Standing Committee on National Defence: November 28, 2024

Defence Policy update

Date: November 28, 2024

Time: 8:15 to 10:15 am ET

Location: In person

On this page

• Opening statement
• Defence procurement review
• Future Fighter Capability Project
• National Shipbuilding Strategy
• Canadian Multi Mission Aircraft Project
• Arctic and offshore patrol ships costs
• Canadian Patrol Submarine Project Request for Information
• Long-term sustainment of Canada’s Leopard 2 family of vehicles
• Controlled goods exemptions for individuals from sanctioned countries
• Government response to the Standing Committee on National Defence Twelfth Report
• Standing Committee on National Defence report on defence procurement
• Procurement Review in Canada's defence policy
• Personal information and cyber security
• Office of Supplier Integrity and Compliance

Opening statement

By The Honourable Jean-Yves Duclos Minister of Public Services and Procurement
Standing Committee on National Defence
November 28, 2024
(Word count: 661)

Opening

Good afternoon, Mr. Chair.

Let me begin by acknowledging that we are gathered on the unceded territory of the Algonquin Anishinaabeg peoples.

With me today are:

• Simon Page, Assistant Deputy Minister for Defence & Marine Procurement Branch, and
• Siobhan Harty, Assistant Deputy Minister for Defence Procurement Review Branch

I am pleased to appear before you today to participate in the committee’s important work.

Before taking your questions, I will outline the role of my department Public Services and Procurement Canada (PSPC) with respect to defence procurement as well as the current and ongoing work to improve procurement processes.

PSPC supports federal departments and agencies in their daily operations by serving as their central purchasing agent, common service provider, linguistic authority and a number of other roles.

Defence procurement

With respect to defence procurement, PSPC acquires defence and marine goods and services for the Canadian Armed Forces (CAF) and the Department of National Defence, the Canadian Coast Guard and other federal organizations, including Public Safety Canada.

The top priority at PSPC when it comes to defence procurement is always to ensure that members of the Canadian Armed Forces have the equipment they need to successfully protect Canadians and meet international obligations.

But an increasingly volatile global security environment, coupled with more frequent and damaging climate emergencies at home and abroad, demands a faster and more flexible approach to procurement.

Defence procurement review

Earlier this year our government announced the defence policy update: Our North, Strong and Free: A Renewed Vision for Canada’s Defence.

This updated defence policy is accompanied by an additional investment of 8.1 billion dollars over 5 years and 73 billion dollars over 20 years in defence spending.

It also reaffirms our commitment to reviewing Canada’s defence procurement system.

We know that defence procurement can take too long and be an arduous process. We have to be more nimble and efficient.

We have to think differently about defence procurement and in the review we’re asking questions at every stage of the process – from how the Department of National Defence sets requirements right up to how quickly we can deliver new equipment while running open, fair and transparent competitive processes whenever possible.

With that in mind, my department, PSPC, along with National Defence, Innovation, Science and Economic Development Canada and the Treasury Board of Canada Secretariat, are advancing several important streams of work.

We’re reviewing the rules and regulations that govern military procurement, as well as the internal processes used to define requirements and approve projects.

We’re looking for ways to compress timelines for major government acquisitions without sacrificing due diligence, and we are working with our industry partners to change the way we consult with defence industry, to adopt a more strategic approach.

We also want to get smarter about how we invest in innovation, and how we acquire and integrate Canada’s innovations into CAF capabilities.

Of course we will always support Canadian industry to be more globally competitive as new opportunities emerge in a rapidly changing defence market.

And we’re going to collaborate more closely with our allies on how we define requirements, how we develop new equipment and systems that support interoperability and strengthen our shared defence, and how we procure them.

My team at PSPC is currently working with other departments and agencies to review and reform our defence procurement processes so that we can better achieve these goals, and I look forward to being able to announce changes in the months to come.

In the meantime, we continue to advance key defence procurements on a number of fronts and as efficiently as possible.

Closing

Mr. Chair, the work we’re doing to speed up the acquisition of capabilities will help Canada meet evolving threats.

As we ask more and more of our armed forces, we are focussed on making sure they have all that they need to keep Canada safe and secure.

Thank you, and I look forward to working with this Committee.

Defence procurement review

Issue

To support the government’s commitments in Our North, Strong and Free, the government has launched a review of Canada’s defence procurement system.

Notes

• Questions on specific defence projects and capabilities should be directed to the Minister of National Defence
  • Questions related to economic benefits and Canada’s defence industry should be directed to the Minister Innovation, Science and Industry

Key facts

• In April 2024, the government released its defence policy update, Our North Strong and Free which, among other things, laid out its forward plan regarding defence procurement and included a commitment of $8.1 billion over 5 years for the Canadian Armed Forces

Key messages

• In spring 2024, the government committed to an ambitious defence policy that responds to the rapidly changing international environment and takes measures to protect our Arctic sovereignty
• We are committed to ensuring that the Canadian Armed Forces (CAF) have the people, equipment, training and infrastructure needed to detect, deter and defeat threats to Canada’s sovereignty
• That is why I launched a review of our defence procurement system – so that we can be nimble and responsive while remaining open, fair and transparent

If pressed on the elements of the review:

