NDVA Committee Meeting

STANDING COMMITTEE ON NATIONAL DEFENCE AND VETERANS AFFAIRS

COMITÉ PERMANENT DE LA DÉFENSE NATIONALE ET DES ANCIENS COMBATTANTS

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, November 16, 1999

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[English]

The Chair (Mr. Pat O'Brien (London—Fanshawe, Lib.)): The first order of business, colleagues, is to report to you that the subcommittee met on Wednesday, November 3, before the House recessed. It agreed that the committee would pick up its procurement study, which we're doing today with some witnesses, and the subject of the participation of Canada in peace missions and the impact of those missions on the quality of life of our military personnel.

Those are the two priority items to be pursued now and in the near future. There is a much longer list of potential topics all members had input on, which will be distributed to the members later for your consideration and for future discussion.

The steering committee also decided to schedule meetings as early as possible with the Minister of National Defence, the Ombudsman of National Defence, the Auditor General, and General Maurice Baril, the Chief of CDS. The committee wants to have those people in at their earliest convenience for a variety of topics.

The committee also recommended that the research officers prepare a document summarizing the suggestions of the various members. You will be getting that shortly from the clerk.

So I put this report in front of you, on behalf of the steering committee. Are there any brief questions on that? Maybe when you see the document you'll have some, and we'll have a chance to discuss it later.

Mr. Hanger.

Mr. Art Hanger (Calgary Northeast, Ref.): Yes, Mr. Chairman. I'm curious. One item I thought might appear on this list of concerns or issues to debate would be the role of the reserves.

The Chair: That was on the list.

Mr. Art Hanger: Was it chosen to be removed?

The Chair: No. Is it not there?

It's under force levels. This document will be distributed, and maybe we can come back to it and have a discussion. Is that all right?

Mr. Art Hanger: That's fair enough.

The Chair: Can I move on now to the second point before we go to our witnesses? I'm sure all members know by now that a letter was delivered to me, because it was very publicly discussed by the minister and others. The minister wrote to me, as chair, on Friday, November 5 in response to our note to him as a committee, vis-à-vis the merchant marines. The minister, in that letter, put forward the possibility that our committee may want to hold additional hearings specifically on the issue of possible compensation for the merchant mariners.

I have not responded to the minister's letter, as I wanted to wait until we met again—and this is our first opportunity—and I had the benefit of your input.

Are there comments or questions on that? Mr. Wood.

Mr. Bob Wood (Nipissing, Lib.): Mr. Chairman, I don't think it's necessary to go through this again.

The minister has agreed to meet with us as quickly as possible—it's up to the committee. If they like, the minister could appear before the committee in the next couple of days—we could probably do it on Thursday or next Tuesday—and just clear up any questions and work on it.

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I just went back into some of the stuff we did before, and Cliff Chadderton had suggested a study group. There are different ways we could try to get a consensus without us getting involved. We might want to talk to the minister about that. I think we've done everything we have to do, and it's up to the minister. He may want to strike a subcommittee to look into that.

The Chair: Okay. I'll take questions. What I hear—correct me if I'm wrong, Mr. Wood—is a suggestion that we not make a decision on the minister's idea at this point, but we invite him to meet with us at this committee as soon as possible and then discuss his suggestion and other possibilities. Is that what I'm hearing?

Mr. Bob Wood: Yes.

The Chair: Okay. Mr. Goldring.

Mr. Peter Goldring (Edmonton East, Ref.): I'm concerned about one paragraph in his letter that deals with opening it up to other civilian groups. Of course, we've gone through a long process with one name on the door, and that was merchant navy. I'm wondering if that could be discussed beforehand with him, or if you would reconsider it, so we don't have the expectation of coming to a meeting with him in attendance and going through a lot of other civilian concerns that really aren't related to the merchant navy concerns at all. Is it possible to limit the discussions to the merchant navy?

The Chair: Sure. That's a valid point, and I see Mr. Wood has taken note of it. He will have a chance to raise that with the minister.

Mrs. Wayne, on the idea that we hold off on a final decision and meet with the minister as soon as possible, what are your thoughts?

Mrs. Elsie Wayne (Saint John, PC): Really, with what has come forward, by the time the minister comes here he will have probably heard from all of the different groups out there. He will find out that some of the information given to him before was not accurate. I have a copy of a letter that was just sent to the minister. It proves beyond a doubt that there are 1,700 registered merchant navy men. They have their files and so on—the ships they were on. They said there may be 400 to 500 out there that they haven't been able to research, but these are all the files that were there. They said the maximum could be 22 to 23. That is it. That letter has gone to Mr. Baker now.

I hope Mr. Baker is getting the information to him. I know how busy everyone is, but I just hope Bob is giving it to him, so he knows. After our meeting two weeks ago, the Merchant Navy Association has put forth a proposal that I think just about everyone would agree to.

The Chair: Thank you. I would just note that in talking to a number of the members as I've run into them—I haven't had a chance to talk to everybody informally. We have gone through long, extensive, and pretty thorough hearings on this issue. I'm not sure there's much to gain by reopening the issue, but I think it would be good to bring the minister in.

Mrs. Elsie Wayne: Yes. Definitely.

The Chair: Mr. Wood, with your agreement, I'm going to consider your suggestion a motion. Is that agreeable?

Mr. Bob Wood: Yes. Will he try to get here for Thursday, unless there's something else on the agenda? That's up to you.

The Chair: We will accommodate the minister if he can come on Thursday at 9 a.m. That would be great.

Mr. Bob Wood: Okay.

The Chair: Can I ask for any objections?

Mr. Laurin.

[Translation]

Mr. René Laurin (Joliette, BQ): Mr. Chairman, before we deal again next week with the issue of the new groups of civilians that are referred to in Minister Baker's letter, could the researchers remind us of what was said by those groups as well as by the Red Cross workers?

I do not recall what was said by the people representing those groups. If they did appear, could you remind us what they were asking for? If that is not the case, I do not see why we would return to this issue. It seems like a ploy to confuse the issue, when we drag out the debate on this and refuse to give veterans their due.

[English]

The Chair: I think that's a good point.

Mr. Wood.

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Mr. Bob Wood: Correct me if I'm wrong, but I don't think any of the other groups appeared before us, René. I think what happened was that it was in a conversation we had with Cliff Chadderton, when we asked, if we do this for the merchant navy, how many other groups out there could come and look for some kind of compensation? I think you said there were about six or seven, maybe eight at the most. That's where it was. None of the others ever came before us.

The Chair: That's it exactly. Several witnesses made the point that if the government does anything vis-à-vis the merchant mariners, there would be a line forming at the right, and some enumerated it up to eight. That's fine. If they feel they have a case, let them come. That's my view. But I think I agree with those who say let's deal with the merchant marine issue and go from there.

So on the motion, Mr. Earle, to not make a decision on the minister's idea or suggestion but to wait until we hear from him Thursday.... Mr. Earle?

Mr. Gordon Earle (Halifax West, NDP): Yes, just to follow up on that idea, it seems to me he's asking two things in this letter: one is to reopen the consensus on compensation, and two, to consider these other groups. We've already agreed amongst ourselves that we shouldn't consider the other groups. But I think if the meeting with the minister is going to be productive and this isn't to drag out, we as a committee should come prepared at that meeting to deal with the first issue—to recommend an amount of compensation, which was done in the minority report. But I think we should have some consensus among ourselves on that issue as a guide for him, because otherwise there's no point to the meeting. He'll come and talk to us and we'll talk to him, and he'll go away still faced with the same problem: how much to compensate. So we should have some guidelines and be prepared as a committee to say we recommend that this amount be considered. He has to make the decision, but we should come to that meeting prepared to put something forward for him to consider.

The Chair: All right. I think if we take a second, Mr. Earle and colleagues, and take another good look at this letter, I don't think that's what the minister is expecting us to do at all. I think that would be extremely difficult. He's asking that we consider opening hearings on the issue of compensation, and I think most of the colleagues here, on both sides of the table, are saying, look, we don't know what we would achieve by opening hearings on the issue of the compensation. Probably at the end of that, I'm not sure we could give him any more advice than he couldn't more quickly achieve in working directly with the groups, as Mrs. Wayne has outlined. Okay?

Mr. Gordon Earle: Can I just follow it up? Unless I'm reading it wrong, he's saying:

...reopening the issue with the specific aim of trying to develop and recommend a consensus position on compensation for merchant navy veterans and their survivors.

He's asking this committee to try to do that after hearings.

The Chair: After hearings.

Mr. Gordon Earle: We all agree, I'm pretty sure, that we don't want to have those kinds of hearings because we've already had them. But the result of having those hearings previously was that we developed a report—though there was dissension in the report—in which all the opposition parties made a specific recommendation, a very specific amount, and the government side did not agree. But that amount was in the report.

Now, it seems to me he's saying he wants to have some kind of recommendation from us on compensation, that at this point he's not able, apparently, to get that from talking to the groups he's already talked to. He wanted something to come from the committee.

So what I'm saying quite clearly is I think if we are to respond positively to this, we should give him something to work with. Whether he accepts it or not is up to him. The closest we've gotten to anything to this point is the recommendation that was in the minority report. That was agreed to by four parties as a reasonable amount to be considered. I would be prepared that we should come to this meeting to give him that guideline, and he can do what he wants with it. He can go and talk to the groups further, or whatever. But I think we should come with something, or else there's no point in meeting, really.

The Chair: No, that's fair enough. I would recall for colleagues, however, that in our letter of November 2 to the minister, that's exactly what we did. We did refer him to the official report—which was silent on compensation because Mrs. Wayne's motion on compensation had been dealt with separately from the official report—and we also referred him to the minority reports, which do deal with compensation. So he's already got that sort of unanimous request from us.

