canadian when it makes sense.
Given today’s international security environment, procurement reform alone is insufficient. Canada needs a defence production mindset, and these amendments are a step toward it.
Procurement is a peacetime luxury; production is a wartime imperative.
As head of Canada’s delegation to the NATO Industrial Advisory Group, or NIAG, I can tell you since Russia’s 2022 invasion of Ukraine, NATO’s focus is on increasing allied production of defence material in short supply, a priority formalized in the updated NATO Defence Production Action Plan.
Increasing defence production as a key part of NATO burden sharing has received insufficient attention here in Canada. With the DIA and amendments to modernize the Defence Production Act, Canada will have the tools and, hopefully, the will to make a bigger contribution to this agenda.
I have three recommendations that I urge you to include in your report. First, with defence funding rising toward 4% of GDP by 2030, DND must urgently publish an updated Defence Investment Plan. It should detail what the CAF will buy, by when and budget estimates. It is essential to encourage companies to invest and prepare, especially SMEs and new entrants, that cannot absorb the cost of unsolicited bids.
Second, clarify how and when defining requirements will be managed between DND and DIA. There is no stated mechanism to align military requirements with the industrial objectives Parliament is about to legislate.
Sovereign capabilities are a new concept for Canada and core to the DIS, so how will the CAF take it into consideration as it sets military requirements? How will the CAF consider sovereign capabilities as a key to mission success in national security, not just someone else’s economic objectives?
While the response lies outside of a legislative solution, clarity from the government would be welcome.
Third, the backlog and security clearance approvals for defence company employees are long-standing, and without clearances granted quickly and predictably, companies cannot do the work for which they are contracted.
The burden falls hardest on SMEs and new entrants. The DIS commits to investing to significantly accelerate the security clearance process for defence contract personnel.
We hope the government acts on this commitment urgently. I would be pleased to share a paper by Vice-Admiral (retired) Ron Lloyd arguing for fundamental reform of Canada’s approach to clearances.
I’ll end on a positive note. Bill C-31 is an important step forward for Canada’s defence industrial base, as it is poised for historic growth. The industry is already in a growth mode. We see it in our own membership, which has grown from roughly 750 firms to nearly 1,800 in two years. Over 80% of our members are Canadian SMEs, many of them new entrants bringing dual-use technologies to defence. These are exactly the kinds of companies Bill C-31 is designed to support. The government’s ambition is clear, overdue, and strongly supported by Canada’s defence industrial base. Bill C-31 is an important component of that.
The international security environment and our NATO membership require this ambition, and CADSI’s member companies are ready to deliver on it. Thank you.
The Chair: Thank you. Mr. Foster the floor is yours.
Richard Foster, Vice President, L3Harris Technologies Canada, as an individual: Good afternoon, honourable senators.
As the country executive for L3Harris Technologies Canada, I am proud to represent over 2,700 employees across three major Canadian subsidiaries with a 75-year heritage: WESCAM in Waterdown, Ontario, manufacturing advanced EO/IR sensors; MAPPS in Montreal producing naval control and platform management systems; and MAS, Mirabel, which provides military aircraft sustainment modification systems integration.
From an industry perspective, the DIA represents an opportunity to address a long-standing challenge in defence procurement: the time required to translate identified operational requirements provided by the Canadian Armed Forces into a contracted and delivered capability.
The objective should be to create a more responsive procurement system in which government and industry can make decisions earlier, with greater confidence and with clearer accountability for outcomes.
Acceleration and predictability need to go together. Predictability strengthens Canadian industrial capacity, allows companies to retain skilled workers, invest in facilities, expand supply chains and develop sovereign capabilities and industrial partnerships that support both national security and economic growth.
Industry can make those investments more efficiently when it has reasonable visibility into what Canada intends to procure, when decisions are expected, how requirements will be evaluated and how procurement strategies may change.
The proposed authority allowing the DIA minister to exempt procurements from competition appears quite broad. There may be legitimate circumstances where a competitive process would be impractical or inconsistent with an urgent operational requirement. Industry recognizes the need for the government to have that flexibility. However, the broader the discretion to depart from competition, the stronger the accompanying transparency and accountability mechanism should be.
Decisions to procure non-competitively should be based on identifiable criteria supported by a documented rationale and subject to appropriate oversight and reporting. This is important for industry confidence, taxpayer accountability and the DIA’s credibility.
Without those safeguards, a mechanism intended to accelerate procurement could create uncertainty about how suppliers are selected and increase the perception or risk of arbitrary decision making. That would work against the predictability a new model is intended to create.
Industry supports the objective of establishing the DIA and creating a faster, more effective Canadian defence procurement system to satisfy operational requirements identified by the Canadian Armed Forces.
To realize that objective, we recommend that the legislation and its implementation framework incorporate three principles. One, make predictability a measurable objective of the DIA, establish greater visibility into procurement priorities, acquisition plans, decision milestones and expected timelines so industry can align investment, workforce and supply chain capacity with Canada’s requirements.
Number two, embed transparency and accountability in the DIA’s decision-making framework. Require clear decision criteria, appropriate documentation and regular reporting on procurement timelines, outcomes and the exercise of exceptional authorities. This would preserve confidence in the system, while enabling decisions to be taken more quickly.
And number three, establish specific safeguards around exemptions from competition, preserve the government’s ability to act rapidly when circumstances warrant, but require non‑competitive decisions to be supported by defined criteria, a documented rationale and appropriate report and oversight.
The objective should be flexibility without arbitrariness and speed without sacrificing confidence in the integrity of the procurement system.
Thank you. I look forward to your questions.
The Chair: Thank you very much.
Hugh Kolias, Chief Executive Officer, Canada Rocket Company: Thank you, Madam Chair, and thank you, honourable senators, for inviting me to address the committee as part of your study of the Defence Investment Agency in Bill C-31 and how it impacts Canada’s ability to obtain sovereign launch capability.
The Canada Rocket Company is a Canadian-owned and controlled company developing medium-lift launch capability in Canada.
I want to start with a brief overview of our company. Since its incorporation in November 2025, CRC has experienced rapid growth. We have recruited more than 30 highly qualified engineers with more than 150 years of combined orbital launch expertise from global companies such as SpaceX, Blue Origin, Rocket Lab and ArianeGroup.
Many of these engineers are Canadians returning after living abroad for over a decade. Others are moving to Canada for the first time, attracted to our mission to build space launch capability for our country.
In under a year, we’ve also attracted over $22.5 million in funding, over 95% of which is Canadian, including an $8.3 million grant from the Department of National Defence. Through the Defence Industrial Strategy, we have attracted talent and capital faster than any other launch company at this stage globally.
For every dollar received in government funding, we have been able to crowd in over $2 in private investment. We are truly grateful to the government for this essential funding and demand signalling. It has led us to be where we are today.
Headquartered in Etobicoke, we are breaking ground on our static engine test facility in southwest Ontario later this week and plan to build a 500,000-square-foot manufacturing plant in Toronto within the next two years.
We expect to create more than 1,000 highly skilled engineering and manufacturing jobs directly over the next decade.
Speed is everything when building to the level of ambition that the Prime Minister has asked of us, and so far, that speed has been matched across our interactions with the federal government. Accelerated work permits; expedited building approvals for our test site; and the stated sovereign need, through the Defence Industrial Strategy, has been foundational to our progress.
Space launch is capital-intensive and provides a significant economic opportunity. According to a commissioned Deloitte study, our program is expected to contribute over $12 billion to GDP and over 64,000 full-time equivalent jobs by 2040.
To maintain momentum, more public funding and signalling are needed to build confidence and certainty among private-sector investors.
First, anchor demand. The government must become an early customer by committing to contract domestic launch capacity for future Canadian civil and military payloads. Underwriting first flights, exactly as NASA did in the early 2000s, is the single most effective way to crowd in the private capital required.
Second, continued co-investment in development. We need continued, cost-shared, milestone-based funding models that match private capital investments through the next phases of test, qualification and flight.
Traditional procurement could not move fast due to the burdensome processes. Too much time is spent in definition phases, and too little was spent building sovereign capabilities and expanding Canada’s industrial base.
The Defence Investment Agency is a strong vehicle to make swift, strategic decisions aligned with core government directives and advancing national interests. In these challenging times, as Canada is increasing defence spending to 5% of GDP, we need to modernize procurement. That is why the Canadian Rocket Company supports this bill.
For the Canada Rocket Company, the need for rapid deployment of Canadian assets in space has never been clearer. We need satellites for almost everything we use in our daily lives, including communications, navigation, observation, research and defence.
We are the only G7 country without space launch capability, and we are completely dependent on other countries to launch what we need into space.
The Canada Rocket Company is unique in Canada as the only company developing a true medium-lift launch vehicle. That means we can launch over 12,500 kilograms to orbit, which is what is needed for Telesat constellations as an example. This is a $35-billion market opportunity for us and for Canada.