• The review will propose a range of initiatives that could include measures to clarify procurement rules, streamline processes and develop innovative approaches to defence procurement
• The changes being contemplated are aimed at compressing procurement timelines, thereby reducing the operational and financial risks caused by procurement delays
• The review will bring forward recommendations on how Canada can move away from transactional approaches to procurement and build sustained strategic partnerships with industry

If pressed on when the government will announce the results of the defence procurement review:

• My officials have been actively engaging with defence procurement stakeholders across the federal government, in our domestic defence industries and with key allies and partners
• We are committed to making ongoing changes and I look forward to being able to announce these, along with my colleagues the Minister of National Defence and the Minister of Industry, Science and Innovation, in due course

Background

In Our North, Strong and Free the government committed to a number of procurement initiatives, including:

• A review of the rules that govern military procurement
• Compression of major acquisition timelines
• Collaborative development of new capabilities with our allies and partners, and
• Changing the government’s approach to working with industry to one of sustained strategic partnerships founded on transparency and trust

Future Fighter Capability Project

Issue

In December 2017, the Government of Canada launched an open and transparent competition to permanently replace Canada’s fighter fleet with 88 advanced jets—the Future Fighter Capability Project.

Note

• All questions related to capability, technical issues, deliveries and requirements, as well as questions related to in-service support costs, including the complete life-cycle costs, should be answered by the Minister of National Defence
• All questions related to the Industrial and Technological Benefits Policy and Canadian Industry’s participation on the Joint Strike Fighter Program should be answered by the Minister of Innovation, Science and Economic Development
• All questions related to trade issues should be answered by the Minister of Foreign Affairs

Key facts

• This is the largest investment in the Royal Canadian Air Force (RCAF) in the past 30 years and the estimated investment for this project remains at $19 billion, which includes associated equipment, initial weapons and ammunition, sustainment set-up and services, as well as the construction of fighter squadron facilities in Bagotville, Quebec and Cold Lake, Alberta

Key messages

• The government is committed to ensuring that members of the CAF have the equipment they need to do their jobs and protect Canadians, while also ensuring the best value for Canadians. We delivered on our promise to launch an open, fair and transparent competitive process to replace Canada's fighter fleet with 88 advanced fighter jets
• The new fleet of F-35 jets will deliver the best fighter capability for our country with an optimal solution in terms of capability, price and economic benefits for Canadians and its acquisition will drive significant work for Canadian industry over a 25-year period
• Working with the United States Government as well as with its commercial partners, Lockheed Martin and Pratt and Whitney, Canada is currently planning for the sustainment of its fleet of F-35. Canadian industry is expected to have significant sustainment opportunities in areas such as airframe and engine depots, as well as in training and maintenance of components over the life of the fleet

If pressed on delays related to F-35 Block 4 issues:

• This question is best answered by my Department of National Defence colleague

If pressed on Canadian industry opportunities:

• The approach to select engine and airframe maintenance depots in Canada is under analysis by the Future Fighter Capability Project team

Background

As part of its defence policy, Our North, Strong and Free: A Renewed Vision for Canada’s Defence, the Government of Canada has renewed its commitment to procure 88 advanced fighter jets for the RCAF.

An independent fairness monitor oversaw the entire competitive process to ensure a level playing field for all bidders. An independent third-party reviewer was also engaged to assess the quality and effectiveness of the procurement approach.

On January 9, 2023, the Government of Canada announced that following an open, fair and transparent competition, Canada had finalized an agreement with the United States government and Lockheed Martin with Pratt & Whitney for the acquisition of F-35 fighter jets for the RCAF.

National Shipbuilding Strategy

Issue

The National Shipbuilding Strategy is a long-term commitment to renew the vessel fleets of the Royal Canadian Navy (RCN) and Canadian Coast Guard, create a sustainable marine sector, and generate economic benefits for Canadians.

Notes:

• Questions on budget, requirements, timelines, international comparisons, and project management should be directed to the Minister of Fisheries and Oceans and the Canadian Coast Guard or the Minister of National Defence
• Questions related to Canadian sanctions against Russia should be directed to the Minister of Foreign Affairs

Key facts

• As of December 31, 2023, we have awarded approximately $26.5 billion in contracts under the National Shipbuilding Strategy to businesses across the country and, of these, $1.36 billion went to small and medium businesses with less than 250 employees
• National Shipbuilding Strategy contracts awarded since 2012 are estimated to have contributed close to $30 billion ($2.3 billion annually) to Canada’s gross domestic product and to have created or maintained approximately 20,400 jobs annually
• The Icebreaker Collaboration Effort (ICE) Pact, announced in July 2024 between Canada, Finland, and the United States, aims at improving the collaboration on building polar icebreakers and tackling common technological and operational challenges in the Arctic. A Memorandum of Understanding is being drafted to outline the roles, responsibilities, and contributions of each country, reinforcing their commitment to enhancing Arctic operations and security

Key messages

• The National Shipbuilding Strategy is about Canadians and Canadian businesses working together to strengthen and renew our Naval and Coast Guard fleets
  • So far, 8 large vessels and numerous small ships have been delivered, and many more are under construction across Canada
  • We will continue working closely with industry to manage costs and schedules, and ensure the best value is provided to Canadians throughout the duration of these projects

