March 14, 1939

LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

Oh, yes. May I interrupt my hon. friend-

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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CCF

Major James William Coldwell

Co-operative Commonwealth Federation (C.C.F.)

Mr. COLDWELL:

Well, I have read the minister's speech.

7X492-118J

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

I distinctly said that the majority report was for the extension of government manufacture.

Topic:   NATIONAL DEFENCE
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CCF

Major James William Coldwell

Co-operative Commonwealth Federation (C.C.F.)

Mr. COLDWELL:

I have read the minister's speech, and all I can find is a very brief reference to the fact that he has just stated. However, that is beside the point. Suffice it to say that the bill itself, as I shall endeavour to show in a few minutes, emphasizes the private rather than the public manufacture of arms, and the purchase from private manufacturers.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

May I

interrupt my hon. friend again? As reported at page 1757 of Hansard, I said:

The majority report was for the extension of the principle of nationalization.

Topic:   NATIONAL DEFENCE
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CCF

Major James William Coldwell

Co-operative Commonwealth Federation (C.C.F.)

Mr. COLDWELL:

As I say, the minister

did mention it, but the minister placed on record substantially the minority report, favouring private manufacture, making only a brief reference to the much more important report of the majority of that committee.

In my opinion the bill as presented to this house does not give adequate control of profits incidental to the private manufacture of arms. It deals only, for example, with contractors selected without competitive bids. In support of that statement I direct attention to the explanatory notes which are printed opposite page 2 of the bill, where I read:

Net profits on contracts awarded by the board-

That is, the board named in this bill.

-without competitive tender, and subcontracts in connection therewith, are to be limited to five percentum per annum on the average capital employed or to be employed in the performance of the contract. Effect is to be given to this provision by the levy of a tax equal to the amount by which profits exceed the maximum of five per centum per annum on the average capital employed.

And may I again emphasize this:

Net profits on contracts awarded by the board without competitive tender. . . .

Then, if we turn to section 7, page 6 of the bill, subsection 9, we find these words:

For the purposes of this section the word "contract" shall include contracts entered into under the authority of this party and subcontracts in connection therewith, but shall not include (a) contracts awarded as a result of competitive tender or subcontracts in connection therewith, and (b) contracts or subcontracts to the extent that such contracts or subcontracts are performed outside of Canada.

Then if we turn back to section 4, subsection 4, on page 3, we find this:

In respect of all contracts, the board shall, wherever practicable, invite tenders either by means of advertisements in the public press or otherwise.

Defence Purchasing Board

"Where practicable" tenders shall be invited. In other words, and primarily, the bill contemplates the calling of tenders for the making of arms; and contracts entered into by tender, according to the section I read immediately before this one, are not. so far as the five per centum profits go, under the control of the board. In the minister's speech on Friday last he made the statement that in the past few years this government had awarded by tender some sixty per cent, I think it was, of the contracts, and forty per cent by the other method.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

That is

where bidding was available.

Mr. COLDWE'LL: I think I have confirmed the statement I have just made, that if that proportion is maintained-perhaps it will not be, but if it is-some sixty per cent of the contracts so awarded would not come under the provisions of this bill. I notice that the minister nods his head in approval of that statement.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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LIB

Ian Alistair Mackenzie (Minister of National Defence)

Liberal

Mr. MACKENZIE (Vancouver):

Mr. Speaker, all these would come under some of the provisions of the bill. They would not come under the taxation provisions of the bill.

Topic:   NATIONAL DEFENCE
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CCF

Major James William Coldwell

Co-operative Commonwealth Federation (C.C.F.)

Mr. COLDWELL:

Exactly. They all come under some provisions of the bill; but the point I am just making is this, that we object to the making of profits out of what we regard, rightly or wrongly-we are all entitled to our opinions-as in a measure blood money. We say, and I think the minister agrees, that as far as the limitation of profit is concerned under this bill, the companies to which I have referred do not come under all, but only that part of them which do not secure contracts by competitive tender. We say that the whole of them should be controlled.

