Directorate of Industry Relations,
Analysis and Policy (DIRAP)
Paul Herring, Director
“CASE FOR CANADIAN DEFENCE
INDUSTRIAL POLICY”
27 February 2012
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Canadian Defence Industrial Strategy:
“No Strategy is Not a Strategy”
• Budget 2011: “Considerable progress has been achieved in
streamlining and improving military procurement processes,
including through the National Shipbuilding Procurement
Strategy and enhancements to the Industrial and Regional
Benefits Policy. The Government is committed to continuing
these efforts by developing a procurement strategy, in
consultation with industry, to maximize job creation, support
Canadian manufacturing capabilities and innovation, and bolster
economic growth in Canada.”
• A Defence Industrial Strategy would require a whole-ofgovernment approach focused on:
– Strategic Procurement
– Export Market Development
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International Comparison
• Canada is unique
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No single point of accountability
Industrial base is closely linked with the U.S.
Primarily 2nd and 3rd tier suppliers
Heavy dependence on exports
• U.S.
– No explicit defence industrial policy
– Mosaic of laws, policies and regulations resulting in 98% of
procurements being sourced domestically
– Robust and comprehensive military industrial complex
• Europe
– Multiple sovereign nations with similar and diverging national
security interests
– Robust (but not comprehensive) defence industrial base
– Fragmented national defence industrial strategies
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Key Issues
• Defence spending is not optimally leveraged in
support of Canada’s broader economic goals.
• Lack of a broader strategy does not maximize
economic benefits.
• Current procurement approach and contracting rules
make it difficult to leverage Government investment
in S&T.
• Not just a matter of adjusting procurement model –
need to change defence procurement mindset.
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Strategic Considerations
• A Defence Industrial Strategy would:
– Strengthen the framework to help small, medium
and large enterprises increase innovation, develop
market share, and move up the Canadian and
global value chain;
– Improve the conditions for growing businesses
and sustainable, quality jobs in Canadian
communities and in the aerospace, automotive,
marine and hi-tech sectors; and
– Require a new mindset and mature partnership
between the Government and industry.
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Discussion
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Question: How do we leverage military
procurement to support the Canadian
defence-related industrial base and help
Canadian companies become more globally
competitive?
Answers:
1. Strategic Procurement
2. Export Market Development
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Strategic Procurement
• Advanced Procurement Management
– Build on CFDS and defence investment plan
– No change to the key features of procurement integrity:
open, fair and transparent
– Align the “pull” of defence procurement with the “push” of
defence-funded R&D
– Identification of critical technology capabilities for industrial
regional benefits considerations
– Continued emphasis on Best Value to Canada, not lowest
cost compliant
– Early, effective engagement of industry through the
ACCORD model.
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Strategic Procurement
• Strategic Capability Areas – identification of defence
products, processes, technologies, and/or human
factors of strategic importance to Canada that would:
– Meet the crucial operational needs of the CF in a costeffective manner;
– Assist the industry in making its strategic investment
decisions;
– Facilitate a better ‘fit’ between industry capabilities and
defence needs;
– Enable strategic industrial regional benefits; and
– Promote skills and technology development in Canada.
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Strategic Procurement
• Policy Integration
– Modernizing the implementation of
industrial regional benefits
– Creation of a defence innovation program
(buy and try)
– Intellectual Property Management
– Human Resources and Skills
Development
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Export Market Development
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Adopting a whole-of-government approach
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Alignment of existing tools and resources
Prioritization of regions/sectors
Supporting small, medium, and large companies
Coordination and follow-up with industry (and key
associations) to help secure export business
– Establishment of a NATO-based Canadian
representative for the early identification of
NATO procurement opportunities.
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Implementation of a
Defence Industrial Strategy
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Goals of a Defence Industrial Strategy
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Timing is synchronized with other reviews
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Stronger defence industrial base to support critical and
strategic CF operational needs
Encourage Canadian manufacturing capabilities and
innovation
Bolster economic growth in Canada
Innovation/R&D, which led to the release of the Jenkins
Report in October 2011
Review of Aerospace Policies and Programs
A Defence Industrial Strategy would shape new
perspectives on the Canadian defence and security
industry.
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Closing Remarks
• Advantage Canada, the Canada First Defence Strategy, the
National Shipbuilding Procurement Strategy, Munitions Supply
Program, and the revised Industrial Regional Benefits program
are current examples of policy initiatives that are creating or will
create the systematic conditions for broader economic success.
• Unlike many countries, Canada lacks a formal Defence
Industrial Strategy and risks becoming less competitive and
realizing reduced growth.
• A formal Defence Industrial Strategy would:
1. Leverage all phases of the defence procurement process so that
Canada can get more from its defence procurement dollar while
ensuring that the CF gets the capabilities it needs; and
2. Coordinate government and industry resources to deliver on a
common export market development approach.
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Thank you – Merci
Questions?
Paul Herring
Director, Industry Relations, Analysis and Policy (DIRAP)
International and Industry Programs (DGIIP)
Department of National Defence
T: 996-7264 Email: Paul.Herring@forces.gc.ca
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