If pressed on the amount of contracts awarded to Chantier Davie Canada Inc.:

• From 2012 to 2023, Chantier Davie was awarded approximately $2.89 billion in contracts, or 10.86% of the value of all National Shipbuilding Strategy contracts awarded across the country, of which approximately $1.99 billion was for repair, refit and maintenance activities

If pressed on the increase in the budget for the joint support ship project:

• With large-scale, long-duration procurement projects like the joint support ship, all project values are best estimates that are based on the data and figures available at the time and can change over the lifespan of the project. Cost projection changes are expected, as the cost of both materials and labour evolve over the years
• In June 2024, the project obtained additional build contract authorities to complete the remaining construction and related work for both joint support ships
• The increased contract value was calculated by considering a number of factors, such as lessons learned from developing a new type of warship for the RCN, COVID-19 impacts that resulted in labour and supply chain disruptions, economic price adjustments, foreign exchange rate fluctuations, and changes in labour rates

If pressed on contract amounts:

• The National Shipbuilding Strategy is a long-term investment that is delivering results now: ships for the RCN and the Canadian Coast Guard and jobs and economic growth for Canada
  • Across the country, opportunities exist for Canadian shipyards and businesses to win contracts for vessel construction, repair, refit and maintenance

If pressed on economic benefits:

• The National Shipbuilding Strategy is generating economic benefits
  • In 2023 alone, the Government of Canada awarded approximately $1.88 billion in new contracts to Canadian companies under the strategy, including approximately $238.1 million to small and medium businesses with fewer than 250 full-time employees
  • Contracts awarded in 2023 are estimated to contribute approximately $1.2 billion ($625 million annually) to Canada’s gross domestic product, and will create or maintain close to 5,600 jobs annually during 2023 and 2024

If pressed on the polar icebreakers:

• On May 6, 2021, the Government of Canada announced its intention to move forward with the construction of 2 polar icebreakers for the Canadian Coast Guard
• Vancouver Shipyards will engineer and construct one polar icebreaker while the other vessel will be engineered and constructed by Chantier Davie
• At Vancouver Shipyards, conception work on a polar icebreaker is advancing as part of the construction engineering and long-lead items contracts awarded in December 2022
• On September 9, 2024, the Government of Canada awarded a $16.47-million (including taxes) ancillary contract to Chantier Davie to advance work on a polar icebreaker

If pressed on the program icebreakers:

• On March 26, 2024, the Government of Canada announced that it has awarded a $19.6 million (including taxes) ancillary contract to Chantier Davie of Lévis, Quebec to initiate design activities for the program icebreakers
• The new program icebreakers will replace the Canadian Coast Guard’s heavy and medium icebreakers that operate in Atlantic Canada and the St. Lawrence waterways during the winter and in the Arctic during the summer
• This contract is expected to create and sustain approximately 35 jobs annually

If pressed on the Canadian International Trade Tribunal and federal court challenges to the award of the Canadian Coast Guard Ship (CCGS) Terry Fox vessel life extension contract:

• The Government of Canada recognizes the decision of the Canadian International Trade Tribunal
• The Tribunal asked that the parties make best efforts to negotiate and report back to it by November 21, 2023, on the outcome of discussions regarding a compensation settlement amount
• The parties reported back to the Tribunal that they were unable to reach an agreement, and subsequently filed submissions supporting their respective proposals. The Tribunal reserved jurisdiction in this matter and provided a ruling on the settlement amount
• On August 19, 2024, the Tribunal issued its Order and Public Reasons on the final settlement amount of $5,426,954, which represents the amount of compensation for lost opportunity to profit ($4,022,254), reasonable bid preparation costs ($1,400,000) and the amount of reasonable costs incurred preparing and proceeding with the complaint ($4,700)
• Payment instructions have been requested from the complainant and finalization of the payment is planned for end of October 2024
• The contract award remains with Ontario Shipyards (formerly Heddle Shipyards) and work continues in support of the Canadian Coast Guard’s mandate

If pressed on the Canadian surface combatant project:

• On June 28, 2024, the Government of Canada marked the start of construction activities on the production test module for Canada’s new Canadian surface combatant fleet
• The test module will allow the shipyard to develop and test project-specific build processes and establish new supply chains, as well as reduce costs by applying lessons learned to achieve efficiencies ahead of building the full ship
• As part of the definition contract, the Canadian surface combatant project is presently in the third of four design stages, functional design
• The Government of Canada, in collaboration with its partners, is actively developing the Canadian surface combatant implementation contract, which will define the terms and conditions for the construction and acceptance of the first batch of Canadian surface combatants

If pressed on the Government of Canada funding infrastructure enhancements at Irving Shipbuilding:

• On August 8, 2023, the Government of Canada announced an investment of $463 million (including taxes) for the first phase of infrastructure enhancements at Irving Shipbuilding
• This funding is part of a larger commitment of $871.7 million (including taxes) for all phases of infrastructure enhancements, provided to Irving Shipbuilding to ensure that they have the capability to construct the Canadian surface combatant design at a rate that will meet the needs of the RCN
• The investment will enable the production and delivery of the Canadian surface combatant ships at the pace required to replace the ageing Halifax-class ships and meet the needs of the RCN while delivering the best value for Canadians
• The infrastructure enhancements were identified during the design phase and adopt specific accommodations identified by Australia and the United Kingdom in the construction of their ships that are based on the same design

Background

The National Shipbuilding Strategy is a long-term plan to renew the RCN and Canadian Coast Guard fleets. It aims to eliminate the boom and bust cycles of vessel procurement that have slowed Canadian shipbuilding in the past.

