Budget: Economic Advantage
TIM PAGE
© 2013 FrontLine Defence (Vol 10, No 2)

The Canadian Association of Defence and Security Industries (CADSI) strongly endorses the federal government’s most recent Budget commitment to create and implement a defence procurement strategy in which Canadian companies will be part of any plan to build and/or maintain and upgrade equipment for the Canadian Armed Forces.

Military procurement is the largest single area of discretionary spending the government has, and it’s clear that the government intends to do something with it, to Canada’s advantage. The federal Budget provided a strong, positive and unambiguous policy statement that, when effectively implemented, will boldly seize the opportunity this spending represents to create jobs, especially high-end manufacturing jobs and export opportunities in the Canadian defence and security sector.

CADSI believes the Budget commitment is a watershed moment for Canada’s defence and security sector – creating a footing similar to other highly industrialized countries with clear strategies to promote their defence and security sectors.

The actual wording of the budget (at right) will let you decide for yourself, but in CADSI’s view, the Government has clearly recognized that it is in the national interest to have a strong, innovative, domestic defence-related industrial base that produces leading edge equipment, generates high-value exports, and supports knowledge-based jobs for Canadians.

A good deal of the credit for the Budget’s strong policy undertakings is due to the continuing efforts of Public Works Minister Rona Ambrose and her commitment to change defence procurement ­outcomes to Canada’s advantage. She, and her Cabinet colleagues, have benefited from the advice they sought from David Emerson in his report on Canada’s aerospace and space sectors, and from the ­recommendations from OpenText executive chairman, Tom Jenkins, and his Panel’s report to the government on leveraging defence procurement around Key Industrial Capabilities in the Canadian sector. Combined, these contributions to the government’s thinking around improvements to defence procurement were instrumental, in CADSI’s opinion, to the Budget’s content.

We also believe that as job creators, providers of value-added goods, services and technologies to the Canadian Armed Forces and significant contributors to the national economy, the weight of our ­members’ voices in support of the Budget’s policy announcement will be important to its successful implementation.

In addition to the Government’s policy commitments, CADSI was equally pleased that the Budget recognized the need for procurement reform if the announced policy objectives are to be achieved. Two key elements of the proposed reform package, which CADSI strongly endorses, are:

  • a plan for participation by Canadian industry prior to approving defence projects; and,
  • an effective challenge function at the front end of the procurement process to better manage risk, cost, and equipment specifications.

CADSI looks forward to getting down to business with the Government, at its first opportunity, to contribute to the effective and timely implementation of these very important policy commitments.


2013 BUDGET EXCERPT

Creating Jobs by Building Equipment for the Canadian Armed Forces in Canada. Building on the success of the National Shipbuilding Procurement Strategy, the Government will better ensure that purchases of military equipment create economic opportunities for Canadians by developing key domestic industrial capabilities to help guide procurement, by promoting export opportunities, and by reforming the current procurement process to improve outcomes.

Canada’s defence spending aims at providing the Canadian Armed Forces with high-quality equipment in order to defend our national sovereignty and vital interests. Simultaneously, these investments can provide Canada with a stronger manufacturing base with a capacity for leading-edge technology and innovation. The potential benefits for the Canadian economy are significant. In Budget 2011, the Government committed to develop a procurement strategy in consultation with industry to maximize job creation, support Canadian manufacturing capabilities and innovation, and bolster economic growth in Canada. The Government is making important progress in the development of its strategy for procuring equipment for our military. In September 2012, Mr. Tom Jenkins, Executive Chairman and Chief Strategy Officer of OpenText Corporation, was appointed as a special advisor to further inform this work. Mr. Jenkins was asked to engage a range of stakeholders involved in Canada’s defence-related industries with a view to establishing criteria and a process to identify key Canadian industrial capabilities. Mr. Jenkins presented his report on February 12, 2013. The report frames the unique, once in a century opportunity presented by major investments in Canada’s Armed Forces to create jobs and economic growth, while enhancing Canada’s ability to protect its sovereignty.

As noted in Mr. Jenkins’ report, many of the most highly industrialized countries have clear strategies to promote their defence sectors. These strategies are based on a recognition that it is in the national interest to have a strong domestic defence-related manufacturing base that produces leading edge equipment. For Canada, such a strategy can generate high-value exports and support high-paying jobs for Canadians.

The Government endorses Mr. Jenkins’ proposal to use key industrial capabilities as a means of fully leveraging defence procurement projects to support economic opportunities for Canadians. A key opportunity for doing so is by targeting, as estimated by Mr. Jenkins, the $49 billion in Industrial and Regional Benefits obligations that foreign prime contractors are expected to accumulate by 2027 to support high-skill and high-value opportunities and jobs in Canadian industries. These opportunities would be selected based on the needs of the Canadian Armed Forces, the potential to access global markets, and the potential for increasing investments in Canadian research and innovation. In addition, the Government will actively promote the significant export opportunities for Canadian-produced goods and services.

To better leverage future investments in equipment for the Canadian Armed Forces, the Government will work with industry sectors and stakeholders such as the Canadian Association of Defence and Security Industries to identify areas of Canadian competitiveness, as well as trends in global demand and supply in defence-related industries. Further, the Government will ensure that all major procurements include a plan for participation by Canadian industry, prior to approving the project.

This Spring, the Government will expedite the analysis of the recommendations made by Mr. Jenkins with respect to selecting a series of interim key industrial capabilities to help guide immediately pending defence procurement projects. The Government will also develop a refined set of key industrial capabilities for use over the long term and examine how existing policies and programs can be tailored to support a Government-wide strategy while remaining cognizant of Canada’s international trade obligations. In parallel, the Government will reform the current procurement process to improve outcomes. This will include thorough and rigorous option analyses, a challenge function for military requirements, early and frequent industry engagement, and strengthened oversight with the use of third-party expertise.

====
Timothy I. Page is president of CADSI (the Canadian Association of Defence and Security Industries).
© FrontLine Defence 2013

RELATED LINKS

Comments