Recently, SpaceX has been rumoured to be retiring the Falcon 9. This is the exact same vehicle that over 94% of Canadian satellites have depended on to reach orbit. At the same time, they intend to use their next new vehicle, primarily for internal purposes.
Canada is being left without reliable access to space. The Canadian government has never directly procured a launch. It has always depended on its mission partners to procure launches as part of their contract. Should the government, through a DIA process, procure anchor contracts, or signal the intent, it will provide the necessary catalyst for us to attract the private capital required to build this capability in and for Canada.
For us to be successful, and for Canada to be competitive globally, speed is the most important differentiating factor: speed of procurement; speed of decision making; speed to orbit.
This is the exact problem the DIA is designed to solve, and we couldn’t be more supportive of its formation.
Thank you very much, Madam Chair. I’d be happy to answer any questions committee members may have.
The Chair: Thank you very much. We are now going to proceed with our questions. Our witnesses will be with us until about 6:10 p.m. As always, we will do our best to allow time for each member to ask questions. Four minutes will be allotted for each question, including the answer. I ask that you keep the questions succinct, even shorter in an effort to allow as many interventions as possible.
I would like to offer the first question to our deputy chair, Senator Ince.
Senator Ince: Thank you all for being here. I’m looking forward to your responses. My first question is about clause 322, which establishes a requirement for competitive procurement. From an industry perspective, are the proposed exceptions appropriately targeted or are some drafted too broadly? Just a simple question, which is for anyone.
Mr. Todd: Often, the legislative drafting is very broad, especially in a Defence Production Act, which is mostly used in a time of war where you need very broad discretionary authorities. Those tend to be narrowed later through other policies, say the Canadian content policy, which could, for example, if applied, limit competition to two or more Canadian companies.
So there are other ways to then restrain a very broad legislative drafting language.
Senator Ince: Thank you.
Mr. Foster: I think the decision to proceed with an exemption from competition should not be the default. I think one of the senators previously talked about, is this going to become the norm? So it should not be. There should be a clear process and criteria developed in terms of how you are going to even go down that road to signal to industry that this could be a possibility. I know of cases where we have been working on competition from our U.S. companies trying to bid into Canada over the last two years, and they’ve just been excluded because of the buy-Canada policy.
Ultimately, it’s about meeting the operational requirements of the Canadian Armed Forces. So how do you make that juxtaposition and say, “We’re going to exclude that? We’re going to build up Canadian companies, but the Canadian Armed Forces may actually get a lower capability?”
In the process the DIA needs to look at what they mean by “true sovereign capability development.”
I do believe Canada over the next 10 to 20 years, if it’s serious in terms of developing a strategic defence industrial base, needs to look at what areas we’re actually going to invest in. Is it rockets? Then we need to spend appropriately and need to develop it and develop it well so that we can compete on the open market.
Right now, the 1,800 companies that have signed up to CADSI all want to be the sovereign capability for Canada, and I’m not sure we have the capacity to do that. Thank you.
The Chair: Thank you.
Mr. Kolias: Thank you for the question. From our perspective, competition comes up a lot, and historically in Canada we’ve been hesitant to crown a national champion to our own detriment, and we almost run competitive processes too far to a fault when effectively nobody ends up winning.
Coming back to some of my remarks around speed — and this is what I tell the team all the time — we need to be the fastest to orbit, and we need to provide our capability to the market as quickly as possible so this time doesn’t pass.
This is not just for launch vehicles; it is across the entire verticals. This is a point in time where we as Canadians have this significant opportunity to build real things in this country. I think it’s incredibly imperative that we take learnings from history and focus on how we can expedite those opportunities.
Using us as an example, we’re essentially a class of one in terms of the vehicle that we’re building and providing. So it will be very difficult to go down that path.
This is where, I think, not just launch vehicles, but the 10 areas within the Defence Industrial Strategy that have been defined. Now it is up to Canadian companies to step up and show their capabilities, and then the government to match that level of ambition and drive the procurement process faster.
Senator Ince: Thank you.
The Chair: Thank you very much.
Senator Cardozo: My question is with regards to flexibility, and I will ask Mr. Todd and Mr. Foster for your comments to start with.
There is a lot of change happening, and it is happening faster. Whether you look at warfare, which is changing due to drone technology; you look at the growth of AI and how that will change how we do warfare; and look at our allies — people who are allies today may not be allies tomorrow. We’ve got some big elections coming up in Europe, which could change some of our long-term allies to be not-so-close friends.
How do we have a system of certainty that you talked about and yet flexibility? So something that we think we absolutely need, maybe in cooperation with a certain country today, two years from now we may be thinking, no, we can’t go that route any further. How do we manage that?
Mr. Todd: Sovereignty. The more you can build up and have your own independence of action, set clear prioritized defence policy objectives, have an understanding of the capabilities that we need to defend ourselves — which ones we can rely on others and which ones we really want to have ourselves — and to then use the instruments that we have through this bill toward the goals in the Defence Industrial Strategy, which sets that vision of more sovereignty for Canada through a stronger industrial base. It’s focusing on that to the greatest extent possible.
Mr. Foster: I like the idea of strategic partnerships and sovereign capability because it now gives the focus to the government to say, “We want to build ammunition in Canada,” for example. That’s a supply capability we don’t want to miss or not have available when we need it.
When you’re talking about aircraft maintenance and heavy depot work, F-35 air vehicle depot is a good thing to have because it gives you operational readiness to use your aircraft when you want at a specific time. It means that you’ve bought all the supplies necessary to enable the plans that the Canadian Armed Forces are going to execute.
Senator Cardozo: I fear we’re heading into this big-spending regime without the flexibility we may need, either for technological reasons or geopolitical reasons. I don’t think you have the answers, but I don’t think all of us are thinking this through. Everything could change in a year or two from now, and then what do we do?
Mr. Foster: We need to pick the big ones and support them and then have the flexibility to expand as required into Europe in some aspects. That is a good move in terms of your supply chain — no question about it, diversification. Then have that flexibility with your allies and partners to be able to pivot on certain aspects if you need to, but you need to define those initial strategic requirements.
Senator Patterson: The other speed that we need to talk about is the speed of trust because one thing that we have seen in the world since February 24, 2022, is that what we thought we could trust we no longer can, and a lot of where we’re going in investment is about sovereignty, but it’s also about trusted partners. So that’s my segue into trusted partners because we can’t do everything at home.
This is the partnership you talked about. The L3Harris example as well — whether it be drones in partnership that we have already signed onto with the Republic of Korea or Poland — you name it. How do we get to the speed of trust with these allies and still remain sovereign? I won’t get into the AI space, but this can be anything from cyberspace right down to parts and parts manufacturing. What needs to be thought about as the Defence Investment Agency stands up and continues to move forward on regulations and policies coming out of this legislation that you’re not seeing now?
You have certainly given us some good recommendations, but is there anything else you would like to see in legislation that, as things start to fall out, will protect sovereign capability, but also ensure that we have trust in the partners that we’re going to be working with on capabilities that are ultimately about defence?
Mr. Todd: It’s not that we can’t do everything at home. In part, we’ve been asked to do too little at home. That’s where we need to start and build up what we have here and rely more on our own industrial base because that’s a strength that we bring to the table. So that’s where we start, and that’s where the industrial strategy is key because, to Senator Ince’s question earlier, it sets a 10-year target to spend 70% on Canadian industry here in Canada. That’s the starting point: to help build what we have here and decide what that is if we can’t do everything, and from there, look at partnerships where that makes sense.
The other point I would make is that Bill C-31 binds the new DIA minister to this, but it doesn’t bind the Minister of National Defence. Again, it is about the role of military capability in this because the industrial strategy reflects a tension between military capabilities and advancing the economy and sovereignty, where we have relied on others for too long and often for too much. That policy tension is also a governance tension in the DIA itself and between departments. That has to be clarified, as I was saying. Who is going to be representing the industrial, economic and procurement objectives when it’s clear in terms of the military capability and their role in that process? Thank you.
Senator Patterson: Just to clarify again, from your perspective, we may need a bit more precision in the legislation in Division 16, so that part is considered?
Mr. Todd: I don’t know that more precision is needed. It’s more in terms of policy and use. With this industrial strategy, there is a clear policy direction. So that’s then where the focus can and should be. It sets targets. How are those targets reported on? How can we keep track of progress toward those targets so that they’re met? Otherwise, the Canadian industry is going to suffer from what it has over the last many decades where a lot of that spending is going offshore.
Senator Patterson: So there is enough framework in the legislation as it exists right now to allow us, as Canada, to pursue those second parts? I’m just being really precise here.