Let's ask the minister to come in if he can; we'll meet with him. Then we'll entertain his ideas and propose some other suggestions. I have Mr. Hanger, and then I'd like to call the vote on the motion to refer this discussion until the minister is able to be here—hopefully Thursday.

Mr. Hanger.

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Mr. Art Hanger: Just as a point of preparation for this committee, and certainly a starting point when it comes to compensation, I know that other packages have been forwarded to other organizations. I believe the Hong Kong vets was one. That certainly would be a starting point for us to look at.

The Chair: That's a point well taken. I appreciate that.

All in favour of referring this to the meeting with the minister?

(Motion agreed to)

The Chair: Could I have a motion to adopt the steering committee's report?

Mr. David Pratt (Nepean—Carleton, Lib.): I so move.

(Motion agreed to)

The Chair: I now invite forward Mr. David E. Scott, president and CEO of Computing Devices Canada. And is Dr. Bernie Grover here? Could I invite you forward, sir, as well?

Mr. Scott, we'll invite you to make your submission, and then Dr. Grover. Then we will open up the floor to questions.

Dr. Grover, could you flesh out your c.v. a bit for us? I've got it, but that's about all the information I have. Could I have a little more for the record, sir?

Dr. Bernie Grover (Individual presentation): Yes, indeed. It will be the first minute of my presentation, sir.

The Chair: Very good. Thank you.

All right. Mr. Scott, please.

Mr. David E. Scott (President and Chief Executive Officer, Computing Devices Canada): Thank you.

Good afternoon. I'd like to thank the committee for providing an opportunity to make this short presentation. The points I'm about to reference are generally applicable to all major crown projects, but I specifically identify the maritime helicopter program as an opportunity that I want to address in this presentation.

My company, Computing Devices Canada, is a leading Canadian electronic systems integrator. We have over 1,400 employees in Canada and sales of over $400 million annually. We have been a supplier to the Department of National Defence since 1948, and today export annually over $100 million of Canadian-developed and produced product. We are also, I might add, the prime contractor for the Canadian army's Tactical Command, Control and Communication System, an approximately $1.5 billion program to re-equip the Canadian Forces with new communications in command and control.

As you know, the maritime helicopter program is the last of the four major crown projects identified in the government's 1994 white paper on defence. The case for launching this acquisition and for doing so in the near term has already been well presented. I would like to address the opportunities that this major crown project offers Canadian industry.

The Government of Canada receives best value for its procurement dollar when the environment permits suppliers to fully apply their technical and commercial skills in a defined procurement process that takes advantage of Canadian-developed technologies in centres of excellence. The government wants to acquire an operational capability within budget and an envelope of manageable risk.

Industry can best deliver against these criteria when the associated parameters are clearly identified against a defined timeline. Major crown projects for the Department of National Defence are, by their nature, complex, but provide ample opportunity for industry to deliver innovative solutions. Companies like mine can achieve for the government a number of objectives once the overall acquisition strategy is defined. We can deliver competitive and innovative solutions meeting the Canadian Forces' operational needs.

In the case of the maritime helicopter program, the technical challenge is not the helicopter, but the designing of an integrated solution within a limited budget that offers proven interoperable technology, mitigates risk, and acts as a model for a partnership between industry and the Department of National Defence. We can provide innovative commercial arrangements in keeping with the objectives of Department of National Defence procurement reform initiatives. Recognizing the significantly reduced capital budget the department today operates with, our company, with a considerable investment in Canada, can work with the department to fashion a comprehensive, long-term business arrangement while ensuring best value and competition.

The capital budget for the Department of National Defence is very limited. Aerospace and defence companies located in Canada must create an export market for their products and technology. A critical component in establishing export markets is the use of Canadian products and technologies by its domestic customer, the Department of National Defence. Thus a major crown project not only creates domestic opportunities, but also positions companies such as Computing Devices to capture export business.

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For example, as a result of our work on the Canadian patrol frigate program, we continue to enjoy and capture offshore business in both Europe and the Pacific Rim. More recently, our work on the Tactical Command, Control and Communication System has generated business opportunities in the United States and Asia.

We can also create and support our chain of small and medium-sized enterprise partners. Speaking from personal and direct experience in a major crown project, I can assure this committee that there are significant benefits accruing to our Canadian small and medium-sized enterprise suppliers. We estimate that every dollar of DND procurement that flows from our company to an SME supplier has a force multiplier of three. Many of our suppliers benefit from export business as a result of their efforts with us on major crown projects.

We can also assure a continued base of life cycle support and planned product improvement. Research and development investment, infrastructure, and a pool of world-class Canadian engineers and technologists will provide to the Department of National Defence a continued long-term support base. All this can be done by industry, industry located here in Canada, using Canadian technology and Canadian skills.

There is a small but well-established group of aerospace and defence companies in Canada with the systems design, program management, and applications expertise suitable to take on the challenges of the maritime helicopter program. My company is one that has both the capability and the mandate to deliver a very competitive solution to the Department of National Defence for its maritime helicopter program. We would urge the department to challenge our skills by releasing the maritime program to Canada's aerospace and defence community as soon as practicably possible.

Thank you.

The Chair: Thank you, Mr. Scott.

Dr. Grover, please.

Dr. Bernie Grover: Mr. Chairman, ladies and gentlemen, since I was invited here on short notice, I did not have the opportunity to provide you with material in advance. Therefore I'm going to use part of my first minute or so to provide a short biography and establish why I might have something to offer to the committee.

In my military career I served in the Canadian army, the Royal Canadian Air Force, and retired as a naval commander in the integrated Canadian Armed Forces. So I have some feel for the military.

In my academic career, I spent four years on the faculty at National Defense University in Washington, where, among other things, I helped developed the year-long, post-graduate, senior acquisition course, as sort of a finishing school course for the senior U.S. defence acquisition community. For my work at National Defense University, President Clinton awarded me the U.S. Meritorious Service Medal. Also, I have taught Canadian defence procurement policy at Queen's University as part of their master of public administration defence management program.

In my policy adviser career, I've been involved behind the scenes for 15 years in developing defence procurement and defence industry policy and programs and preparing senior bureaucrats and military for appearances before congressional and parliamentary committees. However, this is the first time I've been here on my own.

I was a defence policy adviser in the Office of the Secretary of Defense in the Pentagon during the Reagan and Bush administrations, and in Canada I helped prepare defence procurement and defence industry material for Prime Minister Mulroney, and to show I have no political agenda, I did the same for Ministers Collenette and Young when they were Ministers of National Defence.

Thank you for the invitation to appear before you and for allowing me to share some of my thoughts on defence procurement. I have five points to make, and I will make them within my allotted 10 minutes.

Earlier this year, U.S. Secretary of Defense Cohen reported to Congress on the contribution that America's allies were making in helping maintain the peace and security of the democratic world. His report used a fair share approach. In other words, how much did each nation contribute, based upon their ability to contribute?

Canada's contribution was rated inadequate. Of 23 countries the secretary looked at, Canada rated 21 out of 23 or 22 out of 23 in terms of defence spending as a proportion of our GDP, in terms of active duty military personnel, ground combat capability, and combat aircraft share.

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Within NATO, Canada is second only to Luxemburg in not paying our fair share of the common defence. Luxemburg is one-third the size of Algonquin Park and has less than half the number of people who live in the greater Ottawa area. So in practical terms, Canada is dead last.

Between 1990 and 1998, NATO defence budgets overall were reduced by 19%. During the same time, Canada reduced its budget by 33%, the largest reduction of any NATO nation. Notwithstanding its downsizing, re-organizing and re-engineering, DND simply does not have the funds available to upgrade or replace its obsolete and unreliable equipment, nor to maintain its newer equipment adequately.

My first point is that DND's budget is inadequate to meet the Canadian Forces procurement requirement.

Having said that, DND's procurement budget is still government's largest single pool of discretionary spending. In addition to providing for the materiel needs of the Canadian Forces, defence procurement is expected to promote an exceptionally wide range of non-defence government objectives. For example, the Minister of National Defence recently reported to Parliament that the north warning system project involved 12 government departments and agencies and contributed to many national objectives.

If Parliament wishes to leverage defence procurement dollars in promoting other goals, such as regional development, technology transfer, aboriginal development, or whatever, that is your prerogative—some would argue your responsibility. However, the net effect on defence procurement from the perspective of DND and the Canadian Forces is fourfold: it will take longer to acquire equipment; the equipment will probably not fully meet the operational needs of the Canadian Forces; the equipment will cost more; and the procurement process itself will be more lengthy, complex, and costly.

My second point is that using defence procurement as an instrument to promote non-defence national objectives always, without exception, has real costs for DND: increases in equipment costs, capability costs, timeliness costs, and administrative costs. Such an approach may be effective to meet certain objectives, but it will never be efficient.

Defence procurement and its associated activities have been popular targets for government auditors, inspectors, and congressional and parliamentary committees for centuries. Canadian defence procurement is no different. U.S. and U.K. audit reports over the past decade or so are often quite scathing in their assessment of defence procurement activities.

In the U.K., the general theme of the National Accounting Office is that projects are consistently late and over budget. In the U.S., the common theme that the General Accounting Office reports is one of excessively high costs. In Canada over the last decade, the Auditor General has found, with one exception, defence projects tend to come in on time and within budgets. His findings, however, tend to identify opportunities for improving on the margin, not changing the fundamental system.

My third point is that the Auditor General's reports give Canadian defence procurement a very high grade relative to its U.K. and U.S. counterparts.

During the recent downsizing of DND, the number of materiel acquisition and support personnel was reduced by 55%. In order to continue executing its materiel activities, DND has undertaken a wide range of acquisition reforms. The reforms tend to be a combination of the best defence and commercial practices of the U.S. and Canada, blended to fit the unique Canadian defence procurement environment. Some of the reforms are radical—these are the ones that you read about in the media—like contracting out the entire base services activity at CFB Goose Bay. But most have a much lower profile: reducing the paperwork, streamlining processes, moving day-to-day activities from government to industry, reducing inventory, and providing higher levels of service.