The limitation of profits in this bill is also somewhat obscure. If we turn to section 7, subsection 1, at page 4, we find these words:

The maximum net profit-

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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LIB

Walter Edward Foster (Speaker of the Senate)

Liberal

Mr. SPEAKER:

I am sorry to have to interrupt the hon. member, but at the present time the house is not in committee. I would prefer that he confine his remarks to a discussion of the principle of the bill, and defer the discussion of particular sections until the house is in committee of the whole on the second reading. It is the principle of the bill which should now be considered.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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CCF

Major James William Coldwell

Co-operative Commonwealth Federation (C.C.F.)

Mr. COLDWELL:

Mr. Speaker, I always try to abide by the rules of the house and to accept a ruling without question. But at the

moment I am engaged in discussing the principle of this bill, and I find it very difficult indeed to discuss the principle without referring to some of the clauses. Of course if your ruling is that I must not do so, I shall abide by your ruling.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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LIB

Walter Edward Foster (Speaker of the Senate)

Liberal

Mr. SPEAKER:

I would ask the hon. member to confine himself as much as possible to a discussion of the principle of the bill. He might quote some of the clauses of the bill to draw attention to what the bill appears to him to be, but he should not at this time go into a discussion of the bill clause by clause.

Topic:   NATIONAL DEFENCE
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CCF

Major James William Coldwell

Co-operative Commonwealth Federation (C.C.F.)

Mr. COLDWELL:

Thank you, Mr. Speaker; I will endeavour to abide closely by the rules. With your permission I must refer from time to time to some of the phraseology of the bill. If, then, we may just look at section 7, subsection 1 we shall see the principle involved:

The maximum net profit received by any person in respect of any contract to which this section applies shall be limited to an amount equal to five per centum per annum on the average amount of capital of such person employed in the performance of the contract.

And a little further on we have this:

. . . shall be based upon the actual cost (less depreciation at a rate deemed reasonable by the board) of the physical assets including plant, machinery, equipment and working capital. ...

1 am anxious to find out when we get into committee just what the term "working capital" involves, because upon its definition, I take it, a great deal will depend in relation to the limitation of profits under this bill. Of course if it includes capital used in the purchase of material and in the employment of labour, the definition would indeed be very wide, and the real profit, therefore, increased substantially. I submit, therefore, that the first part of the bill does not satisfy that large body of public opinion which demands the elimination of private profit in the manufacture of arms, or even the substantial curtailment of private profit in that manufacture.

So far as we in this group are concerned, my hon. friend from Weyburn (Mr. Douglas) and others of the group have moved on occasion the point of view we hold, which is that in the manufacture of munitions and war materials private profit should be eliminated, and for this purpose the industry should be brought under public control. That does not mean that one would expect those engaged in the industry to render services to the nation without recompense, but it does mean that at least the element of private profit

Defence Purchasing Board

should be eliminated. Therefore, in any bill which is brought before this house dealing with this particular matter, not forty per cent but one hundred per cent of those supplying munitions and arms to the Dominion of Canada should be brought under the control of parliament in relation to profits that are made; if they are allowed at all.

Turning to part II of the bill, we object to the manner in which the bill has been presented. The bill should have been divided into two-there should have been two bills- because it deals with two different things. The first part of the bill quite clearly deals with the purchase of armaments, which in my opinion ought to be considered apart from the financing of capital expenditures under the Department of National Defence. I submit to the minister that we may find ourselves in this position, that while we may agree with one principle of the bill we may be in direct conflict with another principle of it. It is therefore unfortunate that it has been brought down in this particular form. It would have been more satisfactory to the house and particularly to our group had it been brought down in two bills instead of one.

I am not a lawyer and therefore may not understand the import of section 17 of part II of the bill, and until some explanation is given I would hesitate to vote for it. A good many members of the house are uncertain what the clause means. Perhaps it can be explained later before we are asked to vote upon it.