Mr. Todd: We have to look at the governance structure that’s set out in the DIA. There is a minister. All the powers go to the minister through the Defence Production Act. This has been standard going back to the last time the act was updated in the 1980s, if not before then. Through the 1950s, 1960s and 1970s, there was a much stronger industrial base in Canada. We had a consistent legislative framework. What changes are the policy and attitudes, as well as how procurement is executed. That’s the variable, and that’s why having a target and keeping to it allow us with what’s there in the legislation to deliver the Prime Minister’s vision. As a macroeconomist, he knows that spending five per cent of the GDP is not about economic benefits to defence; it’s about transforming the Canadian economy. It’s that big for a sustained amount.
Senator Yussuff: Thank you, witnesses, for being here. Clause 15.1 of the proposed DIA will give the designated minister responsible for it the power to appoint advisers and the establishment of an advisory committee. This is new for good reasons. These advisers and the advisory committee will provide the designated minister advice and support in performing their powers, duties and functions, as outlined in clauses 11.1 and 11.2 for the purpose of the DIA that relates to the investment in national defence security production and procurement.
What criteria should be designated for the minister to use to appoint appropriate advisers if this is critical, and, in addition to that, criteria for members of the advisory committee? The second question is this: What should be the composition of the proposed advisory committee? Should their composition be similar to or different from that of the defence advisory forum or the independent review of the panel on defence acquisition? I ask because these are new powers, and we want to make sure it will work in a way that gives the minister the necessary guidance and expertise he may not have or the department may not have.
Mr. Foster: I have already made some recommendations in that regard. I think you need a smaller group, not a larger group, just because larger groups tend to be unwieldy in terms of actually getting to the crux of the problem. You need to have representation from probably the 10 major key industry capabilities that Canada is looking for. When we decide we’re going to invest in these strategic capabilities with these strategic partners to build our defence industrial base, whatever that is, you need to have representation from those particular groups. You also need somebody on your side of the table that has industry experience such as a retired CEO as opposed to a current sitting CEO who has self-interest in his own company. You need some transparency on that committee.
Mr. Todd: The role of the forum, for which we’ve advocated for many years, is different than advisers. Advisers are more day-to-day in their nature. The forum can be a strategic table to build trust and share information between key members and leaders in the industrial base and the government in terms of where they’re heading, common problems and finding solutions. We’ve looked to the British that have had something similar for many years and have continued that in their most recent changes, and the Germans have as well. It’s a good way to also surface problems and then drive further change into different departments through that table in the forum.
The role of the requirement setting is completely different in terms of the Department of National Defence for high-level mandatory requirements. There is, possibly, a connection in terms of how that impacts considerations of what should be Canadian or not.
Then, in terms of the different roles of advisers, it is form follows function. So what the problem is that the minister and staff have, and then what is needed in terms of their specialties or how they are organized would be different.
Senator Yussuff: Recognizing that we’re in this really unique place right now in the world — and in this country, for that matter — we’re spending a lot of money, and we are committing to spending a lot of money, but this is not sustainable for the long term over the next 10, 15 or 20 years. I could see this changing. Again, the public is very much open-minded right now, but, as you know, if you look at past surveys, this was not where they were at.
The bigger challenge will be what and how we prepare ourselves for that moment when this level of spending is not going to be there to support the efforts that were so robust in what the government is proposing right now. Have you given some thought to that?
Mr. Foster: Well, I think it starts with the operational requirements of the Canadian Armed Forces, and they should help shape what their priorities are in terms of the capability that they absolutely need in terms of sovereignty or not, and then you compare that to the economic viability of some of the competitive industries that you’re trying to put into the defence industrial base and compete against the market. You need to prioritize that, in my view.
The Chair: Senator, we will defer further response to that in the second round because it’s an important question, and I would like to make sure we have it, but time is.
Senator Hay: I love the conversations around sovereignty and Canada first. I think that’s the right place to start for sovereignty.
I promise, at some point, I’ll ask a question that is not data related, but I will focus on you, Mr. Kolias. Congratulations. A November 25, 2025, launch?
Mr. Kolias: Yes.
Senator Hay: A category of one, really, is what you are.
I could say, in the work I do, it’s not rocket science, but in your case, it really is. It took me a long time to write that down.
I have a question that’s more curiosity around data and the data that you’re working within as you’re building and launching and whatnot. Where is your data travelling, how is it travelling and where is it being stored? Again, it comes down to data sovereignty.
And just as a follow-up under that, you must have, I would imagine, dual-use partners. If so, I don’t know if you can say who they are, but are they Canadian-based or allied partners?
Mr. Kolias: Thank you so much for the question, and thank you for the congratulations as well. We really wouldn’t have been able to do any of this without the signalling from the government, the Defence Industrial Strategy and the funding. It’s an honour to be able to, essentially, build the Avro Arrow moment that everyone constantly cites, so we are very excited to be a part of that journey and in reversing the brain drain.
From a data sovereignty perspective, we have a lot of on‑premise storage, which sounds very archaic, but based off our security needs, it is a requirement. Being in our position, we’re caught between two worlds where we have all these fantastic, generative models. Most of those are U.S.-owned and domiciled. The question becomes: We want to move as quickly as possible, but, of course, we also want to make sure that our data does not leave our borders. That definitely underscores why artificial intelligence is part of the Defence Industrial Strategy.
There is, of course, Cohere in Canada that’s looking to solve those problems. As we continue to explore more within the data space and within the Canadian ecosystem, it’s no secret that most companies end up moving to the U.S., but because of aspects like the Defence Industrial Strategy that encourage that investment here at home, there is a real opportunity for us to continue to work with Canadian partners to help expedite that.
There is another Canadian artificial intelligence company that came out of the woodwork a few weeks ago that’s working on generative models for the real world. Being able to generate the computer-aided design, or CAD, of components, and accelerating the development of those, will be a massive opportunity and outlier for us and other Canadians.
Senator Hay: Thank you. My curiosity remains, but just because it’s fascinating.
[Translation]
Senator Youance: My question is a follow-up to Senator Yussuff’s. The Canadian defence industry is a strategic asset, as highlighted by ongoing investments. My question is: Will Bill C-31 give Canadian companies better access to international defence contracts? Are there other opportunities for development and to integrate international supply chains?
[English]
Mr. Todd: I can start. Bill C-31 will not change the domestic rules of other partners. It only changes ours. It’s only through collaboration and goodwill that they might change.
Defence is a very protected marketplace and has always been that way and will continue to be that way, so it’s unclear how much more this would offer. It’s really in the practice and finding new partners. For example, on Friday, we signed a General Security of Information Agreement with Germany, and so we have to put through a lot of enabling infrastructure at a policy and regulatory level in order to really turn the rhetoric into reality and increase our ability to export. There are initial steps. Certainly, waving the flag gets the name out there, and Canada is quite popular these days, but it’s really, then, the hard work of making sure that we can focus on what it is, remove the barriers to collaboration and then be able to sell more abroad.
Mr. Kolias: Thank you for the question.
One area that indirectly contributes is the Government of Canada procuring services. It then gives the confidence of other nations to then procure services from that company. That is one thing that we’re very much looking forward to, and I think it will provide a lot of leverage in those conversations.
The Chair: Thank you very much.
I’m just going to ask a question first if you don’t mind. I think all three of you were here for a good part of the first hour. My question is: Of the testimony you heard in the first hour, is there anything that you’ve heard there that you just want to make sure that we are strong and clear on, from your perspective, or is there anything that you might see differently from what you heard in the first hour and might want to articulate in a different way?
Mr. Foster: I guess the proof is in the details. I do agree that it’s good to have broad legislation. I also think there needs to be controls. I do think the tension between requirements and procurement needs to be there.
I would like to see more detail and process on getting Canada’s Defence Industrial Strategy developed and that the defence investment plan, which we talked about during the first hour, gets refreshed. Getting a defence policy put out would be helpful because those are all signals to industry that show how the details of this legislation are going to be executed.
The Chair: Thank you.
Mr. Kolias: There is always a natural tension in having enough framework or policy because if it gets too prescriptive, companies like ours that, historically, haven’t existed within the Canadian ecosystem might be disadvantaged because of some of the activities we may need to do. Our test infrastructure is a great example of that. No one has tested engines statically in Canada at that scale.
We’ve been working very closely with the Department of National Defence and the Defence Investment Agency in the areas of accelerating temporary foreign worker permits and permitting on federal lands, as we have some of our infrastructure there. Then, of course, when it comes to procurement, because the Canadian government has never procured anything regarding space launch capabilities before, there are a lot of hurdles that exist in the natural system that would probably take years, but we don’t have years because we need to demonstrate to the private markets that the Canadian government will continue with the Defence Industrial Strategy. That, then, sends the signal for them to become comfortable, and it creates the trust that was alluded to as well. It’s about how quickly you can build trust among all the key stakeholders in that ecosystem. Again, that’s why we’re very supportive of the bill and the team at the DIA.