My fourth point is that DND is actively reforming its materiel acquisition and support processes. Some of these reforms have already resulted in streamlining departmental administration while at the same time providing higher levels of service to personnel and equipment in the field. For example, the reformed approach to providing Griffon helicopter logistics support was able to provide spare parts to helicopters deployed in Haiti much faster than was historically possible. If there has been a significant acquisition reform implemented by either industry or government anywhere over the past decade, chances are it has already been considered by DND.

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Finally, I have to make a point about the industrial base that supports the Canadian Forces. The low level of Canadian defence expenditure is simply not enough to maintain the defence industrial capability necessary to support the Canadian Forces. Without significant exports by Canadian defence firms, Canada will pay a very high premium to maintain a capability to supply the small quantities that DND buys. This is already happening, for example, in the case of the Canadian munitions industry.

At the same time, the U.S., our largest market, last April unilaterally removed Canada's preferential access to the U.S. defence market, and it redefined defence industry to include commercial satellites such as RADARSAT. Those actions have the potential to virtually eliminate both Canada's defence exports to the U.S. and RADARSAT II, the keystone of Canada's commercial space program. While the matter has since been negotiated at the very highest levels, and now there are indications that the U.S. position may change, the confrontation identifies a key issue.

In 1996, the defence market for Canadian firms supported 55,000 Canadian jobs. Many of them were in high-tech, high value-added sectors, and many of them were dependent on either the U.S. market or, even more important, access to U.S. technology. Access to the U.S. defence market is unique in that it must be monitored and nurtured. To take it for granted is to lose it. By eliminating or reducing its defence economic relations staff in Ottawa and Washington, Canada took defence trade for granted. Canada may yet lose thousands of jobs and much of its space program as a result.

My final point then is that we need an industrial base to support the Canadian Forces. The key to maintaining that base is access to the U.S. defence market and U.S. technology. If Canada does not focus resources on maintaining the unique Canada-U.S. defence-economic relationship, it will cost Canada dearly.

In summary, Canada's defence budget is at its lowest level since Korea, while the Canadian Forces, with 4,500 troops deployed in 22 operations around the world, have been ordered to their highest level of operational tempo since Korea. The current budget does not support this level of operations, maintenance of newer equipment, and replacement of obsolete equipment.

DND's procurement budget is further eroded by the requirement to support, that is, to fund, other national objectives.

According to the Auditor General, DND procurement projects come in within cost and on time.

DND has initiated a comprehensive program of acquisition reform aimed at increasing performance while absorbing a 55% cut in personnel. The cuts have been made, and in some areas performance has already significantly increased.

Continuing government neglect of the Canada-U.S. defence-economic relationship could cost thousands of jobs, destroy the commercial space program, and significantly increase DND's future procurement costs.

That is my opening statement, ladies and gentlemen. I invite your questions.

The Chair: Thank you very much, Dr. Grover. We will go to questions in a second for both witnesses, so colleagues will have an opportunity to take their choice.

Just for the record, I think largely you're speaking to the converted. I just made a statement in the House today calling on the government to reinvest in the defence budget. I don't think you'll have much disagreement around this table, if any.

I guess the very bottom of the defence was probably last year. Happily, for the first time in 12 years, we at least saw an increase, if small, in the defence budget this year as a result of the report of this committee chaired by the parliamentary secretary, Bob Bertrand, aimed specifically at the quality of life of our forces. I'm not sure if you're aware of that. That may not be the reinvestment we need, but many of us hope it is the start of a series of reinvestments. That's just to have the record correct.

Mrs. Elsie Wayne: Mr. Chair, will we be getting a copy?

The Chair: Is the written submission on its way, Mr. Clouthier?

Mr. Hec Clouthier (Renfrew—Nipissing—Pembroke, Lib.): We just received it.

The Chair: Oh, I'm sorry. We just received it from Mr. Grover.

Mrs. Elsie Wayne: But we will get a copy?

The Chair: Yes, although the request to appear, as I understand from Dr. Grover, was for a long time, we've just restarted and the witnesses didn't have a lot of notice, and we appreciate that. So we will, as soon as possible, distribute that to the members.

Mrs. Elsie Wayne: Thank you.

The Chair: Thank you.

Now I recall for colleagues that the first round is seven minutes, followed by a five-minute round. Please feel free to direct questions to either witness.

Mr. Hanger.

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Mr. Art Hanger: Thank you, Mr. Chairman, and thank you, gentlemen.

I have one question for Mr. Scott. I'm pleased Mr. Grover made such a comprehensive statement listing his very definite five points for consideration. I do have a number of questions for him, and I would actually like his notes, so I could refer back to them. I'll try to remember here what I've planned on asking you.

To Mr. Scott first, your company was to design and install the mission kit for the shipboard helicopters, were they not, or part of it?

Mr. David Scott: We were a member of a Canadian consortium going back many years ago. In the most recent, yet-to-be-announced procurement, we were part of a team that would provide the mission kit for the maritime helicopter. That's correct.

Mr. Art Hanger: With the cancellation of that contract and the possible renewal of it, are you still in the running? You obviously had the technology, the plan, and the system in place ready to go. Where do you sit in the picture now? Right from day one or...?

Mr. David Scott: No. Since the EH-101 was cancelled, we have continued to develop our own equipment with our own internal research and development dollars. We have continued to not only develop that, but also offer it for sale in other markets. In that general area we've been successful, both in the United Kingdom and in Australia, with related products. So we do have a product today that we can offer up to the Department of National Defence once the maritime helicopter program is ready to be announced for procurement.

I might add, though, that it has been a long road since the EH-101 was cancelled. While we've enjoyed some success overseas, one of the points I was trying to make is it's very difficult for Canadian companies to be successful internationally if their domestic customer does not buy their equipment.

With that in mind, we are ready for the helicopter program in Canada when it's announced. We just need to hope that will be shortly.

Mr. Art Hanger: So you would again be part of a consortium then to supply one portion of that contract?

Mr. David Scott: Indeed we might be, yes.

Mr. Art Hanger: Okay. Thank you.

Dr. Grover, you spoke of the different NATO nations and their defence budgets, placing Canada either 21st out of 23 or 22nd out of 23 on the list, listing them from one to 23—near the bottom of the list, I guess, is what you're saying. Also you said Canada reduced its defence budget by 33%, whereas the average overall in the NATO countries was somewhere around 19% to 20%.

If you were looking at Canada's present situation, as far as our military is concerned, what would you think would be an adequate budget?

Dr. Bernie Grover: If Canada were to pay its fair share—

Mr. Art Hanger: Yes.

Dr. Bernie Grover: In other words, based upon the size of the Canadian economy, based upon the size of the Canadian workforce, and looking at, if you want, the western world's total defence requirement, Canada's share would be a $22 billion budget and 159,000 regular force permanent military. This is how far we are away from pulling our fair share, if you like, in the western alliance.

Mr. Art Hanger: So a little better than double what the budget is right at the present time?

Dr. Bernie Grover: Double the budget and two and a half times the number of personnel. Yes, sir.

Mr. Art Hanger: That's a.... Well, it's up to you fellows to sell it.

The Chair: Yes, I know, but we're realistic about what we might sell.

Mr. Art Hanger: Now, since we're such a long way away, and it's quite a climb to a level such as that—it may never be attained. I would assume you're probably working it out at about 2.2% of the GDP, which would put us up pretty close to that point.

Dr. Bernie Grover: That would put us up to about 1.9% or so.

Mr. Art Hanger: Of the GDP?

Dr. Bernie Grover: Yes.

Mr. Art Hanger: Well, that's quite a climb from where we sit right now.

Dr. Bernie Grover: No, I'm sorry, sir. It's 2.94%.

Mr. Art Hanger: It's 2.94% of the GDP?

Dr. Bernie Grover: No. I'm sorry. Canada's GDP is 2.94% of the entire western alliance, if you want. So the idea would be that that would be our share. It would go from where we're at now, 1.1%, to 2.4%, in that range.

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Mr. Art Hanger: That's a good jump. But we're not there. So looking at the bottom line, the lowest point we could probably strike, where should we be? We need a certain capability, but because of the budget cut, that capability doesn't seem to be on the agenda. The replacement of any of the hardware we have at present doesn't seem to be on tap. It's not on the agenda. But where should we be if we were to meet a minimal requirement of those challenges we have with our NATO allies as well as our own defence?

Dr. Bernie Grover: Australia seems to be doing quite well with a defence budget of 1.9% of GDP. Even though they're a much smaller country, their defence budget is slightly larger than Canada's.

Mr. Art Hanger: Yes, it is. I was over there. I observed that they do have a certain capability that we do not.

There was one other point I wanted to bring up. You mentioned non-defence, national objectives. What is that?

Dr. Bernie Grover: That involves creating jobs in Newfoundland, your industrial benefits package, requiring contractors to provide a package of benefits that would include possibly importing technology into Canada, generating jobs on a regional basis—

Mr. Art Hanger: So these programs are designed more for a social benefit, I suppose. Is that what you're referring to?

Dr. Bernie Grover: It's a social benefit or Canadian content. An example is buying a military truck that already exists. DND actually went though this when buying a truck that was in production in Austria. After the army bought it, it required a certain percentage of Canadian content. That meant that, first of all, the prime contractor had to build a facility in Canada in which to actually assemble the truck, and they had to find suppliers for bits and pieces. What it meant was that the truck cost more and the quality was less than if we had bought it off the production line in Austria. The additional costs were absorbed by DND. Now, in the process we did create jobs at various places across the country.