In 2011, following a competitive, fair, open and transparent process, the government established long-term strategic relationships for the construction of large vessels with 2 Canadian shipyards: Irving Shipbuilding in Halifax, Nova Scotia, for the construction of combat vessels, and Vancouver Shipyards in British Columbia for the construction of non-combat vessels.

Following successful negotiations, the Government of Canada signed an Umbrella Agreement on April 4, 2023 with Chantier Davie. Chantier Davie will build a polar icebreaker and program icebreakers for the Canadian Coast Guard, and Ferries for Transport Canada.

All Canadian shipyards across the country, except the three strategic shipyards, can compete to win contracts for small vessel construction, whereas all Canadian shipyards can compete for repair, refit and maintenance contracts.

Original budgets for large vessel construction projects were set many years ago and were guided by limited experience and projections. Shipbuilding is highly complex and we continue to build on lessons learned to ensure future project budget and timeline projections are realistic and achievable. We continue to work closely with the shipyards and industry to address ongoing challenges including cost, time estimates and productivity.

The National Shipbuilding Strategy continues to evolve and will be strengthened by the ICE Pact, an enhanced partnership announced in July 2024 between Canada, Finland, and the United States. This collaboration seeks to accelerate polar vessel production, boost the marine industries of all three nations, and enhance technical cooperation and information sharing to meet global demand for icebreakers. For Canada, the ICE Pact presents new opportunities for the shipbuilding sector by leveraging shared expertise and capabilities, while ensuring that Canadian shipyards and supply chains play a key role.

Canadian Multi-Mission Aircraft Project

Issue

Replacement of the CP-140 will support a Canadian Multi-Mission Aircraft capability that is fully operationally ready, interoperable with allies and key partners, and is able to contribute to Canada’s domestic and international commitments by 2030.

Notes

• All questions related to capability and costs should be answered by the Minister of National Defence
• All questions related to industrial and technological benefits should be answered by the Minister of Innovation, Science and Economic Development

Key facts

• On July 14, 2023, Canada received an offer from the United States Government, in the form of a Letter of Offer and Acceptance, for 14 P-8A aircraft with an option for 2 additional aircraft, and associated equipment and services (including initial sustainment for up to three years)
• The offer was accepted on November 28, 2023, and Canada anticipates delivery of the first aircraft as early as 2026

Key messages

• PSPC continues to support Canada’s armed forces through the acquisition and replacement of defence goods and services
• The P-8A Poseidon is the only readily available military off-the-shelf capability that meets the Canadian Multi-Mission Aircraft (CMMA) requirements and allows the replacement of the CP-140 Aurora by 2030
• On November 28, 2023, Canada accepted an offer from the United States Government for the acquisition of 14 P-8A and has the option to obtain up to two more aircrafts

If pressed on Boeing’s technical challenges with its 737 MAX aircraft and its recent agreement to plead guilty to criminal fraud following fatal crashes in 2018 and 2019:

• The P-8A Poseidon acquired from the United States Government is a military aircraft based on the 737 Next-Generation (737 NG), and not the newer commercial 737 Max 9s which is the subject of the technical challenges and guilty plea agreement
• The P-8A assembly follows a different production and integration process and will be subject to rigorous inspections from the United States Government prior to its delivery to Canada
• Canada continues to closely monitor the situation and its potential impact on the quality and delivery of the P-8A Poseidon to Canada

If pressed on the ongoing machinists strike at Boeing that began on September 13, 2024:

• As Canada is purchasing the P-8A aircraft through the United States Government (USG), Canada will continue to work closely with the USG to assess the potential impacts of the labour dispute on the CMMA project

Background

The aim of the CMMA project is to replace the CP-140 Aurora fleet with a new fleet that will provide long-range, long-endurance and multi-mission capability. The current CP-140 Aurora fleet consists of 14 aircraft which were originally procured in 1980 primarily for maritime patrol and anti-submarine warfare. The estimated life expectancy of the CP-140 Aurora fleet is 2030.

Since its acquisition, the aircraft has been used for a variety of operations at home and abroad including surveillance of Canada’s coastal waters, anti-submarine warfare, maritime and overland intelligence, surveillance, strike coordination, disaster relief missions and many other functions. But, as the CP-140 ages, it is becoming increasingly difficult to support, expensive to sustain, and less operationally relevant in comparison to the threats against which it must defend.

Canada’s defence policy update, Our North, Strong and Free, restated Canada’s need and commitment to acquire new maritime patrol aircraft to modernize its contribution to the North American Aerospace Defence Command (NORAD). The updated policy states that “to continue to meet Canada’s defence needs, the RCAF must increase interoperability with its key partners and core allies”. The acquisition of the P-8A Poseidon aligns with this commitment, as all of Canada’s Five Eyes partners operate the aircraft.