The Chair: We’re going to move on to the second round.
Senator Patterson: This question is going to be a little bit of a softball because I think we’ve answered it already. It’s about clause 316 of the bill. It talks about the ability of DIA to invest, but it also includes acquiring shares.
Now, we certainly have seen evidence in some of our other NATO allies where that has occurred, not in our country but elsewhere, and it has been met quite poorly. People are quite jaded by their perception of it. I will also point to how well Canada has done in the past when the government started investing in things like critical infrastructure. Petro-Canada is a great example. However, I think this is extremely compelling.
I would like to know what your opinion is on whether, with the Minister of Finance’s approval, they can acquire shares in a corporation as a means of keeping it going. What is your perspective on that?
Mr. Kolias: As always, it depends on the actual details. When you acquire shares, sometimes that comes with certain rights. At the end of the day, it would depend on what rights come with the procurement of those shares. The Business Development Bank of Canada is a stakeholder within Canada Rocket Company, so directly or indirectly, the Government of Canada is part of the company and the cap table.
Historically, the view has been that government capital provided to companies is a source of weakness at times because it means a company is unable to attract capital in the private market, so then the government steps in. It’s very much dependent on the situation. We were BDC’s first defence investment back in December 2025. My previous company had raised private capital and sold the business. Historically, investment from BDC has never been viewed as a strong signal to private markets. That has since changed, especially for sovereign capability capacity, like space launches. Having the government invested in multiple different ways, whether it’s through anchor contracts and non-dilutive funding or by acquiring shares and company ownership, sends a signal to private markets that the government is serious about this initiative.
It’s very dependent on the company and what they’re looking to address, but in our specific case, within reason, of course, it’s all about the details. It is great to have that optionality on the table for the DIA.
Mr. Foster: The government of Australia owns about 74% of a radar company. That enables them to decide who they’re going to share it with, who they’re going to sell to and whether that information is releasable or not. In that light, from a Canadian perspective, it’s really about going back to our sovereign capabilities and deciding if this is something we want to keep in Canada that we never want to be sold and taken over by another company because, at the moment, if a company is publicly traded, we can call it sovereign all we want, but tomorrow it could be bought out.
Mr. Todd: For some of the more traditional defence goods, companies want a contract first. A contract allows a lot of the financing to happen. It depends on how much commercial opportunity there is in that good. Financing can’t be seen as a substitute for a contract. I put that out there as well.
Senator Ince: I have a short question. You may have heard me ask it earlier, but I’m going to provide the question to you and look for your response. From an equity lens, do you have any concerns that the exemptions could have a negative impact on small- and medium-sized enterprises, Indigenous and racialized communities or other diverse businesses?
Mr. Foster: I almost see the opposite. I’m hoping that the exemptions will be used with the lens of creating and scaling up small businesses and Indigenous companies. I know we’re actively talking to a lot who recognize the government’s intent. We’re talking to a lot of Indigenous companies. We’re trying to find ways to work together. It’s coming to fruition now after five or six years since we started to incorporate other companies. We’re seeing them at associations and trade conferences.
It’s a good thing. I think if we use our strategic partners and sovereign capabilities wisely, we’ll be saying to our strategic partners, “It’s not just about you and your contract but also about you going out and finding local suppliers, increasing the supply chain and bringing up other smaller companies in Canada.”
Senator Ince: Thank you.
Mr. Kolias: We’re a great example of a small-/medium-sized enterprise that effectively didn’t exist last year. The DIS and soon-to-be DIA really helped us accelerate our progress. Our journey already depends on multiple small- and medium-sized manufacturing companies and suppliers. Through a lot of the policy, we also prioritize buying Canadian and partnering with Indigenous communities and Indigenous-owned companies. I’d like to just point out that we are doing what the legislation has intended, and we were created because of that.
Mr. Todd: Currently, the Canadian industrial base is more than 90% small- and medium-sized enterprises, so they’re already the majority. If this $100 million threshold for the DIA remains in terms of their role, it’s really supply chain opportunities as opposed to platforms or else we would already know who those companies would be. It’s about how to effectively encourage their participation in this.
I note that as we get to the NATO targets, the amount of money that we’re talking about investing in the economic defence industrial base is enormous. We will need to grow that base with whomever can have the ability to participate.
Defence is not for the weak of heart. There are a lot of upfront costs that make it much more difficult for SMEs to participate, such as industrial security and the slow, infrequent buys. For those that want to get into it, regional development agencies are a great asset to learn about those opportunities and to know what is coming.
That is why I talked about an investment plan in my opening remarks. What is the CAF looking to buy, by when and for how much? That is key. To convince companies to put money in, they have to convince their boards and their bankers, and that’s not just press releases; they need real information to get that. There are opportunity costs, especially in the commercial marketplace, that they might be giving up in order to turn to defence.
Thank you.
Senator Patterson: There have been some wonderful witnesses. When we’re going from the comment about going from procurement to production and what that means in the current geopolitical environment, it is poignant. I also want to thank the three of you for the recommendations you put forward. I realize that a number of them are at the policy and regulation level, but they were quite eye-opening.
Dr. Todd, this is related to the security clearance backlog. We know this is a challenge across the government and needs fixing on so many levels, but one of the greatest challenges in the defence industry is that supply chains reach too many corners of this planet, and some of them are not our best partners. There is other legislation there. That all can even impact Canadian-based defence companies. Speeding up something comes with risks, as well.
I want to hear what you’re thinking about how we can. I believe your comment was about the security clearance backlog — that you have had some thoughts on what that could look like. It is not just us but our foreign partners and our supply chains.
Mr. Todd: With respect to this bill, PSPC will remain responsible for the Contract Security Program, which is clearing people and facilities; the Controlled Goods Program, which is a statutorily enabled program that, then, has regulations that allow us to maintain our International Traffic in Arms Regulations, or ITAR, exemption and waivers; and the new cybersecurity certification program that is going to be launching soon.
It’s just something we will need to monitor — when you’re splitting this role between two departments, is there enough coordination in order to make sure those who need to be cleared to participate and deliver on a contract is happening soon enough? If it isn’t, what is happening? Is the security program getting the resources it needs to deliver, as there are a lot more companies that want to participate? You need a security clearance to sometimes even understand what is in an RFP and talk to allies. Public Services and Procurement Canada is also the department that remains responsible for negotiating international agreements for reciprocity, and it has historically faced a lot of challenges.
So, you have more people getting cleared, often for higher levels. In terms of anything related to data, sensors, and command and control systems that we’re starting to invest in, those are even higher levels of clearance. That takes more time.
I was hinting before is that Ron Lloyd has gone through and has written several papers, but he makes the argument that, underneath all this, are the government security policy and the classification framework that date back to the 1980s. We have both classified information and protected information.
All the other policies over the decades have been built on this — from when it was all about filing cabinets and not data in the cloud. It results in a lot of overclassification, especially for protected information — commercial information. This makes digital service delivery costlier, and it creates barriers to new commercial technologies and allied interoperability, as well.
There are recommendations in terms of how to align better with allies, especially regarding the injury test to make sure it aligns with common practice. That is where you are supposed to classify something to — what is the injury of its disclosure? If you end up overclassifying or when you have data together, it is aggregated data, and you raise everything to the highest level.
His argument is that there is more residual risk through this process that is antiquated and is long due for reforms to more appropriately bring it to the level needed. That makes it easier for government and industry to move quickly, as we are all being asked to do.
Senator Patterson: Any other comments?
Mr. Kolias: We were, again, an example of expedited clearance. Since we were part of the Launch the North initiative through the Defence Research and Development Canada, or DRDC, and the Department of National Defence, that provided us a sub-stream expedited path to get our controlled goods permit.
It comes back, again, to that speed of trust. I really like the concept because the industry will go where there are perceived large amounts of investment and money. There will be a perennial backlog of thousands of SMEs that had no idea what defence was in the past, and now everyone is effectively becoming an AI-enabled defence company.
I think that’s where there are opportunities to expedite some of the clearances for those companies that are part of the Defence Industrial Strategy and that are trusted partners. That will help separate some of the noise.
There is a structural problem that would also need to be addressed, but in the interim, I think that would be very helpful. Similarly, the U.S. has what’s called the DPAS — and something we are starting to run into is that some of our suppliers supply manufacturing capabilities to Blue Origin and SpaceX. Who would they choose: them or us? Most of the time, it is likely the trillion-dollar companies down in the U.S.
It’s a bit sideways from security clearances, but I do think this is another opportunity where, once you effectively become a trusted partner within the government — providing expedited clearances across, not just security clearances but manufacturing access and other areas, as well.
The Chair: Mr. Foster, did you have a chance to speak?
Mr. Foster: The only thing I would say is that, in my experience, it is a bit of a capacity issue in terms of PSPC.