Mr. Art Hanger: As you say, the spinoff is not worth the effort to bring this technology in and develop an industry.

Dr. Bernie Grover: I'm saying that Parliament has to recognize that they're imposing a burden on the defence budget when they add these other objectives to defence procurement.

The Chair: Thank you very much.

Thanks, Mr. Hanger. We can come back to you.

That's an interesting observation. I think we do that in just about every one of our budgets in this country, but it's still a valid point.

[Translation]

Mr. Laurin, you have seven minutes.

Mr. René Laurin: Thank you, Mr. Chairman.

I am a bit bothered and confused by something that Mr. Grover said in his presentation. You recommend that we develop local industries to meet our own needs in the area of national defence and he links this industrial development to job creation.

It seems to me, however, that we would be creating a vicious circle if we developed a military industry in order to create jobs. The day when the government takes another tack and decides to get rid of its offensive weapons, concentrating instead on peacekeeping missions which are less equipment intensive, we will have less need of the industries that we have developed. The government may find itself in a dilemma: it will have to choose between eliminating jobs that it has created itself and focussing on its new national defence strategy.

• 1615

It would be kind of like deciding now, when we are passing laws to reduce cigarette consumption, that we want to help develop the tobacco industry and identify new areas where we could grow tobacco because we could create jobs that way. Those efforts would go against our objective of trying to get people to smoke less.

We would be faced with this dilemma of job creation, of new strategies and societal choices. I would like to know if it is possible to develop a national defence industry geared to our conventional needs, such as building helicopters for the Coast Guard, for example, and to the export market, while continuing to ensure that some equipment is imported.

[English]

Dr. Bernie Grover: To a large degree, Canada already does that very thing. For example, when the light armoured vehicle was purchased from General Motors in London, the company established a capability to build and maintain that equipment. The bottom line, however, is that the needs of the Canadian Forces were not enough unto themselves to maintain that over the long term. So we ended up with an excellent capability and a product General Motors was able to export. We require the capability to support the Canadian Forces, but we cannot afford to fund that totally out of the defence budget.

So the ideal situation is, yes, to generate a capability to support the Canadian Forces but at the same time to pick those products or firms that can compete in the export market. The case of General Motors and the light armoured vehicle is an excellent example of that.

On the other end of the scale, we have the low-level air defence program in Saint-Jean-d'Iberville in Quebec, which did not work out. Canada bought it. There was no export market and the company did not enjoy the success of General Motors. The idea that we create jobs we then destroy is not a situation I would see, given the requirement over time to actually increase the defence budget.

[Translation]

Mr. René Laurin: Would your company be viable right now if the National Defence Department was not a customer?

[English]

Dr. Bernie Grover: In the case of General Motors in Oakville, what tended to happen there is that between major export orders, they turned to National Defence for contract work. We have experienced that with a number of companies, where the Department of National Defence helped establish a capability in Canada and then they or Parliament had to come to the rescue by awarding them defence contracts between major export orders.

Is this an acceptable situation? That is for the committee to decide. It is not a perfect situation.

[Translation]

Mr. René Laurin: That brings me to a related topic. Some people say that the Defence Production Sharing Agreement with the United States favours the American industry over the Canadian one. Some people are also wondering if Canada really has the means to renew this agreement, which has to be renegotiated in 2001, if I remember rightly, under the NORAD program.

Given that Canada currently benefits from an export permit exemption when it sells to the United States, should we opt to maintain jobs and support the renewal of NORAD because we can create jobs in Canada that way, or should we not renew NORAD and make the terrible decision to eliminate jobs? Is that what you are suggesting to us?

• 1620

Renewing the NORAD agreement is currently not a jobs issue. It is essentially an economic issue. One has to wonder whether Canada has the means to support an agreement like NORAD with the United States.

[English]

Dr. Bernie Grover: The situation with NORAD is quite an interesting one because it brings in a whole new issue of Canada's participation in the strategic defence initiative, or Son of Star Wars. It is my opinion that it is in Canada's interest to maintain a very close defence relationship with the United States. It is also my opinion that Canada should leverage that relationship into whatever economic advantage we can squeeze out of it. The industries and the firms that tend to export into the U.S. defence market tend to be high value-added, high-tech—the good jobs. To the extent that we can leverage our defence relationship with the United States into job creation in Canada, it is my opinion that it's in Canada's interests to do so.

[Translation]

Mr. René Laurin: To this point, has this transborder trade between the United States and Canada been profitable for your company?

[English]

Dr. Bernie Grover: The short answer is—

[Translation]

Mr. René Laurin: Could you give us a practical example?

[English]

Dr. Bernie Grover: Would you like to answer that?

Mr. David Scott: May I respond?

Since we have a company here in Canada that does a significant amount of export with the United States, if I understood the question correctly.... Business has always been profitable in the United States, and not just in the United States but wherever we trade. We're in business to make a profit for our shareholders, as well as to grow our company. We wouldn't do business in a place where we're going to lose money, including Canada.

So the business has been good. However, I would reinforce the point I made earlier. We can only be successful in those export markets—whether it's Australia, Britain, the United States, or the Far East—if we are also successful in Canada. If there was no Canadian industrial base for defence products, then we would not be here in Canada and we would not be able to export our products.

In terms of export markets, though, no. Those are good markets for us, and we want to continue to keep access to them. Canada's participation in programs such as NORAD and in associations such as NATO are incredibly important for Canadian industry to sustain jobs here in Canada and to grow its international business.

[Translation]

Mr. René Laurin: Thank you.

The Chair: Thank you, Mr. Laurin.

[English]

I can confirm that Minister Baker will be with us on Thursday morning at 9 a.m., so I'll just give you that heads up.

I'll now go to Mr. Pratt, please, and then Mr. Clouthier.

Mr. David Pratt: Thank you, Mr. Chair.

It was good to hear your comments today, Dr. Grover and Mr. Scott. I'm very pleased that you in particular were able to join us, Mr. Scott, because Computing Devices is in my riding. It's a major employer and a major contributor to the community.

With respect to your company's involvement in the Canadian Defence Industries Association, I'm wondering if you've done any calculations at all, or if the CDIA has done any calculations, with respect to how many jobs would be created—both high-quality and, let's say, lower-quality jobs—for every billion dollars that we would add to the defence budget.

Mr. David Scott: That is a difficult question to answer. There have been studies done, particularly associated with major crown projects. But my hesitation in answering you is that it would depend on the nature of the procurements if we're describing procurements here in terms of additional funding for the Department of National Defence budget.

• 1625

If I could use as an example my topic of the maritime helicopter program, it's unlikely that there will be a helo prime that's a Canadian company. There are likely to be offshore suppliers, because there's just not enough business in Canada to sustain a helo prime for that particular application. However, in the value added in terms of systems electronics, systems integration, command and control, and mission systems, there's significant capability here in Canada among a number of companies, just not my own.

For every dollar that's spent, my guess would be that you're looking at least at 60% of that going to the creation of more Canadian content. Everything that's purchased also has material content, and that doesn't necessarily come from onshore. But at least you're looking at 60%, if not more, of every dollar being spent additionally in DND for those high-end items. Whether that spending is in engineering or in manufacturing, they're going to be resident here in Canada. The capability is certainly here among a small but well-established set of companies. It would be a significant leverage if it's aimed at that additional area.

If I can venture an opinion, where DND would like to spend—if they had additional money—is on upgrading existing platforms with additional capability. I say that because that's what is happening in the United Kingdom, that's what is happening in the United States, and that's what is happening in Australia. Platforms are expensive, but a tremendous amount of additional capability can be added for a relatively small cost in the electronics domain.

Mr. David Pratt: In terms of the cuts that have been made to the defence budget, are we in a situation at all in which we're losing, within our industrial base, the skilled workers that are necessary to be able to do many of these contracts?

Mr. David Scott: I think the potential is there. I wouldn't say today that we've lost significant skills, but there are two converging factors. There is the reduced Department of National Defence budget, which means less business for the Canadian industry to do in Canada. That has an effect on the workforce and the retention of the skilled workforce. Associated with that was also perhaps the lack of predictability in terms of a timeline for these major crown purchases. Without a firm timeline, it's difficult to retain and to support a large technical staff.

The other factor that's in the convergence is the information technology explosion of the last few years and the draw the commercial sector has for the skilled workforce. Companies such as my own are trying to address that by diversifying where we can so that we have some commercial offerings as well as military.

Mr. David Pratt: Dr. Grover, I'd like to ask you a question in connection with the white paper, going back to 1994. Obviously that is still the basic document we're working from, although the reality seems to have gone a long way from what's proposed within that white paper. Do you think it's time for us to revisit that entire exercise and look at where we're going as a country in terms of our defence capability and the sorts of things we should be emphasizing? Do you think that's an appropriate exercise at this time?

Maybe I could just throw out another question for you if you have time. We've certainly heard the comments of Lord Robertson and Defense Secretary Cohen. I guess what surprises me is that we haven't heard more from some of our allies in connection with our level of defence spending. Do you have any thoughts on that?

Dr. Bernie Grover: There are two questions there, but I would first just go back to how many jobs a billion dollars in expenditure would create. In direct and indirect jobs the answer is 10,000 per billion dollars of procurement.

Mr. David Pratt: That's being pretty categorical.

Dr. Bernie Grover: It's not categorical at all. I work on this all the time, and one of the things I do behind the scenes is write these numbers for the Canadian Defence Industry Association, as well as for DND and some other organizations. I've worked with a number of the interdepartmental committees that look at this thing, and 10,000 jobs, both direct and indirect, per billion is an accepted number in town.

Should we revisit the white paper? At the end of the Cold War, nobody could possibly have forecasted the extent of Canadian Forces deployment around the world. In the same way that nobody could forecast accurately the demise of the Cold War, we didn't forecast what the end of the Cold War really meant.