Between June and December 2021, Canada contracted the services of a third-party consultant to assess the CMMA requirements. This multi-phased assessment concluded that the P-8A Poseidon is the only readily available military off-the-shelf capability that meets all of CMMA’s requirements.

PSPC, in collaboration with the Department of National Defence and Innovation, Science and Economic Development Canada, has engaged with industry and Canada’s closest allies to determine the best capability to replace the aging CP-140.

Information obtained by Canada demonstrated that the only solution that meets all of the CMMA requirements within the timeframe required to replace the CP-140 fleet by 2030 and avoid an increased capability gap is the Boeing P-8A Poseidon. It should be noted that the P-8A is also owned and operated by all of Canada’s closest defence partners, with over 160 aircraft currently in service around the world.

On November 24, 2023, the Standing Committee on National Defence submitted a report stating that “the committee is of the opinion that the government must proceed by way of a formal Request for Proposals before awarding any procurement contract of the new Canadian Multi‑Mission Aircraft”. The government response was tabled in the House of Commons April 8, 2024.

Arctic and offshore patrol ships costs

Issue

In December 2023, the Department of National Defence responded to a media inquiry regarding the issues and repairs underway on the Arctic and offshore patrol ships (AOPS). As part of this response, 14 ongoing issues were proactively disclosed. These issues continue to draw media attention.

Key facts

• Under the National Shipbuilding Strategy, the government is delivering a total of 8 AOPS
• 6 AOPS for the RCN will conduct sovereignty and surveillance operations in Canada’s waters, including the Arctic; 5 of these vessels have been delivered, and the remaining vessel is under construction
• 2 AOPS for the Canadian Coast Guard (CCG) will be dedicated to a range of missions, including North Atlantic Fisheries Organization patrols, and will have ice capable functionality that will allow the CCG to expand its patrol capability into the low Arctic
• Construction on the first of the 2 CCG AOPS began on August 8, 2023, and construction on second vessel started on July 31, 2024
• To date, the total warranty cost of the AOPS program is $9.3 million, with the cost and number of warranty issues decreasing significantly on each successive ship

Key messages

• When building the first ship in a class, it is normal and expected that there will be issues identified throughout the building process – including after delivery – that require correction
• The AOPS is the first warship built in Canada in the last 20 years. Much learning has taken place, resulting in a significant reduction in defects encountered on successive ships
• Through testing and use after delivery, the RCN has identified deficiencies in several areas and Canada is working collaboratively with the shipyard to resolve these issues and apply those lessons to improve the quality of our future ships

If pressed on repair costs to fix issues:

• We are aware of the ongoing costs and concerns affecting the AOPS. The majority of the issues raised are either fully resolved or partially resolved with mitigation plans in place. We are working diligently to ensure these concerns are addressed and repairs completed

If pressed on Our North, Strong and Free: A Renewed Vision for Canada’s Defence:

• We stand united in our commitment to the Arctic, an enduring symbol of our nation's resolve and strength. Our North, Strong and Free: A Renewed Vision for Canada's Defence reflects this unwavering dedication, highlighting the critical role of the AOPS in the preservation of our Arctic sovereignty
• These advanced vessels are at the heart of our collective strategy for a contemporary, agile naval force, ready to meet the evolving challenges of the Arctic's dynamic environment and the increasing demands of global security

Background

Recent news articles have noted concerns regarding corrosion, mechanical failure, and severe flooding on AOPS. The government is aware of these ongoing issues and has established a plan to address them.

The technical issues affecting AOPS are being addressed by in-service support contracts for AOPS 1, 2, 3, and 4 which have already been delivered and accepted, and are no longer under warranty. The repair plan for these vessels is underway and costs are not currently available

Canada contracted for shipbuilding warranty periods that are typical for shipbuilding projects. The workmanship warranty period for the AOPS ships is 12 months after delivery. For ships out of the warranty period, the repairs are being conducted under the AOPS and joint support ship in-service support contract. To qualify as a warranty item, deficiencies must be identified prior to the end of the 12-month period post acceptance. The contractor remains responsible to address these issues, even if those repairs are completed after the warranty period.

Canada has worked collaboratively with the shipbuilder, the in-service community and with the members of the RCN to achieve these results.

The AOPS project will deliver 6 vessels to the RCN to conduct sovereignty and surveillance operations in Canada's waters, including the Arctic, as well as a wide variety of operations abroad. The project will also deliver 2 modified AOPS to the CCG to conduct sea-borne surveillance such as fisheries patrols as well as other missions, including emergency response, buoy tending, icebreaking support, and ocean science.

The vessels are able to perform a wide variety of tasks, such as: provide increased presence and conduct surveillance operations throughout Canada’s waters, including in the Arctic; support CAF sovereignty operations; participate in a wide variety of international operations, such as anti-smuggling, anti-piracy or international security and stability; contribute to humanitarian assistance, emergency response and disaster relief domestically or internationally; conduct search and rescue and facilitate communications among other ships; support CAF core missions including capacity building in support of other nations; and support other government departments in their ability to enforce their respective mandates.

