New Paradigms for Defence
Procurement and Industrial Policy?
Queen’s University
February 27, 2012
The C&I Group
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Boutique corporate advisory firm – offset
and economic development programs
Lawyers
Defence Industry specialists
Fifty eight year pedigree (1954)
Total staff of approx 50
Offices Australia, India & Canada
C&I Group Services
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Specialist advice on:
– Offsets (IRBs) (TRACE vetted)
– Global business deals
– JV and relationship structuring
– Intellectual property commercialisation
– Defence & IP contract negotiation – with
primes, Government and sub-suppliers
– Socio-Economic Development Programs
as a means to leverage business
Questions
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What percentages of payloads (arctic
ships and then frigates) do we expect to
be produced in Canada?
What would be the spatial (regional)
distribution of that work?
What is our assessment of the role of
Industry Canada in coordination? Are we
competitors to IC?
What is my assessment of Industry
Canada approvals of CCVs?
Market/Economic Forces
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CCV and Regional distribution determined
by the main contractor on a cost/risk
economic basis.
Role of IC or an IRB policy is to try and
influence that decision making in a way that
meets policy objectives but does not distort
the economic rationalism of the contractors
business and pricing.
Market/Economic Forces
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If Canadian shipyards/suppliers are price
and quality competitive work should flow to
them.
– Supply Chains tend to be sticky
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Is a lower “off shore” solution available?
As a “nation” how do we want to drive
industry policy, to what value of a
procurement and where should it be
located.
Australian LHD Ship
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Aus Govt did not mandate where ships were
to be built
French and Spanish looked at primarily
offshore build
media expectation that Spanish would build
wholly offshore meant the potential closure
of a major shipyard
French proposed most of the build in
Australia at various yards
Australian LHD Ship
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Spanish won with compromise solution
meeting two objectives
– hulls built in Spain, up to the flight deck
– Australia yard will build the
superstructure
– all the technology smarts and the critical
systems integration will also happen in
Australia
Australian LHD Ship
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In terms of total tonnage possibly only
20% built in Australia
but in terms of contract value which
included the hi-tech jobs, the
percentages are reversed, i.e. 80%.
Australian Air Warfare
Destroyer
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Australian government mandated the
government owned ASC shipyard must build
the ships
A Navantia design selected
– much of the design and engineering work is
being done in Spain
– tonnage built will all be in Australia
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ASC on a deployed module build program
sharing the modules around a number
shipyards, including quite small ones.
Australian Air Warfare
Destroyer
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Modules consolidated in Adelaide
A number of yards “heads above
water” for a little longer.
Industry policy certainly does drive
outcomes
Major Platforms
Mission System (ears, eyes and brains of the vessel)
– Mission Computer, Displays and Systems Integration
– Sensors
– Radar
– EW
– Acoustics
– EO/IR
– Communications
– Weapons
– Torpedoes
– Guns
Who can do it here?
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Lockheed Martin Canada
GD Canada
Ultra Marine and Electronics
MDA
Raytheon
DRS
As well as numerous capable tech savy
suppliers in areas such as display across the
country
But can we do it here?
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Plenty of capable talent
Do we offer the right risk reward
compared to offshore?
Are we competitive on price?
Are the major suppliers prepared to
contract with Canadian companies?
IRB Policy –does it
encourage?
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Direct IRBs
– Global Value Chains
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Mandate high levels of Direct?
– Direct has many different quality levels
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Defence only IRBs?
Other incentives to promote FULL
participation of Canadians companies in
Canadian defence procurement and global
sales?
Questions –”answered”
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What percentages of payloads (arctic
ships and then frigates) do we
expect to be produced in Canada?
– 35%-40%
Questions-”answered”
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What would be the spatial (regional)
distribution of that work?
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Atlantic Canada
Quebec
Ontario
Western Canada
20%
35%
25%
20%
Questions-”answered”
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What is our assessment of the role of
Industry Canada in coordination? Are
we competitors to IC?
– We do not consider ourselves
competitors, but are we collaborators?
Questions –”answered”
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What is my assessment of Industry
Canada approvals of Canadian
Content Value?
www.ciprojectsgroup.com
trunge@cipgrp.com
20 Douglas St. Guelph, Ontario
Tel: 519 763 6181