• 1630

As I mentioned earlier, Canadians are deployed in 22 operations around the world. Even if the numbers totally are not that great, the logistics of supporting 22 operations are horrendous. So to the extent that the environment in which the Canadian Forces are operating, the environment in which defence as an instrument of our foreign policy is changing, it may be valid to re-look at the white paper. So the short answer to that is yes.

Why haven't we heard of our allies prompting us to spend more? We have heard of it through the new U.S. Ambassador to Canada, for example. The U.S. Congress is generally unhappy with the world looking to the United States to be the world policeman and picking up the cost. So a part of the impetus behind the Secretary of Defense identifying Canada as not being a fair player actually comes from Congress and their interest in having allies pay a bit more of a fair share.

If you have the head of NATO and you have the Secretary of Defense of the U.S. and the U.S. ambassador, that's a fair bit of prompting.

The Chair: Thank you.

Mr. Pratt, of course you may not know that the committee went to Germany last year. I was recently at the UN, and other colleagues have been travelling. Perhaps we don't hear it as bluntly and in our own House as Mr. Robertson put it, and where he chose to put it, but I think we're all getting a lot of input from our allies, although a little more diplomatically than Lord Robertson maybe.

With that, now we go to Mr. Earle. Mr. Clouthier, I'll get you on the next round.

Mr. Earle for seven minutes.

Mr. Gordon Earle: Thank you, Mr. Chair. I want to thank both Mr. Scott and Dr. Grover for their presentations. I have some questions for both.

First to Mr. Scott, where is your company is located? I understand it's in Mr. Pratt's riding. Where precisely is it located? What city? What town?

Mr. David Scott: We are located in Bells Corners just outside of Ottawa. We're also located in Mr. Hanger's riding, I believe in Calgary East.

Mr. Gordon Earle: There are no outlets in the Atlantic provinces?

Mr. David Scott: We have an engineering office that is working with Defence Research Establishment Atlantic. It's a small engineering office just outside of Halifax. It's relatively modest. We'd love to grow it. We just need more budget for the Canadian navy.

Mr. Gordon Earle: Thank you. In your presentation you mention:

Recognizing the significantly reduced capital budget the Department today operates with, our company, with a considerable investment in Canada, can work with the Department to fashion a comprehensive, long term business arrangement while ensuring best value and competition.

I'm wondering if you can elaborate a bit on that. How would you ensure that best value and competition?

Mr. David Scott: It relates to what role in a procurement strategy industry might be called upon to play on behalf of the Department of National Defence. One of the trends we've seen occurring initially in the United Kingdom through a defence reform initiative there, and we also see it in the United States, is where industry has been asked to play the role of prime contractor and run competitions on behalf of the procuring agency—in other words, in a Canadian example, on behalf of the Canadian Department of National Defence.

The role there for industry changes somewhat because the competition is run at a second tier level. A prime contractor is selected. You're going to say, why would that be done? It's because with consolidation in the defence industry there are fewer competitors. It streamlines the procurement process. It reduces the cost associated with the Department of National Defence or, in the case of the U.K., the Ministry of Defence, to run these procurements. The prime contractor essentially runs the competition on behalf of the government.

In playing that role it has obligations to ensure that every competition is run fairly but that it also gives best value to the procuring agency within the government by ensuring that those requirements are met. It takes the risk onto itself, so it reduces the risk envelope for the procuring agency within the government.

• 1635

This is a model I would suggest might be considered by the Department of National Defence in a constrained budget, that they may look for other ways to ensure that their procurement requirements are met both from a time-budget and risk-management point of view, without taking all of that responsibility onto their own relatively diminished shoulders in terms of resources.

Mr. Gordon Earle: Dr. Grover, you mentioned in your presentation the importance and the need for a strong industrial base. You make quite a bit of reference and place emphasis upon access to the U.S. market. This tie-in with the U.S., or this dependency upon the U.S., concerns me a bit, because at the same time it almost sounded like you were downplaying the industrial regional benefits aspect of the defence industry. You mentioned Goose Bay, Labrador, as an example.

For me it seems very important that when looking at a defence industry, we not just look at the defence industry in isolation, because nothing exists in isolation. We must consider the importance of those industries within a community and to the life and fabric of those communities. I'm a bit concerned about the message you were imparting around the industrial regional benefits. Perhaps you might want to elaborate upon that. Are you suggesting that we shouldn't be encouraging defence jobs in the Atlantic provinces and directing all our attention toward Canada-U.S. relations?

Dr. Bernie Grover: No, sir. What I'm saying is if you give the Department of National Defence a dollar to spend and then you say, fine, 10¢ or 15¢ of that dollar you will spend on establishing a fabrication plant in Lunenburg, recognize that you haven't given Defence a dollar to spend; you've given Defence 85¢ to spend.

What I'm saying is when you look at the defence budget and you see what appears to be a fairly large number that's available for procurement, most of it is available for procurement. All I'm saying is you should recognize and acknowledge, in imposing these other objectives, that you're reducing the defence buying power at the same time.

Mr. Gordon Earle: Yes, reducing the defence buying power would perhaps increase the economic capability of a given area where those industrial regional benefits are directed.

Dr. Bernie Grover: Absolutely.

Mr. Gordon Earle: So you're not opposed to that, but you're just saying recognize that the amount is less than what's indicated.

Dr. Bernie Grover: The ideal situation would be to say Defence requires a budget of $10 billion, or whatever, and recognize that in spending $2 billion of that on equipment, they're going to in fact spend $200 million on regional development. So you call that regional development and you fund that as an additional part of the defence budget. In other words, you top it up so that the defence budget really has the buying power that you nominally give it to start with.

The Chair: Give a $1.15.

Dr. Bernie Grover: Give it a $1.15, exactly, sir.

Mr. Gordon Earle: I'm pleased to hear that. Initially it sounded as if you were opposed to the idea of industrial regional benefits per se.

Dr. Bernie Grover: No.

Mr. Gordon Earle: But you're not opposed to that. You're just opposed to mixing it into the budget and not identifying it.

Dr. Bernie Grover: Absolutely, sir.

Mr. Gordon Earle: That eased my mind.

I have one final point I'd like a comment on from either of the gentlemen.

Basically I'm a peace-loving person. I find at times when I'm dealing with defence issues it's almost a bit of a contradiction. This is because we know that the defence industry is built around supplying arms and various pieces of equipment that are quite often used in conflict, and there's a great deal of money involved in that. I think sometimes the U.S. has perhaps certain goals and economic interests in seeing some of these conflicts supporting their defence industry. It almost mitigates against trying to establish peace. In other words, if we had perfect peace in this world, we would probably see quite a decrease in the defence industry.

Have either of you given any thought to looking at the kinds of things that the defence industry procures and seeing if there's some way whereby you can put more emphasis toward things that move toward more peaceful ends and still have an industry that would be viable? I think that's a very crucial question that has to be faced if we decide what direction we want our country to go and what direction we want for our military.

• 1640

Mr. David Scott: If I could respond, I welcome your comment. Most of what Canadian industry does for the Department of National Defence is primarily in electronics and systems and support, and not so much on the pointy edge of what you refer to.

Let me give you a concrete example from the Tactical Command, Control and Communication System contract we received back in 1991. We have developed a remote workstation for telehealth to do diagnostics remotely. We've been able to develop that product using some of the wireless land technologies and satellite communications technologies that came from the Department of National Defence IRIS or TCCS program. We've been successful in selling that in Canada, initially in Northwest Territories and in the province of Saskatchewan and here with the Ottawa Heart Institute in Ottawa, and we recently won a contract to supply a similar product to the Kingdom of Saudi Arabia.

That sounds like a big deal. It's a modest beginning for us, but that's my point, that we try to diversify. Without getting too technical, the technology used in commercial and the technology used in defence today are for the most part identical; it's converging. You can't tell the difference, other than that some are painted beige and some are painted green boxes and some are painted white boxes. That's the basic difference.

Dr. Bernie Grover: Could I just make two comments?

The first is on the suggestion or the implication that there are parties in the U.S. that would like to see wars continuing so they could maintain their defence industry. Based on seven years on the inside down there, and working with the U.S. defence industry and spending a lot of time on the Hill and over in the Pentagon with “the warmongers”, if you want, I cannot possibly imagine anybody promoting that particular aspect as an agenda, even a hidden agenda. I saw no hint of that whatsoever. Yes, they want to promote the defence industry, but they certainly don't want to promote individual wars to justify the defence industry.

The other issue is about producing weapons. I have great difficulty in identifying what a weapon is today. It's like at the end of the Cold War; we weren't sure of where the world was going and we never foresaw 22 operations around the world. The bloodiest war in the last 25 years probably was in Rwanda, the massacres in Rwanda, where the weapon of choice was the machete, which was the implement of the field. So if somebody wants to go to war, they will find a way to go to war. It's a sad comment on our society maybe, but the idea that we can somehow produce benign weapons within the defence industry is, I think—it may be a laudable goal, but it has no practical application.

The Chair: Thank you.

Maybe at the end I'll have a chance to talk with Dr. Grover about the military industrial complex and the warnings President Eisenhower gave the U.S. and the world almost 40 years ago, but we can do that later hopefully.

We'll go to a second round now; five minutes with Mr. Hanger.

Mr. Art Hanger: Thank you, Mr. Chairman.

I just came back actually from a trip to Australia.

Mr. Janko Peric (Cambridge, Lib.): At taxpayers' expense?

Mr. Art Hanger: No, it was at my own expense. I'll make a point of telling you that too.

In any event, Australia has an interesting direction, I think. First of all, they produce a white paper every year on defence. They have declared their military will no longer be diggers of ditches and painters of ships, but their combat capability is going to be the number one priority. Of course they set about doing that on the sharp end, and over 60% of their forces are on the sharp end or directed on the sharp end.