I agree that everything is overclassified; I have seen it. It is easier to just make it confidential, and then I don’t have to worry about what’s in there.
The other thing is trying to commercialize it — get a third‑party industry member to provide some of that service. For example, in the United States, Booz Allen actually provides secret discussion areas that they lend out to other large companies that need to use that facility to have a secret discussion.
So, there could be an industry model where, if there is a capacity issue, you could actually have a third party go and do that work for you.
The Chair: Thank you.
This brings us to the end of our session. I will take the opportunity to thank each one of you for joining us today. It is really important and important testimony on some unique viewpoints. Thank you for that.
For the next hour, we have the pleasure of welcoming David Perry, President and Chief Executive Officer of the Canadian Global Affairs Institute, and joining us by video conference, Peter Clarkson, Mayor of the Town of Inuvik, Northwest Territories, and Philippe Lagassé, Professor of International Affairs, Carleton University. I also want to say, in the interest of everybody this evening, we do have some parallel events taking place, and we have senators who will be in and out of this session. No disrespect to the quality and importance of your testimony, but the Senate had to run tonight also, and we have new senators joining us and a variety of legislation being moved forward. Thank you, and you may see some new faces while we’re here. We invite you to provide your opening remarks to be followed by questions from our members. You have five minutes for the opening remarks, and we will begin with Mr. Clarkson. Welcome and proceed when you are ready.
Peter Clarkson, Mayor, Town of Inuvik: Hello, and good afternoon, I guess evening there.
Thank you for the opportunity to present to the Senate Committee on Bill C-31, Division 4. I have some concerns and also some questions regarding this bill.
Just a bit of context for all the senators and staff and committee members.
Inuvik is located in the Northwest Territories in the Canadian Arctic. Inuvik is two degrees above the Arctic Circle and 80 kilometres south of the Arctic Ocean.
Inuvik has had a DND Forward Operating Location since the early 1990s and was designated as a Northern Operational Support Hub in March 2025. Inuvik has the most strategic airport for Arctic security in the Arctic, as we are 2,000 km from the Russian border and provide easy access to the Arctic Ocean. Inuvik is 5,500 km to Ottawa by road for comparison.
As a small municipal government in the Canadian Arctic, we want to know what this new Defence Investment Agency will mean for municipal and Indigenous governments in the Arctic.
We are not selling ammunition, personnel armoured vehicles or fighter jets. However, we often provide municipal services and facilities for DND and DND staff and operations. We have agreements for fire fighting with DND at the Inuvik airport. Inuvik has contracts with DND for water and waste water services. DND uses the landfill owned and maintained by the municipality. Canadian Armed Forces members use the town’s recreation facilities.
Communities in the Arctic play an important role in allowing DND to complete their operations successfully. Without people living in the Arctic, there wouldn’t be the opportunity to do the things that the Department of National Defence does in the Arctic.
As DND moves forward with its $5 billion modernization of the current forward operating location in Inuvik, there is the potential to have several more contracts for services and facilities, such as multi-use facilities for recreation, DND and Canadian Rangers mobilization and exercises, water and waste water services, solid waste disposal and camps for housing during the construction phase.
I also want to point out that the construction phase, which is planned to be between 10 and 15 years in Inuvik, will be a major investment by DND in the Canadian Arctic, and a similar investment is also taking place in Yellowknife, some investment in Whitehorse and some investment in DND.
The Department of National Defence is close to issuing a tender for the $5-billion contract to a national construction contractor. Once awarded, the construction contractor will then be responsible for purchasing any goods and services needed. Would the new agency play a role in that procurement? Inuvik has been developing a good working relationship with DND staff responsible for the modernization construction and would need to develop that relationship with a new agency. It would be beneficial for all governments in the Arctic to have designated staff who are knowledgeable about the Arctic staff to work with municipal and other governments in the North.
In closing, when dealing with DND on multi-use infrastructure, it is not really a purchase transaction, as it is a relationship and business agreement to help pay for and use a shared facility that benefits the town and DND operations. Will this remain the responsibility of DND as we move forward into the years of spending billions of dollars in the Canadian Arctic? Thank you very much for the opportunity to present to the Senate Committee.
The Chair: Thank you. We will hear now from Mr. Perry. The floor is yours.
David Perry, President and Chief Executive Officer, Canadian Global Affairs Institute: Thank you for the opportunity to speak to you today. This study is coming at a particularly important and actually exciting time for Canadian defence and our defence procurement system. In the last year and a half, we have seen some very significant and, in some cases, unprecedented levels of change on the defence agenda. The level of defence investment and defence procurement is one that we haven’t seen in several generations, and is slated to increase further as Canada continues to increase core defence spending on a path to spending 3.5% of our gross domestic product on the military by 2035. One important component is the creation of the Defence Investment Agency, so I’m happy to appear before you to talk about some of the things in that the draft legislation. In my remarks, I’ll focus on three of them. Two are drawn from the legislation, and one is a bit more general, but I’ll be happy to take things in different directions in the question-and-answer session.
The first issue I want to flag is how the basket of considerations and objectives the agency is supposed to deliver on are going to be incorporated into its decision making, and how will we know how it is balancing those as it carries out its duties?
As an act of Canadian public policy, it’s entirely inappropriate, in my view, for defence procurement to focus on achieving multiple government objectives at the same time. Traditionally, Canada has balanced multiple considerations, including value for money, probity, economic benefit and military capability — both quantity and quality of capability. It’s fair to say that the balance between those considerations has shifted over time, and it appears to be shifting consequentially again with both this proposed legislation as well as the recently tabled Defence Industrial Strategy.
Here I draw the committee’s attention to section 12 under the proposed defence investment agency act and the considerations for the minister. To quote the proposed legislation states that:
In exercising or performing the powers, duties and functions relating to production, procurement and investment in respect of national defence or national security, the Minister must consider
(a) the efficiency of national defence or national security procurement;
(b) the stimulation of investment in the national defence sector or national security sector;
(c) the stimulation and promotion of research, development and innovation in the national defence sector or national security sector;
(d) the possibility of joint procurement and other forms of cooperation . . . ;
— et cetera. Lastly:
(e) the protection and acquisition of intellectual property rights.
These are all notable and worthy considerations, but I would point out that absent in this list or anywhere else in the proposed legislation that I can detect is a mention of retaining the focus on military capability, either in quality or quantity. Between this draft legislation and the other initiatives again, including the publication of the Defence Industrial Strategy, the government is increasing the priority being placed on securing economic benefits, as well as on diversifying Canada’s defence relationships.
That, in and of itself, I don’t think is necessarily a bad thing, but the committee might want to ask whether or not the envisioned balance that is being articulated is an appropriate one, given the circumstances that Canada finds itself.
The second observation I make stemming from the proposed legislation stems from the provisions for exemptions from competitive procurement. The preamble to section 28 notes that:
The Minister may dispense with conducting a competitive procurement process with respect to a contract if, in the Minister’s opinion . . . .
One of, by my count, 17 different noted exemptions from competitive procurement are met. In my view, this section makes several commendable changes from a previous default in our system toward competition and the exemption from competitive contracting when the contract is for defence supplies or services that were the subject of funding provided by the Government of Canada for research and innovation as an example is particularly welcome, as this should facilitate Canada procuring more of the research and innovation that it actually funds.
The provision that this can occur when, in the minister’s opinion, one of these considerations is met reflects very consequential authorities — in both this section and elsewhere in draft legislation — being vested in the minister and left to their judgment. What is a bit unclear are the terms of the basis for how those authorities are to be exercised and how decisions will be made to exercise those authorities. The legislation doesn’t make clear how and in what manner or what level of detail the decisions of the minister will be taken or how those will be communicated to the public or parliament. The committee may wish to consider suggestions for how the operations of the agency and the decisions made by its minister will be conveyed and explained to those outside of the agency itself.
A final observation linked to the previous one relates to the overall level of transparency we are currently seeing in our procurement system, which, in my view, appears to be declining. One advantage of a competitive procurement process, for instance, is that some of the instruments that support the competition provide additional levels of information to the public when some of the supporting documentation is released. If we’re going to see less competitive procurement and more sole sourcing, it is unclear how some of that information that would otherwise be conveyed will be. Without other measures being taken, an increase in non-competitive procurement could, in and of itself, decrease the level of transparency we see with respect to some of these decisions.
Thus far, and recognizing that it has not been in operation for a year and that work is still needed to create the organization and get it going, the Defence Investment Agency has exhibited a relatively low level of transparency, notwithstanding a high level of public engagement by its Secretary of State, in particular.