Canadian Patrol Submarine Project Request for Information

Issue

PSPC, on behalf of the Department of National Defence (DND), issued a Request for Information (RFI) to industry stakeholders to gain further information on the availability of submarines that are currently in service or in production, and the industry’s capability and capacity to build and deliver up to 12 submarines to Canada.

Key facts

• Respondents provided their initial feedback on November 18, 2024
• 22 responses including 7 from Original Equipment Manufacturers (submarine builders) were received. [Redacted]
• The integrated project team will analyze the responses received with a view to moving to the next stages of the project. In addition to the Request for Information, Canada continues to meet with officials from allied and partner countries, and companies and navies in Europe and Asia that currently have or are in the process of building submarines that may meet Canada’s requirements
• To avoid any gaps in Canadian submarine capabilities, Canada anticipates a contract award by 2028, with the delivery of the first replacement submarine no later than 2035

Key messages

• Canada has the largest coastline in the world, and it is essential that the RCN be equipped with superior underwater surveillance capability to maintain our country’s security and sovereignty
• The Navy’s current Victoria-class submarine fleet is scheduled to be decommissioned in the mid-2030s and replacement submarines are needed
• A RFI was published to obtain further information on the availability of submarines that are currently in service or in production, and industry’s capability and capacity to build and deliver up to 12 submarines to Canada

If pressed on the RFI:

• The RCN requires its first new submarine by the mid-2030s. Starting now, we will inform on the best way to obtain this capability
• Canada is seeking information on the availability of submarines that are currently in service or in production
• The RFI will also engage Canadian industry on in-service support and infrastructure for the new fleet, including how partnerships with Canadian industry could be leveraged to create economic benefits in Canada

Background

Through Canada’s defence policy, Our North, Strong and Free, the Government of Canada is providing members of the RCN with the equipment they need to maintain current and future operational readiness.

In addition to the funded initiatives in Our North, Strong and Free, Canada also identified ten capabilities for which options will be explored, including renewing and expanding the RCN’s submarine fleet.

Canada’s key submarine capability requirements will be stealth, lethality, persistence and Arctic deployability – meaning that the submarine must have extended range and endurance.

Canada’s new fleet will need to provide a unique combination of these capabilities to ensure that Canada can detect, track, deter and, if necessary, defeat adversaries in all three of Canada’s oceans while contributing meaningfully alongside allies and enabling the Government of Canada to deploy this fleet abroad in support of our partners and allies.

Long-term sustainment of Canada’s Leopard 2 family of vehicles

Issue

The Department of National Defence has a requirement for the long germ sustainment of the Leopard 2 family of vehicles for a period from contract award, September 12, 2024, to 2036.

Note:

• All questions related to capability and costs should be referred to the Minister of National Defence
• All questions related to the Industrial and Technological Benefits Policy should be referred to the Minister of Innovation, Science and Industry

Key facts

• The CAF currently operates a fleet of 103 Leopard 2 vehicles in 5 variants, which are anticipated to remain operational until 2035
• This contract will allow for the transition of multiple support services into a single long-term sustainment contract to ensure the vehicles continue to be available and relevant for their remaining life
• The contract includes program management, maintenance, technical services, supply support, engineering support, and other forms of support as required

Key messages

• The government is committed to ensuring that members of the CAF have the equipment they need to do their jobs and protect Canadians
• The Leopard 2 family of vehicles plays a vital role in defending Canadian national interests domestically and internationally
• This contract will improve the coordination of engineering efforts between Original Equipment Manufacturer and Government resources by seeking efficiencies through the integration of engineering, support services and management

If pressed on the procurement strategy:

• The Government of Canada follows open, fair and transparent procurement processes to acquire goods and services on behalf of federal departments and agencies
• An Advanced Contract Award Notice (ACAN) was published on August 11, 2022, to confirm that only one supplier was able to provide the services due to Intellectual Property rights
• [Redacted]

Background

The Leopard 2 family of vehicles was procured to replace the aging Leopard 1-C2 fleet with a modern, heavily protected Main Battle Tank and support variants, to provide a protected, mobile, direct fire capability to the Canadian Army. The procurement was expedited in order to meet an initial Urgent Operational Requirement to support the combat mission in Afghanistan.

Controlled goods exemptions for individuals from sanctioned countries

Issue

On October 28, the department will be tabling the response to the inquiry from Mr. Bezan (Q-2939) (Selkirk—Interlake—Eastman) concerning certificates of exemption from registration under the Controlled Goods Regulations granted to individuals from China, Russia, Iran and North Korea.

Key facts

• Temporary workers, visitors and international students who are not Canadian and require access to controlled goods for their work or schooling, may apply for an exemption from registration under the Controlled Goods Regulations
• Exemption requests are evaluated on a case-by-case basis, taking into account how sanctions apply to the specific situation, including the nature of the goods being accessed. We do not automatically deny exemption requests from individuals with citizenship in sanctioned countries
• The Controlled Goods Program conducts a thorough security assessment of individuals following extensive vetting by Immigration, Refugees and Citizenship Canada to enable them to enter and live in Canada
• The Controlled Goods Program’s exemption policies align with those of Global Affairs Canada and Immigration, Refugees and Citizenship Canada

Key messages

• It is the responsibility of the applicant and the Canadian company hiring a foreign worker to ensure compliance with Canadian sanctions regulations
• The Controlled Goods Program, administered by my department, will immediately deny an Exemption Request from applicants who are citizens of sanctioned countries if any level of risk is identified or if adverse information is discovered
• The program will also immediately deny an Exemption Request if the applicant is a citizen of a country prohibited by International Traffic in Arms Regulations requesting to access specific controlled goods noted in those regulations

Background

As noted above, temporary workers, visitors and international students who are not Canadian and require access to controlled goods for their work or schooling, may apply for an exemption from registration under the Controlled Goods Regulations.