• 1645

They've also gone through a process of alternate service delivery. One area they concentrated on was alternate delivery of their mess, their kitchen, over to a private contractor. East Timor hit just after they had privatized a good portion of their kitchen out to a private contractor, and it required that contractor to move from the south end of Australia up to the north. There, of course, the problems began.

The contractor could not deliver food services to the military. They just fell flat on their face. They could not hire enough people to come up to Darwin, and that's still within the country, to look after the troops there, and they ran into major, major problems. They had to reconfigure, again, their military food delivery services to assist the contractor through his contract, and it is unknown how long it will be established in that northern part of the country.

Now, how far should a country go in alternate service delivery? Here was a need for them to move, to mobilize. There was some time given, but how far should a military provide alternate service delivery? How far down the line? Dr. Grover.

Dr. Bernie Grover: There is no nice, neat answer to that whatsoever. DND has approached it by identifying some services as “core services” and arguing that core services are of such a nature that they can only be conducted by the military, and everything outside of this core....

The real issue is identifying what is a core service, and this gets back to your Australia case. The British MOD has contracted out or ASDed some activities that sort of stretched the limit. Their staff college is an example. They closed three existing staff colleges and awarded a single contract to somebody to build a staff college, maintain the staff college, develop and present the courses, and do so for 35 years.

A military staff college is something that most of us would think of as being a military function, as opposed to subcontracting out to Cranston University or something like that. However, that's where they've drawn that line. I understand they're going to contract out their strategic air lift, including in-flight refuelling. They're going to contract out what used to be done by the Royal Corps of Transport in tank transportation.

I think there's going to be a weeding out, if you will, as countries go to war and test these in war.

I was in the Pentagon during the Gulf War and we had thousands of contractors that went with our American troops to the front lines in Saudi Arabia, with no difficulty whatsoever. There it worked.

Mr. Art Hanger: So that doesn't really tell me exactly where you can go and where you can't go.

Dr. Bernie Grover: It's uncharted waters, and wherever you draw the line is going to be a subjective decision and it will have to be actually tested in real operations.

In the case of our going to the UN operation in Haiti, we had a Bell Textron technician along providing supply support to the five helicopters. It worked extremely well.

Mr. Art Hanger: My last question is on procurement. A statement of requirements come out of the military. They say this is the piece of kit we need to do the job. Now, I would assume you would say that should be in a stringent program or process to, first, come up with that statement of requirements and, once it's decided, what should happen internally, both within the military and over to the government, and then over to the contractor. What would you say would be the best process for that?

• 1650

The Chair: Dr. Grover, Mr. Hanger was over time, but we want to give you a chance.

Dr. Bernie Grover: Okay. I think the statement of requirement requires two parts to it, the must haves and the would like to haves.

Once the operators identify the must haves and the want to haves, you turn it over to cabinet, if you want, or to the rest of government to add their industrial benefits or anything else that has to go along. But I think the key is to define the requirement in such a way that gives the greatest latitude to industry on how to meet the requirement.

Instead of going into volumes of detail telling industry how to do their job, the operator has to tell them what we require in terms of capability and let industry determine how best to meet that capability. Otherwise we will never be able to take advantage of the innovation and effectiveness of industry. If we tell industry how to do their job, we will never be able to take advantage of what they can offer us.

[Translation]

The Chair: Mr. Laurin, you have five minutes.

Mr. René Laurin: Thank you, Mr. Chairman. By the end of 1999, the Department of National Defence must table an action plan for re-engineering its capital acquisition process. Are you aware of this action plan? Has your company played a role in its development? If yes, can you comment on how this acquisition plan addresses the areas that were referred to by the Auditor General?

[English]

Dr. Bernie Grover: I have not heard of a document called the Procurement Action Plan, so I cannot comment on it.

[Translation]

Mr. David Scott: Me neither.

Mr. René Laurin: I will have to ask that question of witnesses who will be here after you. I will now go back to the cross-border trade agreements and NORAD.

In your opinion, are any changes required to these bilateral or international agreements? Is the current process effective enough? Should changes be made to it, and if yes, which ones?

[English]

Mr. David Scott: I'm not sure I can answer that, but I'll try.

From our company's perspective and from a general industry perspective, relationships between Canada and the United States, between Canada and its allies, and between the Department of National Defence and its relationship with the Department of Defense and others in NATO are very important.

I'm not sure I'm in a good position to recommend what changes might occur, but I would suggest that strong evidence of government support for the Department of National Defence in its defined role would significantly assist our Department of National Defence in its relationships with its allies.

Dr. Bernie Grover: Okay. I spent some time in Washington working the Canada-U.S. defence economic relationship. I have watched that relationship formally deteriorate over the years. The difficulty today is that for Canada to attempt to upgrade or revise that would be very difficult because we don't have very many bargaining chips left. We would go in at a disadvantage and we would come away from the negotiations at a disadvantage.

Our defence budgets are small. We have closed part of our defence market to U.S. firms. The U.S. does not like some of the foreign policy stances Canada has taken on things like land mines and nuclear weapons within NATO. So we have a lot of things going against Canada within the U.S.-Canada bilateral arrangement. Now is definitely not the time to reopen any of our bilateral agreements, unless we simply want to have them deteriorate.

• 1655

[Translation]

Mr. René Laurin: Should we conclude that you are in favour of the status quo?

[English]

Dr. Bernie Grover: I would suggest that we maintain the status quo until we are able to go to the table with some indication that we are a bit more serious about paying our fair share in working with the U.S. in the mutual defence of North America and in the mutual promotion of our national security interests.

[Translation]

Mr. René Laurin: Since they are bilateral agreements, there are obviously two partners. Suppose that Canada does not want to amend any provisions of these bilateral agreements, but that the United States wants to make some changes, what aspects of the agreements should Canada stand firm on?

[English]

Dr. Bernie Grover: As most of the agreements now stand, Canada should remain firm on virtually all of them, because it's in Canada's interest to do so. The difficulty is that most of these agreements can be changed unilaterally, if you want, or an agreement can be made null and void by an action taken in some other way. So when the United States' Congress redefined commercial satellites as defence equipment and suddenly made access to that technology subject to licensing and many other things, they effectively changed key aspects of the Canada-U.S. bilateral arrangement, and they did so without any input from Canada and knowing it would hurt Canadian interests.

[Translation]

Mr. René Laurin: In your presentation, you talked about an integrated procurement process. Are you talking about a process whereby a company develops specifications with the Department, as well as specific plans that do not lead to a competitive process, but instead to the development and sharing of the desired objectives with a single company? Is that what you mean?

[English]

Mr. David Scott: That's mine.

No, by “integrated approach”, what I meant was that when we talked about the statement of requirements earlier, my colleague described very well what industry looks for, which is to allow us to be innovative in responding to a statement of requirements. There are always going to be cost and risk trade-offs in a major crown procurement, and industry can play a role with government by indicating where those cost and risk trade-offs might be so that at the end of the day the government can get best value for its dollar by understanding the risks associated with certain requirements or the implementation of certain requirements.

When I indicated “integrated process”, it's the consultation and involvement of the Canadian defence industry—through its associations as well as individual companies—with the Department of National Defence, so the department has the best understanding it can before it releases the statement of requirements as to what those trade-offs might be.

I might say, from our company's experience, the department does that very well. It does work collaboratively with industry to shape those requirements. They're not always perfect, but those procurements are complex by their very nature, so it's difficult to be perfect. But they do work well with industry in trying to look at those trade-offs.

The Chair: Thank you, Mr. Laurin.

Mr. Clouthier, then Mr. Peric and Mr. Pratt.

Mr. Hec Clouthier: Thank you very much, Mr. Chair.

Mr. Scott, I'm very similar in one regard to my colleague Mr. Earle. I try to be a peaceable person, but as my father is French and, as the chair knows, my mother is pure Irish, sometimes it's a volatile mixture, and we don't mind getting into a little scrap. So here I go.

• 1700

I don't want to get into an internecine battle, especially with the big guys. To the big guy over here from the riding of Calgary Northeast, I didn't know that some of your business was located in his riding. If you ever want to move to another riding, mine is available, Renfrew—Nipissing—Pembroke. It's close to the Petawawa base. The honourable member knows it very well.

Mr. Art Hanger: You need all the help you can get.

Mr. Hec Clouthier: I have the floor. Is that right, Mr. Chair?

The Chair: Yes.

Mr. Hec Clouthier: Mr. Scott, my question to you is, considering the fact that you do spend a lot of money and in some instances do not actually get the job, so to speak.... You mentioned offshore. What percentage of your income would be offshore?

Mr. David Scott: The answer to that, sir, will depend on any particular year. On average in the last decade about half of our business has come from outside of Canada. About half is from the United States and half from the rest of the world. However, there have been times when 90% of our business came from outside of Canada. When we look forward to the next three to four years, we expect that only a third of our business will come from Canada. We're probably looking at over 65% in export business.

Mr. Hec Clouthier: Thank you very much.

Dr. Grover, I agree with you that our defence money should be tied to the GDP.

But something is interesting, and perhaps you can fill me in on it. We have 60,000 troops, give or take a few, and we have about 4,500 in theatre. Compared with the percentage of troops from other countries throughout the world, what percentage of our troops would be involved in peacekeeping duties or whatever? We're between 7% and 8%. Would you know offhand? I don't know what it is compared with the United States, Britain, or anyone else. As we speak, what percentage of their overall troops would be engaged in peacekeeping missions around the world? Do you know?

Dr. Bernie Grover: The one good thing the Secretary of Defense said about Canada in his report to Congress back in March was that Canada led all of the countries he looked at in the proportion of troops earmarked for peacekeeping and United Nations duty. So percentage-wise we lead the allies in the proportion of our troops.

