The Canadian Association of Defence and Security Industries (CADSI) has been actively encouraging the federal government to move forward with its plans to re-invest in Canada’s military and security forces. We believe this can be done in such a way that delivers much needed new equipment to the uniformed forces while achieving strategic long-term economic benefits for Canada and strengthening the country’s defence and security industrial base. This has been CADSI’s consistent message on behalf of its 500 member companies which are:

• contributors to the Canadian economy (70,000 jobs producing $7 billion in annual revenues, roughly half of which is earned internationally);
• generators of technologies and innovation for global commercial, military and security markets;
• partners to the government’s national security objectives and sovereignty; and,
• providers of competitive, world-class military and security assets of strategic importance to Canada and available when they are needed.

There are a number of criteria by which industry can measure whether meaningful and sustainable industrial, economic and trade benefits are achieved through defence and security procurements. Achieving these criteria will strengthen the government’s ability to address Canada’s national defence and security priorities now and into the future and build a stronger, internationally-competitive economy built around highly valued knowledge-based jobs.

Criterion #1
Have Canadian-based companies been selected by the government for defence and security contracts, where the company’s capabilities are competitive and respond to operational requirements?

Canada possesses world-class capabilities in a number of defence and security related products, technologies and services. Those capabilities include, among others: communications and systems to support network enabled operations; surveillance and intelligence technologies; light armored vehicles; munitions; bio-metric and CBRN technologies and equipment; mission integration capabilities for defence and security systems; simulation and training; naval combat systems; avionics and defence electronics; and in-service logistics and technical support for a wide variety of defence and security products.

Where competitive Canadian-based capabilities exist and can respond to the defined operational requirements, CADSI believes that those Canadian-based companies should be the preferred suppliers.

Criterion #2
Has the government acted strategically in leveraging defence and security procurements to the maximum value for Canada and to the strengthening of this industrial base?

Where the government determines that there are no competitive Canadian-based suppliers, and that it will meet its requirements from off-shore suppliers, its procurement strategy would target meaningful involvement of Canadian industry in areas of strategic long-term importance to this country. The goal should be for Canada to move up the industrial food chain to become knowledge leaders in systems design, software engineering, product development, sub-system inte­gration and world product mandates in ­tar­geted sectors as well as fully capable deliverers of mid-life upgrades and in-service support.

In defining these strategic interests, CADSI would recommend that the government  formally consult with industry as it considers its preferred procurement strategy and assesses whether Canadian-based capabilities exist, and how these capabilities can address defined operational requirements and/or offset obligations.

Criterion #3
Does the government support a Canadian defence and security industrial strategy? Has it articulated specific industry capabilities in its procurement strategies that it believes should form part of a sustainable Canadian industrial base?

The government’s chosen procurement strategy for defence and security acquisitions should guarantee meaningful Industrial Regional Benefit (IRB) obligations that build strategic capabilities in Canada. Negotiated offset obligations could be drawn from a list of capabilities, technologies and services resident in Canada, including aerospace, that have strategic value to the future needs of the Canadian military and security forces; that can become international growth platforms for Canadian companies; and/or that can provide business and technology growth opportunities in the supply chain of major prime contractors. CADSI offers itself as a forum for government consultation on the development of such a list with Canada’s defence and security industry.

Criterion #4
Has the government mitigated the trade restrictive impact of ITAR in order for Canada to benefit from major capital equipment procurements from U.S. suppliers?

Almost 50% of Canada’s trade in defence and security products and technologies are with the U.S. market. This represents almost $3.5 billion in annual industry revenues and tens of thousands of Canadian jobs. The U.S. market has become increasingly difficult for Canadian ­companies due to ITAR and export ­control regulations. For Canada to participate meaningfully in any U.S.-based acquisitions of major defence and security related equipment, it is essential for both American and Canadian industry to be able to obtain Technical Assistance Agreements in a timely manner and for matters respecting dual nationals to be addressed on a level playing field.

Political efforts at the highest level in Canada and the United States are urgently needed to mitigate the trade restrictive impact of current ITAR and export control interpretations for Canada to enjoy maximum benefits.

Criterion #5
Does the government’s IRB strategy deliver meaningful and sustainable qualitative and quantitative benefits to Canada and to its industrial community?

Canada’s Industrial and Regional Benefits program is an important tool in the govern­ment’s ability to bring meaningful benefits to Canada from the offshore purchase of major capital equipment. To be effective, IRBs would target strategic capabilities of long-term value to Canada, such as qualitative and quantitative benefits that strengthen Canada’s defence and security industrial base. Open consultation with industry stakeholders on current IRB policies and practices and upcoming procurement strategies would help to optimize such opportunities for Canada.

For instance, are there positive benefits to the Canadian economy through:

• allowing IRB credits to be banked;
• establishing a small business investment fund, into which obligations can be committed, to enable new technologies and innovation in the economy;
• allowing, at the time of contract award, more flexible and effective timing of IRB obligations; and
• establishing responsive and flexible credit multiples for identified strategic technologies, intellectual property and export-oriented business growth platforms.

Joint industry-government co-operation in developing and maintaining a comprehensive roster of Canadian-based defence and security capabilities for IRB programs would help to expose government and those off-shore companies with offset obligations to the depth and breadth of investment possibilities in Canada.

Criterion #6
Do the government’s defence and security procurement strategies integrate current and future R&D investment priorities from both public and private sectors?

CADSI encourages current and future industry and government investments and programs in defence and security related science and technology and research and development to be integrated into procurement strategies of the government to help build strategic growth platforms in key technologies. Formal industry consultations would be a logical place for the government to identify where these opportunities lie and how best to develop synergies between industry and government in these areas.

Criterion #7
Is the government willing and able to make decisions on defence and security ­procurements? Is it capable of achieving procurement reform in the process?
 
CADSI has encouraged the government to re-invest in Canada’s defence and security forces through a process that is fair and transparent, guarantees meaningful Canadian-based industry involvement and ensures value for the customer and a fair market return for the suppliers. We have also encouraged the government to find a streamlined process at both the Cabinet and bureaucratic levels to decide on procurement and whole of government benefit strategies and decisions on major military and security capital acquisitions.

CADSI members expect that as Canada re-invests in its most active acquisition phase in 30 years, the government is listening to the needs of the military and security forces. Member firms believe that they have the capabilities and the capacity to play their part in ­contributing to those operational needs. And CADSI, while recognizing the ­primary objective of properly equipping the Canadian military and security forces, also expects the government to think more broadly in support of strategic ­capabilities with supply chain potential and niche international market opportunities that may or may not be relevant to the Canadian military and security forces in this spending cycle.

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Tim Page is the President of CADSI (the Canadian Defence and Security Industries Association).
© FrontLine Defence 2006