Just one indicator. As of a couple of hours ago, the agency’s website indicates it is only focused on eight projects. Despite public comments from officials several months ago that the organization has, in fact, taken over the management of several dozen more from Public Services and Procurement Canada. Other than asking people who are working there directly, it is not clear how the public or parliament can actually get a meaningful understanding of what exactly the agency is focused on. Perhaps this is simply a feature of the organization still being created as we are speaking today, but given the consequences of the scope and scale of defence procurement before Canada right now — as well as some very consequential changes in the manner in which the government wants to see procurement undertaken — significantly more transparency is warranted at the moment. Thank you.
The Chair: Thank you.
We’re now going to hear from Professor Lagassé. The floor is yours.
[Translation]
Philippe Lagassé, Professor of International Affairs, Carleton University, as an individual: Thank you, Madam Chair. Good evening from Halifax, Nova Scotia.
It is a pleasure to appear before you this evening to discuss the Defence Investment Agency Act and amendments to the Defence Production Act.
As my colleague Mr. Perry noted, this legislation comes at a critical time for Canada.
[English]
Canadian defence spending is slated to increase significantly over the coming decade, with the government planning to reach 3.5% of gross domestic product by 2035. In addition, the government has released a Defence Industrial Strategy that aims to greatly expand the Canadian defence industrial base, spur innovation and research and augment the capabilities that are acquired from Canadian companies.
As part of these efforts, a Defence Investment Agency was established as a special operating agency within PSPC to streamline acquisitions, speed up processes and enable the government to achieve its defence industrial ambitions.
[Translation]
Passing the Defence Investment Agency Act is the next step. The legislation proposes to establish the DIA as a stand-alone entity, institute a new minister and empower both this new minister and the DIA Chief Executive Officer with significant powers.
I will highlight three aspects of the legislation that deserve particular attention, owing to the uncertainty that surrounds them.
[English]
First, the proposed new section 28 of the Defence and National Security Production and Procurement Act states that:
The Minister may dispense with conducting a competitive procurement process with respect to the contract if, in the Minister’s opinion . . . .
Certain exceptions apply. As Dr. Perry noted, there are upwards of 17 of these exemptions.
I would recommend that the committee inquire into how many of the exemptions already exist in procurement and contracting rules, what having these exemptions on a statutory basis implies and what accountability measures and mechanisms are in place to validate exceptions that are made, again, in the minister’s opinion.
Second, section 13 of the proposed defence investment agency act holds that:
The Minister may, on behalf of the Government of Canada, enter into contracts for the purposes of exercising or performing the Minister’s powers, duties or functions.
It is unclear whether this section implies that the new minister will be holding contracting authority that normally belongs with the Treasury Board, or whether this section is merely a delegation of authority to the minister from the Treasury Board.
The difference is consequential, since Treasury Board contract approvals have been a source of delay in Canadian defence procurement. If the new minister of DIA’s contracting authority remains under the Treasury Board’s overarching authority for contracting under the Financial Administration Act, the ambitions of the Defence Industrial Strategy and the DIA may be harder to realize, and defence procurement may continue to be slowed by the board and its limited capacity.
[Translation]
Third, section 15 of the Defence Investment Agency Act holds that:
The Minister may appoint advisers and establish advisory committees to advise and aid the Minister in exercising and performing the powers, duties and functions relating to production, procurement and investment in respect of national defence or national security . . . .
The minister is further empowered to set the compensation of these advisers and committees.
It is recommended that the committee inquire into the envisioned role of these advisers and committees, and whether they will be public office holders subject to the Conflict of Interest Act.
[English]
To conclude, I believe that the proposed defence investment agency act and the amendments to the Defence Production Act are important and worthwhile. The legislation promises to accelerate military procurement, encourage a strong defence industrial base and spur more research and development. However, a degree of uncertainty still surrounds aspects of the legislation. Clarity should, therefore, be sought on these elements. Thank you.
The Chair: Thank you very much. We’re now going to proceed to questions. Colleagues, our witnesses will be with us here until about 7:15. As always, we will do our best to allow time for each member to ask their questions. I’d like to offer the first question to our deputy chair, Senator Ince.
Senator Ince: Thank you, Madam Chair. Thank you all for joining us. My question is to all of you.
What should the composition of a proposed advisory committee be? To what extent should their composition be similar to or different from the Defence Advisory Forum or the Independent Review Panel for Defence Acquisition, or IRPDA?
Mr. Perry: Thanks very much for the question.
The answer would fundamentally depend on a couple of things: What exactly the industry advisory board that you reference is going to do, which remains unclear to me, at least at this point in time; and whether or not the Independent Review Panel for Defence Acquisition is going to remain or not.
Absent that, I would say, ideally, the government, in whatever capacity and different mechanisms it assembles, should get advice and input from a range of different functions. That would include people who have some distance and independence and people who have direct insight into industry considerations. I think what would also be helpful is to have some level of input that’s viewed as being independent into strict capability considerations and some related to the feasibility of proposals. One thing that I think has been missing in the past is somebody who can pass judgment on whether or not a particular plan would violate the laws of physics and be extremely challenging from an engineering point of view and not simply providing an extra layer of review.
Mr. Lagassé: I would add a few things. The first is that these advisers are remunerated, so it wouldn’t simply be an advisory capacity. There is obviously some intention for them to perform functions beyond simply pro bono advice. Again, it would be important to know whether or not they become public officeholders and whether or not they’re subject to the Conflict of Interest Act. If they are advising on their own industries, how do we ensure proper firewalls are put in place around that?
The scope is quite large as well. Even the nature of remuneration seems to be under the discretion of the minister, with the cooperation of the Treasury Board, which implies a desire to bring in people from the private sector, but we still want to have a better idea of exactly what it is that they might be doing.
In terms of the relationship with the Independent Review Panel for Defence Acquisition, or IRPDA. The IRPDA is under the Minister of National Defence and has a very strict mandate focused uniquely on reviewing operational requirements, as developed by the technical authority, which is DND and the Canadian Armed Forces.
Now, I envisage that these other advisers would be more on the industrial and investment side. If the IRPDA does continue, it would be primarily focused on the capability and requirement side of things.
Senator Ince: Mr. Clarkson, do you have any comments?
Mr. Clarkson: Canada is a large country. Having a diverse advisory panel or committee to provide advice is important because, certainly, things are very different in the Arctic compared to downtown Toronto. Anything that can be done to provide that diversity and breadth of knowledge would definitely provide a good service to the agency and the country.
Senator Ince: Thank you.
Senator Patterson: I’ll start with Dr. Perry, but I am happy to hear comments from all witnesses.
This will go back to your comment in that we’ve seen a shift in the last 50 years going from procurement into investment. Now, it isn’t quite clear in the act as to what the priorities are, and you very specifically tapped into the military capability.
Dr. Lagassé, you also talked about when the technical authority provides capacity. You can certainly imagine that I’ve heard some concerns that, in a highly technical, modern space, where, really, what we need is more reliance on what the adversary has, is quite a challenging question. Most of the technical authority is coming up with capabilities that are integrated, and whether it is on the air force, navy or army side, each piece has a role as a building block.
I would like you to expand a little bit more on your comment about the shifting priorities and finding out how we balance military requirements with the industrial benefits and some of our other trade challenges.
Then I’m going to add for Mr. Clarkson. As you stated in your opening comments, you are the one living with the results of this. When we’re looking at military capability, do we need to take into consideration what is needed in the place where this capability lands? I’ll start with Dr. Perry and pass it back to the remaining witnesses.
Mr. Perry: Thank you very much, senator.
To take a step back, I guess what I would put into context, as all these changes roll through, it’s not very clear yet what kind of a working relationship the investment agency will have with the other parts of the wider acquisition procurement ecosystem: the Department of National Defence and the Canadian Armed Forces in particular. Depending on what that relationship looks like in the future, it might shape or influence how much the agency needs to take into consideration military requirements or whether or not that will entirely be left not just to be able to articulate and shape the military requirements, but to have those be carried through into decision making taken at the agency about how that will balance against the other priorities, some of which are mentioned in the considerations the act suggests the minister has in mind, which is appropriate and normal in a Canadian context that there is a wide range of considerations.
As this new ecosystem unfolds, it’s not really clear to me how that voice for military capability is going to be maintained and in what shape. In the absence of that clarity, I think additional mention that this a consideration for the minister of the agency to have in mind, which is currently absent, might be appropriate. Part of that will ultimately depend on exactly how all of this is supposed to unfold and what voice National Defence does, in fact, maintain.
Senator Patterson: We can go to Mr. Clarkson next and ask Dr. Lagassé to close.
Mr. Clarkson: I would just say that allowing DND to do what they need to do to provide investment in northern Canada has to involve local communities and local Indigenous groups. We’re there as the foundation for those investments. Without people living in the Arctic sustainably, the things that the Canadian Department of National Defence wants to do would be almost impossible to take place.