Mr. Hec Clouthier: Is there a benchmark, Dr. Grover? We keep hearing that our troops are stretched and we can't send any more. Maybe I'm not too bright in this regard, but I'm thinking we have 60,000 troops overall and we have 4,500.... I'm all for increasing the number of troops and the budget, but I'm thinking, is there a magic percentile figure you shouldn't go over? I don't know.

Dr. Bernie Grover: No, I don't think you'll find any agreement on a magic number.

One of the difficulties is that we tend to select from the same group of troops, if you want, for a lot of these operations.

Mr. Hec Clouthier: I hear it all the time.

Dr. Bernie Grover: In Petawawa, for example, you see the same people going again and again and again, because out of the 60,000, the actual number of infantry or combat armed soldiers is relatively small.

Mr. Hec Clouthier: To be candid with you, Doctor, unless the troops are married, in many instances they want to go, at least the people I'm talking to, the younger troops. When they're married and have small children, maybe they don't want to go on two or three missions in a row. But in other instances they want to go because they get more money.

Dr. Bernie Grover: Yes, but on the other hand—I don't have the numbers to back this up—I would suggest that given the professional volunteer force we have and the relatively high compulsory retirement age, we have one of the older military forces around. So, yes, you have a number of young folks who join the army to get out there and do their thing, but once they're married and settled down with a couple of children and they've already been there as a single person three, four, or five times, it becomes more difficult.

Mr. Hec Clouthier: I have one additional short question. This is something that's perhaps completely irrelevant to today's proceedings, but you did mention that you have had quite an eclectic military career that involved the three services of army, navy, and air force. What are your thoughts on the separation of the forces?

• 1705

The Chair: We'll need another series of meetings for that.

Mr. Hec Clouthier: But you would know because you were in all three.

The Chair: Give him a “good” or “bad” response. We'll give him a one-word answer.

Dr. Bernie Grover: I was actually in the Canadian Forces Medical Service, which was integrated before integration, so I've been twice around the buoy with integration.

I think integration is a great idea. It allowed me to do all kinds of wonderful things I could not have done in the past. It gives a flexibility to the forces that a lot of other forces don't have, such as the very fact that cooks can go to sea, jump out of airplanes, and do all kinds of wonderful things because they're not tied to a particular service. The bottom line is it's a great idea, and let's keep it.

Mr. Hec Clouthier: Mr. Scott, we'll talk afterwards.

The Chair: Mr. Peric, Mr. Clouthier left you a minute here.

Mr. Janko Peric: Thank you, Mr. Chair.

Dr. Grover, you mentioned that Canada is placed 21st. Who's below Canada?

Dr. Bernie Grover: If you look at the larger group and you go outside of NATO, there are two countries below Canada. One is Luxembourg, but, as I mentioned, Luxembourg is so small it doesn't count. The other one is Japan. Japan is limited by its constitution not to spend more than 1% of GDP on defence. However, I would argue that if you look closely at Japan, you'll see they have other ways of spending defence-like dollars on organizations and whatnot that could be construed to be defence. But the two countries that are below Canada are Japan and Luxembourg.

Mr. Janko Peric: Are the newest members of NATO better off than Canada?

Dr. Bernie Grover: In terms of their ability to pay. They pay more of a share.

Mr. Janko Peric: That's surprising news.

We can compare our economy with theirs, let's say Hungary or Poland, and we know what the economic situation is over there. Maybe they should rethink, or their membership was too soon.

Our role is different from that of our southern neighbours.

But there is no question that we should increase the budget now, and it's up to the minister, with support from this committee for the next federal budget. Where is the most urgent need for an increase in the budget?

Dr. Bernie Grover: DND needs money for certain types of new equipment and to maintain the newer equipment they have. They don't have sufficient funds to maintain, for example, the new frigates at the level at which they should be maintained.

Mr. Janko Peric: That's for maintenance.

You mentioned new equipment. If they purchase new equipment, how many years is that new equipment going to be sufficient?

Dr. Bernie Grover: As my friend was saying, equipment tends to last much longer. The secret is to buy a platform with a long life expectancy and continue to upgrade it. The United States will have aircraft flying for 50 years.

The Chair: Thank you, Mr. Peric.

Now we'll turn to Mr. Earle for five minutes.

Mr. Gordon Earle: Thank you.

First I have a question for Dr. Grover, and then if we have time, I have a quick question for Mr. Scott.

Dr. Grover, I want to come back to Canada-U.S. defence relations. You mentioned that it's in Canada's best interest to maintain a very close defence relationship with the U.S. As we talked a bit farther, it was mentioned that sometimes these relationships are changed unilaterally by certain actions that are taken by one side or the other. It comes to my mind that most of the changes have come about through action taken by the U.S., for example, when they refused to allow us to launch the satellite because of some security concerns they had and the changing of the special status Canada enjoyed in terms of trade.

• 1710

I guess I would like to hear a little more as to why you feel it's in Canada's best interests to maintain this. You yourself mentioned that some of the things we've done, like our position on land mines and so forth, are things that would perhaps not put us in a favourable light with the U.S., but to me those are things we can be proud of. At what cost do we maintain this kind of close relationship? When do we give up things that are of value to us in order to create that business climate?

Dr. Bernie Grover: There's one thing that disappointed me an awful lot when the United States changed its laws and rules, deemed commercial satellites to be defence satellites, and changed Canada's access to the U.S. market. The U.S. document that was going around town went over to the Pentagon, and the Undersecretary of Defense for Policy in the Pentagon signed off that he agreed with it, without Canada even being made aware that the policy document was going over to the Pentagon. That should never have happened. We used to have the ability in Washington to monitor things like that and to intervene to ensure that either they didn't get signed or that at least Canada's case would be heard.

There are a number of reasons for why we should maintain this close relationship. One of them is access to U.S. technology. RADARSAT is essentially the future of Canada's commercial space program. As I understand it, it can't operate without U.S. technology, unless you want to go back and spend hundreds of millions of dollars to redevelop it from scratch. So we have a number of cases in which we need access to the technology.

It's an excellent market. It's the largest defence market in the world, and it will remain the largest defence market. If you can break into that market and stay there, it's a lucrative market as well. Plus, it's very nice to be on very good terms with the world's only superpower.

The Chair: Especially when they live next door to you.

Dr. Bernie Grover: Yes, when they live next door to you both to the south and to your northwest.

So they have the largest defence budget in the world. They're our neighbours. They share our continent. They have technology that we need access to. Can we annoy them by taking a special stand at times? Yes. You pick your battles, but I'm not sure we've picked the right ones recently.

Mr. Gordon Earle: Mr. Scott, you mention in your presentation that:

The Government wants to acquire an operational capability within budget and an envelope of manageable risk. Industry can best delivery against these criteria when the associated parameters are clearly identified against a defined time line.

That's the phrase I want to focus on, because one of the concerns with respect to this whole issue of procurement has been the time involved from point A to point Z in terms of completing something. The maritime helicopter project is a very key example of this.

What's your view on that, because someone mentioned—perhaps it was Dr. Grover—that DND has actively been reforming its processes? Do you feel we're now at a point when this defined timeline is manageable, or are there still problems on that score from your perspective?

Mr. David Scott: It's never going to be good enough, because industry would like to have everything all at one time, right? We'd all like to know the results. It's an imperfect world, and the Department of National Defence is probably as good as any agency when compared to the U.S. Department of Defense or the Ministry of Defence in Britain—if I can use those two examples—in terms of outlining their requirements and getting it in a timely fashion. On the other hand, if we look at the maritime helicopter program from its original process going back into, I guess, the late seventies or early eighties, it has been a long time coming. That's a cost to industry, because the technology has to be supported. It could be improved.

I think the best thing that could happen would be blocks of time. Within a block of time, it could be agreed that a program would happen or would not happen. No one is trying to tie down the government to a particular quarter, month, or even year. But if someone said that we're going to do this in the next five years, and that person could then be held accountable to that timeline, that would be a benefit.

• 1715

Mr. Gordon Earle: Thank you.

The Chair: Thank you, Mr. Earle.

At this point, the chairman actually gets to ask a couple of questions, and I'd like to do that. I've enjoyed my colleagues' questions and your presentations.

Mr. Hanger noted his recent trip to Australia. Two weeks ago, I had a fairly long and very interesting meeting with the Australian defence minister and several of his staff. He was very effusive—that's the word I would use—in expressing his gratitude, I suppose, to me as chair of the committee, but to Canada. Our participation in Timor was his purpose for coming to Canada. Consistently, we hear how vital Canada's participation is.

I'll address this to you, Dr. Grover. Given the realities you've expressed that none of us like, why do you think the participation we do make is so highly valued by these nations, by our allies?

Dr. Bernie Grover: I think it reflects the professionalism, the experience, and the capability of the military people that we send on these missions. As an instrument of foreign policy, Canada gets incredible mileage out of its limited Canadian Forces. If you go into the NATO organization, the committees we're on and the positions we have are all out of proportion to the size of our contribution.

The Chair: I hope I hear you saying that our people are the best in the world at this task.

Dr. Bernie Grover: There is no question in my mind about that.

The Chair: Thank you.

To Mr. Scott, you're in the defence industry business, so what's your view of public opinion as it relates to spending more money at this point in time on the defence budget in Canada? I wouldn't mind hearing from Dr. Grover on this too.

Mr. David Scott: What I'd offer you is a personal view, obviously.

The Chair: With respect, I imagine I know what your personal view is, but do you interact with the public? Do you have any sense of what the public's view is? That's who calls my office and Art Hanger's office and Gordon Earle's office.

Mr. David Scott: I think there's a general lack of understanding of the role that the Department of National Defence is called upon to play with the general public. For a variety of reasons, the image of the department has suffered in the last few years in the public domain. I think the good news is masked by some of the unique and not representative things that might have gone on in the last few years, and I think that has coloured the view of the department. But I think there's a public acceptance of a need for Canada to sustain its military with proper equipment and resources, and that's positive.