The Controlled Goods Program (CGP) at PSPC ultimately decides whether to grant or deny an exemption based the security assessments conducted. If granted, exemptions may come with specific conditions, such as limited access to certain controlled goods, restrictions on the duration of access, and additional security measures that employers must implement.

This is just one part of the vetting process for people coming into Canada. PSPC’s security intelligence partners—Immigration, Refugees and Citizenship Canada (IRCC), the Canada Border Services Agency (CBSA), the Royal Canadian Mounted Police (RCMP), [Redacted] conduct their own thorough vetting of individuals before approving their entry into Canada.

While the CGP relies on the assessments performed by these partners, it conducts its own independent checks to ensure comprehensive security evaluations are carried out. A request to the CGP cannot be submitted without a valid work, study, or visit permit. If any conditions are breached or new information emerges that presents a security risk, the CGP reserves the right to revoke the exemption.

Government response to the Standing Committee on National Defence Twelfth Report

Issue

In consultation with other departments, PSPC provided a comprehensive Government-wide response to the Standing Committee on National Defence’s Report 12, A Time for Change: Reforming Defence Procurement in Canada (Twelfth Report), which raised concerns about the overall efficiency and effectiveness of Canada’s defence procurement system.

Key facts

• A comprehensive response to the Twelfth Report of the Standing Committee on National Defence (NDDN) was tabled on October 17, 2024, in which the Government acknowledges or agrees with all 36 recommendations from the Standing Committee on National Defence

Key messages

• In our response to the Committee’s report, we committed to continuing to address concerns focused in five key areas outlined in the Response: Streamlining, Simplifying, and Improving Procurement Processes; Training and Continuous Improvement; Enhancing Defence Funding and Capabilities; Promoting Transparency, Accountability, and Inclusivity; and Enhancing Collaboration and Partnerships
• PSPC recognizes the need to reduce bureaucratic hurdles, simplify procedures, and align procurement practices with international standards to increase the efficiency of defence procurement

If pressed on efforts to advance defence procurement reform:

• To coordinate and advance defence procurement reform, the Defence Procurement Review Office was established within PSPC in fall 2023 to lead a cross-departmental review of defence procurement and policies
• Budget 2024 announced reforms to the Canadian Defence Policy, and its review processes, by committing Canada to undertake a defence policy review every four years and complete a review of Canada’s defence procurement system

Background

According to the Twelfth Report, bureaucratic hurdles and the complexity of defence procurement processes, risk aversion and politicization issues, defence procurement personnel shortages, a lack of transparency and accountability, procurement delays, and cost overruns have raised concerns about the overall efficiency and effectiveness of Canada’s defence procurement system.

The Government Response to the Twelfth Report was developed by PSPC, in consultation with the Department of National Defence, the Department of Fisheries and Oceans Canada and the CCG, Innovation, Science and Economic Development Canada, Global Affairs Canada, Justice Canada, the Privy Council Office, Finance Canada, and the Treasury Board of Canada Secretariat and provides a comprehensive Government of Canada-wide response to the Twelfth Report’s 36 recommendations. As all committee recommendations were generally aligned with the government’s policies, the response either agreed with or acknowledged each of them, ensuring alignment of the response with the Government’s ongoing priorities and planned actions.

Standing Committee on National Defence report on defence procurement

Time for change: Reforming defence procurement in Canada

Procurement review in Canada’s defence policy

Speeding Acquisition and Advancing Defence Procurement Reform

Defence procurement takes too long in Canada and needs to be faster and more effective. We will think differently about how we procure equipment, how to better maintain and upgrade it over time, and how to ensure it is optimized to meet the diverse needs of our members. We will also compress the timeline of major acquisitions, to reduce the operational and financial risks of delays and gaps between capabilities being retired and new ones being added.

PSPC, National Defence, Innovation, Science and Economic Development Canada, and the Treasury Board Secretariat have launched a review of our defence procurement system. This includes examining internal processes used by Defence to define requirements and approve projects, and looking at the broader set of rules, regulations and policies that govern military procurement. This effort will clarify mechanisms to facilitate the timely delivery of military equipment, enable increased use of government-to-government arrangements where it makes sense to develop strategic partnerships, and look at how best to leverage existing programs to strategically invest in the domestic capacity needed by the military.

We will think differently about how we procure with our allies. Like Canada, they are rethinking how to speed up the acquisition of capabilities to meet quickly evolving threats. They are also supporting defence industrial initiatives and strategies to build resilient supply chains, incentivize private industry to scale up or open new production lines, secure sources of supply, and roll out domestic workforce and acquisition strategies that invigorate their economies.