While we welcome the suggestion of a defence purchasing board as a method of meeting a given situation, we should have been better pleased had the government contemplated wider public manufacture of munitions. I realize, of course, as I believe most members do, that the manufacture of all that is required would not be possible, but at this moment a greater measure of control over private manufacture ought to have been instituted in a bill of this sort.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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CCF

Abraham Albert Heaps

Co-operative Commonwealth Federation (C.C.F.)

Mr. A. A. HEAPS (Winnipeg North):

A few remarks which the Minister of National Defence (Mr. Mackenzie) made in this chamber last week, when he introduced the resolution on this subject, prompt me to rise on this occasion to say a few words on the question of a defence purchasing board.

In the first place I asked the minister what was to become of the interdepartmental committee which has been functioning for so many months. When I put that question to him, as usual with him, he spoke of the magnificent work which the committee had done while it was in existence and said that if I carefully perused the bill when it was

introduced I would ascertain what was to become of the committee. I have casually gone through the bill, and if I understand anything of what it proposes it seems to me that in one way the interdepartmental committee goes out of business while in another respect it is resurrected.

I have no objection to what has been done in that respect, but if the interdepartmental committee had done such splendid work while it was functioning I do not see why it should go out of existence. Personally I believe that those wrho comprised the committee were all men of excellent character and great ability, and I feel that the persons who will be appointed to the new defence purchasing board will in their own way be no better men than those who until now have been functioning in that particular regard. If that is so, I wonder why we have this bill at all. As I say, in one way we are doing away with the interdepartmental committee, and in another way we are resurrecting it. In the measure itself we find that before a contract is finally approved, the Minister of National Defence makes a requisition to the proposed board, then it goes through the Department of Finance, then it is approved by the governor in council. I think that is a cumbersome way of doing government business. I may be alone in that assertion, but I have more confidence in existing departmental officials than to believe that it should be necessary for a contract to go through three departments before being finally approved of. Is there any other contract of more than

85,000 which has to go through the same routine as is proposed here? If there is I should like to know what department deals with contracts in such a manner.

When the minister spoke on Friday last he paid this group indirectly a very fine compliment. He did not intend it, and that is why I say it was indirect. In his lengthy speech he paid more attention to the seven members of this group than he did to the duties which the new defence purchasing board is expected to perform. He spent more time in trying to point out the fallacies of the things we stand for than he did in discussing the purpose of the resolution. If there was one thing which ho tried to impress upon the house it was the fact that, unless there were some incentive, people who might make munitions could not, be expected to engage in the successful production of armaments.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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LIB

Charles Benjamin Howard

Liberal

Mr. HOWARD:

Hear, hear.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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CCF

Abraham Albert Heaps

Co-operative Commonwealth Federation (C.C.F.)

Mr. HEAPS:

There is at least one hon. member who agrees with that. The Minister of National Defence is a very able lawyer.

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Defence Purchasing Board

If I wanted a lawyer to defend me I would go a long way in an effort to secure the services of the hon. gentleman, because after hearing his fervid oratory-when he is in his ordinary mood and is not over-excited- I believe there is hardly a jury whom he could not convince. Consequently I would go to considerable lengths to secure the services of so able a lawyer.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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LIB

Charles Avery Dunning (Minister of Finance and Receiver General)

Liberal

Mr. DUNNING:

It is better not to need one.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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CCF

Abraham Albert Heaps

Co-operative Commonwealth Federation (C.C.F.)

Mr. HEAPS:

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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LIB

Robert Emmett Finn

Liberal

Mr. FINN:

Love of country.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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CCF

Abraham Albert Heaps

Co-operative Commonwealth Federation (C.C.F.)

Mr. HEAPS:

I wonder if the minister

would tell us what it was.

Topic:   NATIONAL DEFENCE
Subtopic:   CREATION OP DEFENCE PURCHASING BOARD TO ENTER INTO CONTRACTS FOR MUNITIONS, EQUIPMENT, MATERIALS AND SUPPLIES
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March 14, 1939