We have over a thousand employees. We deal a lot with our communities. They're not all defence hawks. I think the general view is that if you're going to have a military and define its role, then you're expected to support them in terms of equipment, resources, and budget.

The Chair: Thank you.

Dr. Grover, what do you think the public feels about reinvesting in the military?

Dr. Bernie Grover: I would suggest that the public feels that the Government of Canada has let the military down at this point.

The Chair: Yes, I would agree with that, with one change. I'd pluralize “government” to “governments”, because it doesn't seem to matter what its political stripe is. Aside from our political views and the points we try to make—you can be on either side of the table here very easily—the fact is that we had 11 straight years of cuts to the defence budget by two different governments. So I share that. I hear it all the time from people in my riding, and throughout the country now that I'm on this committee. I think the mood is very positive amongst the public at large to reinvest in military. That's a point a number of us are trying to make with the appropriate people in order to help to increase the defence budget.

I'll ask my last question and then see if there are other questions.

To you, Dr. Grover, with the 22 current missions and a troop level of 60,000, what do you think it should be, given that number of missions?

Dr. Bernie Grover: I cannot speak authoritatively on that, but I would suggest another 10,000 troops in order to provide for rotation troops and for training, and to take the burden off the people who are spending as much time out of the country as they are today.

The Chair: So 70,000 would be a better number for the missions we're involved with now.

• 1720

Thank you very much for that.

Mr. David Pratt: I have a follow-up to your question, Mr. Chair.

The Chair: Just briefly, Mr. Pratt, and then I'll go to Mr. Hanger.

Mr. David Pratt: In your view, would that additional 10,000 give us the ability to sustain a force abroad of about a brigade or a little bit more than that? Or does that provide us with greater capability in terms of overseas commitments?

Dr. Bernie Grover: We have not been able to sustain a brigade overseas for quite some time. We sustained a brigade overseas in Germany under static conditions. As I understand it, we would not have been able to field a brigade for the Gulf War, for example. If you're going to field a brigade, that's one thing. If you're going to have 22 various-sized missions, that's another thing. You're not going to have them both at the same time.

Mr. David Pratt: Okay.

The Chair: Thank you, Mr. Pratt.

We have a few minutes for individual, short questions. Mr. Hanger, did you have maybe one question?

Mr. Art Hanger: I just wanted to make reference again to my Australian trip. One of the reasons for why I wanted to go there was to see exactly why Australia, with a population of 18 million people, could field a force of 4,500 and take full charge of that operation. As a country, they are taking charge of the operation themselves.

Certainly there is some assistance in addition to that 4,500. There is some assistance from Canada and others. I got a very good picture of who's compatible and who's not. They have Thailand, Pakistan, and a few other nations involved there. The Australians, the Americans, the Canadians, the Brits, and the New Zealanders have a certain compatibility as far as their militaries are concerned, and that allows them to work very well together and to complement one another. They were very appreciative of Canada being there as a protector, with a supply ship and with those C-130Es running back and forth. I don't know how the helicopters were working, the Sea Kings, but we'll hear that when they get back.

Australia has a capability that surpasses Canada's. Their procurement process seems to be so different. It doesn't seem to be politically tainted. Their military isn't a partisan issue. I don't care what party you're from, the military is the military. When they want to set the standard for some of the requirements they need, basically it's not all tied up into an area of politics. At least, it's less so than in Canada, let's put it that way.

The Chair: Do you have a question?

Mr. Art Hanger: My question is this. How can this process dealing with procurement be taken out of or be removed from the politicization of the whole affair? They are obviously doing something there. Maybe it's a national attitude. I don't know. But it doesn't seem to prevail here. What do you see as—

The Chair: Is that to Dr. Grover?

Mr. David Pratt: To Dr. Grover, yes.

The Chair: Just briefly, if I can hitchhike on it, that's not the impression I got in my discussions. I got the impression that they have their version of an IRB problem in Australia too.

Mr. Art Hanger: We're going to talk about this when we proceed to that.

The Chair: I'd just like to get a clarification on who's correct. What's the answer?

Dr. Bernie Grover: For the first point, if all we were doing was putting together 4,500 troops in Nova Scotia in order to move them across by ship to Newfoundland and we wanted to take charge of it, we could do it. There's nothing particularly unique there. They don't have 21 missions around the world at the same time.

The Chair: Exactly. It's in their backyard.

Dr. Bernie Grover: It's in their backyard. They're deploying from their own home base, so I take exception to the idea that Canada could not do that. I think Canada could do that.

The Chair: Hear, hear.

Dr. Bernie Grover: Australia still has a highly integrated defence procurement/defence industry approach, and you may be more familiar with it. There's a much higher integration, if you want, of industrial development goals and defence procurement goals. They're more clearly articulated than they are here.

Is that fair to say?

The Chair: Mr. Scott, can you help us with that?

• 1725

Mr. David Scott: Sure. I'll respond to both points.

The Australian government has laid out very clearly in successive white papers the technologies they view as germane to retaining some Australian sovereignty over technology. In those industries they work very closely between the Department of Defence and their aerospace and defence companies.

With respect to politicization, I have a couple of observations. In our dealings with Australia—and we're just finishing up a program for the Australian Air Force—there is AII, it's called, Australian industrial involvement. It is as demanding as anything we've seen in Canada for industrial regional benefits.

A voice: Hear, hear.

Mr. David Scott: The states within Australia compete mightily for investment dollars, and that includes defence dollars. I would say it's a fairly politicized environment to be in. We have to satisfy in-country requirements whenever we do business in Australia, even for relatively small amounts.

I'd also say that with our experience in the U.S., Canada enjoys a fairly unpoliticized procurement process within the Department of National Defence when I contrast it to what happens in Congress. As a company, we only hope that remains the case.

The Chair: Thank you, gentlemen.

The Australian minister pointed out to me that obviously they should step up. It's their backyard. I didn't know this, but it was the first time they've led, according to him, so I guess it would be obvious that they would. Having said that, I agree with Mr. Hanger: they should get credit for doing it.

The last question goes to Mr. Pratt.

Mr. David Pratt: Thank you, Mr. Chair. Perhaps I could ask a couple of questions to both our witnesses, and if they feel like responding on either count, they can.

First of all, it's probably no coincidence that Canada has one of the largest deployments of Canadian Forces in recent times, coinciding with our term on the Security Council and our involvement at the UN. That seems to also coincide with Minister Axworthy's promotion of what has been described as the human security agenda.

Do you see Canada's international involvements increasing over the next few years on the basis of the promotion of the human security agenda—that is, the protection of civilians in armed conflict, as we've seem in places such as East Timor, Kosovo, etc.? That follows up on my question in relation to the white paper.

The other question I have is probably more directed at Mr. Scott. On the issue of the RMA, your company is involved very clearly in what could be described as RMA-type activities, with respect to the use of technology, changing military doctrine, etc. In the big scope of things, in the big picture in terms of where the world is moving, where does Canada fit in on the RMA? Are we out of the game completely, or are we just hanging on by our fingernails?

The Chair: Speaking of the game analogy, we're in overtime, so I'm going to ask for brief answers, and then Mrs. Longfield is going to ask one short question too.

Gentlemen.

Dr. Bernie Grover: On the first issue, I foresee an absolutely incredible menu of opportunities to pick and choose from in terms of intervening in East Timor types of operations. It will depend entirely upon the extent to which the government of the day wants to become involved, but there will be no lack of opportunities.

Mr. David Scott: On the question about the revolution in military affairs and the corresponding revolution in business affairs, no, I don't think Canada is out of the game at all. A number of things that have been initiated by the Department of National Defence in cooperation with industry are all keeping us in the game. We just need to continue to have an identifiable thread forward that says, “This is our plan. This is what we want our department to do.” And we need to understand there are costs associated with it.

So long as the resources and the budgets are there, we're going to continue to be in the game.

The Chair: Thank you very much.

The very last question goes to Mrs. Longfield.

Mrs. Judi Longfield (Whitby—Ajax, Lib.): Given that we have small budgets, given that we excel at what we do, and given that we live next to a superpower, and also taking into consideration that it's been proven time and time again how well and how easily we integrate with other forces, should we be looking at perhaps picking a couple of areas or looking at things we do well and perhaps abandoning some of the other traditional areas we've been trying to cover?

• 1730

Dr. Bernie Grover: That is a white paper deliberation issue—

Mrs. Judi Longfield: I appreciate that, but I'm asking—

Dr. Bernie Grover: —a very real one.

There's a simple choice. We can pretend that we can do everything everywhere under all conditions and go through the charade of that, or we can truly fund some narrow area. I think there would be some dangers in identifying that narrow area, because one of the things you find with all these peacekeeping or peacemaking operations is that they are war-like operations. There are not these nice categories that this is war, this is peacekeeping, and this is peacemaking. They are conditions other than war but with many of the attributes of war, and as soon as you start eliminating key parts of your defence capability, then you start eliminating your ability to play in that environment.

Mrs. Judi Longfield: Can we not have the capability to play without having all the tools, without having all the toys? Is there a way?

The Chair: Are you saying to play a more restricted game?

Mr. David Scott: I would suggest that Canada already enjoys some of that through its relationship with its NATO partners, particularly the United States, where there are assets and intelligence shared that Canada on its own currently could not afford.

The Chair: Thank you very much.

Mr. Scott and Dr. Grover, I want to thank both of you very much for being here today, for the interesting testimony you have given us, and for your very thoughtful answers to these questions. That helps our work quite a bit. Thank you.

The committee is adjourned until Thursday morning at 9 a.m. sharp, please, with Minister Baker.