Canada will pursue increased economic opportunities as part of newly forming defence trade arrangements among trusted partners. Our privileged access to allied defence, research and innovation sectors supports good jobs and economic growth for Canadians. For example, thanks to our trusted status, every one of the more than 3000 F-35 fighter jets sold by the United States to its partners around the world will contain parts made in Canada by Canadian workers. By leveraging our world-leading capacity for invention and innovation, Canada will pursue collaborative development of new weapons and systems that will support interoperability, and ultimately strengthen our collective defence.

We have a global reputation as a hub for innovative research and the development of cutting-edge capabilities vital to the future of military operations. This will be boosted with NATO's Defence Innovation Accelerator for the North Atlantic, which is establishing a North American Regional Office in Halifax. We will capitalize on our strengths and develop new ones, including in areas such as avionics, satellite technologies, sensors, computing, command and control, secure communications, and munitions. The integration of emerging technologies, including AI, will be informed by Gender-Based Analysis (GBA) Plus considerations. Government investment in these areas will help keep our technology at the leading edge and position our industry as a strategic resource to our international partners.

Personal information and cyber security

Issue

PSPC has procedures in place when awarding contracts to ensure the protection of personal information and to mitigate the impacts of any potential breaches.

Key messages

• The protection of the personal information of employees is a priority for the Government of Canada
• PSPC’s Contract Security Program undertakes security verifications based on requirements provided by client departments
• This is especially critical for National Defence, as any breaches could compromise operational security or expose the personal information of military personnel

Background

PSPC’s Contract Security Program provides the security clauses to address security requirements identified by client departments at the time of contract award.

BGRS/SIRVA privacy breach

This breach involved unauthorized access to personal information held by BGRS and SIRVA Canada LP, who offer relocation services to the Government of Canada. It affected a significant number of current and former employees, members of the CAF and RCMP members and personnel. The breached information could belong to anyone who had used relocation services as early as 1999. The personal information was subsequently leaked on the dark web, raising the potential of identity theft and concerns about data security within third-party contractors.

In both its role as contracting authority and user of the services for its own employees, PSPC implemented a breach response protocol and collaborated with the Treasury Board of Canada Secretariat (TBS) and other impacted departments. Potentially affected employees were notified, and credit monitoring services were offered to current and former employees.

Cyber incident at MSH International

On February 9, 2024, a ransomware breach was discovered by MSH and resulted in operations being paused immediately. This breach involved unauthorized access to sensitive personal information held by MSH International’s systems. MSH is the subcontractor to Canada Life that provides emergency travel and comprehensive coverage services to members of the Public Service Health Care Plan (PSHCP) who are posted abroad or travelling, including CAF personnel. This raised the potential for identity theft and concerns about data security within third-party contractors.

In both its role as contracting authority and client (employees using emergency travel services), PSPC implemented a breach response protocol and collaborated with TBS.

MSH claims processing operations resumed on February 26, 2024, when the situation was under control. Both Canada and Canada Life were assured that the servers were cleansed. MSH has informed affected members. It was later confirmed that PSPC employees were not affected, so the department’s involvement in the breach response was limited to contract administration activity.

Office of Supplier Integrity and Compliance

Issue

The Office of Supplier Integrity and Compliance supports the government’s ability to identify suppliers of concern and take appropriate action to mitigate the risk they pose.

Key facts

• N/A

Key messages

• The Government of Canada is committed to taking action against improper and unethical business practices, and to holding companies accountable for their misconduct while safeguarding federal expenditures
• When the new Office of Supplier Integrity and Compliance was established in May 2024, a revised Ineligibility and Suspension Policy came into effect
• The new office improves the government’s ability to respond to emerging risks of misconduct and fraud while protecting the integrity of the federal procurement and real property systems

Background

The Office of Supplier Integrity and Compliance (OSIC) replaces the Government of Canada’s Integrity Regime which was in place since 2015 as a government-wide policy-based debarment system designed to further protect the integrity of federal contracts and real property transactions.

The new office will continue to play a significant role in safeguarding the federal procurement and real property systems, which encompasses approximately $20 billion annually for procurement contracts, real property agreements, the management of Crown-owned properties, and rental payments on 1,690 lease contracts across Canada.

The new office provides an opportunity to modernize the Government of Canada’s debarment and suspension program and further strengthen its use of data analytics to identify potential instances of fraud and wrongdoing and better leverage intelligence relevant to assessing the integrity of vendors within government contracts and real property agreements.

Triggers for suspension or debarment under the policy include offences under the Criminal Code, the Financial Administration Act, the Corruption of Foreign Public Officials Act, the Canada Elections Act, and more – as well as similar offences that occur in other jurisdictions.

The office is also empowered to take action pursuant to the policy if it finds that contracting with a supplier may bring the federal procurement into disrepute or otherwise be contrary to Canadian public policy.

To detect and address wrongdoing, the office monitors current events for allegations of supplier misconduct through research, information sharing, and data analytics. OSIC will continue to exercise due diligence in assessing potential suppliers to the Government of Canada and is prepared to take action when the policy is triggered in order to protect and uphold the integrity of the federal procurement system.

Additional information about the new office and the revised Ineligibility and Suspension Policy is available on the OSIC website.