Inuvik being the largest community in Canada above the Arctic Circle, certainly we have some infrastructure, but we’re going to need a lot more, especially during the construction phase. They’re estimating between 1,000 and 1,500 workers will be in Inuvik during the construction phase. Our population right now is a little over 3,000 — 3,300. That will put tremendous pressure on the community in a good economic development way. By working with, for example, the Town of Inuvik, we can provide recreation facilities and a recreation package for those construction workers, so they have something positive to do when they’re not working. We all know they could easily find negative things to do.
We plan to work with DND and the design and builder contractors, and do whatever we can to assist DND to create some legacy projects for Inuvik and for the Arctic. Thank you.
Senator Patterson: Go ahead, Dr. Lagassé.
Mr. Lagassé: Thank you, senator.
I would say the relationship between DND, CAF and the DIA has the potential to be quite difficult. We’ve seen it in other jurisdictions — notably, the Australian example with their Defence Materiel Organisation about 15 years ago — that when you have a procurement agency that has a very strong mandate to do certain things and the technical authority is focused on the capabilities, unless there are good efforts put into reconciling those two entities, you will have friction and conflict.
Part of this can be mitigated through a very clear defence policy that indicates quite precisely what capabilities are going to be built here in Canada or should be acquired from Canadian companies, which will be partnered and which should be foreign-owned or foreign-built. But we do need some methodology that clearly spells out both to the Defence Investment Agency and to the Department of National Defence/Canadian Armed Forces when it is so important to have an advantage over adversaries that foreign should be bought — and, in all likelihood, we’re talking American here most of the time — and when it is important to know that we want to develop a capability here in Canada.
If that isn’t addressed head on, and if that is left vague, I anticipate that we will have quite a few situations where the two — DND/CAF and DIA — are just not seeing eye to eye.
Senator Anderson: Thank you to the witnesses. My question is for Mayor Clarkson.
Mayor Clarkson, I want to connect what you have just said directly to the legislation. Section 12 sets out the matters the minister must consider when making procurement and investment decisions: efficiency, investment, research and innovation, international cooperation and intellectual property. Northern capacity, Indigenous participation, modern treaty obligations and community benefits are not expressly included in that list.
Based on the experience you described, should northern and Indigenous participation be expressly incorporated into the decision-making framework rather than depending on policy for the discretion of whoever is administering a particular procurement?
Mr. Clarkson: Thank you, Senator Anderson. Yes, there needs to be something in there that specifically states that northern and Indigenous participation in these investments needs priority and needs to be listed.
With the amount of money that’s being planned to be spent in the Arctic, everyone needs to realize that this money is being spent in the area where we live, in the area where we work and in the area where we recreate.
Because it is so different than the southern part of Canada, there needs to be that consideration and additional time to ensure the consultation is being done in the Arctic with the people that live in the Arctic. The Department of National Defence has started that process, but there is still room for improvement. As we move closer to awarding these large contracts — and this is another question that I think people have been asking: Once the contract is awarded, does DND still have the influence that they would have with the design and builder contractors, because these are huge contracts. All of that should have some place in this legislation.
Thank you, Senator Anderson.
Senator Anderson: Thank you.
As a follow-up, just for your reference, across the bill there does not appear to be a substantive reference to Indigenous Peoples, Inuit, First Nation, Métis, modern treaties, section 35 or Indigenous benefit plans. The references to Aboriginal government, I found, are confined to clause 86, technical amendments to the Income Tax Act dealing with tax information provisions and definitions. They are not a broader recognition of Indigenous rights or participation in the measures created by Bill C-31.
Just to clarify with you, Mayor Clarkson, your recommendation is to include consultation with Indigenous rights holders and northern communities; is this correct?
Mr. Clarkson: Yes, I think so. That is very important as we move forward with these projects because the people living in the Arctic have to know what’s going on and be able to participate the best they can.
As you know, just the runway extension, which would allow the military planes to be able to land and take off safely in Inuvik, was constructed by local Indigenous businesses. So the capacity is there, and we need to take advantage of that capacity but also work with all of the people in the Arctic to ensure that what’s being put in place benefits the people in the Arctic, because there are a lot of legacy projects that — if the time, consideration and planning are given — could provide some incredible legacies for the Arctic.
One that we continue to bring up with DND and the potential prime design and builder contractors is camps and housing. There is a huge shortage of housing in the Arctic. Rather than trucking up 500 ATCO trailers and disposing of them in the landfill at the end of the 15-year construction period, let’s build apartments, row houses, condos and other housing that can be left in the communities and provide housing for people in the Arctic.
Senator Anderson: Thank you.
Senator Hay: Where am I going to go?
Dr. Perry, you have called for faster flowing, smaller scale funding to get innovation into military hands and open contracting pathways for SMEs. My question is for you, and then I have a couple of other questions for Mayor Clarkson and Dr. Lagassé.
As it is now, are there real opportunities for SMEs? How do they compete against the big primes?
For Mayor Clarkson, how do Indigenous-led companies — SMEs — have access to faster flowing, smaller scale funding?
Then I have a follow-up with Dr. Lagassé.
Mr. Perry: Thanks very much. There are two components to that. One is whether or not there is the actual opportunity, as a previous witness was talking about. Not just a contracting mechanism and a process to do it but an actual source of funds and articulated requirements that could actually be accessible to smaller companies that have different levels of resources than large ones do. In the absence of having that kind of actual opportunity and a pathway and a funding source, a lot of what are quite commendable objectives in the Defence Industrial Strategy are going to be difficult to realize.
Smaller companies generally need to have a progressive pathway to get early stage work and grow competency and ability to execute in scale over time. It’s very difficult to expect any of them to immediately be able to access a major opportunity into the tens or hundreds of millions of dollars.
It is a part of what I called for with my co-author, Alex Salt, including additional funds being made — potentially and specifically — to Canadian small- and medium-sized enterprises, additional financial authorities being made available closer to the operators to not just have a centralized function but to have the people who would use some of this material, equipment or services, and having a higher dollar limit on what they could get access to financially, and then having the contracting capacity to match that.
You need to have the money available. You need to have an articulated mechanism to disperse it in terms of the subject matter and the requirements, and then you need to have both the right level of authorities as well as the capacity to actually let contracts altogether if you want to achieve some of the goals that the industrial strategy lays out in terms of those innovation leading and research and development intensive opportunities for small companies.
Senator Hay: And just a quick yes or no: Are you hopeful that that will happen?
Mr. Perry: I don’t know.
Senator Hay: Okay. Yes, no, or I don’t know.
Mayor Clarkson, I’m interested in your thoughts around Indigenous-led companies and rural/remote.
Mr. Clarkson: There are a number of Indigenous-led companies that operate out of Inuvik. They’re very good at road construction. They’ve just built the extension to the runway. There are other training programs going on and programs that are getting people job ready.
Certainly, once the design and builder contractors have been selected, then these companies will see what opportunities are available for them. I know that various companies and DND have already been meeting with Indigenous governments to give them the heads up. There has been some money provided already for the training of local people to get them job ready.
Is this enough? Probably not. But as we ramp up, and these $5 billion projects ramp up, there will be more money available for training and getting people ready to be able to do some of this work.
It certainly makes good economic sense if you can hire somebody who lives in the location as opposed to bringing them up from Toronto or St. John’s, Newfoundland. There are people who will be willing to do the work and people who have the capacity to do the work. They just have to be given the opportunity.
Senator Hay: I hear you’re hopeful.
Senator Yussuff: This may or may not have been asked: Could you elaborate on your concerns related to the scope of exceptions to competitive provisions that are allowed for in the bill? Specifically, we didn’t hear much from the first government panel about the concrete accountability and oversight measures and what they would look like. Maybe you can provide some suggestions for this committee to think about.
Mr. Lagassé: Thank you, senator. The scope is potentially quite big. If you go through those exceptions — and I think Dr. Perry might concur — almost any procurement that the government is deciding to advance or move quickly on could fall under one of these exceptions. I find it particularly telling that the legislation does use the phrase “in the minister’s opinion.” That tends to suggest that an evaluation is almost made at a level of ministerial discretion.
The question then becomes this. When we do have companies that feel they have been mistreated by this or that things were not done correctly or that proper procedure was not followed, presumably, will the minister have legal opinions and advice to back up some of these choices that have been made? What measures can we put in place to ensure that, frankly, all of the agency’s work doesn’t begin to fall apart if too many of these non-competitive bids go forward and if we have a number of different bidders who complain that this was unfair or the capability was worse?
So, simply put, there is quite a bit of potential for this to go very much off the rails if it is not careful.
Back to what we can do about it, part of it is radical transparency when it comes to some of the choices that have been made. That should be central to how this agency works. It will need to explain very clearly the criteria it chose on which to invoke one of these exceptions and to be frank and open about how exactly the selection was made so that outside experts can comment on it.
You may even want, in some cases, to have some of the counselors and advisers who are provided for in the legislation to provide independent advice on whether those criteria were met.
Much like with the Independent Review Panel for Defence Acquisition — that has an independent review function on the technical requirements within DND and CAF — one would hope that a similar body advising the minister at DIA could vet and check whether a competitive process really should be avoided in a particular case.
Mr. Perry: I agree with everything Dr. Lagassé would say. In my read of those exemptions, I am not really sure what wouldn’t find some purchase in that list of 17 exemptions from a competitive process if the government actually desired to avoid competition or to just simply not pursue competition.
It really comes down to laying out an understanding that everyone can share about what the rules of the road would or would not be.
On what basis will the government make selection decisions? It’s difficult to get my head around at least how the industrial strategy’s objectives really significantly supporting Canadian industry will be met if there isn’t a clear articulation of how different firms in Canadian industry or elsewhere will or will not be selected.
As Dr. Lagassé was talking, it occurred to me to wonder whether it would be possible to have some sort of challenge function if someone were not selected. Will it all rest on the minister’s opinion whether one of those tests were met? I don’t know how you challenge a minister’s opinion without some kind of process or matrix for understanding how the decisions were made.
It is not that difficult to picture a situation where people think that the decisions being made have a level of arbitrariness to them. That may or may not be fair, but in an environment where we are really trying to create a better relationship with industry and where we are trying to grow our domestic industry for all kinds of valuable reasons, people need a clear sense, before they make their own commitments, before they pursue particular projects or before they try to get some kind of work, of how their chances might be with the Government of Canada. As it’s configured right now, I worry people would not have a solid understanding.
Senator Yussuff: Thank you.
Senator Patterson: You have all brought up exceptional questions about what we don’t know right now about this legislation, as opposed to the regulations or policies, et cetera, that may fall out of it.
From your perspective, is anything significant missing from this legislation as it sits and as it reads right now? What would add strength as we’re moving forward? We talked a lot about transparency and clarity and appropriate consultation at the ground level.
You may need to think about that, and you can certainly submit it in writing, but that is my question to you. I’m eyeballing you, Dr. Perry. Would you like to go first?
Mr. Perry: Sure. I just reinforce the role that military capability will play in the considerations. More broadly, in legislation or elsewhere, we need a clear understanding about the agency. Some initial discussion would be on the single and only point of contact in the procurement ecosystem. Quite clearly, that will not be entirely the case. More consolidation and more centralization are needed, but there will still be involvement from the same sets of departments that have been involved in the past, just at differing levels. Innovation, Science and Economic Development Canada will still have involvement in industrial policy elements. Public Services and Procurement Canada will have some pieces related to controlled goods programs and security clearance. National Defence does not have a well‑specified role.
Greater clarity about how all of this will work together, either through legislation or through some of the other elements you mentioned is warranted.
As an aside, what will be quite impactful in making the legislation, as written, work or not work, will be some of the other efforts that I’m aware are under way across government to make quite consequential changes to the procurement process, some of the operating procedures in the Department of National Defence and in the central agencies. A lot of that remains not well articulated or defined at this point in time. As you said, it’s a little difficult to comment when not seeing the whole picture.
Mr. Clarkson: As I mentioned earlier, it is very important that communities in the Arctic and Indigenous Peoples and their governments and businesses be fully engaged and fully involved because when that amount of money is being spent in the Arctic, in a remote northern area, that impacts everyone.
At one of our town halls, the fact was raised that there could be tens of thousands of truckloads of supplies coming up the Dempster Highway. The Town of Inuvik and all the other Beaufort Delta communities rely on that highway to deliver goods and services, groceries and all of those things. Will you put another 10,000 or 30,000 trucks on that highway? It’s fragile as it is. The Department of National Defence would need to look at improving that highway to allow that amount of material to be trucked north.
Many other areas in the Arctic would need to be considered, which wouldn’t need to be considered to build a base in northern Alberta, at Cold Lake or somewhere.
Additional time and consideration are needed for that, as well as direct consultation with the territorial and municipal governments and also the Indigenous governments in the Arctic. Thank you.
Senator Patterson: Can anything be added to the current Division 16 to address the issues that we keep hearing about regarding understanding and clarity, et cetera?
Mr. Lagassé: I would focus, again, on the relationship between the minister and the Treasury Board, particularly when it comes to the minister’s ability to draw on the Consolidated Revenue Fund, in particular, on the contracting side. To be frank, I’ve heard three different versions from officials over the past three or four months about what the legislation is actually intending to do. Frankly, I find that really frustrating because it seems an internal battle is happening within the executive around what exactly that language is meant to achieve.
That section on the contracting authority and the ability to draw down on the consolidated debt revenue fund should probably be much clearer. I would seek out some effort on the part of government witnesses to be explicit about the intent is.
If we leave it up to regulations or statutory interpretations based on whether this legislation finds itself in a subsection of the Financial Administration Act, we may find ourselves thwarting the very processes and endeavours we’re trying to accelerate. I would encourage the committee to press the government more clearly on if there is a way to refine that language to actually specify the intention of this bill.
Senator Ince: Mayor Clarkson, you may or may not have an answer to this, but I’m looking at the fact that we have vast lands in the North from the Yukon to Iqaluit. Have you had or are there conversations around DND and the defence industry to look at the gap we have in covering that vast piece of land?
Mr. Clarkson: The premiers of the three territories and the mayors of Whitehorse, Inuvik, Yellowknife and Iqaluit have gotten together and discussed what this will mean. We have written to the Treasury Board saying, “In order to participate fully in this and to work with the huge DND machine and potentially the contractors, we need resources in order to do that,” because municipal governments are very thin and flat.
When I was mayor from 2000 to 2006, Arctic security wasn’t even on the radar screen. We had the airport and F-18s landing. We had the U.S. Air Force coming in and landing, but really it wasn’t on the municipal radar screen. Since elected in October 2024, it has consumed about 50% of my time as Mayor of Inuvik. It consumes time for the Mayors of Yellowknife, Whitehorse and Iqaluit.
We may not have all the answers on what needs to be done, but we know that DND and the federal government need to put some time into considering how things will take place and what can be done to ensure that the people living in the Arctic play a role in that and that it benefits those people who will continue to live in sustainable communities. That’s important.
Certainly welcoming the development, but welcoming it where people of the Arctic also receive the benefits from that huge development. Thank you.
Senator Ince: Thank you.
[Translation]
Senator Youance: My question has been partially answered, with respect to the bill’s exceptions. I would like to hear the witnesses’ interpretation of the powers the bill would confer on the minister. I would like to share a few examples regarding infrastructure construction.
The minister has absolute control over the construction of defence projects. Section 312 is the legal cornerstone of a state‑led industrial policy. It provides the legal framework to coordinate multi-sector logistics and convert civilian manufacturing facilities into military production chains. The last element is unilateral criteria. There are sections that give absolute power to the minister to target any company, among other things.
In terms of transparency and accountability, how do you interpret these new powers granted to the minister?
Mr. Lagassé: This level of discretion and authority is not uncommon, but it is still exceptional, in peacetime, to see a single minister with so much authority.
That said, the agency was created with extraordinary ambitions in mind. With respect to discretion, we must remember that the minister needs to take several factors into consideration at the same time. Indeed, this bill considers the possibility that Canada might find itself in a major power conflict in the future. It is about giving a minister the power to put Canada on a war footing if necessary. You have certainly heard other witnesses say this possibility is quite real and obvious. Therefore, we have to look at the bill in that context.
Senator Youance: Thank you.
[English]
Mr. Perry: A bunch of these provisions and the powers accorded to the minister do, generally, seem embedded in a wartime framework. However you want to characterize the state of war we are in right now, I don’t think there are many other people in the National Capital Region who are operating as if we’re in a legitimate wartime framework. Having a set of authorities oriented around that mentality would be quite out of step with the way the rest of the government apparatus works on a day-to-day basis.
There are definitely circumstances in which that would be needed.
This may be a juxtaposition of the proposed defence investment agency act and any update to the Defence Production Act, the latter of which was very much wartime in orientation. A number of the elements associated with the Defence Production Act needed updating for passage of time, including dollar limits, which have not been inflated in a long time. That makes sense, but having the two operate together, or the intent in having that be presented together, is to create a potential scenario where that level of urgency and the level of direness would be exercised in theory, but it seems to open up some other circumstances. It’s also not clear whether there would be any kind of threshold you would need to cross to work on that principle. Again, some clarity about when you would get to the stage of when you can make decisions as if Canada is at a full-time war versus the more routine day-to-day or however you want to characterize the way things are working right now.
The Chair: Thank you to all of our witnesses. That brings us to the end of our time with you this evening. Thank you, Mr. Clarkson, Dr. Perry and Professor Lagassé for taking the time to meet with us today.
Senators, we will suspend for a few minutes to see our guests out and start our in camera discussion.
(The committee continued in camera.)